Sample Question & Answer On L’oréal: Global Brand, Local Knowledge

L’Oréal’s approach to the market expansion in the other countries changed over the years. The company used to rely on own brands, but later it realized that it could become a global company if it acquired the foreign brands and made them available in the other countries. When L’Oréal bought several American brands, it achieved many important business objectives. First of all, it gained access to the large American market. Secondly, L’Oréal started to use these brands to attract the very diverse customers in terms of culture, origin, income, etc. Thirdly, the company updated these brands and started to use them abroad. For example, Maybelline was in crisis, when L’Oréal bought this brand, but later it became extremely popular in the U.S. low and mid-income segment and in the emerging countries. Therefore, L’Oréal expanded geographically and became truly global thanks to the wide range of brands that are not related to France.
L’Oréal did not develop a lot of its brands, because R&D and marketing require a lot of resources. Moreover, becoming a global company does not mean that the company has to sell only the products from its homeland in the overseas markets. Due to the large number of cultural differences and variance in the customer tastes, the company can fail if it decides to sell only its own brands abroad. The approach taken by L’Oréal is based on buying the brands and adjusting them to the global and local strategies. For example, the company acquired Maybelline for $758 million. Later this brand was modified and popularized among the young and less affluent customers in the USA. The product line was extended and advertised differently. In just three years sales grew by 93% and Maybelline was present in 70 countries. Most L’Oréal’s local brands are targeted at the mass market and therefore there is no point in introducing the unknown foreign brands with the different core values.
L’Oréal is one of the largest companies in the cosmetics industry. However, despite its large size, the company has been able to quickly react to the market changes thanks to the organizational structure that allows setting up separate objectives for every brand. The company is organized in three groups: Cosmetics, The Body Shop, and the dermatology branch. Cosmetics group is the most important and brings 93% of the revenue. Moreover, L’Oréal’s operations are divided in four divisions: consumer products, luxury products, professional products, and active cosmetics. Each division has its own marketing team. In addition, there are several research and evaluation centers around the world that gather information about the consumers. In general, L’Oréal outspends the competitors in terms of R&D and advertising.
The elements of L’Oréal’s global strategy include selling products to the customers and professionals in three large regions: Western Europe, North America and new markets. In order to maximize sales L’Oréal offers luxury and consumer products. Moreover, as it was mentioned above L’Oréal offers both international and local brands that have always been popular in a particular country or region. As the result L’Oréal approaches every market differently and thanks to the large product portfolio may offer the product mix that will match the customers’ needs the best. R&D helps to develop the new products or adjust the existing products based on the local customers’ peculiarities.
Kiehl’s is a luxury brand with a very positive image. It will be worth globalizing this brand more actively if Kiehl’s sales start to stagnate in North America. Kiehl’s is a unique brand with a very long history – the company will not be able to compete on their own due to the fierce competition in the cosmetics industry, but by means of L’Oréal Kiehl’s may get the lacking global appeal, because L’Oréal is present in all affluent countries and has an extensive distribution network. L’Oréal might apply its traditional approach to Kiehl’s growth strategy – analyze the local potential in the other countries, adjust Kiehl’s product range and invest into advertising in order to popularize the brand.