Strategic Management

Strategic Management

Writing an case analysis based on the case of L’Oréal and the Globalization of American Beauty.
The analysis will be evaluated along the following dimensions:
(a) Identification and prioritization of the central strategic issues in the case
(b) Use of facts from the case (no external research) to support your identification and prioritization
(c) Professional quality (clarity, grammar, spelling) of written work.

Excellent Fair Poor
1)Your Identification and prioritization of the central strategic issues in the case was: Clear identification and prioritization of the main and the secondary themes in the case Reasonably good sum-mary of the main themes, you missed a few, and you attempted some prioritization Spotty and inconsistent, you presented an in-complete picture of the central themes and the secondary themes with little or no prioritization
2) Your use of the facts of the case to support your identification and prioritization was: Meticulous use of facts from the case and per-suasive arguments to support all the themes identified You made an attempt to support your analysis with facts from the case but your arguments were weak or incom-plete Scant: you asserted themes and their impor-tance without support-ing facts from the case
3) The professional quality of your written work was : Smooth, clear and per-suasive writing style. Evidence of meticulous proofreading: no dis-cernible errors in gram-mar and spelling Overall, reasonably clear writing style with a few confusing parts. A few errors in grammar and spelling Line of reasoning was often unclear and con-fusing. Several errors in grammar and spelling.

Professor Geoffrey Jones, Senior Researcher David Kiron, Global
Research Group, Executive Director Vincent Dessain, and Researc
h Associate
Anders Sjoman of the HBS Europe
an Research Office prepared this case. HBS case
s are developed solely as the basis for class dis
cussion. Cases
are not intended to serve as endorsements, sources of primary
data, or illustrations of effective or ineffective management.
Copyright © 2005 President and Fellows of Harvard College. To orde
r copies or request permission to reproduce materials, call
write Harvard Business School Publishing, Boston, MA 02163, or go
to No part of this publication
may be
reproduced, stored in a retrieval system, us
ed in a spreadsheet, or transmitted in any form or by any means—electronic, mechani
photocopying, recording, or otherwise—without the permission of Harvard Business School.
L’Oréal and the Globalization of American Beauty
On a muggy summer day in 2004, Philip Cl
ough, president and CEO of Kiehl’s Since
1851, a small
upscale cosmetics maker, was directing the placem
ent of moving boxes arou
nd his business’s new
office in a renovated warehouse on Hudson Str
eet in lower Manhattan’s
Greenwich Village. As
Clough gave a tour of the group’s spare fifth-floor
office space, there was little evidence that Kiehl’s
represented one of the most radical experiments in
the 97-year history of its corporate parent, Paris-
based L’Oréal, the world’s largest beauty firm.
L’Oréal USA purchased Kiehl’s in 2000 as part of a seven-year, carefully planned acquisition
strategy. The U.S. buildup was critical to the globalization of L’Oréal’s business, which had grown
from 25,000 employees and $4 billion in revenues
in 1988 to 50,000 employees and $14.3 billion in
revenues in 2002. By adding popular American brands such as Maybelline, Redken, Matrix,
SoftSheen-Carson, and Ralph Lauren
Fragrances to its portfolio of French brands, L’Oréal had created
an international brand portfolio for consumers wi
th a wide range of incomes and tastes in 140
In the early 1980s, achieving such a high level of
global distribution was ba
rely in the sights of
L’Oréal senior managers. L’Oréal was France’s
leading beauty company, but its international
presence was limited. Many believed that the concep
tion of Parisian beauty as being expensive and
high culture—the image of all L’Oréal brands at
the time (e.g., Lancôme in cosmetics and L’Oréal
Professional in hair care)—limited the company’s ab
ility to expand into international markets. Jean-
Paul Agon, president and CEO of L’Oréal USA, explained:
We did not have an accessibly priced, genuinely popular [brand] with a global potential.
We had a couple in Europe, but we didn’t have an
ything that we thought had world potential.
That was a major problem because to develop in many of the newer markets in the world, our
L’Oréal brand was simply too premium for the le
vel of affluence of those countries. We had
some of the products we needed, but there were some huge parts of the business missing,
mainly cosmetics. We really needed in our portfo
lio a more attractively priced proposition, not
just to fill a hole in the States and in Europe
, but to go around the world and in all the new
For the exclusive use of D. Lu, 2015.
This document is authorized for use only by Duo Lu in Strategic Mgmt – Spring Semester 2016 First Half taught by Rajan Kamath, University of Cincinnati from December 2015 to April 2016.
805-086 L’Oréal and the Globalization of American Beauty
Moreover, few senior managers at the time belie
ved that even Lancôme, one of L’Oréal’s most
successful brands, could compete e
ffectively in the U.S.—one of
the world’s largest markets for
beauty products—against American foes such as Estée Lauder and Revlon.
The acquisition of U.S. brands not only bolstered L’Oréal’s international presence but also enabled
the evolution of L’Oréal’s internal organization, which eventually split into three main product

Consumer Products Division
sold hair-care, skin-care, makeup, and perfume products
through mass-market retailing channels at competitive prices (2003 revenues increased 7.7%
on a like-for-like basis to $9.4 billion).

Professional Products Division
sold colorants and hair-care, texture, and styling
products to hairdressers and salon profession
als worldwide (2003 revenues increased 8.6% on
a like-for-like basis to $2.4 billion).

Luxury Products Division
housed L’Oréal’s prestige cosmetics and perfume brands.
Products were distributed through selective re
tail outlets, such as department stores,
perfumeries, travel retail outlets, and the
group’s own boutiques (2003 revenues increased
4.2% on a like-for-like basis to $4.3 billion).
By 2004, more than 94% of L’Oréal’s revenues were coming from 17 core brands spread across these
divisions. (See
Exhibit 1
for a breakdown of brands by division.)
Kiehl’s was considered a key addition to L’Oréal’
s luxury collection: its skin-care, body-care,
fragrance, and hair-care products were renowned
for their high quality, effectiveness, and cult
following among celebrities. Customers made pilg
rimages from around the world to the original
Kiehl’s location in New York’s East Village, where samples were handed out liberally to any
customer. Its customer base was loyal and younger
than the traditional luxury cosmetics consumer.
Its Generation X employees elicited gasps of “Oh my
God!” when they told friends that they worked
at the Kiehl’s store in Manhattan.
Kiehl’s represented a significant departure from th
e other offerings in L’Or
éal’s product mix. “We
bought it precisely because we thought it was inte
resting to see a brand do
things successfully that
were contrary to what we would have do
ne,” said L’Oréal CEO Lindsay Owen-Jones.
brands had million-dollar advertising budgets. Kieh
l’s did no advertising at all, and its products
were, at the time of the acquisition, notably hard to
find. L’Oréal owned no st
ores, no salons, no spas,
nor any other point of sale. Kiehl’s, by contrast
, had done much of its business from a single
neighborhood store that offered a
ttentive service, a few retail outl
ets in upscale department stores
such as Bergdorf Goodman and Neiman Marcus, and mail order.
As Clough explained, L’Oréal intended to expand
Kiehl’s and sell its original products in stores
around the world:
When L’Oréal bought Kiehl’s, it was a smal
l family company. Celebrities touted our
products in the media. And demand was swampi
ng the only store we had. Part of Kiehl’s
allure was that few people outside of New York
had access to our produc
ts. In the past several
years we have opened quite a few stores around the globe, created a website, and expanded
our business several times over. The issue going
forward is: Are there any limits to how far we
can take Kiehl’s in the global marketplace? For
instance, how do we preserve the integrity of
the brand as we take it worldwide?
For the exclusive use of D. Lu, 2015.
This document is authorized for use only by Duo Lu in Strategic Mgmt – Spring Semester 2016 First Half taught by Rajan Kamath, University of Cincinnati from December 2015 to April 2016.

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