Anika PatelAVP Consultant Group, LLC
Presentation Outline
I. Introduction
II. Mission/Vision
III. Internal Assessmenta. Financial Ratiosb. Organizational Chartc. Market Positioning Mapd. Marketing Strategye. Value of the Firmf. Strengths/Weaknessesg. IFE
IV. External Assessmenta. Competitor Analysisb. CPMc. Opportunities/Threatsd. EFE
V. Strategy Formulation
a. SWOT
b. SPACE
c. BCG
d. IE
e. GSM
f. QSPM
g. Recommendations
VI. Strategy Implementation
a. EPS/EBIT Analysis
b. Projected Statements and
Ratios
VII. Conclusion
HISTORY OF L’Oreal:
- L’Oreal was founded in France in 1909.
- One century of expertise in cosmetics.
Group Profile:
- $ 26.2 billion consolidated sales in 2011
- 27 global brands
- 613 patents filed in 2011
- Present in 130 countries in 5 continents.
COMPANY OVERVIEW
Headquarters: Clichy, Hauts-de-Seine, France
Chairman and Chief Executive Officer:
Jean-Paul Agon
Employees: 68,900
Operational Groups: 6 Divisions
Non-executive Director & Major Shareholder:
Natalia Streignard
Area Served: Worldwide
COMPANY OVERVIEW
Consumer Products ($12,687.4, 48%)
Luxury Products ($ 6,192.1, 24%)
Professional Products ($ 3,629.4, 14%)
Active Cosmetics ($ 1,833.9, 7%)
Dermatology Branch ($ 909.1, 3%)
The Body Shop ($ 990.2, 4%)
Total ($26,242.6, 100%)
PRODUCTS and SERVICESIn $ millions except percentages
Products and Services
Western Europe $ 9,348.1 (36%)
North America $ 5,683.9 (22%)
New Markets: $ 9,311.3 (35%)
Asia-Pacific ($ 4,669.2, 18%)
Latin America ($ 2,168.4, 8%)
Eastern Europe ($ 1,724.6, 6%)
Africa, Middle East ($ 749.1, 3%)
Dermatology Branch $ 909.1 (3%)
The Body Shop $ 990.2 (4%)
Total Revenues $ 26,242.6(100%)
2011 Revenues by Geo Divisions
In $ millions except percentages
2011 Sales by Division ($ Millions)
Western
Europe,
$9,348.10 North
America,
$5,683.90
Asia-Pacific,
$4,669.20
Latin America,
$2,168.40
Eastern Europe,
$1,724.60
Africa & Middle
East, $749.10
Dermatology
Branch,
$909.10
The Body Shop,
$990.20
Total 2011 Sales = $26,242.6 million
BEAUTY FOR ALLFor more than a century, L’Oréal has devoted itself solely to one business: beauty (2). It is a business rich in meaning, as it enables all individuals (1) to express their personalities, gain self-confidence and open up to others (7).
Beauty is a language. (6).L’Oréal has set itself the mission of offering all women and men worldwide (3) the best of cosmetics (2) innovation (4) in terms of quality, efficacy and safety (8). It pursues this goal by meeting the infinite diversity of beauty needs and desires all over the world (3).
Beauty is universal. (6)Since its creation by a researcher (4) the group has been pushing back the frontiers (7) of knowledge (4). Its unique Research arm enables it to continually explore new territories and invent the products of the future, while drawing inspiration from beauty rituals the world over (6).
Beauty is a science. (6)Providing access to products that enhance well-being, mobilizing its innovative strength (4) to preserve the beauty of the planet and supporting local communities (8). These are exacting challenges, which are a source of inspiration and creativity for L’Oréal.
Beauty is a commitment. (6)By drawing on the diversity of its teams (9), and the richness and the complementarity of its brand portfolio (2), L’Oréal has made the universalization of beauty its project for the years to come.
L’Oréal, offering beauty for all. (6)
Current Vision & Mission Statement:
At L’Oreal, we believe beauty is language, science, commitment, universal, and permeates all (6). Our mission is to empower our highly creative team of researchers to design innovative (4, 7), healthy products (2), and our attentive employees (9) to remain responsive to the diverse tastes of our radiant customers (1) who confidently express their inner and outer beauty in our continuously expanding markets around the world (3, 5). Our shareholders can take pride in their investment knowing they contribute to one of the most socially responsible (8) and profitable (5) providers of magnificence (7).
Beauty for all.
Improved Vision & Mission Statement:
Revlon Inc. mission is to emerge as the leader (5) in cosmetic and personal care (2) throughout the world (3). Revlon takes pride (7) in manufacturing (4) the top skin care (2) and strives to please young and older women (1) alike. Revlon Inc. Vision is to satisfy the needs of their customers (1) with glamour and excitement (7) that they provide at an affordable price (8).
Competitor’s Vision & Mission Statement:
Internal Assessment
(2011) L’Oreal Revlon IndustryGrowth Rate (2010-2011) % 0.0435 0.0454 0.044
Revenues $ 26,242.6 1,381.4 202,535
Gross Profit Margin % 0.7124 0.6434 0.4931
OPS Profit Margin % 0.1704 0.1472 0.1368
Net Profit Margin % 0.1200 0.0387 0.1067
Current Ratio % 1.0831 1.5469 0.52
Quick Ratio % 0.7953 1.2161 0.40
Return on Assets % 0.0909 0.0461 0.0185
Financial Ratio Analysis: Revenues in $ millions except per share data
(2011) L’Oreal Revlon IndustryDebt-to-Equity Ratio % 0.1185 (1.7518) 0.5980
Return on SH Equity % 0.1384 (0.0771) 0.3180
Price/Earnings Ratio % 0.1268 0.1800 0.5934
Earnings per share $ 9.64 81.26 14.40
Inventory Turnover % 9.900 12.4 1.19
Total Asset Turnover % 0.800 1.2 0.28
Accounts Receivable Turnover
% 6.7896 6.5160 3.16
Average Collection Period days 53.8 56.0 -
Financial Ratio Analysis: Revenues in $ millions except per share data
Current Organizational Chart:Chairman of the Board &
CEO
EVP, Admin & Finance
Managing Director
Operations
EVP Research & Innovation
Managing Director Strategic Marketing
Department
Managing Director of
Human Resources
Managing Director of Corporate
Communications, Sustainable
Development& Public Affairs
President, Consumer Products Division
Managing Director of
Luxury Products Division
Managing Director of
Active Cosmetics Division
General Manager of Professional
Products Division
Managing Director of
Asia –Pacific Zone
Managing Director of
Latin America
Managing Director of
North America
Managing Director
Africa, Middle East Zone
Problems with Current Organizational Chart CEO and Chairperson titles assigned to
same person.
There is no Chief Operating Officer (COO) instead has Managing Director of Operations.
Executive Vice President of Administration & Finance titles assigned to same person.
Managing Director of Corporate Communications, sustainable Development and Public Affairs title is ambiguous.
Recommended Organizational Chart
Chief Finance Officer
Chief Marketing
Officer
Chief Human
Resources
Chief Info Officer
Chief R&D Officer
Chief Technology
Officer
President Africa & Middle
East
President Europe
Chief Operating
Officer
CEO
President Latin
America
President Asia-
Pacific
President North
America
By Geographic Regions
VP of Consumer Products
VP of L’Oreal Luxury
VP of Active Cosmetics
VP of Professional
Products
President Body Shop
President Derma Branch
Chairman of the Board
Chief Legal
Officer
Organizational Chart Improvements
Added Chief Legal Officer, Chief
Information Officer, Chief Technology
Officer.
Presidents report to COO.
Gave officers only one title.
Divisional Vice Presidents report to their
respecting Geographic Zone President.
Assign Presidents to The Body Shop and
The Dermatology Branch.
Countries of Operation
Higher
Quality
Lower
Quality
Lower Breadth
of Products
Higher Breadth
of Products
MARKET POSITIONING MAP
L’Oreal
Revlon
Avon
Higher
Breadth
of Products
Lower
Breadth
of Products
Higher
Quality
Lower
Quality
MARKET REPOSITIONING STRATEGIES
Revlon
Avon
L’Oreal
CURRENT MARKETING STRATEGIES
L’Oreal has nearly 1 billion consumers
globally (representing around 15% of
population), and plans to conquer a billion
new consumers over next 10 to 15 years.
L’Oreal has 41 production plants across
current market and invested to add new
sites in Mexico, Indonesia, and Egypt.
L’Oreal has presence in 130 countries and
plans to expand in other developing
markets.
$9,348.6
$5,683.7
$2,168.5
$1,724.7
$749.5$4,668.5
CURRENT OPERATIONS
L’Oreal Sales 2011 by Zone ($mil)
$757.4
$107.2
$74.7
$233.4
$208.7$9,348.6
$5,683.7
$2,168.5
$1,724.7
$749.5$4,668.5
CURRENT OPERATIONS
L’Oreal Sales 2011 by Zone ($millions)
Revlon Sales 2011 by Zone ($millions)
RESEARCH & EVALUATION CENTERS
WEB SITE AND eCOMMERCE
WEB SITE AND eCOMMERCE
STRENGTHS
Uses attractive colors such as black where beauty glows
in dark
Easy to maneuver through the site and straight forward
about their product offerings and company overview.
WEAKNESSES
Fonts are too small to read and goes out of allotted area
(page).
Navigation doesn’t work properly - when selecting Country didn’t take directly to the country instead shows page error
or didn’t load up at all
Needs to add Face book Logo on main page of website
WEB SITE AND eCOMMERCE
Have to find L’Oreal on Facebook.
L’Oreal already had registered for Facebook application and is paying
for service.
L’Oreal must put Facebook logo on its website which directly
navigates customers to facebook to share their thoughts for L’Oreal.
WEB SITE AND eCOMMERCE
WEB SITE AND eCOMMERCE
STRENGTHS Enclose Face book and Twitter Logo on its main page
Big screen grabs one’s attention and encourage to
have a look at their product offerings
Good navigation as it directly takes you to where you
want to in couple seconds Logo is big
WEAKNESSES None
Shareholder’s Equity
Net Income x 5 years
(Stock Price/EPS) x Net Income
# of Shares Outstanding x Stock Price
Four Method Average:
11,549
15,744
39,938
73,727
$35,239.5 million
$ Goodwill/$ Total Assets 0.23
In millions of $US except for per share data
(using a 1.29 dollar/euro exchange rate)
VALUE OF THE FIRM ANALYSIS
L’OREAL’S STRENGTHS AND WEAKNESSES
StrengthsWei
ght
Rating Wtd
Score
1 27 international brands distributed in over 130 countries. L’Oreal has 5 regional hubs
worldwide.0.04 3 0.12
2 The Body Shops total sales were $990.204 million (4% total sales). The Body Shop has
over 70 brands in 60 countries (presence in global travel retail outlets across 44
markets).
0.05 3 0.15
3 L’Oreal has $930 million invested in R&D. 3,676 researchers throughout 19 research and
16 evaluation centers filed 613 patents in 2011.0.06 4 0.24
4 L’Oreal achieved 9.5% sales growth in New Markets ($9,311.3 million in sales; 35% total
sales; $1,713.12 million ops profit); added 4 subsidiaries in Africa and Middle East.0.14 4 0.56
5 L’Oreal achieved 0.6% sales growth in Western Europe ($9,348.1 million; 36% total sales;
$1,951.8 million ops profits); acquired Sanaflore in France.0.06 3 0.18
6 L’Oreal has positioned 41 production plants across current markets including a new
one in Russia; opening new sites in Mexico, Indonesia and Egypt.0.08 4 0.32
7 L’Oreal’s achieved 5.5% sales growth in North America (ops profit = $1,044.9 million).
L’Oreal acquired Maybelline and Essie. 0.07 3 0.21
8 Global predictive center (Lyon) reconstructs 130,000 units of biological tissues for
predictive evaluation of ingredients and products. 9 reconstructive skin and cornea
models developed. Reduces time to market.
0.03 4 0.12
9 The Dermatology Branch (Galderma) total sales were $909.13 million (Western Europe;
$242.8 million; North America: $450.8 million; New Markets: $215.55 million).0.04 3 0.12
10 L’Oreal conducts in-house packaging of products at their plants through the Wall-to-
wall program; reduces transportation costs and waste generation.0.02 3 0.06
Sub-Total for Strengths 0.59 2.08
INTERNAL FACTOR EVALUATION (IFE) MATRIX
WeaknessesWeight Rating Wtd
Score
1 L’Oreal suffered -2.8% sales loss in its Eastern European Market in 2011,
despite a 3.9% market growth (Ops profit: -$734.79 million)0.08 2 0.16
2 L’Oreal lacks a Beauty Tools division which its chief competitor, Revlon,
does have.0.05 2 0.10
3 L'Oreal's organizational structure limits its ability to create integrated
brand promotion strategies for its distinctive SBU’s.0.03 1 0.03
4 L’Oreal has a limited number of perfume, bath, and baby products in
its portfolio compared to competitors.0.02 1 0.02
5 L’Oreal lacks energy efficient production facilities in North America
similar to ones in Belgium, Spain, India and France.0.02 1 0.02
6 L’Oreal does not practice direct selling strategies in their marketing
initiatives as compared to competitors (Avon and Mary Kay).0.06 2 0.12
7 L’Oreal has consolidated key market segments under “New Markets”;
limits managerial response to changes in major geographic SBU’s.0.06 2 0.12
8 L’Oreal’s Total Asset Turnover ratio (0.8) is lower than its chief
competitor, Revlon’s (1.2).0.02 1 0.02
9 L’Oreal’s cost of operations (55.05%) is higher than its chief competitor,
Revlon’s (49.42%).0.03 1 0.03
10 When selecting different country options, L’Oreal’s website has
defective or nonexistent navigation and translation capabilities.0.04 2 0.08
Sub-Total for Weaknesses 0.41 0.70
Total IFE Score 1.00 2.78
INTERNAL FACTOR EVALUATION (IFE) MATRIX
EXTERNAL ASSESSMENT
MAJOR COMPETITORS IN THE INDUSTRY
COMPANY SALES ($Mil) NET INCOME ($Mil)
Procter & Gamble 82,559 11,797
Unilever 64,701 6,437
L’Oreal 28,263 3,399
Kimberly-Clark 20,846 1,591
Colgate-Palmolive 16,734 2,431
Kao 14,273 562
Reckitt Benckiser 15,213 2,813
Avon 11,292 514
Estee Lauder 8,810 701
Shiseido 8,095 154
Clorox 5,231 545
Energizer Holdings 4,646 261
Church & Dwight 2,749 310
Revlon 1,381 53
COMPETITIVE PROFILE MATRIX (CPM)
L’Oreal Revlon Avon
Critical Success Factor Weight Rating Score Rating Score Rating Score
Brand Recognition & Reputation 0.08 3 0.24 4 0.32 2 0.16
Price and Quality Perception 0.09 3 0.27 4 0.36 2 0.18
Breadth and Depth of Product
Lines0.15 3 0.45 4 0.60 2 0.30
Market Share 0.12 4 0.48 2 0.24 3 0.36
Production Efficiency 0.08 4 0.32 3 0.24 2 0.16
Growth in Mature Markets 0.06 4 0.24 3 0.18 2 0.12
Growth in Emerging Markets 0.06 4 0.24 3 0.18 2 0.12
Product Innovation 0.07 4 0.28 3 0.21 2 0.14
Direct Sales 0.04 2 0.08 1 0.04 4 0.16
eCommerce & Web Marketing 0.08 4 0.32 2 0.16 3 0.24
Celebrity Spokes Models 0.12 3 0.36 4 0.48 1 0.12
Creative Packaging 0.05 3 0.15 4 0.20 2 0.10
Totals 1.00 3.43 3.21 2.16
KEY INDUSTRY TRENDS
EXTERNAL FACTOR EVALUATION (EFE) MATRIX
OpportunitiesWeight Rating Wtd
Score
1 The worldwide cosmetics market grew 4.4% in 2011 representing $197.4 billion with
no devaluation, bannalization, or massificaation.0.02 2 0.04
2 Major BRIMC and minor growth countries have several million middle class
inhabitants and are projected to account for 5 of the 10 largest economies by GDP
by 2020.
0.08 2 0.16
3 BCG reports the Chinese middle class is expected to increase from 150 million to
+400 million over the next decade. 340+ urban locations projected to increase to
550 million in 10 years.
0.06 2 0.12
4 Direct retail sales in the US increased 4.6% to $29.9 billion in 2011 of which 78% were
women and 89% worked part time. 0.06 1 0.06
5 Google Offers, Living Social, and Groupon have launched apps for Android phones
to alert consumers to deals through mobile devices.0.04 4 0.16
6 91% of new products pacesetters were brand extensions that either expanded
effectiveness, new technologies, improved processes, new or unique formulas,
varieties, designs or patterns.
0.05 4 0.20
7 Federal Aviation Safety requirements restrict passengers from carrying more than 4
oz. of personal products aboard aircraft. 0.06 4 0.24
8 Latino and Asian population is expected to nearly triple (Hispanics, with the highest
consumption of personal care products in 2009, are expected to grow from 16.7% in
2012 to 21.2 in 2025.
0.08 4 0.32
9 29% of consumers made at least one consumer packaged good purchase online in
12 months. OTC drugs and health & beauty supplies ranked highest in respondents
buying the brand they want the most.
0.05 2 0.10
10 To reduce currency volatility, companies can hedge their exposure with futures
contracts (an 8.8% annual increase of dollar index).0.07 3 0.21
Sub-Total for Opportunities 0.57 1.61
EXTERNAL FACTOR EVALUATION (EFE) MATRIX
ThreatsWeight Rating Wtd
Score
1 Federal Aviation Safety requirements restrict passengers from carrying more
than 4 oz. of personal products aboard aircraft.0.03 4 0.12
2 Consumption of cosmetic products per inhabitant is 10 to 20 times lower in
immature countries than in mature BRIMC countries.0.05 2 0.10
3 China’s GDP growth target is 7.5%, which is well below the range recorded in
5 years; India slowed growing 5.3% in 1st Qtr 2012.0.05 2 0.10
4 Shiseido Co (Japanese cosmetics) acquired Bare Essentials (US) for $1.7 billion;
Coty agreed to acquire OPI Products (nail salon products) for $1 billion.0.04 3 0.12
5 P&G is a global leader in personal and beauty care products 20% in Western
Europe; $14 billion net in restructuring, cost reduction, & marketing reduction
over next five years.
0.06 2 0.12
6 Avon markets Regenerist and Anew skin products to baby boomers; Johnson
& Johnson launched a line of E-Pulse, Skin-Electro-Stimulation technology (skin
rejuvenation/anti-aging)
0.03 2 0.06
7 54% of the female respondents in 2008 said they would “buy the brand they
want the most”’ (down to 45% in 2010 and 43% in 2011).0.04 3 0.12
8 Avon sales in India increased 57.4: due to direct sales in 2011. 0.07 1 0.07
9 Due to weak US economic environment and higher pricing of green products,
consumers may be deterred from buying green products.0.04 2 0.08
10 Avon and Revlon both offer perfume products in their portfolio. 0.02 1 0.02
Sub-Total for Threats 0.43 0.91
Total EFE Score 1.00 2.52
STRATEGY FORMULATION
SO Strategies WO Strategies
SWOT MATRIX
SO Strategies WO Strategies
1 Establish JV with Parlain Co Ltd or Sa Sa Intl Holdings
Ltd (China); BK Corporation (Mumbai); Natura
and/or O Boticario (Brazil).
(S4, O2, O3)
Decentralize by establishing separate geographic
profit centers to achieve 20% growth over 3 years in
New Markets and 6% in Eastern Europe over 3 years.
(W1, W3 W7, W8, O1)
2 Increase North American Sales by 15% over 3 years
through IBP, direct selling, and e/mMarketing by
targeting the growing population of Hispanic and
Asians .
(S7, O4, O8)
Develop IBP marketing campaign with direct selling
to achieve 15% sales growth in the US, and 20% in
BRIMC.
(W3, W6, O2, O3, O4, O8)
3 Increase sale of Body Shop, Dermatology Branch
products 12% over 3 years through m/eMarketing
and global travel retail outlets.
(S2, S9, S10, O5, O7, O9)
Improve Web site design and e/mCommerce as part
of IPB marketing campaign to increase online sales
25% over 3 years.
(W10, O5, O9)
ST Strategies WT Strategies
SWOT MATRIX
ST Strategies WT Strategies
1 Body Shop will increase sales 9% over 3 years in its
global travel retail outlets through 5 new perfume
and brand extensions of existing products.
(S2, T1, T10)
Develop 5 perfume, increase portfolio of affordable
bath and body products to introduce into all markets.
(W4, T10)
2 Achieve 20% sales growth in New Markets by
increasing production to 100% in 16 existing and 3
new plants and incorporating direct sales methods
and acquiring/JV’s with three distributors.
(S4, S6, T2, T3, T8)
Invest $20 million to improve its Website design and
eCommerce capabilities to increase online sales 25%
over 3 years. (W10, T 8)
3 Increase sales of current products in North America
15% over 3 years by increasing production and
distribution to 100% at 9 existing facilities and a new
one in Mexico. (S6, S7, T4, T6, T7, T9)
4 Increase sales 15% over three years of more
affordable green and specialty products in all
markets using its efficiencies in R&D, production,
packaging to control costs. (S3, S6, S8, S10, T6, T9)
5 Increase sales 6% over 3 years in Western Europe
through sales of current products (Sanaflore).
(S5, S6, T5, T6)
SPACE MATRIXFinancial Position (FP)
Return on Investment 7
Leverage 4
Liquidity 3
Working Capital 6
Net Profit Margin 4
Inventory Turnover 5
Return on Assets 6
Price-Earnings Ratio 4
4.875
Stability Position (SP)
Technological Changes -5
Rate of Inflation -3
Demand Variability -4
Price Range of Competing Products -5
Barriers to Entry in Market -2
Competitive Pressure -6
Ease of Exit from Market -6
Price Elasticity of Demand -2
-4.125
Competitive Position (CP)
Market Share -3
Product Quality -4
Product Life Cycle -3
Customer Loyalty -4
Capacity Utilization -2
Technological Know-how -1
Control Over Suppliers & Distributors -3
-2.857
Industry Position (IP)
Growth Potential 5
Profit Potential 4
Financial Stability 3
Extent Leveraged 3
Resource Utilization 4
Ease of Entry into Market 1
Productivity, Capacity Utilization 4
3.428
SPACE MATRIX
CP
SP
FP
IP-7 -6 -5 -4 -3 -2 -1
1 2 3 4 5 6 71
2
3
4
5
6
7
-7
-6
-5
-4
-3
-2
-1
Conservative
Defensive
Aggressive
Competitive
(0.57, 0.75)
BOSTON CONSULTING GROUP MATRIX
Geographic
Division
Sales ($)
mil
Sales
%
Profits
($) mil
Profits
%
RMSP ISGR
%
1 North America 5,683.74 23.3 1,044.90 21.09 0.4002 + 2.7%
2 New Markets 9,311.22 38.3 1,713.12 34.59 0.6556 + 8.3%
3 Western Europe 9,348.63 38.4 1,951.77 39.42 0.6583 + 0.9%
4 The Body Shop 990.2 4.0 87.72 1.77 0.0697 + 1.7%
5 Dermatology
Branch
909.1 3.0 154.80 3.13 0.0640 + 17%
Total 26,242.6 100.0 4,952.31 100.0
STARS
II
BOSTON CONSULTING GROUP MATRIX
CASH COWS
III
DOGS
IV
QUESTION
MARKS
I
Relative Market Share Position
Ind
ust
ry S
ale
s G
row
th R
ate
(%
) .50 0.01.0
+20
0
-20
Hig
hM
ed
ium
Low
High Medium Low
2
3 4
5
1
INTERNAL-EXTERNAL (IE) MATRIX
Geographic
Division
Sales ($)
mil
Sales
%
Profits
($) mil
Profits
%
IFE
Score
EFE
Score
1 North America 5,683.74 23.3 1,044.90 21.09 3.04 3.47
2 New Markets 9,311.22 38.3 1,713.12 34.59 2.76 3.29
3 Western Europe 9,348.63 38.4 1,951.77 39.42 3.19 3.24
4 The Body Shop 990.2 4.0 87.72 1.77 3.29 3.09
5 Dermatology
Branch
909.1 3.0 154.80 3.13 3.35 3.05
Total 26,242.6 100.0 4,952.31 100.0
INTERNAL-EXTERNAL (IE) MATRIX
II
V VI
III
2.0 1.04.0
4.0
2.0
1.0
High
3.0 to 4.0
Medium
2.0 to 2.99
Low
1.0 to 1.99 VIII XI
I
IV
VII
3.0
3.0
Strong
3.0 to 4.0Average
2.0 to 2.99
Weak
1.0 to 1.99
EFE T
OTA
L W
EIG
HTE
D S
CO
RES
IFE TOTAL WEIGHTED SCORES
2345
1
GRAND STRATEGY MATRIX (GSM)
Quadrant
II
Quadrant
III
Quadrant
IV
Quadrant
I
Rapid Market Growth
Weak
Competitive
Position
Slow Market Growth
Strong
Competitive
Position
L’Oreal
QUANTITATIVE STRATEGIC PLANNING MATRIX (QPSM)
KEY EXTERNAL FACTORS Increase North America Sales by 15% over 3 years
Increase New Markets Sales by 20% over 3 years
Opportunities Wgt AS TAS AS TAS
The worldwide cosmetics market grew 4.4% in 2011 0.02 3 0.06 4 0.08
Major BRIMC and minor growth countries are projected to
account for 5 of the 10 largest economies by GDP by 2020.
0.08 2 0.16 4 0.32
BCG reports the Chinese middle class is expected to
increase from 150 million to +400 million over the next
decade.
0.06 2 0.12 4 0.24
Direct retail sales in the US increased 4.6% in 2011 0.06 - - - -
Google Offers, Living Social, and Groupon have launched
apps for Android phones to alert consumers to deals
through mobile devices.
0.04 4 0.16 2 0.08
91% of new products pacesetters were brand extensions 0.05 4 0.20 3 0.15
Federal Aviation Safety requirements restrict passengers
from carrying more than 4 oz. of personal products aboard
aircraft.
0.06 3 0.18 4 0.24
US Latino and Asian population is expected to nearly triple 0.08 - - - -
29% of consumers made at least one consumer packaged
good purchase online in 12 months.
0.05 4 0.20 2 0.10
To reduce currency volatility, companies can hedge their
exposure with futures contracts (an 8.8% annual increase of
dollar index).
0.07 2 0.14 4 0.28
QUANTITATIVE STRATEGIC PLANNING MATRIX (QPSM)
KEY EXTERNAL FACTORS Increase North America Sales
Increase New Markets Sales
Threats Wgt AS TAS AS TAS
Federal Aviation Safety requirements restrict passengers from
carrying more than 4 oz. of personal products aboard aircraft.
0.03 3 0.09 4 0.12
Consumption of cosmetic products per inhabitant is 10 to 20
times lower in immature BRIMC countries
0.05 2 0.10 4 0.20
China’s GDP growth target is 7.5%, which is well below the
range of 9.2% to 14.2% recorded in the past five years.
0.05 1 0.05 4 0.20
Shiseido Co (Japanese) acquired Bare Essentials (US) Coty
agreed to acquire OPI Products (nail salon products).
0.04 3 0.12 1 0.04
P&G is a global leader in personal and beauty care products
20% in Western Europe; $14 billion net in cost, restructuring, &
marketing reduction over next 5 years.
0.06 4 0.24 2 0.12
Avon markets Regenerist and Anew skin products to baby
boomers; Johnson & Johnson launched a line of E-Pulse, Skin-
Electro-Stimulation technology
0.03 - - - -
54% of female respondents (2008) said they would “buy brand
they want the most”’ (down to 45% (2010) & 43% in 2011).
0.04 4 0.16 3 0.12
Avon sales in India increased 57.4 (in direct sales in 2011). 0.07 - - - -
Due to weak US economic environment and higher pricing of
green products, consumers may be deterred from buying
green products.
0.04 3 0.12 1 0.04
Avon and Revlon both offer perfume products 0.02 3 0.06 4 0.08
1.00
QUANTITATIVE STRATEGIC PLANNING MATRIX (QPSM)
KEY INTERNAL FACTORS Increase North America Sales
Increase New Markets Sales
Strengths Wgt AS TAS AS TAS
27 international brands distributed in over 130 countries. 0.04 3 0.12 4 0.16
The Body Shops total sales were $990.204 million (4% total sales).
The Body Shop has over 70 brands in 60 countries
0.05 2 0.10 3 0.15
L’Oreal has invested $930 million in R&D in 2011. 3,676 researchers
throughout 35 research and evaluation centers filed 613 patents
0.06 2 0.12 3 0.18
L’Oreal achieved 9.5% sales growth in New Markets ($9,311.3 mil. in
sales (35% total sales)); added 4 subsidiaries in Africa & Middle East.
0.14 - - - -
L’Oreal achieved 0.6% sales growth in Western Europe ($9,348.1
million; 36% total sales); acquired Sanaflore in France.
0.06 - - - -
Positioned 41 plants across current markets including a new one in
Russia; opening new sites in Mexico, Indonesia and Egypt.
0.08 2 0.16 4 0.32
L’Oreal’s achieved 5.5% sales growth; 4.3% market growth in North
America . L’Oreal acquired Maybelline and Essie.
0.07 - - - -
Global predictive center (Lyon) reconstructs 130,000 units of
biological tissues for predictive evaluation of ingredients and
products. 9 reconstructive skin and cornea models developed.
Reduces time to market.
0.03 3 0.09 2 0.06
The Dermatology Branch (Galderma) total sales were $909.13
million (Western Europe; $242.8 million; North America: $450.8
million; New Markets: $215.55 million).
0.04 3 0.12 2 0.08
L’Oreal conducts in-house packaging of products at their plants
through the “Wall-to-Wall” program reduces transportation costs &
waste generation.
0.02 3 0.06 4 0.08
QUANTITATIVE STRATEGIC PLANNING MATRIX (QPSM)
KEY INTERNAL FACTORS Increase North America Sales
Increase New Markets Sales
Weaknesses Wgt AS TAS AS TAS
L’Oreal suffered -2.8% sales loss in its Eastern European Market in
2011, despite a 3.9% market growth.
0.08 - - - -
L’Oreal lacks a Beauty Tools division which its chief competitor,
Revlon, does have.
0.05 3 0.15 4 0.20
L'Oreal's organizational structure limits its ability to create
integrated brand promotion strategies for its distinctive SBU’s.
0.03 3 0.09 4 0.12
L’Oreal has a limited number of perfume, bath, and baby
products in its portfolio compared to competitors.
0.02 4 0.08 3 0.06
L’Oreal lacks energy efficient production facilities in North
America similar to ones in Belgium, Spain, India and France.
0.02 - - - -
L’Oreal does not practice direct selling strategies in their
marketing initiatives as compared to competitors .
0.06 2 0.12 4 0.24
L’Oreal has consolidated key market segments under “New
Markets”; limits managerial response to changes in major
geographic SBU’s.
0.06 - - - -
L’Oreal’s Total Asset Turnover ratio (0.8) is lower than its chief
competitor, Revlon’s (1.2).
0.02 2 0.04 4 0.08
L’Oreal’s cost of operations (55.05%) is higher than its chief
competitor, Revlon’s (49.42%).
0.03 2 0.06 4 0.12
When selecting different country options, L’Oreal’s website has
defective or nonexistent navigation and translation capabilities.
0.04 2 0.08 4 0.16
1.00 3.55 4.42
1 billion new customers over next 10-15 years.
Sustainability initiatives (2005-2015):
(1) reducing greenhouse gas emission by 50%.
(2) reducing waste generated per finished goods by 50%.
(3) reducing water consumption per finished goods by 50%.
EXISTING STRATEGIES TO BE CONTINUED
NEW STRATEGIES TO BE IMPLEMENTED
Establish Joint Ventures with: ($2 Billion)› Parlain Co. Ltd or Sa. Sa. Intl. Holdings Ltd (China);
› BK Corporation (India);
› Natura or O Boticario (Brazil).
Hire key executives (CIO, CLO, CTO, Presidents) ($24 Million)
Establish 10,000 direct sales force in BRIMC. ($225 Million)
Improve website design & e/m Commerce. ($20 million)
Initiate an Integrated Brand Promotion marketing campaign to increase global sales over next 3 years. ($231 million)
Total Cost of New Strategies to be Implemented: ($2.5 Billion)
STRATEGY IMPLEMENTATION
EPS/EBIT ANALYSIS
100% Debt 100% Stock
Recession Normal Boom Recession Normal Boom
EBIT ($) 2,500,000,000 4,500,000,000 6,500,000,000 2,500,000,000 4,500,000,000 6,500,000,000
Interest($) 39,750,000 39,750,000 39,750,000 0 0 0
EBT ($) 2,460,250,000 4,460,250,000 6,460,250,000 2,500,000,000 4,500,000,000 6,500,000,000
Taxes ($) 727,987,975 1,319,787,975 1,911,587,975 739,750,000 1,331,550,000 1,923,350,000
EAT ($) 1,732,262,025 3,140,462,025 4,548,662,025 1,760,250,000 3,168,450,000 4,576,650,000
# Shares 602,984,082 602,984,082 602,984,082 623,430,635 623,430,635 623,430,635
EPS ($) 2.87 5.21 7.54 2.82 5.08 7.34
Amount of Capital Needed: $2,500,000,000
Interest Rate: 3.25%
Tax Rate: 29.59%
Stock Price: $122.27
# of Shares Outstanding: 602,984,082
EPS/EBIT ANALYSISDebt/Stock 30/70 Debt/Stock 70/30
Recession Normal Boom Recession Normal Boom
EBIT ($) 2,500,000000 4,500,000,000 6,500,000,000 2,500,000,000 4,500,000,000 6,500,000,000
Interest ($) 11,925,000 11,925,000 11,925,000 27,825,000 27,825,000 27,825,000
EBT ($) 2,488,075,000 4,488,075,000 6,488,075,000 2,472,175,000 4,472,175,000 6,472,175,000
Taxes ($) 736,221,393 1,328,021,393 1,919,821,393 731,516,583 1,323,316,583 1,915,116,583
EAT ($) 1,751,853,608 3,160,053,608 4,568,253,608 1,740,658,418 3,148,858,418 4,557,058,418
# Shares 617,296,669 617,296,669 617,296,669 609,118,048 609,118,048 609,118,048
EPS ($) 2.84 5.12 7.40 2.86 5.17 7.48
Amount of Capital Needed: $2,500,000,000
Interest Rate: 3.25%
Tax Rate: 29.59%
Stock Price: $122.27
# of Shares Outstanding: 602,984,082
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
$2,500,000,000 $4,500,000,000 $6,500,000,000
EPS-EBIT Chart
Common Stock Financing Debt Financing
EPS/EBIT ANALYSIS
PROJECTED INCOME STATEMENTIn $ millions % Sales 2011 2012 2013 2014 Note
Net Sales 100% 26,242.6 38,609.5 40,851.3 43,268.0 1
Cost of Sales (28.8%) (7,548.4) (11,786.5) (12,432.2) (13,128.2)
Gross Profit 71.2% 18,694.2 26,822.9 28,419.1 30,139.8
R&D (3.5%) (929.5) (1,351.3) (1,429.8) (1,514.4)
Adv/Promo (30.9%) (8,116.2) (12,014.0) (12,706.8) (13,453.5) 2
SGA (20.6%) (5,401.1) (8,036.6) (8,498.4) (8,996.2) 3
Ops Profit 16.2% 4,247.5 5,421.0 5,784.2 6,175.7
Other Income(Exp) ( 0.47%) (124.2) (86.9) (60.9) (51.1) 4
EBIT 15.73% 4,123.2 5,334.1 5,723.4 6,124.6
Interest (1.5%) (0.24%) (62.1) (131.4) (134.3) (137.7) 5
Capital Gain 0.14% 36.8 50.0 68.0 92.5 6
Net Finance Cost (0.1%) (25.3) (81.4) (66.3) (45.3)
Other Fin. income (exp) (0.03%) (7.2) (6.7) (6.2) (5.8) 7
Sanofi Dividends 1.45% 381.3 559.8 592.3 627.4
EBT 17.05% 4,472.0 5,805.9 6,243.1 6,700.9
Income Tax (5.04%) (1,323.3) (1,945.9) (2,058.9) (2,180.7)
Net Income 12.01% 3,148.8 3,859.9 4,184.2 4,520.2
PROJECTED INCOME STATEMENT
Dividend Payout (in $ millions)
(2011) - $ 1,521.17 million
(2012) - $ 1,864.74 million
(2013) - $ 2,021.40 million
(2014) - $ 2,183.71 million
Retained Earnings (In $ millions)
(2011) - $ 1,627.59 million
(2012) - $ 1,995.21 million
(2013) - $ 2,162.82 million
(2014) - $ 2,336.48 million
PROJECTED BALANCE SHEET
Assets (in $ mil) 2011 2012 2013 2014 Note
Noncurrent Assets 24,684.2 25,791.5 27,550.6 29,911.5
Goodwill 8,003.9 8,003.9 8,003.9 8,003.9
Intangibles 3,195.7 3,291.6 3,818.2 4,581.9 1
PPE 3,716.2 3,716.2 3,716.2 3,716.2
LT Assets 8,902.2 9,792.4 10,967.5 12,502.9
Deferred Tax Assets 866.1 987.4 1,044.7 1,106.5
Current Assets 9,962.2 15,428.8 19,346.1 22,732.8
Inventory 2,647.2 3,681.5 5,154.1 7,215.7 2
Acct Receive 3,865.1 7,721.9 8,170.3 8,653.6
Other Current Assets 1,166.3 1,306.2 1,489.1 1,727.4
Current Tax Assets 152.2 158.3 167.8 181.2
Cash and Cash
Equivalents
2,131.3 2,560.9 4,364.9 4,954.9 *
Total Assets 34,646.3 41,220.3 46,896.7 52,644.3
PROJECTED BALANCE SHEET
Shareholders Equity 2011 2012 2013 2014 Note
Equity 22,752.4 26,115.1 29,010.7 32,205.0
Share capital 155.6 155.6 155.6 155.6
Additional PIC 1,640.1 1640.1 1640.1 1640.1
Other reserves 15,955.8 17,950.9 20,113.8 22,450.3 *
Direct equity 2,650.6 2,915.6 3,207.2 3,527.9
Cumulative Translation
Adjustments
32.1 48.2 72.3 108.4
Treasury Stocks (831.3) (581.9) (366.6) (201.6) 1
Net profit to Owners 3,145.5 3,982.5 4,184.2 4,520.2
SH Equity 22,748.4 26,111.1 29,006.5 32,200.8
Noncontrolling Interest 4.0 4.05 4.12 4.23
In $ millions
PROJECTED BALANCE SHEET
Liabilities (in $ mil) 2011 2012 2013 2014 Note
Noncurrent Liabilities 2,696.4 4,114.7 5,656.9 7,234.6
Provs for Retirement Ben 1,456.3 1,531.3 1,606.3 1,681.3
Provs for Liabs & Charges 291.7 364.6 473.9 592.5
Deferred Tax Liabilities 874.2 1,311.4 1,835.9 2,386.7
Noncurrent borrow & debts 74.2 907.5 1,740.8 2,574.2 2
Current Liabilities 9,197.6 10,990.4 12,229.1 13,204.7
Trade Accts Payable 4,189.5 4,608.5 5,069.3 5,576.3
Provs for Liabs & Charges 645.9 658.8 672.0 685.4
Other Current Liabilities 2,666.0 2,905.9 3,167.5 3,452.6
Income Tax 288.9 424.9 449.7 476.3 3
Current Borrows & Debt 1,407.1 2,392.1 2,870.6 3,014.1
Total SH Equity & Liabilities 34,646.3 41,220.3 46,896.7 52,644.3
Retained Earnings
Balance Sheet
Retained Earnings
2013 20142012In $ millions except per share data
20,113.8 22,450.317,950.9
2,162.8 2,336.51,995.2
Income Statement
2011
15,955.8
1,627.6
+ + +===
Comparing Retained Earnings
=
Cash & Cash Equivalent 2,131.3 2,560.9 3,800.8 4,178.2
14,328.2
+2010
L’Oreal 2011 2012 2013 2014Growth Rate % 0.0435 0.47 0.05 0.05
Revenues $ 26,242.6 38,609.5 40,851.3 43,268.0
Gross Profit
Margin
% 0.7124 0.6947 0.6957 0.6966
Net Profit Margin % 0.1200 0.1000 0.1024 0.1045
Current Ratio % 1.0831 1.4038 1.5820 1.7216
Quick Ratio % 0.7953 1.0689 1.1605 1.1751
Return on Assets % 0.0909 0.0936 0.0892 0.0859
PROJECTED FINANCIAL RATIOS: Revenues in $ millions except per share data
PROJECTED FINANCIAL RATIOS: Revenues in $ millions except per share data
L’Oreal 2011 2012 2013 2014
Debt-to-Equity Ratio % 0.1 0.2 0.2 0.2
Return on SH Equity % 0.1 0.1 0.1 0.1
Inventory Turnover % 9.9 10.5 7.9 6.0
Total Asset Turnover % 0.8 0.9 0.9 0.8
Accounts Receivable Turnover
% 6.8 5.0 5.0 5.0
Average Collection Period days 53.8 73.0 73.0 73.0
STRATEGY EVALUATION
BALANCED SCORECARD# Area of Objective Measure / Target
TimeExpectation
Primary Responsibility
1 Hire key executives (CIO, CLO, CTO, Presidents, Vice Presidents).
Identify, recruit, and orient new executives into their respective positions.
By end of 1st Qtr, 2012
CEO, CHR
2 Establish Joint Ventures with: Parlain Co. Ltd or Sa. Sa. Intl. Holdings Ltd(China); BK Corp. (India); Natura or O Boticario (Brazil).
Achieve annual sales growth of 20% :9% in China, 6% in Brazil, and 5% in India.
2012 - 2014 CEO, DivisionalPresidents
3a Initiate an IBP marketing campaign to improve global sales in conjunction with direct sales in #3b.
Achieve Annual Customer increases of 7%-5%-3% in U.S.; Achieve 10%-6%-4% annual customer increase in BRIMCs.
2012 - 2014 CEO and CMO
3b Establish direct sales force of 10,000 in BRIMC.B = 600; R = 500; I = 3,700; M = 400; C = 4,800.
Recruit, train and orient 25% direct sales representatives each quarter per country. Continue to recruit over 2 yrs.
2012 - 2014 CMO, CHR, Divisional Presidents.
4a Increase e/m Commerce Sales Performance through coupon apps and CRM.
Develop and add two coupon apps; increase annual online sales 10%-8%-7%.
2012 - 2014 CMO, CIO, CTO
4b Improve website design by: Enhance fonts, ease of navigation; translate site into Spanish, Chinese, & Hindi; link to Facebook, Twitter, and YouTube.
Employ the latest software and hardware to enhance web site.
2012 - 2014 CMO, CIO, CTO
CONCLUSION
The strategies presented helps L’Oreal to achieve its long-term goal
of acquiring 1 billion new customers over the next 10-15 years.
L’Oreal is in an optimal position to build its reputation and brand
image by reaching new and diverse populations of beautiful people
in growing markets targeted in these strategies.
Utilizing only 7% of L’Oreal’s assets, the supporting objectives are
clearly specified, obtainable, verifiable, measureable, timely and in
keeping with L’Oreal’s core vision and mission to provide…
These strategies align L’Oreal’s distinctive competencies in R & D
and Sustainability, as well as demonstrates L’Oreal’s sense of Social
Responsibility by bringing economic growth opportunities into
developing economies.
BEAUTY FOR ALL!!!
Anika PatelAVP Consultant Group, LLC
QUESTIONS?