Case Study Description of L'Oreal India: Where Beauty Meets Tradition
In 2013, L'OrA?al SA had become the largest cosmetics manufacturer in the world by understanding different markets and offering products to those consumers that met needs they may not have realized they even had. In India, L'OrA?al spent more than 20 years studying its target consumers and developing products to cater to their specific needs. However, developing localized products was not the only criterion for success in a new market. L'OrA?al needed to also localize every aspect of its operations, from research and development to marketing and outreach. As well, the company needed to deal with intensifying competition as global and local players challenged L'OrA?al's efforts to penetrate and dominate the hair-care, skincare, makeup, and professional hair-care segments in the value-conscious and largely unorganized but fast-growing beauty market in India. What localization and market development strategies should L'OrA?al implement? Prem Shamdasani is affiliated with National University of Singapore.
Swot Analysis of "L'Oreal India: Where Beauty Meets Tradition" written by Prem Shamdasani includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that L'ora Al facing as an external strategic factors. Some of the topics covered in L'Oreal India: Where Beauty Meets Tradition case study are - Strategic Management Strategies, Manufacturing, Marketing, Sales and Strategy & Execution.
Some of the macro environment factors that can be used to understand the L'Oreal India: Where Beauty Meets Tradition casestudy better are - – increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, geopolitical disruptions, increasing energy prices, central banks are concerned over increasing inflation,
customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of L'Oreal India: Where Beauty Meets Tradition
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in L'Oreal India: Where Beauty Meets Tradition case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the L'ora Al, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which L'ora Al operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of L'Oreal India: Where Beauty Meets Tradition can be done for the following purposes –
1. Strategic planning using facts provided in L'Oreal India: Where Beauty Meets Tradition case study
2. Improving business portfolio management of L'ora Al
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of L'ora Al
Strengths L'Oreal India: Where Beauty Meets Tradition | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of L'ora Al in L'Oreal India: Where Beauty Meets Tradition Harvard Business Review case study are -
Training and development
– L'ora Al has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in L'Oreal India: Where Beauty Meets Tradition Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High switching costs
– The high switching costs that L'ora Al has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Superior customer experience
– The customer experience strategy of L'ora Al in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– L'ora Al is one of the most innovative firm in sector. Manager in L'Oreal India: Where Beauty Meets Tradition Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the L'ora Al are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For L'ora Al digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. L'ora Al has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Successful track record of launching new products
– L'ora Al has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. L'ora Al has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Low bargaining power of suppliers
– Suppliers of L'ora Al in the sector have low bargaining power. L'Oreal India: Where Beauty Meets Tradition has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps L'ora Al to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– L'ora Al is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Prem Shamdasani can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Ability to recruit top talent
– L'ora Al is one of the leading recruiters in the industry. Managers in the L'Oreal India: Where Beauty Meets Tradition are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Strategy & Execution field
– L'ora Al is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled L'ora Al in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– L'ora Al is present in almost all the verticals within the industry. This has provided firm in L'Oreal India: Where Beauty Meets Tradition case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Weaknesses L'Oreal India: Where Beauty Meets Tradition | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of L'Oreal India: Where Beauty Meets Tradition are -
Slow decision making process
– As mentioned earlier in the report, L'ora Al has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. L'ora Al even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High cash cycle compare to competitors
L'ora Al has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High bargaining power of channel partners
– Because of the regulatory requirements, Prem Shamdasani suggests that, L'ora Al is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Capital Spending Reduction
– Even during the low interest decade, L'ora Al has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, L'ora Al is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study L'Oreal India: Where Beauty Meets Tradition can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the segment, L'ora Al needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of L'ora Al supply chain. Even after few cautionary changes mentioned in the HBR case study - L'Oreal India: Where Beauty Meets Tradition, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left L'ora Al vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, firm in the HBR case study L'Oreal India: Where Beauty Meets Tradition has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract L'ora Al 's lucrative customers.
Skills based hiring
– The stress on hiring functional specialists at L'ora Al has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Low market penetration in new markets
– Outside its home market of L'ora Al, firm in the HBR case study L'Oreal India: Where Beauty Meets Tradition needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study L'Oreal India: Where Beauty Meets Tradition, is just above the industry average. L'ora Al needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Opportunities L'Oreal India: Where Beauty Meets Tradition | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study L'Oreal India: Where Beauty Meets Tradition are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects L'ora Al can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. L'ora Al can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help L'ora Al to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Leveraging digital technologies
– L'ora Al can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. L'ora Al can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, L'ora Al can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, L'Oreal India: Where Beauty Meets Tradition, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of L'ora Al has opened avenues for new revenue streams for the organization in the industry. This can help L'ora Al to build a more holistic ecosystem as suggested in the L'Oreal India: Where Beauty Meets Tradition case study. L'ora Al can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, L'ora Al can use these opportunities to build new business models that can help the communities that L'ora Al operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Loyalty marketing
– L'ora Al has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, L'ora Al is facing challenges because of the dominance of functional experts in the organization. L'Oreal India: Where Beauty Meets Tradition case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Buying journey improvements
– L'ora Al can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. L'Oreal India: Where Beauty Meets Tradition suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for L'ora Al in the consumer business. Now L'ora Al can target international markets with far fewer capital restrictions requirements than the existing system.
Learning at scale
– Online learning technologies has now opened space for L'ora Al to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Threats L'Oreal India: Where Beauty Meets Tradition External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study L'Oreal India: Where Beauty Meets Tradition are -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. L'ora Al needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents L'ora Al with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for L'ora Al in the Strategy & Execution sector and impact the bottomline of the organization.
Environmental challenges
– L'ora Al needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. L'ora Al can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Increasing wage structure of L'ora Al
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of L'ora Al.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Stagnating economy with rate increase
– L'ora Al can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of L'ora Al.
High dependence on third party suppliers
– L'ora Al high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of L'ora Al business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– L'ora Al has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, L'ora Al needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. L'ora Al will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Weighted SWOT Analysis of L'Oreal India: Where Beauty Meets Tradition Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study L'Oreal India: Where Beauty Meets Tradition needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study L'Oreal India: Where Beauty Meets Tradition is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study L'Oreal India: Where Beauty Meets Tradition is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of L'Oreal India: Where Beauty Meets Tradition is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that L'ora Al needs to make to build a sustainable competitive advantage.