SWOT Analysis of L’oreal: Strengths & Weaknesses 2021

NameL’Oréal
IndustryCosmetics & personal care 
Founded1909
HeadquartersClichy, France
CEONicolas Hieronimus
Revenue27.99 billion Euros (2020)
Profit5.20 billion Euros (2020)
CompetitorsYatsen Holding, Estee Lauder, Avon Products, Revlon, Coty and CHANEL.


Headquartered in Clichy, France, L’Oréal is a company that manufactures and sells cosmetics and personal care products. The following sectors help the company operate; L’Oréal Luxe, Professional products, Active consumers, and Consumer goods. The professional product sector deals with the manufacturing and selling of hair salon products; the consumer product section offers personal care products for men and women; L’Oréal Luxe is the luxurious segment of L’Oréal which markets rich and opulent skincare/care products. Lastly, the active consumer section sells cosmeceutical skin/hair care products. The company ranked at the 86th position on World’s Best Employers list and was known to be the 30th most valuable band globally in 2020 (Forbes, 2021). 

L’oreal Strengths 2021:

  • Good Research & Innovation.

    A widely recognized strength of L’Oréal is its R&D (Research & Development) team.L’Oréal spends huge amounts of money on the research and development of products in order to ensure that they are safe to use and are high-quality products. The bar graph presented below by Ridder (2021a) clearly shows the company’s expenditures on R&D from 2009-2020, exhibiting that the company invests a great deal into innovating its products and keeping its offerings updated with the market trends.
  • Globally Expanded.

    As of 2019, the company has expanded to 150 nations with its main focus on the economies of Western Europe, North America and the New Markets: the Asia Pacific, Latin America, Eastern Europe and Africa, Middle East (L’Oréal, 2020). This has allowed L’Oréal to capitalize on some of the largest economies worldwide and even manufacture products with diversity, earning them ample amounts of profits. The following chart indicates the breakdown of L’Oréal’s market segment. 
  • Diversity in Products.

    L’Oréal as a brand is not only invested in manufacturing and selling cosmetics or hair care. Lately, the company has expanded to the skincare, fragrances and even hygiene industry (L’Oréal, 2021). Such diversification has allowed the company to earn profits from all markets, and it also provides multiple safety nets for the brand in case a market fails or has reached stunted growth. 

  • High-End Celebrity Endorsements.

    L’Oréalhas invested in using high-end celebrities to market the brand over the years. This is a strategic step carried out by L’Oréal as it not only adds to the reputation of the brand but also increases sales. Some celebrity endorsers of the brand include Blake Lively, Jennifer Lopez, Aishwarya Rai, Karlie Kloss, Helen Mirren, etc. (Mohanan, 2015). 

L’oreal Weaknesses 2021

  • Many Subdivisions.

    The large operation base of the company also comes with plenty of problems and issues. Handling such a large operation base is always a hassle for companies as it leads to communication gaps that compromise the quality of the brand’s products. Also, a large operation base results in the brand having to hire a lot of employees. L’Oréal had approximately 85,087 employees in the year 2020 (Ridder, 2021b). This clearly indicates that the human capital expenditure of the company is huge and could lead to the company suffering a loss in the future. 

  • Saturated Market.

    The cosmetics and skincare market is one of the most competitive and intense markets globally. New and improved products and innovations have left no room for growth. This put the market position of L’Oréal in jeopardy because if the innovations do not keep coming, the name of the brand will dissolve among competitors.

  • High Expenditures.

    A plethora of resources is invested by L’Oréal in R&D and advertising/promotion. The company invested 8.65billion Euros in the year 2020 on advertising which is a drop from the 9.21 billion in 2019 but is still enough to make a dent in the earnings of L’Oréal (Ridder, 2021c).

L’oreal Opportunities 2021:

  • Manufacturing Organic Products.

    Organic beauty products have high demand globally. Although L’Oréal already sells some basic organic products, it could invest in more organic ingredients and broaden its range of skincare segment. This will prove to be quite beneficial for the brand as the organic skincare market is expected to grow 5.24% from 133.90 billion in the years upcoming years of 2021-2026 (GlobeNewswire, 2021). 

  • Collaborating with skin-care outlets.

    The company has collaborated with many famous celebrities such as Beyonce; however, the opportunity to collaborate with skin care retail stores, such as The Body Shop, is available. The brand equity and reputation of L’Oréal and The Body Shop will go hand in hand to provide both brands with increased sales and even target new customers. 


L’oreal Threats 2021:

  • Ever Changing Demand for Products.

    The cosmetics/personal care industry is always changing. The demand for every product varies across different time periods. Some days few products are in high demand whilst on other days the demand for the same product completely drops due to changing trends. This puts L’Oréal under a great deal of pressure to develop innovations because if not done right, the brand could lose customers.

  • Competitive Market.

    Although L’Oréal is a prominently recognized brand, it still receives a great deal of competition from Yatsen Holding, Estee Lauder, Avon Products, Revlon, Coty, CHANEL, etc., which makes it hard for the brand to make a place for itself. However, L’Oréal has managed to stay valuable; it could be easily replaced by any of its competitors or new entrants by just a couple of advanced products. 

L’oreal SWOT Analysis Conclusion:

In conclusion, it can be seen that L’Oréal is quite a valuable and popular brand in the Cosmetic/personal care market as it has focused on building its strengths. The key strengths of L’Oréal include a good R&D team and also using celebrities to market the brand. This builds the reputation of L’Oréal; however, the brand has weaknesses such as a large operation base which jeopardizes the integrity of the products it manufactures. Also, the high expenditures could lead to the company not earning sufficient profits. If L’Oréal capitalizes on the opportunities it is presented with, for instance, manufacturing more organic products and even collaborating with skin-care retail shops, it could help the brand expand. Further achieving a greater target audience would lead to profits and minimize the threats the brand is vulnerable to. 


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References:

  1. Annual Report. (2020). L’Oréal Paris. 
  2. Forbes. (2021). L’Oréal. Forbes. 
  3. GlobeNewswire. (2021). Skincare Market Size, Research, Share & Global Trends | 5.24% Compound Annual Growth Rate Forecast till 2026, Report by Fortune Business Insights™. GlobeNewswire. 
  4. L’Oréal. (2020). L’Oréal worldwide. L’Oréal. 
  5. L’Oréal. (2021). A global flotilla of complementary brands. L’Oréal. 
  6. Mohanan, P. (2015). Because They’re Worth It: L’Oréal Paris Celebrity Endorsers. Thread by Zalora. 
  7. Ridder, M. (2021a). Research and development (R&D) expenditure of L’Oréal worldwide from 2009 to 2020. Statista. 
  8. Ridder, M. (2021b). Total number of employees of L’Oréal worldwide from 2010 to 2020. Statista. 
  9. Ridder, M. (2021c). L’Oréal’s advertising and promotion expenses worldwide from 2007 to 2020. Statista. 
SWOT Analysis of L’oreal: Strengths & Weaknesses 2021
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