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L'Oréal-The Body Shop

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on 13 September 2012

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Transcript of L'Oréal-The Body Shop

I. Introduction
II. Why did L'Oréal acquire The Body Shop?
III. What are the Corporate Cultures of both companies?
IV. What are the National Cultures ?
V. Did the acquisition work or not? Why?
VI. Conclusion
Sources The Body Shop - L'Oréal Acquisition Table of Content Anita Roddick (1942 - 2007)

" I honestly believe I would not have succeeded if I had been taught about business " I. Introduction - The Body Shop Founder of The Body Shop

Initially founds The Body Shop to create natural cosmetic products in different sizes

Social activist

Pioneer of ethical and green consumerism

Passes away at age of 64 Anita Roddick (1942 - 2007) 1976: founded in Brighton: first natural beauty products company in the UK The Body Shop - Key Dates 1978: Anita begins licensing franchises Rapid growth worldwide 1984: goes public with 138 stores in operation 2002: Anita & Gordon Roddick step down as CEOs 27th March 2006: becomes part of L'Oréal Group June 2008: Sophie Gasperment becomes Chief Executive Today: over 2550 stores in 62 countries , 77 million customers and operates in 25 different languages I. Introduction - L'Oréal Founded in 1909 by Eugene Schueller, a chemist Headquarter: Clichy, Hauts-de-Seine, France Operations in over 130 countries Over 500 brands worldwide Very large product line (hair colour, make-up, perfumes, hair care, men and women) Targeted markets: mass, professional, luxury and active cosmetics World's largest cosmetics and beauty company "I want to shake the hand of the one female in my life who's caused me more trouble than any other"

Sir Lindsay Owen-Jones, CEO of L'Oréal, to A. Roddick II. Why did L'Oréal acquire The Body Shop? L'Oréal's reasons: II. Why did L'Oréal acquire The Body Shop? Market different products with different target market (environmental and socially ethical consumers) New geographical markets (eg: The Body Shop enters India easily) Meet society's pressure for green business Reach a critical size for exploiting economies of scale In 1984 the company goes public -> focus on profit maximization, and can't really do what it wants -> started looking for someone to purchase the company Then L'Oréal's CEO contacted them. Potential to influence the buying decisions of a large corporation (and its consumers) "I believe they (L'Oréal) are honourable and the work they do is honourable" A. Roddick Important conditions were settled The ethic of The Body Shop influenced L'Oréal's policies : invest in research on alternatives to animal testing, Anita Roddick is a "trojan horse". The Body Shop reasons to accept: 5 Core Values:
- Against Animal Testing

- Support Community Fair Trade

- Defend Human Rights

- Activate Self-esteem

- Protect our Planet III. Corporate Culture - The Body Shop The Body Shop Training School & Training Center in 1985 Charitable Foundation, launched in 1990 "Our company culture fosters and values diversity"
Mr. Owen-Jones, former L'Oréal's CEO III. Corporate Culture - L'Oréal Commitment to diversity: employees, customers and suppliers Employee assistance (Europe's top business employer in 2008) Guiding principles: research and innovation in beauty
613 patents filed in 2011
18 research centers around the world Scientific community support: the L’Oréal-UNESCO Awards for Women in Science English Culture French Culture (cc) photo by medhead on Flickr IV. National Cultures IV. National Cultures The Body Shop
English culture L'Oréal
French culture IV. National Culture UK (The Body Shop)

Medium power distance (35)
-> No large gap between the wealthy and the poor
-> Strong belief in equality for each citizen
-> Opportunity to rise in society France (L'Oréal)

Large power distance (68)
-> Gap between the wealthy and the poor
-> Inequalities are accepted
-> Hierarchy is needed
-> Power highly centralized Power Distance IV. National Culture http://geert-hofstede.com/france.html Individualism versus collectivism UK (The Body Shop)

Strongly individualist (89)
-> Among the highest in the world
-> Personal fulfillment
-> Think for yourself and develop own ideas to contribute to society France (L'Oréal)

Highly individualist (71)
-> Private opinions prevail
-> In the work environment, focus on the task and autonomy
-> Direct communication
-> Recognition of one's work Masculinity versus femininity IV. National Culture UK (The Body Shop)

Strong masculinity (66)
-> Success oriented society
-> Strong devotion to work
-> Clear performance ambition
BUT The Body Shop is much more feminine France (L'Oréal)

Relatively feminine (43)
-> Care for quality of life
-> Sympathy for the underdog
-> Supportive management
-> Dialogue to resolve conflicts Uncertainty Avoidance IV. National Culture IV. National Culture Long-term versus short-term orientation V. Did the acquisition work or not? Why? "The alliance of the expertise of L’Oréal (its experience of international market) with the corporate culture and the values of The Body Shop will be really beneficial for the two companies"

Lindsay Owen-Jones (Chairman and CEO of L'Oréal), 2006 The problems.... The cultural clash
Impact on the stakeholders
Boycott organized by the animal protection lobby (still nowadays)
Against animal testing : the consumers felt betray
No more alternative to cosmetic giants (threats in 2005)
The brand image : The Body Shop works as a "greenwasher" for L'Oréal Dan Lyons (Uncaged campaign director) "It's a sad day" After the sale : The satisfaction of the consumers fell by half in 3 weeks Nowadays : The Body Shop has received an ethical rating of 2.5 out of 20 ("ethicore system" by Ethical Consumer) Nestlé, shareholders of L'Oréal, has been voted the world's least responsible company (internet poll) UK (The Body Shop)

Very low uncertainty avoidance (35)
-> Changes are made as new information arise
-> New and innovative products
-> No detail-oriented work
-> Procedures are flexible to emerging environment France (L'Oréal)

High uncertainty avoidance (86)
-> Structure, rules and security are preferred
-> Change are considered stressful UK (The Body Shop)

Strongly short-term oriented (25)
-> Focus on quick goals and results
-> Respect for tradition
-> Continuous tests on new products and ingredients France (L'Oréal)

Short-term oriented (39)
-> Focus on quick results
-> Not much focus on saving
-> Management based on self reliance, hard work The media reported the discontent (most of our sources) "This brand has been damaged, perhaps terminally" Mike Brady, coordinator of activist group Baby Milk Action : forecast the failure ...did not hinder the success The hostile reaction quickly died down A special status : independance, same distributor network, same management team, only reports to the hierarchy Enables to invest : success of the new shops Effective success : more shops, higher profits http://www.loreal.com/_en/_ww/html/company/pdf/LOREAL_RA2011_HD_27032012_EN.pdf p.18 http://www.scribd.com/doc/43516561/L-Oreal-and-the-Body-Shop p.15 Sources (1) - Newspapers articles

Le Monde article, march 18th, 2006 “L’oreal soigne son image en achetant The Body Shop”: http://www.respire-asbl.be/L-Oreal-se-paie-une-image

http://ecosalon.com/behind-the-label-the-body-shop-against-animal-testing-campaign/

http://www.independent.co.uk/news/uk/this-britain/body-shops-popularity-plunges-after-loreal-sale-473599.html

http://www.guardian.co.uk/business/2006/mar/17/retail.animalrights

http://articles.nydailynews.com/2012-03-14/news/31183327_1_animal-research-chemicals-testing - Websites

http://targetjobs.co.uk/employer-research/loreal-insights
http://news.bbc.co.uk/2/hi/business/4817814.stm)
Ethical rating of The Body Shop: http://www.ethicalconsumer.org/
Successful takeover: http://business2k12.files.wordpress.com/2012/03/research-bullet-briefing-20121.pdf
Hofstede Cultural dimensions: http://geert-hofstede.com/france.html
Anita Roddick interview: http://www.guardian.co.uk/business/2006/nov/03/ethicalliving.environment
Guiding principles of L'Oréal: http://targetjobs.co.uk/employer-research/loreal-insights Sources (2) Sources (3) - Case Studies:

Personal case study (Marmara University, May 2012), available on demand

Sciences Politiques University Presentation: http://www.needocs.com/document/academique-cours-etudes-de-cas-etude-de-cas-strategie-l-oreal,8576

- L'Oréal Annual Report 2011

- Graphs 1: http://www.loreal.com/_en/_ww/html/company/pdf/LOREAL_RA2011_HD_27032012_EN.pdf

- Graph 2: p. 18 http://www.loreal.com/_en/_ww/html/company/pdf/LOREAL_RA2011_HD_27032012_EN.pdf

- Graph 3: p. 15
http://www.scribd.com/doc/43516561/L-Oreal-and-the-Body-Shop The Body Shop : NO Are the national cultures important for the company? L'Oréal : YES Controversies: The Body Shop focused on ethics vs/ L'Oréal profit seeker BUT VI.Conclusion Advantages for both parties:
L'Oréal:
Stock prices increase
Benefits from The Body Shop ethical brand image The Body Shop:
Retains its 'raison d'être'
Profits from a new world level
Opportunity to influence the researchers, shareholders and board of L'Oréal of the importance of eco-friendly products and promotions Thank you for your attention ! Growth strategy:
Full transcript