LOREAL Business Analysis

8/10/2019 LOREAL Business Analysis

1/33


2/33


3/33


4/33


5/33


6/33

Cosmetics Are Part Of TheUniversal Quest For

Beauty

As a form of self expression,they are personal in the fullestsense - just as they are part ofsocial life, serving a daily need

-tact with others. At LOreal, weare fully committed to meetingthat need, putting all our exper-

tise and research resources towork for the well-being of menand women, in al their diversity,around the world. That commit-

tment is what gives meaning toour business. LOreal achieves 7 out of 9


7/33

Beauty for All

At LOreal, we are fully committed to meeting the need for high quality cosmet-

all our expertise and research resources to work for the well-being of men andwomen, in all their diversity, around the world. For that purpose we strive to -logical territories while ensuring that each of our employees had the opportu-

nity to develop his or her potential growth.That committment is what gives meaning to our business.


8/33


9/33


10/33

Millions 2010 2009 2008Net Sales 19,495.8 17,472.6 17,541.8

Cost of Sales -5,696.5 -5,161.6 -5,187.2

Gross Profit 13,799.3 12,311 12,354.6

Research & Development -664.7 -609.2 -587.5

Advertising and Promotion -6,029.1 -5,388.7 -5,269.1

Selling, general & administrative expenses -4,048.6 -3,735.5 -3,773.4

Operating Profit 3,056.9 2,577.6 2,724.6

Other income and expenses -153.2 -277.6 -156.3

Operational Profit 2,903.7 2,299.9 2,568.3

Finance costs on gross debt -43.8 -92.0 -208.8

Finance income on cash and cash equivalents 17.2 16.0 34.6

Finance costs, net -26.6 -76.0 -174.2

Other financial income (expenses) -9.0 -13.0 -7.2

Sanofi-Aventis dividends 283.8 260.1 244.7

Profit before tax and non-controlling interests 3,151.9 2,471.0 2,631.6

Income tax -909.9 -676.1 -680.7Net Proft 2,242.0 1,794.9 1,950.9

attributable to:

-owners of the company 2,239.7 1,792.2 1,948.3

-non-controlling interest 2.3 2.7 2.6

Earnings per share attributable to owners of the company 3.82 3.07 3.31


11/33


12/33


13/33

Critical Success Factor L'Oreal P&G Avon Estee Lauder

Weight Rating Score Rating Score Rating Score Rating Score

Advertising 0.15 4 0.6 4 0.6 1 0.15 3 0.45

Product Quality 0.1 3 0.3 3 0.3 4 0.4 4 0.4Innovation 0.05 4 0.2 2 0.1 2 0.1 3 0.15

Price Competitiveness 0.1 3 0.3 3 0.3 3 0.3 2 0.2

Management 0.1 3 0.3 3 0.3 4 0.4 3 0.3

Market Share 0.1 4 0.4 3 0.3 2 0.2 2 0.2

Global Expansion 0.05 3 0.15 2 0.1 3 0.15 3 0.15

Distribution 0.05 3 0.15 3 0.15 2 0.1 2 0.1Customer Loyalty 0.1 3 0.3 2 0.2 4 0.4 4 0.4

Financial positioning 0.1 4 0.4 3 0.3 4 0.4 4 0.4

Product Selection 0.05 4 0.2 4 0.2 4 0.2 4 0.2

Social Responsibility 0.05 4 0.2 4 0.2 4 0.2 4 0.2

Total 1 3.5 3.05 3 3.15


14/33

L'OREAL AVON REVLON ESTEE LAUDER

LIQUIDITY

Current Ratio 1.0x 1.4x 1.5x 1.8xQuick Ratio 0.6x 0.7x 0.7x 1.1x

LEVERAGE RATIOS

Debt to Assets Ratio 0.4x 0.8x 1.6x 0.6x

Debt to Equity Ratio 0.6x 4x (3)x 4x

Long Term Debt to Equity Ratio 0.06x 1.5x (1.7)x 0.4x

ACTIVITY RATIOS

Inventory Turnover 3 Days 3 Days 3 Days 2 Days

Fixed Assets Turnover 7 Days 7 Days 13 Days 8 Days

Total Assets Turnover Under1 Day 1 Day 1 Day 1 Day

Accounts Receivable Turnover 6 Days 14 Days 7 Days 7 Days

PROFITABILITY RATIOS

Gross Profit Margin 70.80% 63.52% 64.95% 78.49%

Operating Profit Margin 15% 10% 14% 16%Net Profit Margin 11% 6% 25% 6%

Return on Assets 7.92% 10.25% 12.91% 14.17%

Return on Equity 15.76% 43.96% -37.28% 34.25%

Earnings Per Share $3.79 $1.39 $6.26 $2.38

Price Earnings Ratio (MS based on

11/08/10)6 21 2 31

GROWTH RATIOS

Sales 12% 6% 2% 13%

Net Income 25% -3% 571% 47%


15/33

Self Regulation by CTFA (Cosmetics Toiletry Fragrance Association) Manufacturers responsibility for customer safety FDA regulates labelling and inspects manufacturing facilities FDA does not test cosmetics Container cant contain poisonous material


16/33

Rules for labelling:

Identity statement - nature and use of product Net quantity of contents - weight

Name & place of business Distributor statement - where its manufactured and by who Material facts

ingredients

Ingredients Labelings cant be false or misleading


17/33

What can a product contain?

cannot contain decomposed substance

must be packaged in sanitary conditions where there is no contamination container cannot contain poisonous material

d substance

ry con itions w ere t ere is no contaminationsonousmater a


18/33

1. SUPPLIERS

Bargaining Power of suppliers HIGH

Bargaining Power of suppliers at LOreal - LOW

2. SUBSTITUTE PRODUCTSPotential development of substitute products- MEDIUM to LOW

3. COMPETITORS - HIGH to MEDIUM

low

low

low

low

high

high

high

high

med

med

med

med

LOreals competitive advantage is product differentiation


19/33

4. BUYERSBargaining power of consumers/buyers - MEDIUM to LOW

- Age 16 to 60 years old- Middle to upper class- Higher education, and cultural knowledge- Higher income level

- Man and woman, the majority of women- Have leisure time- Is critical, and informed consumer- Not afraid to complain, not tolerant of mistakes and failures inproducts

5. ENTRY OF NEW COMPETITORSPotential entry of new competitors - LOW

low

low

high

high

med

med


20/33


21/33

- Financial

-


22/33

- Technological

o Patents 612 patents in 2010

o 18 research centers across the world o 12 evaluation centers

- Reputation


23/33

- Human Resources

o 66,619 employees in 2010

o My Learning Internet platform that trains employees and

and enrichment


24/33

- Advanced research and development on ethnic skin types

- Ability to venture into untapped markets

- Cutting edge technology and constant innovation

- Brand management

- Ability to reduce debt to equity ratio by 14.1% in a year


25/33


26/33


27/33

Internal family disputes on heritage and companycontrol

Weak in the North American market: smallest

production and sales Decentralized company structure means hard tocontrol: slows down company production and weakenimage.

Hard to know who is accountable for problems with all

these different brands in one company. Worldwide marketing strategy that adapts product and

advertising to the culture: blurs image of company.

Continuous innovative ideas and products required:

high R&D costs, and so high risk


28/33

Market development in untapped countries such asKorea and the Middle East

Technological advancement creates new markets andadvertising medium opportunities: social media, online

website Growing aging market in Western countries

Growing markets in developing countries of Asia:aspiring customers

Male growing interest in beauty

Growing concern for UV protection and minimizingaging

Growing concern for environmentally friendly products


29/33

Increasing competition from pharmaceuticals

Trend towards cosmetic surgery has increased withTV shows etc

Image of beauty if changing towards a more natural,makeup free look

Lingering recession and slow economic growth:reduced consumer spending

hard to approach those markets

Increase government policies and regulations oncosmetics may increase prices.

Increase in oil and transportation price: global


30/33

Market share abroad + increase international brand awareness Economies of scale Knowledge and adaptation to culture Attract investors from new markets

Disadvantages and Costs

Market and government regulations Increase transportation and distribution costs Risk of failure to meet demand of new markets


31/33


32/33

Will speed up production and give innovation leadership Will give competitive advantage over companies that do not possess several brands Will avoid redundant costs

Disadvantages and Costs

Need a lot of communication + organization


33/33

Date post:	02-Jun-2018
Category:	Documents
Upload:	marius-ciuculan
View:	231 times
Download:	0 times

LOREAL Business Analysis

Documents