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Introduction L’Oréal Group is the leading corporation of the cosmetics industry worldwide, headquartered in Frace. L'Oreal is operating in 150 countries, offering 34 cosmetics brands. Its sales accounted for €22.02 billion in 2017, €2.1 billion of sale in e-commerce and 498 patents were registered. The company concentrates on providing beauty products and technology for the mass consumer in every continent such as hair colour, hair care, skin care, sun protection, makeup, and perfumes. It has brands in four divisions: L’Oréal Luxe, Consumer Product Division, Professional Product Division and Active Cosmetics Division. Such division improves the efficiency of its operational processes and distribution channels, e.g. department stores and shopping mall offer high-end products, while consumer products and active cosmetics are distributed through supermarkets and drugstores, and professional products distribute to hair salons around the globe. In 2017, revenue of L’Oréal Group come from consumer product division accounted for 46,6% of the total sales of four divisions. Also, Western Europe is the largest market for L’Oréal, second by North America. L’Oreal is Beauty for all is the mission of the company. It contributes trustworthy and valuable beauty commodities that are innovative. Moreover, the products have to satisfy different beauty demands of a different customer group. This means it does not mainly discuss information like the brands under L’Oreal or their potential customers; it principally concentrates how it is investigating to provide L'oreal customers’ needs. History Established by Eugène Schueller - a new and artistic chemist in 1909, L’Oréal initially began with first hair colouring product that he created, produced and market to hairdressers and salons in Paris. By then, Schueller had set a culture that is now a part of L’Oréal's DNA: Research and innovation in the beauty industry. Nearly one century of operation, L'Oreal Group underwent four main stages. 1909-1956: The first steps, forming an empire Eugène Schueller graduated from the Institut de Chimie Appliquée de Paris in 1904 and went on to establish Société Française de Teintures Inoffensives pour Cheveux (later known as L'Oréal) on 30th July 1909.

Thanks to in-depth knowledge in chemical, Schueller developed his knowledge for new ideas and released his first hair colouring treatment called Oréal which was a blend of gentle compounds. The product was an exceptional success at that time, offering a wide range of colours; unlike others products in the market at that time which commonly used henna or mineral salts so gave quite an artificial appearances. In 1925, the company changed its brand name to L’Oréal. Since then, It has impacted consumer’s daily life significantly. 1957-1983: Globally expanding through acquisitions This period was considered as “Le Grand L’Oréal”. By the brilliant decision of its former chairman – Mr François Dalle, the L'Oreal Group went to internationalisation stage. The company strategy was to acquire other strategic brands, contributed to the spectacular growth of the Group. The L'Oreal's motto was “Savoir saisir ce qui commence” (seize newer opportunities). Brasil was the prior market with a presence in 1959. This decision made Brazil the platform for the whole Latin America continent. The acquisition of Lancôme - a perfume, skincare and makeup brand - in 1964 was the first strategic move of becoming a high-end beauty empire. A year after, the acquisition of Garnier enabled L’Oréal to own a line of organic hair care products – a different direction for the haircare industry. In 1970, by buying Biotherm, L’Oréal had stepped up its skin care research. Notably, the year 1973 revealed the maturity of the Group in dermatological and pharmaceutical activities after its acquired of the majority interest in pharmaceutical company Synthelabo. In 1976, L’Oréal bought the mascara brand Ricils to infiltrate makeup market. At that time, the agreement between Nestle and L'Oreal had given L’Oréal’s international development in particular markets in Asia to expand its empire. By 1983, L'Oreal had set up an R&D centre specialising in hair care and skin care to design its products for the Japanese market. 1984-2000: Dominating the beauty industry Over the period of seventeen years, L'Oreal achieved significant success, dominated by necessary investments in research. The Group had entirely become the world cosmetics leader through its worldwide presence of brands due to numerous acquisitions. 2001-now: Embracing diversity in its global presence

Having in hand a portfolio of powerful and international brands, L’Oréal has enhanced its competitive advantage by embracing differences in culture in its global growth. The Group has been continually making new acquisitions to meet global and regional demands. It also tackles socially responsible initiatives to hold sustainable progress. Business Strategy The corporate level strategies that L’Oréal implementing are horizontal integration, vertical integration, and strategic alliances to keep its position as the leader in beauty product manufacturing, globally. L’Oréal had been taking advantages of horizontal and vertical integration in the purpose of building a grand picture in new geographic territories. The company new markets comprised of Eastern Europe, Asia/Pacific, Latin America, Africa and the Middle East. For example, at the of 2013, L’Oréal had successfully acquired Interconsumer Products Group based in Kenya and Cheryl's Cosmetic pharmaceuticals of Mumbai. This allowed L’Oréal to increase its market share in the skin and hair care industry (Terfis Team, 2014). With numerous of acquisitions in these markets, L’Oréal has continued to expand further its market share in the cosmetics industry. L’Oréal applied a horizontally integrated corporate level strategy as the company continually purchasing companies that are unique to achieve competitive advantage in the environment they operate. A clear example of this is the recent acquisitions of Magic Holdings in China and Niely Cosmetics in Brazil. In order to increase profitability, L’Oréal will use their R&D ability to integrate their extensive researches to differentiate Magic Holdings, and Niely Cosmetics established products. Another horizontal integration of L’Oréal took place in February 2014; L’Oréal made an announcement of their completed acquisition of two Japanese brands. The two brands were Decléor and Carita, which boosted L’Oréal’s recognition in Japan as they are both specialize in skin care, hair care, and fragrance merchandises. The two Japanese companies are together ranked at number two globally as the most notable within the professional skincare and beauty market (Terifs Team, 2014). L’Oreal applied a vertical integration. For example, L’Oreal implements vertical integration through the way The Body Shop outsources its raw materials for use in product manufacturing. This differentiates the Body Shop from other L’Oreal brand. L’Oreal also executes integration through its research and development facilities across the world and the integrated production facilities that manufacture the majority of L’Oreal cosmetics brand 3

product. Another example of vertical integration is L’Oreal's ownership of the brand Sanoflore The French laboratory specifically designs and manufactures its variety of cosmetics and aromatherapy products. Sanoflore became a part of the consumer products division and still have its control as a manufacturer by handling all stages of the aromatic and medicinal plant chain. L’Oreal applied a strategic alliance when they partner with Nestle. In 2002, L’Oreal Finance announced the joint venture between the two companies, whose mission is to develop further the market of cosmetic and nutritional supplements. As a result, Inneov laboratories was in the business with equal ownership between Nestle and L’Oreal. Combination of Nestle's nutrition expertise and L’Oreal's skin and hair experiences will nourish an active environment for the development of the next nutritional supplements. According to L’Oreal Finance statements, Inneov laboratories remain highly ranked in European pharmacies and is the first partnership between the food and cosmetic industries (2002). Transnational Strategy L’Oreal's ability to execute a cost-effective structure that satisfies the needs of different cultures around the world which demonstrates how a transnational strategy is executed. L’Oreal's organisational structure is illustrated through a global-matrix structure; in which business are separated by geographic zone, and then broken down furthermore by suppliers and supporting value-chain activities. L’Oreal's business activities are first broken down by geographic zone in order to integrate research and production facilities on a global scale that satisfy the specific needs of the areas in which they operate. L’Oreal operates in six different areas including Western Europe, North America, Asia/Pacific, Eastern Europe, Latin America, and Africa/Middle East. L’Oreal's brands are then further broken down by divisions in the group. As L’Oreal has expanded on a global level throughout the years, the complexity of organisational structure has increased which demonstrates how L’Oreal operates under a global matrix structure. L’Oreal's Group involves thirty-four international brands. These brands are grouped under four independent divisions within L’Oreal Group. The divisions are L'Oreal Luxe, Consumer Products Division, Professional Products Division and Active Cosmetics Division. Every division under the L'Oreal Group targets and caters their products to a specific market segment.

Division L’Oréal has a long-term and robust image which has been targeting to consumers across all income levels by providing a diverse range of beauty product. The company has given user around the world to have easy reaching to their commodities that shape their expectations, lifestyles and beauty requirements. L’Oréal is recognised through four different division where each of the brands has a specific picture by fitting cultural and societal differences that appropriate their consumer in their native location. These divisions are defined as: L’Oreal Luxe, L’Oreal Consumer Products, L’Oreal Professional Products, L’Oreal Active Cosmetics. L’Oreal Luxe L’Oreal Luxe is well-known for the ownership of a variety of high-end beauty brands. L’Oréal Luxury has two primality aims: digitalise and diversify to cover all consumers’ lastest expectations.” It has given a unique world of beauty that implicates for elegance and refinement with three major specialisations: skin care, makeup and fragrances. The representation brands for this group included: Lancôme, Yves Saint Laurent, Giorgio Armani, Kiehl’s, Urban Decay, IT Cosmetic, Shu Uemura, Biotherm, Helena Rubinstein, Yue Sai, Clarisonic, Atelier Cologne, Ralph Lauren, Viktor&Rolf, Diesel, Cacharel, Maison Margiela. Currently, L’Oréal Luxe products are not only sold at department stores, cosmetics stores, travel retail, but also ownbrand boutiques and online websites. L’Oreal has been taking a significant position in the Division’s product development process as the result of the concrete driver of product identification, design, industrialisation and manufacture. These points are crucial for displaying 40,000 L’Oreal Luxe products point of sale throughout the world. This division occupied 23% of the beauty market and 40% of worldwide cosmetic market growth on published data. This luxury industry is attractive by the “made in” label. It is defined with technique and expertise. At the moment, most of the brands are produced in France. On the other hand, Kiehl's which is the original American is made in the USA brand, and the Japanese brand Shu Uemura is made in Japan, in purpose to respect these brands' historic heritage. Also, Lancôme, Biotherm, Shu Uemura, Yves Saint Laurent, Kiehl’s; perfumery which includes Giorgio Armani, Ralph Lauren, and Diesel are manufactured and operated marketing and distribution activities in Indonesia. Furthermore, 30% of the production in Indonesia will 5

provide for the domestic market while other 70% will be allocated among other countries in the South-East Asian region. L’Oreal’s manufacturing plant in India also embraces production line of Lancôme, Kiehl’s, Yves Saint Laurent, Giorgio Armani, Ralph Lauren, Diesel that cater 90% production for Indian. Besides, this category towards women who is more likely to enjoy luxury products that associate to the product of high quality and affordable price. Targeted consumers mostly are the high-income, who can spend an immense amount of money on their appearance comprehensive. They believe high price is identified as excellent quality and it is always worth it to purchase high-end commodity. This means in their perspective, “drugstore” brand or cheaper products is defined as low-quality and ineffective. In general, L’Oreal Luxe successfully applies a differentiation strategy to vary its portfolio to achieve its maximum profit in the worldwide market as well as compete with its competitors such as Shiseido and the Estee Launder Companies. In Asian-Pacific, this division has been carrying out a strong performance with doubledigit growth in China, Japan, and Southern Asia in Yves Saint Laurent, Giorgio Armani, Kiehl's Lancôme and its new acquisition, IT Cosmetics products specifically. The American performances a slow development of the L’Oréal Luxe Division that against a background of inventory reductions. There are only Yves Saint Laurent, and IT Cosmetics have continued to report double-digit growth. The L’Oréal Luxe in Latin American, Western Europe, Eastern Europe have also achieved a strong growth in 2017. L'Oreal Luxe, in general, marketing its image by combining scientific proficiency and an instinctive understanding of women’s essential to create significant innovations, exclusive and balancing between skin care, makeup and perfume. Lancôme also builds its impression by taking the reflection of woman who embodies a radiant, confident and universal gorgeousness while keeping it modern and down to earth. Moreover, this division also collaborate with many celebrities to marketing its brand such as Lily Collins (actress, model) works with Lancome and Karl Lagerfeld (Artist) collaborate with Shu Uemura.

L’Oreal Professional Products Trends nowadays are becoming more complicated than ever. The hair colour has become a tool to express individual personality and style to the community. By not letting the products

and services fall behind, L’oreal Professional Products Division decided to work with the most famous stylists and techniques to identify the new trend. They have collaborated with many celebrities and fashionista to invite them to release many new makeup and hair products. The professional products division of L’oreal has maintained the long-lasting, and mutually beneficial relationship with the global salons since the success of the company and hairdressers are always linked. This division allocates its products to the hair salons on all over the world. Its brand portfolio strives to meet the needs of all types of their clients, regardless of their demand or purchasing power. L'Oréal Group's professional product division is enhanced by following the small umbrella brands: Redken, Matrix, Kérastase, Pureology, Decléor, Shu Uemura Art of Hair, Carita, Mizani, Baxter. The President of Professional Division, Nathalie Roos explained that at the time when other competitors consider about how to ameliorate their service through customer’s feedbacks . and community’s mutual trend, L’oreal has already connected with over 1.6 million hairdresser partners and expertise all over the world – gathering together to create something unique and completely different. Knowing that consumers demand is a hairstyle that can express their personality. L’oreal believes that the best way to assert the talent and their expertise is to achieve the client’s satisfaction with the right hair colour the moment the client walk out of the salon. The division has co-created the hair colour palette and new techniques with the professionals in order to meet customer expectations. The innovations and exclusive salons are two things that keep L’oreal stay in the game. The highest priority of the division and their partners is to create the best experience for the consumers. As a result, the app L’Oréal Professionnel Style My Hair was developed and has been downloaded over two million times. By 2018, L’oreal has prepared several assets to cater the more pleasant experiences of their professional salon system thanks to their Salon E-motion™ programme and L’Oréal Professionnel Style My Hair app, which now features the augmented reality. 1.1.

Digitalisation

More than 86% woman watching hairdressing tutorial on Youtube and 700 million videos are viewed each month. Following this trend, L’oreal's Professional Team Division response to their consumers by releasing two social applications called “Salon E-motion™” and “K-Profile”. 7

The first application can reply 100% comments, and questions asked online and also defines the new trend in posts. The “K-Profile” app help the professionals to assign the treatments that used in salons and at home. 1.2.

Natural Products

L’oreal commitment is to maintain and develop the natural professional beauty products. The natural elements have become an essential part of the beauty industry. In order to meet the need of the consumers, L’oreal combined high-quality products and social responsibilities. One of the most outstanding brands following this trend is the Aura Botanica by Kérastase, an excellent luxury beauty product that contains 98% of natural ingredients and reliable sources. Another brand launched in 2017, the Biology R.A.W (Real.Authentic.Wholesome) with 70-100% ingredients come from natural and biodegradable, is contributed to the reliable proof of the Group’s commitment to the environment.

Consumer Product Division L’Oréal’s Consumer Product Division is founded with an idea of providing beauty products and technology for the mass consumer in every continent of the world from Asia, South America, North America, Europe, Australia to Africa. There are eight cosmetic brands under the consumer product division of L’Oréal Group: L’Oréal Paris, Magic, Garnier, Maybelline New York, African Beauty Brands, Essie, NYX Professional Makeup, and Niely. Consumers can find brands under consumer product division in many mass retailing channels (supermarkets, hypermarkets, drugstores or traditional stores) at a more affordable price compare to L’Oréal Luxe. These brands cater toward consumer who in need of colouring products, hair care, skin care, and makeup. L’Oréal Paris is the biggest brand under the consumer product division. L’Oréal Paris’ vision is to provide customers with the latest technology and the highest quality in their products. As a global beauty brand, L’Oréal Paris could be found in every single continent of the world. In North America, specifically in the United States, Canada and Mexico; consumers can find L’Oréal Paris products in many drugstores, supermarkets and traditional stores in those countries.

Maybelline New York, famous for producing the first ever commercial cake mascara in 1917 which is quite revolutionary for the period. Founded by Thomas Lyle Williams, a young Chicago chemist in 1915, the brand name is a portmanteau of Thomas’s sister, Mabel and the main ingredients of his first product: Vaseline, hence Maybelline. With the success of the ingenious cake mascara, Thomas was on a path to develop more fantastic product under the brand Maybelline. From that single mascara cake, Thomas had the opportunity to expand his brand to a further spectrum of cosmetics products, for example, eyeshadows, foundations, lipsticks. Recently, Maybelline New York has collaborated with Nikkie de Jager – a Dutch makeup artist and YouTube influencer who owns a beauty channel on YouTube with more than eleven million subscribers. Collaboration between Nikkie and Maybelline New York consist of two series of videos of Nikkie showi...