L'Oreal and the Globalization of American Beauty SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of L'Oreal and the Globalization of American Beauty
Examines L'Oreal's acquisition of leading U.S. cosmetics brands, including Maybelline, Redken, and Kiehl's, and their subsequent renewal and globalization. Reviews the history of L'Oreal, now the world's largest cosmetics company, from its origins in France in 1907. The company entered the United States in 1953, and from 1990, expanded rapidly with the acquisition of U.S. brands, which were renewed and then taken international. Focuses on Kiehl's--since 1851, a quirky New York luxury brand--which L'Oreal acquired in 2000 and is now expanding globally. Shows how L'Oreal developed a portfolio of U.S. and European brands that are now sold globally. Explores the corporate strategy and marketing challenges facing consumer products firms as they globalize and how acquisitions can facilitate globalization.
Authors :: Geoffrey G. Jones, David Kiron, Vincent Dessain, Anders Sjoman
Swot Analysis of "L'Oreal and the Globalization of American Beauty" written by Geoffrey G. Jones, David Kiron, Vincent Dessain, Anders Sjoman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that L'oreal Kiehl's facing as an external strategic factors. Some of the topics covered in L'Oreal and the Globalization of American Beauty case study are - Strategic Management Strategies, Business history, Entrepreneurship, Globalization, Mergers & acquisitions and Global Business.
Some of the macro environment factors that can be used to understand the L'Oreal and the Globalization of American Beauty casestudy better are - – supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, geopolitical disruptions, there is backlash against globalization, increasing transportation and logistics costs,
technology disruption, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of L'Oreal and the Globalization of American Beauty
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in L'Oreal and the Globalization of American Beauty case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the L'oreal Kiehl's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which L'oreal Kiehl's 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 and the Globalization of American Beauty can be done for the following purposes –
1. Strategic planning using facts provided in L'Oreal and the Globalization of American Beauty case study
2. Improving business portfolio management of L'oreal Kiehl's
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of L'oreal Kiehl's
Strengths L'Oreal and the Globalization of American Beauty | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of L'oreal Kiehl's in L'Oreal and the Globalization of American Beauty Harvard Business Review case study are -
Successful track record of launching new products
– L'oreal Kiehl's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. L'oreal Kiehl's 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.
Organizational Resilience of L'oreal Kiehl's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that L'oreal Kiehl's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– L'oreal Kiehl's 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 Geoffrey G. Jones, David Kiron, Vincent Dessain, Anders Sjoman 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.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For L'oreal Kiehl's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. L'oreal Kiehl's 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.
Diverse revenue streams
– L'oreal Kiehl's is present in almost all the verticals within the industry. This has provided firm in L'Oreal and the Globalization of American Beauty 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.
Sustainable margins compare to other players in Global Business industry
– L'Oreal and the Globalization of American Beauty firm has clearly differentiated products in the market place. This has enabled L'oreal Kiehl's to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped L'oreal Kiehl's to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that L'oreal Kiehl's 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.
Innovation driven organization
– L'oreal Kiehl's is one of the most innovative firm in sector. Manager in L'Oreal and the Globalization of American Beauty 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'oreal Kiehl's 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.
Learning organization
- L'oreal Kiehl's is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at L'oreal Kiehl's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in L'Oreal and the Globalization of American Beauty Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– L'oreal Kiehl's has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study L'Oreal and the Globalization of American Beauty - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the L'Oreal and the Globalization of American Beauty Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Weaknesses L'Oreal and the Globalization of American Beauty | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of L'Oreal and the Globalization of American Beauty are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study L'Oreal and the Globalization of American Beauty, it seems that the employees of L'oreal Kiehl's don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Capital Spending Reduction
– Even during the low interest decade, L'oreal Kiehl's 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Geoffrey G. Jones, David Kiron, Vincent Dessain, Anders Sjoman suggests that, L'oreal Kiehl's 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.
Workers concerns about automation
– As automation is fast increasing in the segment, L'oreal Kiehl's 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 cash cycle compare to competitors
L'oreal Kiehl's 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.
Lack of clear differentiation of L'oreal Kiehl's products
– To increase the profitability and margins on the products, L'oreal Kiehl's needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though L'oreal Kiehl's has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - L'Oreal and the Globalization of American Beauty should strive to include more intangible value offerings along with its core products and services.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the L'Oreal and the Globalization of American Beauty HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though L'oreal Kiehl's has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As L'Oreal and the Globalization of American Beauty HBR case study mentions - L'oreal Kiehl's takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Increasing silos among functional specialists
– The organizational structure of L'oreal Kiehl's is dominated by functional specialists. It is not different from other players in the Global Business segment. L'oreal Kiehl's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help L'oreal Kiehl's to focus more on services rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, L'oreal Kiehl's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study L'Oreal and the Globalization of American Beauty can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities L'Oreal and the Globalization of American Beauty | 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 and the Globalization of American Beauty are -
Manufacturing automation
– L'oreal Kiehl's can use the latest technology developments to improve its manufacturing and designing process in Global Business segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. L'oreal Kiehl's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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'oreal Kiehl's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– L'oreal Kiehl's has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study L'Oreal and the Globalization of American Beauty - to build a competitive advantage using analytics. The analytics driven competitive advantage can help L'oreal Kiehl's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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'oreal Kiehl's in the consumer business. Now L'oreal Kiehl's can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, L'oreal Kiehl's can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
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'oreal Kiehl's can use these opportunities to build new business models that can help the communities that L'oreal Kiehl's operates in. Secondly it can use opportunities from government spending in Global Business sector.
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'oreal Kiehl's 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.
Developing new processes and practices
– L'oreal Kiehl's can develop new processes and procedures in Global Business industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Learning at scale
– Online learning technologies has now opened space for L'oreal Kiehl's 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects L'oreal Kiehl's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at L'oreal Kiehl's can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Global Business segment.
Lowering marketing communication costs
– 5G expansion will open new opportunities for L'oreal Kiehl's in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Threats L'Oreal and the Globalization of American Beauty 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 and the Globalization of American Beauty are -
Environmental challenges
– L'oreal Kiehl's 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'oreal Kiehl's can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study L'Oreal and the Globalization of American Beauty, L'oreal Kiehl's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Shortening product life cycle
– it is one of the major threat that L'oreal Kiehl's is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of L'oreal Kiehl's
– 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'oreal Kiehl's.
Stagnating economy with rate increase
– L'oreal Kiehl's 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.
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.
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.
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'oreal Kiehl's needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
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'oreal Kiehl's business can come under increasing regulations regarding data privacy, data security, etc.
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'oreal Kiehl's in the Global Business sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents L'oreal Kiehl's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– L'oreal Kiehl's needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Global Business industry regulations.
Consumer confidence and its impact on L'oreal Kiehl's demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Weighted SWOT Analysis of L'Oreal and the Globalization of American Beauty 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 and the Globalization of American Beauty 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 and the Globalization of American Beauty 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 and the Globalization of American Beauty 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 and the Globalization of American Beauty 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'oreal Kiehl's needs to make to build a sustainable competitive advantage.