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L'Oreal and the Globalization of American Beauty Case Solution
L’Oreal started off as a small company when Eugene Schueller, the owner, started producing hair color products by incorporating customers’ needs. He knew what the customers required, and this is why, from the very beginning; L’Oreal was destined to be successful. After spreading as a sought-after brand in Europe, L’Oreal decided to become global, and its first stop was the United States. L’Oreal was indeed good at studying its new market. Soon enough, it was competing well with the top local brands in America and the reason for its success was the acquisitions that it underwent in order to grow internationally. The acquisitions of companies such as Maybelline, Kiehl’s and Redken acted as the pathway for the growth and success of L’Oreal.
Following questions are answered in this case study solution:
How did L’Oreal become the world’s largest beauty company? What was the role of acquisitions in the growth?
L’Oreal offers consumers worldwide “American” and “French” concepts of beauty. Are there any limits to the national beauty images it can globalize?
What are the global opportunities for Kiehl’s? What are the limits, if any?
What challenges did they face in building a global beauty business?
What specific capabilities did L’Oréal have (or develop) to become the world’s largest beauty company?
L Oreal and the Globalization of American Beauty Case Analysis
1. How did L’Oreal become the world’s largest beauty company? What was the role of acquisitions in the growth?
L’Oreal, since its formation in 1907, was preordained to becoming one of the leading brands dealing with hair color and body care products. L’Oreal’s first step into the US market made it realize that becoming a leading brand in this market was not an easy task. L’Oreal could sense that it was facing a number of challenges, and it had to dig deeper in order to survive as a top brand in one of the biggest markets in the world. One of the insights that employees of L’Oreal had been that to make its mark in US; L’Oreal needed to capture the attention of every kind of consumer.
L’Oreal understood that in order to capture a big market, it had to leave its mark on all sides. Every acquisition that was carried out had the same motive behind it; the determination to become global and to sell and be known outside Europe. For instance, a particular acquisition was initiated because it made products available to a bigger market, like the acquisition of Kiehl’s.
Also, one of the major acquisitions that L’Oreal undertook was of the famous, yet stale brand known as Maybelline. L’Oreal had studied the new market well, and it knew that French elegance was not enough to conquer a huge market. Maybelline offered it new potential consumers belonging to a younger age group, and L’Oreal was determined to enhance, or rather, restore the image of Maybelline through its own expertise in the field.
2. L’Oreal offers consumers worldwide “American” and “French” concepts of beauty. Are there any limits to the national beauty images it can globalize?
While the motive of L’Oreal was to grasp a larger portion of the market share in the United States because of the popular belief that having a market in United States meant being a famous brand worldwide. This is why; L’Oreal did not solely depend on selling its French concept of beauty which worked very well in Europe. L’Oreal knew that the customer base in the States was large and not every customer was keen on buying the elegant French brand, either considering it too expensive or considering it a brand for people belonging to an old age group.
This is why, through acquisitions, L’Oreal succeeded in reintroducing some of the American concepts of beauty by using its expertise in the field in order to have a wider customer base comprising of every age group, particularly the younger age group. The acquisition of Maybelline, Redken, Kiehl’s served this purpose well.
However, it cannot be said that having the American or French concept of beauty worldwide can lead to certain limits in the globalization of beauty images. This is because L’Oreal has already successfully strived to overcome this limitation. L’Oreal knew that in order to be a globally accepted brand, it needed to be more than just an American or French concept of beauty. While it did accept the importance of American brands to conquer the American beauty market, it knew that it could not depend on American local brands completely to be global. Therefore, today, L’Oreal enjoys a global position because it sells different brands to different countries instead of relying on local or French brands.
3. What are the global opportunities for Kiehl’s? What are the limits, if any?
Kiehl’s was a successful business in the beginning, and it was the brand name that was essential for the expansion and recognition of L’Oreal’s business. However, the initial challenge was to make sure that Kiehl’s was not promoted as being just a New York luxury brand. The motive was to ensure that wherever the new stores were opened, they should have a certain softness which caused the local people to connect with it rather than considering it an out-of-reach, luxury brand.
Kiehl’s succeeded in doing that. People were more curious about having Kiehl’s in their neighborhood and once they saw what the store really had to offer; they were inclined to come back again; therefore, granting it acceptance. The purpose of Clough, who was the President of Kiehl’s was to ensure that every big city should have one of Kiehl’s stores opened and as Kiehl’s indeed was a fast growing business with a very important and rather sought-after luxury brand name, the only limitation was to make people connect to Kiehl’s and consider it more than just a luxury brand out of reach for the majority. This aim was achieved by ensuring that the new stores had a local touch to it while maintaining the Keihl’s official store look.
4. What challenges did they face in building a global beauty business?
As soon as L’Oreal decided to become global, it was clear that a number of obstacles lined the path that had to be followed. Stepping outside of Europe and entering US was a challenge in itself and in 1953, when L’Oreal formed Cosmair in the US in order to distribute its products to beauty salons, it was evident that it was a small fish in an ocean, and it needed to secure its position immediately to enhance its presence in the international market.
One of the challenges that it faced was regarding its image of a rich, elegant and rather stylish Parisian brand which was out of reach of a common customer with normal needs and which did not meet the requirements of the youth. Working over this image was essential for L’Oreal and many of its acquisitions had the sole purpose of becoming an acceptable and welcomed presence in the international arena, such as the acquisition of Maybelline and Redken.
Furthermore, the challenges were internal in nature too. This is because L’Oreal needed to develop and balance its divisions. For instance, the acquisition of Redken resulted in a reassessment of L’Oreal’s hair care division, creating new divisions. Through its acquisitions, L’Oreal was able to strengthen its divisions and its internal structure became stronger, as well.
5. What specific capabilities did L’Oréal have (or develop) to become the world’s largest beauty company?
There is no denying that L’Oreal possessed the expertise in the field of hair color and beauty products. This was evident since the initiation of L’Oreal when Eugene Schueller, the owner of L’Oreal, very carefully incorporated consumer wants and requirements into the products. As L’Oreal climbed up the ladder of success and started creating its presence in the States, it had the capability of reading its new market and potential customers very clearly.
L’Oreal realized that due to the presence of leading brands such as Clairol, Estée Lauder and Revlon, competition was indeed tough. Making its presence felt was a challenge that L’Oreal very confidently took and it started digging deeper into the market.
Firstly, L’Oreal started looking around to see what an average customer required and what the local brands had to offer. Not only this, it also started scrutinizing which brand was performing well and which brand was performing poorly. Brands such as Kiehl’s and Maybelline had huge goodwill. However, they either lacked resources or their image was getting stale. L’Oreal knew how to deal with such a situation, and it found the answer in acquisition, which ultimately led to its immense growth and prosperity internationally.
L’Oreal also possessed the talent, expertise and a resource which it used brilliantly in order to make Kiehl’s a global brand and in order to capture new and younger consumers by improving Maybelline’s image. On the whole, L’Oreal knew how to study the market well and strike its deals in such a way which benefited both parties.
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