L’oreal and the Globalization of American Beauty
“L’Oreal and the Globalization of American Beauty”
I. Key Problem
From the inception of L’Oreal, in 1907, until the late 70’s the global beauty market was largely fragmented and characterized by the domination of local consumer preferences over the search for global efficiencies. Though consumer product companies had been gradually moving toward beauty products and cosmetics, the 80’s marked a monumental industry shift when major conglomerates, such as Unilever and P&G, began to buy leading U.S. companies to globalize their brands. In order to keep up with an industry that was experiencing rapid consolidation and the emergence of more powerful international competition, L’Oreal decided to revamp their globalization strategy. They began to build their international strategy of evolving from a French beauty company to a global brand name around the five strategic elements of arenas, vehicles, differentiators, staging & pacing, and economic logic. Because of the narrow perception of Parisian beauty being luxurious and expensive, L’Oreal believed that in order to compete in the international market they would need to expand their image and offer a more complete product line. The company’s management decided that the American beauty market was the gateway to further international expansion and therefore initially targeted the U.S. as their arena. In order to gain a position in the U.S. market, L’Oreal used the vehicle of foreign direct investment by cautiously moving to acquire potentially profitable U.S. brands. They hoped to use these acquisitions to create a full portfolio of products that they could promote not only locally but also in all major global markets to achieve global economies of scale and scope.
Through the late 80’s and 90’s L’Oreal made multiple successful U.S. acquisitions that filled the gaps in the company’s product offerings and established their three main divisions of operations. In 2000, in an effort to reinforce their luxury
I. Key Problem
From the inception of L’Oreal, in 1907, until the late 70’s the global beauty market was largely fragmented and characterized by the domination of local consumer preferences over the search for global efficiencies. Though consumer product companies had been gradually moving toward beauty products and cosmetics, the 80’s marked a monumental industry shift when major conglomerates, such as Unilever and P&G, began to buy leading U.S. companies to globalize their brands. In order to keep up with an industry that was experiencing rapid consolidation and the emergence of more powerful international competition, L’Oreal decided to revamp their globalization strategy. They began to build their international strategy of evolving from a French beauty company to a global brand name around the five strategic elements of arenas, vehicles, differentiators, staging & pacing, and economic logic. Because of the narrow perception of Parisian beauty being luxurious and expensive, L’Oreal believed that in order to compete in the international market they would need to expand their image and offer a more complete product line. The company’s management decided that the American beauty market was the gateway to further international expansion and therefore initially targeted the U.S. as their arena. In order to gain a position in the U.S. market, L’Oreal used the vehicle of foreign direct investment by cautiously moving to acquire potentially profitable U.S. brands. They hoped to use these acquisitions to create a full portfolio of products that they could promote not only locally but also in all major global markets to achieve global economies of scale and scope.
Through the late 80’s and 90’s L’Oreal made multiple successful U.S. acquisitions that filled the gaps in the company’s product offerings and established their three main divisions of operations. In 2000, in an effort to reinforce their luxury