L’Oreal external audit:-

There are following factors that include in external audit:-

Political
The political challenge is that L'Oreal should conform to all the different government leadership
styles in various countries it operates within.

L'Oreal is obligated to produce safe products that do not contain any harmful substances.

L'Oreal has to follow the rules set by Advertising Standards Authority. For example

Advertisements cannot be misleading that over-exaggerating the functions of a product.

Economical
L’Oreal’s main consumer products categories are all highly sensitive to global economies of
scale and scope.

L'Oreal should adapt to all the different economic environments and problems in all countries it
operates in. For example in 2004, L'Oreal was affected by the continued weakness of the dollar
and other currencies.

Social
The culture of a country consists of the values, attitudes and beliefs of its people. For example,
with modern standard of living continues to improve and the level education get higher and
higher, the social increasingly recognize the external image, and people are increasingly focusing
on the image appearance, the demand of quality and effectiveness of cosmetic and related skin
care products become higher and higher.

In 2018, 43% of new or updated products had an improved social/environmental profile due to a
new formula including sustainably sourced renewable raw materials or raw materials respecting
the principles of green chemistry.

L’Oreal Recognized by Foundation for Social Change as a "Leader of Change"

L’Oreal Recognized for approach to sustainable, responsible and inclusive growth and for
creating positive social impacts while reducing environmental footprint.

Technological
Scientific knowledge of the skin and hair accumulated by L'Oreal for over a century has opened
the way to great innovations.
Legal
L'Oreal's legal teams make a vital contribution and shed expert light on legal decisions. Their
missions consist mainly in making L'Oreal's business operations legally secure.

Environmental
Environmental concern is L’Oreal use natural ingredients mostly which is environment friendly.
L’Oreal manage a programmed of internal audits and establish indicators for measuring and
reporting on group performance in terms of the environment.

Demographics-
The demographic shifts really influence a company’s products with the recent trends whereby
ageing population in the western hemisphere, aspiring consumers in emerging markets and other
trends all this but L’Oreal responded to this trends better than its rivals and as a reason to this
being the only cosmetic group present in every distribution channel .

Competition-
Rivals such as Procter & Gamble (P&G) , Estee Lauder and Unilever have always had a fierce
and cut-throat competition in the industry and as per Corbett (2004) who said that competition
brings out the best in organizations and it certainly did with L’Oreal grabbing the most
opportunities and winning over consumers hearts with new and innovative products.

Further competitive analysis:-

L'Oreal Revlon Avon

Critical Success Factors 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 Lines 0.15 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
Opportunities
1. The worldwide cosmetics market grew 4.4% in 2011 representing $197.4 billion.
2. Major BRIMC and minor growth countries have several million middle class citizens and
are projected to account for 5 of the 10 largest economies by GDP by 2020.
3. BCG reports the Chinese middle class is expected to increase from 150 million to +400
million in 10 years. 340+ urban locations will increase to 550 million in 10 years.
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.
5. Google Offers, Living Social, and Group on have launched apps for Android phones to
alert consumers to deals through mobile devices.
6. 91% of new products pacesetters were brand extensions (expanded effectiveness, new
technologies, improved processes, new/unique formulas, varieties, designs or patterns).
7. Federal Aviation Safety requirements restrict passengers from carrying more than 4 oz. of
personal products aboard aircraft.
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.
9. 29% of consumers made at least one consumer packaged goods purchase online in 12
months. OTC drugs and health & beauty supplies ranked highest in respondents buying
the brand they want the most.
10. To reduce currency volatility, companies can hedge their exposure with futures contracts
(an 8.8% annual increase of dollar index).

Threats
1. Federal Aviation Safety requirements restrict passengers from carrying more than 4 oz. of
personal products aboard aircraft.
2. Consumption of cosmetic products per inhabitant is 10 to 20 times lower in immature
countries than in mature BRIMC countries.
3. China’s GDP growth target is 7.5%, which is well below the range recorded in 5 years;
India slowed growth by 5.3% in Q1 2012.
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.
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.
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.
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).
 8. Avon sales in India increased 57.4% due to direct sales in 2011.
9. Due to weak US economic environment and higher pricing of green products, consumers
may be deterred from buying green products.
10. Avon and Revlon both offer perfume products in their portfolio.

Summary:-

L’Oreal have been in the beauty industry for a hundred years and their reach to the peak of the
mountain was slow and steady and very thoughtful as to be the global leader in the beauty
industry problems are bound to show up from time to time and L’Oreal have been able to take
the pressures faced from competition and globalization aspects and tried to make the best out of
them so as to be the King in the beauty industry but even though the journey does not end over
here for L’Oreal as there still lies areas of improvement in the organization so as to remain the
King for the years to come.

L’Oreal should also develop a new business strategy that will give them a better competitive
advantage against Estee Lauder, P&G maybe by going to segment and catering to a further range
of ethnic groups and so try to apply a differentiation strategy and be successful.

Another area that still needs to be closely patched up is regarding its marketing strategy towards
males because according to research shows that men are becoming increasingly concerned with
their appearance and skin care and so it is an opportunity for L’Oreal to grip on before its rivals
do.

L’Oreal grows and adapts to these changing global demands, it is progressively appropriate to
ask what L’Oreal contributes to the standards of beauty and where they are falling short. If
beauty is really for everyone, product diversity, availability, and sourcing must reflect this
statement.

91% of new products pacesetters were brand extensions (expanded effectiveness, new
technologies, improved processes, new/unique formulas, varieties, designs or patterns). L’Oreal
responds well than from rivals. They grapping opportunities and introduce new products
according to customer needs.

L’Oreal score 3.43 from their rivals Revlon and Avon in terms of success factors life quality,
pricing and packaging.
References:-
https://www.loreal-finance.com/sites/default/files/2019-09/LOreal_2017_Registration_Document.pdf

https://finance.yahoo.com/

https://www.companyreporting.com/sites/default/files/annual-report-index/loreal-annual-report-
2016.pdf