Presentation on Strategy Formulation and Situation Analysis. By, Manpreet Chadha For, Prof.

Michael Wasserman 22nd Dec, 2012

Strategy Formulation
Strategic planning is concerned with developing a corporations missions, objectives, strategies and policies SWOT analysis is a popular tool for gauging the overall situation The advantages of SWOT,
Identification of corporations objectives, Analyzing the resources available to the firm Identifying untapped opportunities

Strengths
World Leader in Cosmetic Brands Strong Research & development, 613 patents (source-LinkedIn) Diversified product portfolio (cosmetics and personal care) Presence in 130 countries! (source-LinkedIn) Strong Supply-Chain Integrated Corporate Social Responsibility policy

Weaknesses
Misleading ad claims
LOreal ad featuring actress Rachel Weisz was banned in the U.K. , as it was unrealistic and mislead the anti-wrinkle creams effectiveness Was blamed for Indian actress Freida Pintos excessively white skin in a makeup ad
Recently was accused by the FDA and was asked to change the Web site and product labels to ensure the claims dont violate drug regulations
(Source: mediadecoder.blogs.nytimes.com)

Opportunities
Emerging markets of developing countries Growing cosmetic range for over 60
(source: http://www.loreal-finance.com/site/us/contenu/rapport/rapport2006/Markets_trends.pdf)

More strategic mergers and acquisitions Sustainable growth by improving technology

Threats
Local Players in emerging markets Foreign rules and regulations Counterfeit products Cannibalization

EFAS (External Factor Analysis Summary)

External Strategic Factors Opportunities Growing cosmetic range for over 60 Weight Rating Weighted Scores Comments

More strategic mergers and acquisitions

Sustainable growth by improving technology Emerging markets of developing countries

0.10 0.15 0.10 0.15 0.15 0.15 0.10 0.10

5 4 3 4 3 3 2 2

0.50 0.60 0.30 0.60 0.45 0.45 0.20 0.20

Lancme has great positioning

To target more ethnicities

Would even contribute to CSR Great potential demand Can be stringent Can reduce margins Can reduce margins Scanning s important

Threats
Foreign rules and regulations Counterfeit products Cannibalization Local Players in emerging markets

TOTAL SCORES

1.00

3.30

IFAS (Internal Factor Analysis Summary)

Internal Strategic Factors Strengths
World Leader in Cosmetic and Personal care Brands

Weight

Rating

Weighted Scores

Comments

0.15 0.10 0.10 0.15

4 4 4 5

0.60 0.40 0.40 0.75

High Brand equity Understanding the consumer needs in a better way Economies of scale Available funds for expansion

Strong Research & development, 613 patents Diversified product portfolio Strong Supply-Chain and CSR

Weaknesses
Misleading ad claims

0.50

1.00

Have been an issue for a while, can hamper image

TOTAL SCORES

1.00

3.15

SFAS (Strategic Factors Analysis Summary)

SFAS (Strategic Factors Analysis Summary)
Weighted Scores

Weight
Strategic Factors

Rating

Comments

Emerging markets of developing countries (O)

Foreign rules and regulations (T)

0.15

0.75

0.10 Counterfeit products(T) 0.10 More strategic mergers and acquisitions (O) 0.15

4 4 4

0.40 0.40 0.60

* * *

Strong Supply-Chain and CSR (S) Misleading ads (W) World Leader in Cosmetic and Personal Care Brands

0.10 0.25 0.15

2 2 2

0.20 0.50 0.30 *

* *

TOTAL SCORES

1.00

3.15

TOWS Matrix

L'Oreal's Competitive Analysis

Strategy Formulation intertwines with competition faced and can be analyzed with Porters 5 Forces Review of Mission and Objectives

Innovation and Research (launches 2-3 products annually)

Diversified Product Portfolio Leveraging brand-esteem through marketing mix and celebrity endorsements

Co-operative Strategies
Joint agreement with CosMedic to introduce BioMedic products Acquired premium skin- care products company SkinCeuticals, 2004 Acquired Chinese brand Mininurse in 2004 Acquired Soft-Sheen, a leading hair care brand for AfroAmerican women Took over The Body Shop in 2006

Discussion Board Questions

What alternative strategies L'Oreal can implement if new competition enters?

Please go through the video on L'Oral Paris Revitalift Ad featuring Rachel Weisz. https://www.youtube.com/watch?v=APF41QIBBho Do you think L'Oreal broke any ethical standards, if so, then what approach it should have taken?

Other References
(Essentials of Strategic Management, 5th Edition, by Hunger & Wheelen) www.loreal.com/_en/_ww/tools/privacy/privacy_1.aspx L'Oreal's LinkedIn pagehttp://www.linkedin.com/company/loreal/careers?trk=top_na v_careers