L'oreal Corporate Sustainability Report Analysis - Case Study Example

?Strategic analysis of Loreal L’oreal has been one of the largest companies in the FMCG sector in matters of the sales volume it accounts over the years. The organization deals with consumer brands as well as the professional products. The most popular consumer brands of the organization has been L’Oreal Paris and Garnier(consumer products, n. d) whereas the products like Kerastase has been popular under the professional segment. The organization deals with a variety of luxury products as well as active cosmetics and has delivered to the needs of the people on a regular basis. The paper studies the business system of the organization, the overall organization structure and carries an in depth analysis of the strategies which it has adopted to remain competitive in the market. Organizational culture in L’Oreal: L’Oreal has adhered to strong organizational cultures over the years. Since its inception, the organization has aimed to deliver its best to fulfill the needs of the people. It has maintained transparency in maintaining high quality of the products. In the development of the product, the organization has been careful in maintain the safety and the efficacy. The organization maintains a high level of ethics as a part of their corporate culture. Fairness in every action of the organization is found to exist. There is maintenance of good practice of the corporate governance. The organization maintains strong relationships with customers and suppliers. Every employee in the organization is provided with equal opportunities based on their positions. (Ethics, n. d) The organization also maintains long term value for the share holders by protecting their interest and utilizing the company assets. The organization maintains honesty and clarity to wards the customers and the claims they make about the products are all proven by scientific data. As a part of the organization culture, the organization also carries out with their ethical practices in accounting and reporting and does not tolerate any level of corruption. The privacy of the employees is also maintained at a high level and the employees are provided with an environment in which they fell motivated to deliver their best for the organization. The employee participation is also allowed to a large extent in the organization and thy employees also contribute with their ideas and suggestion (Diversities, n. d). The efficiency of the employees are recognized and rewarded and respect towards the culture of the employees is maintained. The organization also tries to take care that no level of biasness creeps in the organization. As a part of the culture, the organization also tries to deliver its best for the overall development of the society and maintaining its responsibility towards the society. It promotes the human rights of the people and makes contribution towards the development of the children in various societies. It also carries out awareness program for the maintenance of biodiversity. Organizational structure of L’Oreal: In the consideration of the organizational structure of a multinational organization like L’Oreal the most significant thing which comes into notice is the fact that the organization maintains decentralized structure. The organization has various divisions which are controlled by the respective departmental heads. The overall workings of the organization are maintained by the CEO. The CEO is responsible for the direct supervision of various departments which includes marketing, finance and the human resource (The official board, n. d). The overall decentralization of the organization poses as a weakness in the overall management of the organization. There are also no modes of intercommunication between the departments in the organization. The organization also has a management committee who are in charge of the different sectors. In spite of the decentralization of the overall organizational, the presence of review committee which are supervised by the board of directors of the organizations. The review committee keeps on constant monitoring of the works of various departments which helps in building the effective control of the organization (The Management and remuneration Committee, n. d). Organization process: The overall success of the organization can be contributed to the strategies incorporated by the organization in the daily business process. Though the organization has expanded considerably in their product, but their main focus always has been on the cosmetics which is the primary product. In order to cater the changing needs of the customers the organization concentrates heavily on the research and development and spends sufficient amount in the creation of high quality and innovative products. As a result of the huge amount of innovation undertaken by the organization, there is a presence of 20 strong global brands which keeps the sales of the organization always on a high (Innovation, n. d). Tin order to effectively market their products, L’Oreal takes the help of each of the distribution channels in order to reach out to a maximum number of customers. The organization over the years has realized that the success of the organization has been through effective globalization and the acquisitions, and has provided much importance in these respects. In order to have a strong reputation in the market, L’Oreal also focuses on the corporate social responsibility through which they contribute towards the growth of the society and in turn builds up a strong brand value in the market. The organization concentrates on 7 ways to achieve all round growth. The market research team identifies new competitive areas through which they can attract more consumers towards their brands. New structure of the industry is also focused in the process to achieve sustainable growth. The organization has expanded into the profitable market of Brazil and China in order to strengthen the customer base. Other than utilizing ball the delivery channels, new delivery approaches are also devised by the organization (supplier, n. d). One of the critical strategies which have been incorporated by the organization is introduction of the existing products to the new customers. The existing products which have already being popular in the market are served to the new customers in order to attract them towards the brand and later introduce the new products to them. In the innovation of the new products and services, careful market analysis is conducted by them so that the exact demands of the customers can be met by them. The organization also maintains product for different target groups and this helps them in maintaining their overall position in the industry (Christine, et al, n. d). Application of Michael Porter’s three generic strategies and SWOT analysis: Michael Porter has developed a category scheme comprising three general categories of strategies. These strategies are frequently used by business organisations to achieve as well as preserve competitive advantage. These three general strategies are describes as segmentation strategy, differentiation strategy and cost leadership strategy. The cost leadership strategy is applied by businesses by reducing the prices of few products which are produced mainly for some targeted customers to achieve greater market shares. This is achieved by setting lower prices in the targeted market and also by setting lower prices to the value ratio. The differentiation strategy is based on the business and production strategy of produced differentiated products compared to the products produced by several competitors. Under this strategy different brands are produced by the business organisation compared to those of the competitors. Finally, under the segmentation strategy these differentiation strategy and cost leadership strategies are applied in order to get greater share of the targeted markets by focusing on different segments of the market. In this strategy different marketing mix strategies are applied in those specialised markets (L’OREAL CORPORATE SUSTAINABILITY REPORT ANALYSIS, n.d, pp.6-8). L’Oreal has used these three generic strategies since a long time in their business domains. The differentiation strategy is the most important strategy for the company. This is one of the most important characteristics of the company. The company produces different cosmetic and pharmaceutical products which are highly differentiated from products produced by the competitors. These differentiated products are helping the company to gain greater market share as well as greater market segments for their products. Large volumes of investments on various research and development as well as innovations are made by the company to achieve greater competitive advantage in the market. The company also spends greater amounts of money in the process of reducing costs of production by reducing the cost of materials and factors of production. The company also sells its products at various targeted markets at lower prices to get the maximum share of the market. The company also uses different market segmentation of different focused markets by applying those cost leadership strategies and differentiation strategies (L’OREAL CORPORATE SUSTAINABILITY REPORT ANALYSIS, n.d, pp.6-8). Due to successful application of all these strategies the company is gaining greater amounts of revenue since many years which are shown in the graph below: (Source: Annual Report, 2011, L’Oreal) And the SWOT analysis of the company is also presented in the table below: Location of factor Type of Factor Favourable Unfavorable Internal Strengths Continuing research and innovative development in interests of beauty Development activities in cosmetics field and fields like dermatological and pharmaceutical Strong advertising strategies Weaknesses Decentralised organisational structure Existence of multiple subdivisions Low profit margins compared to competitors ‘The coordination and the control of the activities and image in the worldwide market’ External Opportunities Growing demand for different beauty products supplied by the company Regarded as the leading cosmetic brand in the world Growing markets ranging from affluent, aged as well as general masses of developing and developed countries Existence of greater market share for various products due to registration of numerous patents by the company Threats Existence of growing competition in the cosmetic brands’ field Prevalence of economic downturn Lack of efforts of the company in reaching different underdeveloped countries Low spending habits of consumers and the presence of economic crunch Source: “SWOT Analysis L'Oreal Current position of the organization and the current position in the industry: The annual report of L’Oreal in the year 2011 reflects the fact that the organization has received sufficient development in all sectors in the financial year. The sales figure confirms on the firm, that the products of L’Oreal have become the market leader (2010 annual report, 2010). Graph comparing the sales between the year 2009, 2010, and 2011 (2010 annual report, 2010) The sustainable and profitable growth of the organization also confirms the fact that the strategies incorporated by the organization in the fiscal year all have yielded success and reflects the dynamics of the employees in adherence to the policies of the organization. The success of the organization can be contributed to the presence of organizational culture by which the employees dedicate their best for the sake of the organization. The operational efficiency also has been achieved by the coordination between the different teams in the organization. The overall strategies adopted by the organization have been flexible and have suited perfectly to fulfill the demands of the customers. In the presence of innumerable competitors in the present business generation much credit goes to the management of the organization in holding their top position. The focus on regular innovation and on the research and development team has reaped the success of the organization. In the context of the effective strategy undertaken by the organization, the efficiency of the marketing team also needs to be mention which has utilized all the possible options to reach out to the customers. As a result of the overall success, the organization needs to be more careful in devising strategies which would help them in the future days to remain competitive. Conclusion: The analysis of the strategies adopted by L’Oreal reflects on the fact that the success of the organization has resulted due to various factors. The presence of strong organizational culture enforces unity among the employees and motivates them to a greater extent and delivers considerably towards the fulfillment of the objectives of the organization. Though the overall organizational structure is decentralized, still the organization maintains sufficient control over every aspect of the organization which is reflected by the success of the organization. In matters of incorporation of the strategies the important thing which has been observed in the case of L’Oreal is the fact that the organization carries out effective research and analyses the market demands and needs. Importance is provided towards each of the unit of the organization and areas of improvement are hinted out on a regular basis. Though the organization has expanded its product line, but still sufficient consideration is provided towards the prime segment and devises new strategies on a regular basis to reach out to the customers. References 2010 annual report, (2010), Loreal, available at: http://www.loreal-finance.com/eng/annual-report Accessed on 28.2.2012) Christinne, et al, (n. d), L‘Oreal. Consumer Products, n. d, available at: http://www.loreal.com/_en/_ww/index.aspx?direct1=00003&direct2=00003/00004 Accessed on 28.2.2012) Accessed on 28.2.2012) Diversities, (n. d), available at: http://www.loreal.com/_en/_ww/html/our-company/diversity-is-a-priority.aspx Accessed on 28.2.2012) Accessed on 28.2.2012) Ethics,( n. d) , available at: http://www.loreal.com/_en/_ww/html/our-company/the-l-oreal-spirit.aspx? (Accessed on 28.2.2012) Innovation, (n. d), http://www.sustainabledevelopment.loreal.com/innovation/ Accessed on 28.2.2012) L’OREAL CORPORATE SUSTAINABILITY REPORT ANALYSIS, (n.d.), RISEBA, available at: http://www.businessenglishpractice.com/loads/video/25.pdf (accessed on March 5, 2012) L’Oreal, ( n. d). http://www.theofficialboard.com/org-chart/l-oreal Accessed on 28.2.2012) Supplier, (n. d), available at: http://www.loreal.com/_en/_ww/html/suppliers/index.aspx (Accessed on 28.2.2012) SWOT Analysis L'Oreal, (2008), available at: http://loreal.exteen.com/20080805/swot-analysis-l-oreal (accessed on March 5, 2012) The Management and remuneration Committee, (n. d), available at: http://www.corporateregister.com/a10723/loreal03-sus-fr.pdf (Accessed on 28.2.2012) Read More