Eugene Schueller, a young French chemist of decent German accent, developed a hair dye formula called L’Aureole which later befallen to be the company’s title L’Oréal. Being a fresh product, it was a rigid task to promote and garner customer assurance. So, Mr. Schueller decided to approach local Parisian Hairdressers which added the customer trust to the portfolio of the company. The perfect blend of production, sales and marketing fabricated the concrete foundation of L’Oréal hallmark. From France to Italy to Austria and Holland, it was just a matter of time for the emerging brand to conquer the market (Jones, Kiron, Dessain, & Sjoman, 2006).
Acquiring and adding existing hulking brands to the same tree made company to flourish its branches in all the directions. How did L’Oréal become the world’s leading beauty company? What was the role of acquisitions in the growth? (Answered by: Renja Lilith Rutte, Saurav Kedia) ¨Being big in the States means you are big worldwide” was the spark for the manager to establish the path for globalization of the company (Jones, Kiron, Dessain, & Sjoman, 2006).
Described in “L’Oréal’s model: The key strategies of French multinational Company” by Beatrice Collin and Daniel Rouach, L’Oréal constructed the pillar of internationalization on four basic ideas, ‘Invest in all countries to diversify risks, Make a number of international acquisition to become more efficient, Look for economics of scale by singling out a dozen worldwide brands and Maintain efforts in the European and American markets where there is already potential to grow.’ (Béatrice Collin, Daniel Rauch, 2009)
Following the strategic plan, L’Oréal opted to intrude the US and as per the idea, COSMAIR Inc. was pulled in and acted as a face value for the company to flourish (Jones, Kiron, Dessain, & Sjoman, 2006). Blooming opportunity in Latin-American Market made company to rope in PROCOSA Inc and take over the market in Brazil. Continuing the strategy, L’Oréal acquired Garnier in 1965, Gemey in 1974, Maybelline in 1994, Jade in 1995, Shu Uemura in 2000 and The Body Shop (L’Oréal’s history, 2018).
According to the calculation by CM-CIC in 2010, L’Oréal was able to set a milestone with an annual turnover of around 4.5 Billion USD with Garnier (2.3B USD), Maybelline (1.5B USD) and Loreal Professional (1.1B USD) being the main contributors to it (Dromard, T. ,2018). L’Oréal’s has been actively investing in the R&Ds making them the one of the toughest competitors to beat. Highly advanced support allows them to innovate and invent product.
On the path of Glocalization, they managed to satisfy millions of customers with personalized product in respective to the market. For example, a product locally known as ‘Kajal’ which resembles a black crayon used by Indian women as an eyeliner was in the dire need of being innovated as India being a humid country, any Kajal would not stay for more than 2-3 hours. Maybelline realized the sparkling opportunity of innovation and developed a new Kajal with the claim of it being smudge proof withstanding the humid climate for more than 6 hours. Innovation landed as a boon to the sales and it skyrocketed within a short time (“Comment L’Oréal veut conquérir un milliard de clients”, 2018).
L’Oréal offers consumers worldwide “American” and “French” concepts of beauty. Are there any limits to the national beauty image it can globalize? (Answered by: Jinha Suh, Gangin Kim) In the early 1980s, L’Oréal had a thin time of its globalization. The biggest obstacle was its luxurious image of Parisian beauty, which was conceived to be expensive and high culture in the global market at that time and it acted as a barrier against the general consumers who cannot afford extravagance (Jones et al., 2006).
Moreover, their preferences for the local brand’s products had been unaffected due to the unfamiliarity with L’Oréal. To adapt to the huge global market with wider price range and diverse products, L’Oréal segmented the market into four product divisions: Consumer Products, L’Oréal Luxe, Professional Products, Active Cosmetics (www.loreal-finance.com, 2018). This is an example of Market Segmentation, which refers to a concept of ‘understanding customers and satisfying their needs’(Jones et al., 2006). From the fact that this product division aimed to satisfy customers from various income and status levels and succeeded, this case sets and excellent example of Democratic Market Segmentation.
Furthermore, this also familiarized L’Oréal to a broader audience by exposing itself to different types of markets. Upon that, senior managers had ought to acquire numerous local companies dovetailed into each product division. For example, by acquiring brands such as Redken 5th Avenue and Matrix, they announced themselves as professional hair salon products, while keeping their luxurious position with Lancôme Paris and Helena Rubinstein (Jones et al., 2006). Their efforts toward market segmentation and acquisition enabled L’Oréal to further penetrate the vast market and to bring itself to a successful globalization. The large investment in development facilities researching unique beauty products for Africans and blond people also led to a great breakthrough in beauty differences vary by country (Jones et al., 2006).
What are the global opportunities for Kiehl‘s? What are the limits, if any? (Answered by: Nikoloz Butikashvili, Elene Tsintsadze) Kiehl’s founded by Russian Jewish Pharmacologist John Kiehl’s in 1851 is one of the companies that has flourished over the century and offered premium high-quality products to its customers in 150 countries (www.loreal-finance.com, 2018).“The first freestanding stores outside the U.S. were opened in London (2002), Hong Kong (2003), and Toronto Many customers were attracted to the Kiehl’s mission, which set the tone for not only its products but also its corporate philosophy.”(Jones et al, 2006) The key factor of its success was being acquired by L’Oréal in 2001 which opened the doors with new opportunities for the company. Kiehl’s has stores in 46 nations (http://www.kiehls.com/stores).
Reasonably viewed as a standout amongst the best subsidiary brands of L’Oréal, Kiehl’s could share most of the assets and data with the entire of L’Oréal and its framework composed sections. Khiel’s strives to improve product’s quality, natural ingredients and personnel, it also creates strong customer base that are fully committed with the brand. Having such a special culture opens more opportunities globally. Philip Clough, the head of Kiehl’s, believed that establishing impressive connection with consumers with maintaining its authenticity is critical to function in the international markets.
The same approach also limits Kiehl’s global opportunities. Initially, Kiehl’s being a luxury brand uses same advertising approach globally, failing to create impact on customers. “Creating a neighborhood feel was considered a critical feature of any effort to replicate the Kiehl’s store brand.” (Jones et al, 2006). Major limits for Kiehl is being unable to analyze the demographics and failed in flourishing in the area with younger, liberal minded and free spirit society consumers. This would have helped Kiehl’s to multiply its customers and have an impact on their mind. Kiehl’s realizing the flaws is on the right track to conquer the premium cosmetic brand.
With clear goal in mind, L’Oréal worked together with all the companies and made an unbeatable image around the globe. A small innovation with harmless hair dye turned out to be multinational company has already marked its name with golden words in history of growth. Moreover, by segmenting the market to target specific audience worked successfully, further announcing their name across the globe.