SOE11112 Creating Business Excellence and Marketing Assignment Sample
Introduction
In order to succeed in the marketplace, it is essential for a company to set certain guidelines that will allow the business to prosper efficiently. In this context, L’Oréal has been taken into consideration. The essay will focus on the analysis of macro changes in the marketing strategy of the chosen organisation. The essay will provide a brief introduction of the company, which will allow the study to obtain better results in the end. Adding to this, there will be several different identifications of recent macro changes by L’Oréal, which will consist several factors such as social, economical, technological and environmental. Furthermore, the essay will also focus on potential challenges that are being faced by the organisation along with highlighting several opportunities as well.
Company background
Figure 1: Company logo
(Source: L’Oréal, 2021)
L’Oreal is a personal care brand that has its registered headquarters in Clichy, France. It is referred to as the largest organisation operating in the cosmetics industry which are majorly focused on skin care, make-up, hair colour, perfumes and many more (L’Oréal, 2021). The organisation is servicing all over the world along with attaining an operating income of €29.87 billion. Adding to this, the net income of the organisation is estimated to be €3.75 billion. Furthermore, the company has several subsidiaries such as Lancome, Garnier, Maybelline, NYX Cosmetics, AcneFree and many more (L’Oréal, 2021).
Identification of recent macro changes
Economic factors
The emergence of Covid-19 led to a global financial crisis, which has to some extent impacted L’Oréal. The international brand of L’Oréal had reported a significant drop in the sales since the pandemic. In the first quarter, L’Oréal generated €7.22 billion, down by 4.8% on the previous year (Culliney, 2020). The company further reported a sharp decline in sales in the Western Europe with sales down by 7.7% at €1.9 billion (Culliney, 2020). In North America, sales were also down by 4.8% and in Asia Pacific by 3.7% (Culliney, 2020). The Chairman and CEO Jean-Paul Agon of L’Oréal said that every zone of the geographical location has been affected by the covid especially due to the lockdown measures. The L’Oréal Luxe and professional products division had been heavily impacted for the first quarter, which was down by 9.3% and 10.5% respectively (Culliney, 2020). The most affected category in the portfolio of L’Oréal was makeup, with a temporal slowdown of NYX professional makeup and Maybelline New York.
Figure 2: Consolidated sales of L’Oréal worldwide from 2009 to 2020
(Source: Statista, 2021)
Therefore, in order to counter such challenges, L’Oréal before the covid also was planning on embracing the tech of digital beauty and further with the emergence of covid, the company started investing more on the digital strategies rather than media investments. At the peak of the Pandemic when every company was struggling to adopt several marketing strategies in order to manage sales, L’Oréal was spending around 77% of its investment on digital platforms (Market line, 2021). The below figire reflects the strategy map of the company segmented into three divisions like e-commerce, virtual try-on and packaging tech.
In the period of lockdown, the company continued to invest in online from offline in order to keep the consumers interested in trying advanced makeups through digital ways and further increasing the consumer base. Following the pandemic of Covid-19, L’Oréal has been successful in launching its first ever line of digital makeup and virtual try-on facilities. Moreover, the rise of e-commerce has significantly assisted in making the marketing more convenient. L’Oréal has increased interaction with its consumers by 40% across channels like WeChat and Facebook messenger (Market line, 2021). L’Oréal has also brought forward marketing strategies such as providing discounts and offers on their products so that the consumers get interested in purchasing bulk products due to the low prices.
Social factors
Consumer preference towards no chemical cosmetics
In the current scenario, the proper marketing analysis is required along with the needs of the company to ensure that the market demands are met in an effective manner. The organisation of L’Oréal maintains a strong communication with its customers and understands its demand in a proper manner. L’Oréal is a famous French consumer care brand, which in recent times is focusing on the reduction of chemicals in its products. The natural ingredients are more preferred by its customers and thus, this need has been analysed effectively by its set of experts. From the above figure 2, it can be analysed that L’Oréal Paris is the leading cosmetic brand in the entire world with brand value of 10.22 billion US dollars followed by Gillete and Nivea (Statista, 2021). High brand value is achieved when the company understands the latest social trends of the market and acts according to it. The marketing department is focusing on digital marketing with the help of social media campaigns. According to statistics, more than 60% of their customers are on social media websites (Statista, 2021). Thus, with the help of Facebook and Twitter pages they interact with their customers and inform them regarding the latest deals and offers. The strong communication between the customer and company is a key for success and this is the aspect, which L’Oréal is leading from its competitors. The quality of the product is also focused by the brand and in recent times, the company has tied up with e-commerce brands in order to enhance their market penetration. The campaign of zero chemical cosmetics enhances their sales ratio to a considerable extent. The organisation in recent times is also looking for the alternative of plastic bottles so that the eco-friendly aspect can be further boosted (Statista, 2021). The leadership in the management is playing a vital role in the organisation’s success, as they understand that in order to conduct business in a sustainable manner the customers need to be involved in their decision-making. The polls are also launched regarding any innovative ideas and models regarding their product. Thus, the customer interaction and interest further grow in the process. The company also understands the needs of the customers and according to it; the final decisions are taken by the management in order to counter the social factors.
Environmental factors
In terms of environmental factors, L’Oréal has also faced some challenges due to which the organisation has to adopt changes in their products while also modifying and their marketing strategy (Santos et al. 2018). Researchers have reflected that Volatile Organic Compound (VOC) that is present mostly in a large number of beauty products is responsible for smog and pollution. Even, the excessive use of raw materials live palm oil has led to deforestation in some areas as 70% of cosmetics are utilised as one of their raw materials (Livemint, 2019). Therefore, L’Oreal had to adopt some form of sustainable business operation in order to ensure that their products and their business activities do not harm the environment.
In order to address the concern of growing environmental issues caused by cosmetics, the organisation has adopted sustainable commitments until 2030 (L’Oréal, 2021). Even it has stated that 95% of their raw materials used as a part of their formula would be bio-based from minerals that are abundantly found on earth. The organisation has also pledged that 100% of the plastic packaging utilised would be procured from recycled plastic or from sources that are bio-based, and in this regard, the organisation is willing to achieve 50% of this target by 2025 (L’Oréal, 2021). Another target that the organisation has set for its sustainability would be the 100% recycling and reuse of the waste that is generated as a part of L’Oréal production process.
Considering the present operations of the organisation, it has been seen that 59% of the raw materials that L’Oréal utilises are derived from sources that are renewable. The organisation is also addressing its waste management strategies quite effectively due to which 96% of the waste that is generated on-site have been recycled or utilised for producing energy.
As a part of their marketing strategy to demonstrate how they are addressing environmental issues, the organisation has taken the pledge that by 2030, 100% of the water that L’Oréal utilises would be reused helping them to achieve a circular economy (L’Oréal, 2021). The company has also developed the concept of a water-loop factory where such a process is already undertaken. In addition, at present, the company has 5 such factories that use their water-loop technology to reuse and recycle all the water utilised as a part of the industrial manufacturing process.
Additionally, there have been factors such as the use of Butylated Hydroxyanisole (BHA) and Butylated Hydroxytoluene (BHT), which is present in several cosmetics and have the tendency to affect marine life. In this regard, L’Oréal has been taking several steps to ensure that its products do not include harmful raw materials that can cause such environmental damages. Some of the major products sold by L’Oréal contain BHT and BHA, which include moisturizers and face washes due to their antioxidant and stabilizing agent properties (L’Oréal, 2021). The company has been in talks with its major suppliers to ensure that they stop using such chemicals so that the final product remains free from such environmentally toxic compounds.
Marketing strategy
As a part of their marketing strategy, L’Oréal has been continuously utilising several channels to communicate with their target customers. Apart from cosmetics, the organisation also has beauty salons that apart from providing services to customers also act as a physical asset for the company to promote its products and services.
The organisation has adopted a market penetration and product and development strategy from time to time depending upon their requirement based on the above-mentioned macro factors. Furthermore, as a means of digital transformation, the organisation has extensively utilised social media platforms and with the help of social media influencers, the company has gained extensive visibility (Adida, 2021). As a result of such marketing strategy, not only L’Oréal brand identity has increased but the company has been able to effectively address its market penetration strategies in the different markets in which it operates.
Potential future challenges and identification of business growth opportunities
L’Oréal is one of the leading cosmetic brands in the world. However, as the business is changing with rapid pace there are certain challenges that may hinder the organisation’s business in future (Schwertner, 2017). Sustainability is one of the major challenges for cosmetic brands like L’Oréal. The beauty industry is the one, which is growing due to the mesmerising effect, which is being attained by the products. However, the industry is found to be having greenwashing issues. The organisation operating in the beauty and cosmetic industry lacks organic products, which are not meeting the standard of the consumer about being sustainable. In this relationship, the organisation is using 1% of the organic product and 99% of the ingredients are chemicals and pesticides which are harmful for an individual (Mirra, 2021). However, maintaining suitable measures could be one of the huge challenges of L’Oréal in the near future. On the other hand, the beauty and cosmetic industry is found to be increasing its presence as the global business is reported to be $ 532 billion (Danziger, 2021). Therefore, it is an opportunity for L’Oréal to enhance their products and services to achieve most of the advantages and benefits in the business.
Conclusion
Based on the above analysis it has been understood that even though L’Oréal is a reputed and huge cosmetic brand but due to pandemic, it has witnessed huge losses most significantly in its makeup segment. In this relation, the organisation has struggled very hard to retain their customer through providing offers and discounts. It has been evaluated that as the most of the users are being active on social media, the organisation used to communicate with the consumer sustain in the marketplace. Furthermore, sustainability has been identified to be one of the huge challenges that may possibly hinder the business of the organisation, which needs to be considered by the organisation for better business experiences in future.
References
Adida, A., 2021. L’Oréal digital consumer operating system. In Managing Digital Transformation (pp. 146-155). Routledge.
Culliney, K., 2020. Highs and lows: Beauty giants report mixed economic impact amid covid-19. [Online]. Available from <https://www.cosmeticsdesign-europe.com/Article/2020/05/25/COVID-19-crisis-impacts-beauty-financials-hard-personal-care-fares-better> [Accessed on 26 November 2021]
Danziger, P, N. 2021. 6 Trends Shaping The Future Of The $532B Beauty Business. [Online]. Available from <https://www.forbes.com/sites/pamdanziger/2019/09/01/6-trends-shaping-the-future-of-the-532b-beauty-business/> [Accessed on 26 November 2021]
L’Oréal, 2021. Digital, a new field, a new playground. [Online]. Available from <https://www.loreal.com/en/beauty-science-and-technology/beauty-tech/digital-transformation/> [Accessed on 26 November 2021]
L’Oréal, 2021. Inside Our Products, BHT. [Online]. Available from <https://inside-our-products.loreal.com/ingredients/bht> [Accessed on 26 November 2021]
L’Oréal, 2021. Managing Water Sustainably. [Online]. Available from <https://www.loreal.com/en/commitments-and-responsibilities/for-the-planet/managing-water-sustainably/> [Accessed on 26 November 2021]
L’Oréal, 2021. Preserving Natural Resources. [Online]. Available from <https://www.loreal.com/en/commitments-and-responsibilities/for-the-planet/preserving-natural-resources/> [Accessed on 26 November 2021]
L’Oréal, 2021. We Stand for All Women Around the World. [Online]. Available from <https://www.loreal.com/en/> [Accessed on 26 November 2021]
Livemint, 2019. Unseen 2019: The ugly side of beauty waste. [Online]. Available from <https://www.livemint.com/mint-lounge/features/unseen-2019-the-ugly-side-of-beauty-waste-11577446070730.html> [Accessed on 26 November 2021]
Market line, 2021. L’Oréal COVID-19 HAS ACCELERATED COMPANY’S DIGITAL PLANS. [Online]. Available from <https://www.marketline.com/blog/loreal-covid-19-has-accelerated-companys-digital-plans/> [Accessed on 26 November 2021]
Mirra, 2021. 9 MAJOR Problems with the Beauty Industry. [Online]. Available from <https://inthemirra.com/blogs/news/problems-with-the-beauty-industry> [Accessed on 26 November 2021]
Santos, R., Au-Yong-Oliveira, M. and Branco, F., 2018, September. L’Oréal and its innovative differentiated positioning process in the beauty industry. In European Conference on Innovation and Entrepreneurship (pp. 717-XII). Academic Conferences International Limited.
Schwertner, K., 2017. Digital transformation of business. Trakia Journal of Sciences, 15(1), pp.388-393.
Statista, 2021. Brand value of the leading 10 cosmetic brands worldwide 2021. [Online]. Available from <https://www.statista.com/statistics/243722/brand-value-of-the-leading-15-cosmetic-brands-worldwide/> [Accessed on 26 November 2021]
Statista, 2021. Consolidated sales of L’Oréal worldwide from 2009 to 2020. [Online]. Available from <https://www.statista.com/statistics/243986/consolidated-sales-of-loreal-worldwide/> [Accessed on 26 November 2021]
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