Change and Continuity in L’Oreal

Change and Continuity in L’Oreal Introduction There have been plenty of cosmetics that have been produced and released in the market by various companies in the previous five years. The reason behind this is that more and more people especially women are becoming more conscious of their physical appearance that they are prepared to spend their hard earned money even on expensive but high quality and effective cosmetics. While the cosmetics industry is comprised of many companies that offer unique cosmetics at varying prices, it remains clear the LOreal remains as one of the more dominant and successful organizations at present. Since its establishment in 1909, LOreal has since become a significant force to reckon with in the cosmetics industry (LOreal Official Website, 2010). The advent of globalization has enabled the company to diversify its products to cater to various target markets with distinct beauty needs. Because of the massive profits that LOreal consistently gets from its local markets, the company has been able to effectively allocate its financial resources towards its expansion activities that have helped solidify the companys dominant position in the cosmetics industry. Guided by the effective leadership headed by CEO Jean-Paul Argon, LOreal has amazingly continued to make strides even in the presence of the global economic crisis that has resulted in many of its competitors experiencing significant declines in productivity and profitability. It is clear that the deep wealth of financial and human resources of LOreal along with the effective strategies to take advantage of the benefits provided by globalization has helped sustain the productivity of the company and it is expected that LOreal would be able to maintain its strength in the next couple of years. Part A: Internal / External Analysis Internal Analysis: Strengths LOreal is very much a recognized and admired company in the field of cosmetics. The organization is actually the most dominant and productive cosmetics producer over the past decades. This dominance consistently allows LOreal to attract more followers and convert them as loyal customers by making them satisfied with the beauty products that they buy. The growing population of LOreal has always been the stable source of revenues for the organization which makes it easy for them to achieve financial strength. The effective leadership of LOreal is doing a great job in adjusting the organizations plans and initiatives based on the latest trends in the cosmetics industry. This signifies the dedication of the management to maintain the positive image of the organization by always offering the more reliable beauty products that people will really enjoy and love. LOreal functions under the principle that to maintain its top position in the cosmetics industry, the focus and emphasis of their activities have to be geared to what their customers really aim for in terms of being beautiful (Begoun 2004, p. 560). LOreal does not take chances and is noted for making smart moves to beat its competitors in launching the most innovative beauty products all the time. LOreals cosmetics do not really come at cheap rates but the huge number of loyal customers is a sufficient proof that these products really work. LOreal is also known for its remarkable capability to always be the first company to find the latest beauty ingredients that will work well. The organization possesses deep financial resources to use in extensive research efforts that will help them to check the typical beauty problems of people. Consistent assessments of the cosmetics of LOreal are also being undertaken so that the organization is assured of the sustained effectiveness of their products. Any moves done by its competitors are also being monitored by LOreal for the organization to be able to respond quickly with better products and initiatives. Internal Analysis: Weaknesses The major point of vulnerability of LOreal is the alarming truth that the organization seems to neglect the idea of selling its cosmetics to the people belonging to the lower classes. The inability of the organization to keep in touch with the lower classes is a huge obstacle that continuously denies them the opportunity to clearly separate itself from the rest of its rivals. Because the prices of LOreal products are not considered as budget friendly among the lower class families, they are consistently being beaten by their rivals in this market segment (Kapferer 2008, p. 379). This is absolutely where the rivals of LOreal are striking back in an effort to somehow catch the company The usual criticism that LOreal receives regarding its cosmetics is that they are only made for the wealthy people to enjoy. The advertisements of LOreal boast of the numerous celebrities that endorse their products, and these send the wrong signals especially to the people belonging to the lower classes that these beauty products were not intended for them to use. This has sparked rumors that LOreal is biased when selecting their target markets that will use their cosmetics (Turner 2005, p. 226). This negative publicity and the failure of the organization to clarify these nasty rumors have somehow cast doubts even on their loyal customers regarding the true intentions of the organization. Critics also always question the corporate social responsibility initiatives of LOreal. Since LOreal has diversified its operations in numerous locations involving more than 80 countries, an evident weakness is that handling and monitoring its global activities have truly turned into significant challenges for the company. It only becomes harder for the company on the areas where LOreal products are not really very much patronized by the public due to the expensive prices and lack of familiarity. If LOreal is not going to do anything to improve its poor status in these countries, their competitors will someday take advantage of these weaknesses and may displace them at the top of the cosmetics industry. External Analysis: Opportunities LOreal is always presented the opportunity to offer its loyal clients with the best cosmetics that are impossible for their competitors to imitate. Even though the company is criticized for its selective target marketing initiatives, it could always help to silence their critics by always coming up with high quality products that are reasonably priced. The company has to continue taking advantage of its excellent research and development team that has proven its capabilities time and time again. The chance to respond to the criticism that LOreal is afraid to deal with the consumers from the lower classes must be grabbed by the company to once and for all settle this issue. Perhaps an important move connected to this would be finding ways to make their products more affordable for the public (Capon 2008, p. 263). This way, the consumers from the lower classes can be able to start appreciating the cosmetics of LOreal and not simply dream of using them just like what they always see and hear in the advertisements. It is always important that the consumers feel that their needs are being addressed by the companies whose products they patronize. LOreal can still keep on searching for other struggling cosmetics organizations and perhaps make intensive moves to acquire them to further expand their operations and strengthen their grip at the top spot in the cosmetics industry. It is no secret that the ongoing financial crisis has affected most companies and minimized their effectiveness, but remarkably LOreal has stayed strong even through the tough circumstances (Tang 2008, p. 20). The deep resources of the company significantly helped them to coast along the difficult stretch of 2008 and 2009 when the financial crisis struck. By making efforts to acquire or strike partnership deals with other smaller cosmetics companies, manufacturers and suppliers, LOreal can be able to take advantage of the financial crisis to pull away from their competitors and pounce on the problems that continue to hound them. External Analysis: Threats Since LOreal is the most dominant cosmetics company at present, the rest of the field is always waiting for any potential mistakes that LOreal is going to make so they can take advantage and pull themselves closer to the top (Doz 2001, p. 44). The intense rivalry is very typical in the cosmetics industry, and if LOreal becomes complacent and starts underestimating the capabilities of their competitors to beat them in sales and profits, it could be a costly mistake and something that the company could regret later on. Whether LOreal admits it or not, the financial crisis sooner or later will become an imminent problem that they will have to deal with especially if the crisis extends for the next two to three years. It can become more problematic if LOreal fails to adjust the prices of its beauty products, as the financial crisis has made most people to hesitate spending their money on expensive beauty products. Therefore, LOreal cannot simply keep relying on its deep financial resources to save them from the impacts of the financial crisis because eventually they will get depleted if even their loyal customers decide to refrain from buying their cosmetics. It is a must for LOreal to be able to find other ways to sustain their financial stability and make contingency plans in case the number of their loyal customers begins to decrease. LOreals promotional activities have also been attacked by critics for being biased and providing statements about their products that are merely lies (Sandhusen 2008, p. 52). These are absolutely not good for the long term progress of the company, as these controversies will forever be remembered by the public which could prevent LOreal from stabling bigger and stronger customer bases. The image of the company may be that of a dominant organization in the cosmetics industry, but if the public would believe that they are involved in illegal and unfair practices, they would eventually be losing majority of their precious clients. Summary What LOreal has to focus on is guaranteeing that they continue to capitalize on their strengths while their vulnerabilities are identified and resolved immediately. The various strengths of LOreal are unique and have been obtained through the hard work and commitment of the company to excellence. It would only be logical for LOreal to keep utilizing their strengths to their advantage given that its competitors are still struggling to the impacts of the economic crisis. The company also has to be resilient to monitor any available opportunities that could emerge and should not hesitate to grab them. LOreal, though, must be extra careful because their competitors are always significant threats to their dominance in the cosmetics industry. They need to pay close attention to their activities especially their marketing programs that have been the subject of controversies and fix the issues immediately. Task 2: Globalization and LOreal How globalization influences policies and decision making in LOreal The advent of globalization has had significant impacts on the policies and decision making of LOreal. Globalization has enabled LOreal to formulate policies that are geared towards utilizing its distinct operational structures to produce cosmetics that can be well appreciated by the public consumers all over the globe (Floyd 2004, p. 77). The policies of LOreal have always been based on globalization, and these include addressing the beauty needs of clients all over the globe, utilizing its resources to produce the best cosmetics, advocating diversity in their workforce to obtain better capabilities, improving its knowledge of world trends in cosmetics as well as establishing effective partnerships with providers and manufacturers all over the world to enhance the outputs and minimize their expenses. Through creating policies and decisions that aim to sustain LOreals dedication in offering the best beauty products to its global clients, the company believes that it is able to use globalization to its advantage. LOreal is aware that establishing a global presence is important for them to achieve success, which is why their policies and decisions are geared toward being involved in the cosmetics industries all over the world. LOreal aims to help establish an excellent business environment all over the world while expanding its operations in various sectors (Haig 2006, p. 27). For LOreal, globalization signifies the necessity for them to broaden its operations to enable more individuals from different cultures to get to know and use their beauty products. This global expansion initiative, though, is being done by the company in an organized and effective manner. LOreal has effective guidelines that help safeguard the environment of the foreign countries where they have operations. T he company also offers employment opportunities that are loaded with excellent incentives. They also have policies in interacting effectively with their providers to advocate the maintenance of excellent guidelines in the production of cosmetics. Of course, LOreal does not forget to recognize the policies and traditions of their global partners for development. The advent of globalization has also heavily influenced the policies and decisions of LOreal with regard to workforce diversity. LOreals policies and decisions are geared towards improving its operations through harnessing the knowledge and skills of their workforces all over the global and getting their precious suggestions and contributions. The company understands that the presence of globalization implies the need for them to rely on their diverse workers and address their typical concerns. The policies of LOreal also include guidelines to coordinate with the leaders of foreign countries where they have operations in offering sources of livelihood for their people in exchange for the continued stay of LOreal. This way, the company is able to maintain good relations with more than 80 countries where they currently have production plants and offices. It has become very clear for LOreal that to achieve global dominance in the cosmetics industry of the world, they have to use the diversity of their workforces to their advantage (Finkelstein 2007, p. 132). While the company has successfully expanded its operations in various continents, it remains a challenge for LOreal to penetrate certain underdeveloped countries due to cultural and language barriers. This is the reason why the management is working to break these barriers through new policies that will enable the company to finally penetrate in these tough locations that will contribute to their long term success. LOreal also has policies that aim to build strong relationships with its global business partners, including material providers and manufacturers. This is based on the philosophy of the company that it cannot achieve success by relying only on its own efforts. The company understands that by encouraging the participation and support of other important business organizations, LOreals aim to succeed can have a better chance to happen (Khanna 2010, p. 101). This structure of operation also helps the company to delegate its responsibilities effectively and trust that their business partners will be able to accomplish the tasks and responsibilities given to them by the LOreal management. Another impact of globalization in the policies and decision making of LOreal is the obvious focus on recognizing the rights, traditions, beliefs and norms of every foreign country where they have operations. The company understands that they have to be careful not to violate any of these international laws and policies if it wants to remain productive in these foreign locations. The policies of LOreal in this regard require the constant communication of the corporate leaders and the government representatives to discuss effectively the guidelines and other agreements that need to be approved. This way, any unexpected problems or concerns that could happen in the international locations can be easily resolved and their potential negative impacts are significantly minimized. Part of the policies of LOreal in respecting the international laws of their global business partners is the policy of maintaining the cleanliness of the environment. As LOreals products involve chemical wastes, the company assures the governments of their global business partners that waste disposal is always done effectively to prevent environmental damage and other hazardous impacts. Critically evaluate the effectiveness of LOreals response to globalization In terms of addressing the beauty needs of clients all over the globe, LOreal has mostly been successful in this regard. LOreal views the existence of globalization as a force that makes the beauty needs of their global clients even more complicated. This is because the existence of globalization can easily change the mentalities of people through what they see, heat and read in the media (Mueller 2004, p. 180). This means that what the beauty products that they might like today may be irrelevant for them tomorrow. However, because of the competent and hard working research and development team of LOreal, the changes in the consumer trends and behavior are easily monitored and thoroughly evaluated by the company. The successful response of LOreal to globalization in terms of addressing the needs of their global customers can be attributed to the hard work of its research and development team. The advent of globalization has also challenged LOreal to utilize its resources effectively to produce the best cosmetics. This is because globalization has also been beneficial to the competitors of LOreal. Its competitors have also acquired the new technologies, information and expertise that have significantly improved their operations and their chances to topple LOreal at the top of the cosmetics industry (Kurtz 2009, p 45). However, LOreal has been able to prove time and time again why it would be hard for its competitors to displace them at the top. Under the guidance of effective leaders, LOreal has consistently been able to maximize the depth of its financial and technological resources to create unique, innovative and relevant beauty products that cater to the beauty needs of its global clients. LOreal has never shown any hesitation to spend significant amounts of money in order to always be the first company to launch cosmetics that can catch the attention of global consume rs. LOreal has also been effective at responding to the challenges of globalization through the presence of diversity in their workforce to obtain better capabilities. With its global operations anchored on the strong contributions of its more than 100 production sites with almost 60,000 workers coming from various cultural backgrounds, LOreal has been successful in maximizing the availability of the skills, knowledge and expertise of its diverse workforce to its advantage. It is quite evident that the presence of globalization has made it mandatory for companies to really use a diverse workforce to be able to cope up to the challenges that it presents (Morck 2005, p. 211). The success of the response of LOreal to globalization in this aspect can be directly attributed to the excellent work of the human resources department of the company. The department is able to effectively select the right combinations of people from various cultures to handle the responsibilities inside the company, and does a good job in making sure that the needs and concerns of the employees are always addressed. As a result, the employees of LOreal all over the world are able to contribute significantly to the overall success of the organization. Globalization has always been connected to modern technologies and mass media, and LOreal has successfully used them in improving its knowledge of world trends in cosmetics. The negative consequences of failing to know and understand the latest developments in any market or industry have always been costly and disastrous for companies, which is why LOreal has significantly invested in modern technologies and production equipment as a proof of their readiness and willingness to embrace the challenges brought about by globalization. LOreal does not really worry about the huge funds that it shells out to acquire these technologies and equipment, because it understands that eventually the advantages of their investments would eventually outweigh the expenses. Aside from expanding its operations globally, LOreal has also been successful at establishing effective partnerships with providers and manufacturers all over the world to enhance their outputs and minimize their expenses. Over the last three years, LOreal has engaged in various acquisitions in an effort to cope up to the expansion activities of its competitors as dictated by globalization. Because of globalization, the implementation of free trade has made it easier for the competitors of LOreal to also engage in expanding their operations especially in areas where LOreal has been having difficulties in penetrating. Nonetheless, the strength of the significant acquisitions of LOreal most notably its acquisition of the Body Shop and Sanofi-Aventis is still much better compared to the minor transactions being done by their competitors. Perhaps the only aspect where LOreal has not achieved any satisfactory results is with regard to the environment (Peng 2008, p. 92). It is a well known fact that globalization has been criticized for causing environmental degradation, and the complaints being received by LOreal with regard to waste management are proofs of this. The company has been blamed for polluting water systems due to the chemicals involved in its production wastes, and this has surely caught the attention of the public. Complaints also with regard to the company making use of live animals to test their products have been condemned by animal rights advocates, and numerous protests have been initiated all over the world to stop LOreal from continuing such initiatives. While the company has always denied being involved in these animal testing activities, animal rights groups have yet to be convinced that LOreal is not guilty of these violations. These negativities are definitely undesirable and need to be fixed b y the company before they get blown out of proportions and become more complicated. Areas for improvement in the response of LOreal An important area of improvement for LOreal is concerning its research and development department. This unit deserves to be given credit for its excellent outputs and performances that have enabled the company to maintain its dominant position in the cosmetics industry. It is safe to say that the challenges brought about by globalization in terms of addressing the unpredictable beauty needs of the people have all been shouldered and correctly identified by the tireless researchers of LOreal (Flapper 2005, p. 80). This does not mean though that there is no more room for improvement for this department. The management of the company can keep allocating funds to this department to make sure that the researchers are able to keep doing their studies and activities without any limitations. It is important to remember that the research team is doing its studies on consumer behavior on a global scale, so financial assistance will definitely be needed by the department. The management of cultural diversity among its employees is also an important area of improvement for LOreal. While the company has done a good job in taking advantage of the diverse skills, knowledge and expertise of its employees all over the world, it will be beneficial for the company if there would be clearer methods of conflict resolution especially as cultural diversity is also the usual culprit of frequent disagreements among the employees. It is impossible to think that the employees of LOreal will always agree to all aspects of their work so it will help that methods of conflict resolution are firmly in place. This is an important impact of globalization that LOreal cannot afford to neglect since it could really have negative consequences on the performance of the company. The company is already doing a great job addressing the needs of their global workforce, but ample focus has to also be given to ensure that the diverse employees of LOreal are all on the same page. The use of mass media for its marketing efforts can also be improved by LOreal in response to the challenges of globalization. LOreal has been criticized for unfair advertising practices which have been denied by the company. Nonetheless, to make sure that all these criticisms are answered effectively, perhaps it is now time for the company to step up their efforts in utilizing various types of media outlets to improve its marketing outputs and reach more consumers from faraway places (Rugman 2005, p. 167). The use of Internet as an effective marketing strategy can be an excellent move for LOreal to intensify its marketing efforts and take advantage of its extensive reach. The marketing team also has to monitor the contents of their advertisements to check if there are indeed signs or indications of racial discrimination to prevent unnecessary controversies and issues from emerging. Perhaps the most important area of improvement that LOreal has to focus on is concerning ethics and environmental issues connected to globalization. This has been the major cause of controversies and problems for the company and it is only a matter of time before lawsuits will be filed against LOreal for continuous violations on animal rights and environmental policies. The improvement necessary for this starts with the employees of the company learning to follow the policies especially since they are operating in foreign countries. The management and the employees of LOreal really need to make serious discussions regarding these matters because if they are left unresolved, they will really start pulling the company down. These controversies are not good for the image of LOreal, so the sooner they are able to provide remedies to these problems, the better it will be for the company as they can start concentrating on issues and concerns that are more important than dealing with the co nsequences of their inability to follow policies. Conclusion There is no doubt that LOreal is at present at the top of the cosmetics industry because of its effective strategies that are geared towards taking advantage of its strengths and opportunities as well as reducing the impacts of its weaknesses and the threats being imposed by its competitors. It has also helped the company in having excellent leaders and hardworking, diverse employees. LOreal firmly believes that cultural diversity is an asset for the company, which is why the skills, knowledge and expertise of its employees are always developed to maximize them and put them to good use. Globalization is perceived by LOreal as a challenge and an opportunity to keep improving its operations all over the world. LOreals policies and decisions have undoubtedly been influenced by the impacts of globalization, and the company does not see anything bad at it for as long as the activities that they do are always in accordance to their mission, vision and objectives. The policies of LOreal have always been based on globalization, and these include addressing the beauty needs of clients all over the globe, utilizing its resources to produce the best cosmetics, advocating diversity in their workforce to obtain better capabilities, improving its knowledge of world trends in cosmetics as well as establishing effective partnerships with providers and manufacturers all over the world to enhance the outputs and minimize their expenses. There have also been negative impacts of globalization that LOreal needs to resolve immediately to make sure that they are able to maintain at the top of the cosmetics industry for the long term.