L’Oreal SWOT & PESTLE Analysis

Strength

1. Strong Research & Development: L'Oréal has around four thousand researchers and a budget equivalent to 3.3% of sales for research and development. The R&D expenses for 2019 were €985 million and they have constantly risen over the years. The cosmetics industry faces a lot of competition and L’Oreal focuses on success and growth through innovation. The Company has also made advances in cellular engineering and micro fluids which will enable it to use this in its products in future. The company also collaborated with cloud data integration company, Talend, to transform its research and innovation (R&I) unit into a value-added service by leveraging its data lake to create advanced cosmetic products.

2. Universalisation - The Development Strategy: The Universalisation strategy of The Company focuses on globalization that respects differences. Through this strategy The Company can modify their offerings to suit the consumer’s demands in various parts of the world. They study the specifics of consumer’s requirements and adapt their products to the lifestyles of different consumers. The Company has research centres in the United States, Japan, China, Brazil and India. The data from these areas enable The Company to develop products as per the consumer aspirations.

3. Quality and Safety: The cosmetics industry has to comply with safety requirements and legislation. The Worldwide Safety Evaluation organisation evaluates the safety of raw materials and finished products from the industry. L’Oreal monitors the adverse effects that may arise once the product is on the market through its “cosmeto-vigilance network”. This network compiles, validates and analyses any adverse effects related to use of a product based on rigorous, proven methodologies, allowing the appropriate corrective measures to be taken where necessary.

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Weakness

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Opportunity

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Threat

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Political

1. Consumers increasingly conscious of values and political affiliations of brands:Beauty and fashion industry in particular has seen consumers being acceptable towards brands which share the same values and ideals. Further as per the results of a survey in the United States, 51% of the respondents agreed that they would boycott a brand based on its endorsements or affiliations. L'Oréal Paris had an experience in this regard when its spokes-model Amena Khan faced backlash in 2018 over her "anti-Israel" tweets discovered from 2014. She stepped down from the company's promotion which had featured a hijab-wearing woman in a hair campaign. In another incident in 2017, L'Oréal ended its partnership with transgender model Munroe Bergdorf over a Facebook post which invited a lot a criticism. The post by Munroe had criticized white people for their racist behavior. Thus L'Oréal taking a stand on these political and socially charged issues may be at the risk of alienating some of its loyal customers.

Economic

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Social

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Technological

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Legal

1. Regulatory and consumer pressure on sustainable supply chains:A responsible corporation operating on a global scale needs to implement strong compliance standards for suppliers, so that there are no legal, ethical or social violations. L’Oréal being a multinational brand needs to ensure that it follows a “zero tolerance” standard for violations in its supply chain. The company has been criticized in 2017 for failing to disclose forced labor and slavery risks in its supply chain over the procurement of mica. These risks need to be disclosed as per regulations such as Britain’s 2015 Modern Slavery Act which mandates major businesses to report slavery and forced labor risks in their supply chains. Mica which is sourced from India has had issues with child labor being used in the mines. L’Oréal needs to conduct independent audits to ensure that such violations do not take place which can also harm the reputation of its brand.

Environmental

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