InformationSystems
Emmanuel MONOD
Executive MBA 8419– Module 3
Promo 9 – Groupe 1
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Lionel AUSTRUY
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Ivan BAILLY
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Arnaud BOMPAS lll
Anne CABOTIN
Luiza STANIEC
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Success Story
13 Septembre 2008
2
ECONOMIC PERFORMANCE
L’Oréal awarded the Grand Prix for economic performance, by
the magazine L’Expansion: September 2007
The company that has demonstrated the most remarkable
economic performance over the past 40 years
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3
INNOVATIVE AT HEART
Every year
• Over 4,000 new product formulas are created
• Over 30,000 new patents
• Increase of the number of researchers
• Increase R&D budget
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3,3%
4
Focused and Integrated
• 94% of its production
is internal
• Acquisitioning raw material
production plants to be able to
have direct control over quality,
immediate accessibility and
reap outmost benefits from the
process
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Perfect ‘FIT’
•
•
•
•
•
•
•
HR
R&D
Marketing
Management
Diversity
Communication
Drive & Passion
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L'ORÉAL‘S PERFORMANCES
Group performance
over 4 years
2007
Dividend per share :
X2 since 2002
+62% since 1997
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Cosmetic
Market
Environment
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THE COSMETIC MARKET
• 110 billion € in 2006
• Growth: 4,5% over the past 15
years
• High profitability
• Rest of the world zone: 33%
• Fragmentation
• L’Oréal number 2 (fragrances)
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Market attractiveness
PORTER’s network model
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Product Life Cycle
Consumer products
Active Cosmetics
•
Most of the business
has reached maturity
(91%) in Europe
•
BRIMC countries
represented 10% of
the turnover but 33%
of L’Oréal’s growth in
2006
Professionnals
Luxury products
Body shop
Growth
Maturity
Decline
Europe - North America
Active Cosmetics
Consumer products
Professionnals
Luxury products
Body shop
Growth
Maturity
Decline
BRIMC
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BCG Matrix
•
•
Active Cosmetics is a STAR
Luxury Products could become a DOG
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Differentiation
• Lack of creativity & flexibility
• Standardization of advertising and
creative process - centralization
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Management
and
Structure
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Management Overview
1909/1957: EugèneSchueller
1957/1985: François Dalle
1988/2006: Lindsay Owen Jones
From 2006 till today: Jean-Paul Agon
Organic
ENTREPRENEURIAL
INNOVATIVE
Mechanistic
Structures / Management Systems
FUNCTIONAL
DIVISIONAL
Centralized
Decentralized
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Evolution Management
& Structure
Dalle
Owen Jones (OJ)
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•
•
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Man with a vision
Internationalization
Autocratic
Agile
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Guided by intuition
R&D, focus on experts
Internal competition
Fiefdoms
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Segmentation
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Balancing act: Jean Paul Agon
Jean Paul Agon operates within a Matrix, where all elements
must be balanced out throughout the structure:
•
•
•
•
Three level decision process: divisions, zones and corporate
Mutual adaptation
Internal structure not formalised in order to promote
organisational agility
Organic growth
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Processes
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The value Chain
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L’ORÉAL : a global company leant
on 3 pillars
MARKETING
R&D
PROCESSES
Purchases/Supply
Production of
finished products
Distribution
Sales
L’ORÉAL
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Processes Value Chain
Purchases/Supply
• Suppliers
• Raw materials
• Containes/packa
ging
• Equipment
• Indirect
purchases
• POS/Promo
Production of finished products
• L’ORÉAL factories
• Outsourcing
partnership
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Distribution
• L’ORÉAL
warehouse
Sales
• Shopes
• Supermarket
• Perfume
shop
• Department
stores
• Bodyshop
stores
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L’ORÉAL at the crossroads?
BUSINESS MODEL
L’ORÉAL
Centralized
• Integrated core business vision
• Strategic control
• Unique consumer
• `Common prodicts
• Common processes
•
•
•
•
Mixted models
Segmented by business
Operational directives
Few shared processes
Decentralized
• Holding
• Different consumers’ databases
• Different markets
• Different products
• Specific processes
SAP DEPLOYMENT MODEL
Centralized TO
BE
•Single design
•Single implementation
•Necessity to join a standard
AS IS
•
•
•
•
Unique model based design
Numerous implementation
Common rules and guides
Local flexibility
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Decentralized
•Multiple design
•Numerous implementations
•Local entities are totalous
autonomous
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Policy
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Vision
• A strong, simple, challenging and forward-looking vision
by a charismatic leader : François Dalle
« I wanted to change a small business
into a big business, I wanted to beat our
foreign competitors back out of the
french market and succeed eventually
one day, to beat them in their own
countries »
• A vision that became the unifying thread of l’Oréal
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Mission statement
• « serving all kinds of
beauties »
• « promoting a genuine,
blooming, happy, reachable
and generous beauty »
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Core values
• Diversity
• Innovation
• Individual talent
• Devotion to individual well-being
• Striving for excellence
• Passion for adventure
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Organizational learning
• Low degree of formalization/ agile
structure
• Verbal transmission
• Close cooperation between Marketing
and R&D
• Projects & missions
• Risk taking culture
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A strong company culture
• Stability in top management
• Historical background on organic
growth
• Low formalization
• Consistency between values and
learning organization
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Need for
Change
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30
NEED FOR
CHANGE
J.P.Agon: “the model has been successful in the past, it still
works and will work very well in the years to come”
 THERE IS NEVER JUST ONE MODEL IN HYPER
COMPETITION – Emmanuel Monod
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31
CONFLICTING INTERESTS
Shareholders
Initial capital X32 in 20 years
Innovation
Leadership
Customers
More differentiation
Expertise
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Employees
20% turnover (28/32)
Strike
32
BEAUTY IS FRAGILE
• End of the organic growth since 2001
Brand
Year
Activity
Turnover
(million €)
Shu Uemura
2001
Skin & Make-up
145
The Body Shop
2006
Bio-cosmetics
435
YSL Beauté
2008
Luxury
626
• Old fragrances portfolio
•
•
Trésor & Romance (1990)
Polo (1978) & Aqua di Gio (1996)
• Stock’s drop by 20% since Jan08
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CHALLENGES TO ADRESS IN
HYPER COMPETITION
• Management quality (new CEO)
“My objective is to make L’Oréal a
company of its time, modern in its internal
behavior. Our homogeneity is a strength but it
should not get transformed into consanguinity,
we have to keep attracting talented people”
“LEADS WITH HUMAN SENSITIVITY”
“ACHIEVES RESULTS WITH INTEGRITY”
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CHALLENGES TO ADDRESS IN
HYPER COMPETITION
• More differentiation
Luxury: exclusivity, experience,
high quality
No cascading effect
• Mastering distribution channels
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CHALLENGES TO ADDRESS IN
HYPER COMPETITION
• R&D focus
Budget 3% turnover versus 30% for
marketing
Partnership with suppliers
High quality raw materials
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