Comparative Study for the Strategic Design

Management between L’Oréal and Estée Lauder

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Table of Contents

Introduction .................................................................................................................... 3
Research Purpose and Research Question ..................................................................... 4
Design and Management................................................................................................ 6
Methodology .................................................................................................................. 7
Findings and Analysis .................................................................................................... 8
Comparative Analysis of Marketing Strategies between L’Oreal and Estee Lauder ... 13

L’Oréal Company ............................................................................................. 14

Company Introduction ......................................................................... 14
PEST Analysis ..................................................................................... 15
Management of Strategies.................................................................... 16
Estee Lauder Company ...................................................................................... 18
Company Introduction ......................................................................... 18
PEST Analysis ..................................................................................... 18
Management of Strategies.................................................................... 21
Comparative Analysis .......................................................................................... 22

Conclusion ................................................................................................................... 27
References .................................................................................................................... 29

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1. Introduction

Nowadays both companies are running neck-to-neck and catching up with each up
during the increasing developed makeup category and compete with each other to
take dominance. However, in such an accelerated beauty market, the comparative
value of each brand has less to do with the forces that make success for L’Oréal and
Estée Lauder from the beginning, but has more to do with the vision and their
strategic management (Shin’ya, 2008). Each brand has its own unique features in their
strategic design management. As for Estée Lauder, the brand is proud of being the
leading character in the field of luxury beauty, but the brand does not own the mass
business as well as the deep pocket of L’Oréal to start all over again in the changing
market. While for L’Oréal group, conquering and mastering all categories at any price
is the goal of L’Oréal, and all acquisitions are pushed for the maximum benefits
(Lennard, 2011). Such strategy makes the company capitalize on the momentum of
the brand though the company has suffered poor performance in recent years
(Lennard, 2011). As the leading beauty cosmetics conglomerates in the world,
L’Oreal and Estee Lauder are sparing no effort to stay competitive in the
fast-changing beauty market (Badkar, 2014). It is enormously appealing to explore
how these two beauty cosmetics conglomerates design its strategic management and
understand the how they practice the theories must be beneficial for me to understand
the subject of design management (Creswell, 2009). Furthermore, by studying the
seminaries and difference of both companies, it can be useful in the further study of
design management. This essay mainly aims to explore the strategic design
management between L’Oréal and Estee Lauder and analyze the similarities and
differences of the strategic design management of both companies, moreover, this
essay will also use the design management theory to analyze the how it influences the
strategic design of both companies and seek to offer a detailed study of how the
L’Oréal Company and the Estée Lauder Company implement the various design
management strategies and tools to promote the development of the company (Smith,

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2009). Meanwhile this essay will expand the comparison from the brand identity,
culture, management, marketing, financial operation, production and so on through a
series of literature to visualize and analyze the main concept and demonstrate the
relationship between these items.

2. Research Purpose and Research Question

Though there have been a few studies in exploring the brand strategic management of
both companies, such as Operations Management: The L’Oréal Way (ARC Advisory
Group, 2010), The Case Analysis of L’Oreal Corp. as Market Leader (Ashraf, et al.
2015), and Estée Lauder’s Makeup (Lofton, 2003) and so on, there has no study in
comparing the strategic design management between L’Oréal and Estee Lauder to
know the difference between each other and accelerate the brand expand in a
particular way in the commercial aspect. Therefore, it is believed to be an interesting
and beneficial topic to explore. There is an increasing notion in the aspect of business,
especially in the emergence and development of the cosmetics business. L’Oréal
Company and the Estée Lauder Company and design are the growing worthy of the
cosmetics business with the traditional and new business structures. Because design a
strategic and useful tool companies prefer to use to achieve the great competitive
advantage. However, many companies does not realize the importance of the design
management of a company’s strategy and the great designer can strengthen the
environment, communication, products and the cooperate identity (Kotler & Rath,
1984).

Furthermore, by studying the seminaries and difference of both companies, it can be

useful in the further study of design management. Therefore, it is believed to be an
interesting and beneficial topic to explore. By exploring the strategic design
management between L’Oreal and Estee Lauder and analyzing the similarities and
differences of the strategic design management of both companies in the aspect of

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social behavior, cognitive neuroscience, multi-sensory processes, entrepreneurship,
playfulness and gamification, designing strategies, aesthetic appreciation, behavioral
economics to neuro-marketing, experience design, design audit to service and systems
design, and creative strategic leadership (Born, 2005), it can be useful to understand
the strengths and weaknesses of both companies in the strategic design management.
By researching the topic and collecting relevant materials, the research aims and
objectives can be analyzed for further study.

Research Aim and Objectives

1. To examine how strategic design management has influenced the brand

strategies of L’Oreal and Estee Lauder Cosmetic companies
2. To conduct an analysis of the major elements of the design process in strategic
brand management for L’Oreal and Estee Lauder Companies
3. To compare how L’Oreal and Estee Lauder companies have modified the
business environment for brand design process and brand strategies

3. Design and Management

Usually the term of design is misunderstood by its simple definition of the artistic
creation applied in the development of products. However, it is defined by Klter and
Rath (1984) that design can be regarded as a process to help the companies to achieve
consumer satisfaction and promote the profitability but not only simply the process of
physical creation. Currently design has been applied in a various aspects of business
by building of the intangible services and the tangible products (Koostra, 2009). The
elements of design mix demonstrate that the designers must pay much attention to the
marketing, the performance of the company, the durability and quality, the sourcing
and manufacturing, the appearance, the creative vision, and the finance (Kotler and
Rath, 1984). But the companies usually neglect and overlook the importance of

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design, thus not acknowledging its worth in the business management (Kotler and
Rath, 1984).

The overlook of the application of design management can limit the company’s
ability to gain competitive advantages and make the company lose the possibility of
owning effective management (Martin, 2009). Design Management concludes the
synergy creation between the company and the business sectors because of each
sector managing its own values, culture, dynamics and opinions (Koostra, 2009). The
purpose of design management is to make the physical connection, and establish the
communication channels concerning the concept that the companies can perform in a
better way of they can understand the potential and importance of design (Smith,
1981).

4. Methodology

In order to get an enough understanding of the design business initiatives, the method
of case study research design is used for this study. The case study in this research
shows what to explore, instead of just being a simple methodological approach
(Musico, 2009). The case study research strategy allows in-depth study involved
natural environment and the aspect of participants in such circumstance (Mohsin &
Lockyer, 2010). The case study strategy is a reasonable and logical choice and it can
document and explore the relationships between what has happened and what can
happen on the context. As in Robert K. Yin’s book Case Study Research: Design and
Methods (2013), he said, in composing the report, non-fiction wiring should be
needed on sound facts instead of cause illusions by using storytelling. Moreover, most
data information and materials in the case study method will be collected through
primary research. Primary research is preferred as it gives first hand information that
is free from any kind of distortion and this makes it more reliable and credible. The
data collection instruments for gathering primary data are structured questionnaires.

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The number of questionnaires is to be prepared based on the size of the target sample
and in this case, 100 participants are targeted, implying that there are 100
questionnaires to be prepared and distributed to the respondents. The respondents are
customers of cosmetics drawn from the public used as case study without knowing
whether they have any preference for Estée Lauder Company or L’Oréal Company,
thus ensuring the finding and analysis as much as true.100 participants are to be
selected to take part in the research by filling the questionnaires. The filled
questionnaires are to be collected by the researcher in person and analyzed using
SPSS. As suggested by Schultz (2009) SPSS is a preferred method of analysis since
the data retrieved from questionnaires is quantitative in nature involving statistic and
the method gives an objective analysis of the findings.

5. Findings and Analysis

Among these 100 participants, more than 90% are female customers as females pay
more attention to cosmetics brands and have more accurate judgment about these two
brands, thus making this research result more accurate and reliable. About 30% of the
participants age 18 to 25. About 50% of them age 26 to 40 and these customers have a
rather solid economic strength and the cultural level people, so they have the purchase
power and focus more on high-tier cosmetics brands and products as well as the
quality of the cosmetics brand. Their judgment in the questionnaire can provide great
help in the findings and analysis. About 15 percent of the participants age 41 to 55
and about 5% of the participants age more than 55. Among these participants, about
75 of them have undergraduate education background and about 10 of them have
graduate education background. It is believed that participants who have certain level
of education background can make more accurate and believable judgment. And less
than 5 participants have education background of below undergraduate and about 10
participants have PHD education background. Among these participants, more than
61% participants’ monthly consumption is from 2501 to 4000 pound and these people

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basically have undergraduate education background. About 22% participants have
monthly consumption more from 40001 to 5500 pound and they have graduate
education background or undergraduate background. About 10% Participants with
PHD background have monthly consumption above 5501 pound and the rest
participants’ monthly consumption is below pound 1000. Therefore, it can be seen
that the construction of the sample, the participants is reasonable and it is expected it
can deliver a quite accurate result. Indeed, the questionnaires involve some
description about the brands’ traits of Estée Lauder Company and L’Oréal Company
from three different perspectives based on the aim and objective of this essay: brand
strategies of L’Oreal and Estee Lauder Cosmetic companies, design process in
strategic brand management for L’Oreal and Estee Lauder Companies, and design
environment of L’Oreal and Estee Lauder companies. Below there are some key
questions data, findings and analysis about both L’Oreal and Estee Lauder companies’
strategies design.

As in the aspect of brand strategies of L’Oreal and Estee Lauder Cosmetic companies,
on one hand (Figure 1), more than 40% participants slightly agree that L’Oreal
marketing strategy is more attractive than Estee Lauder and 20 % participants
strongly agree that L’Oreal marketing strategy is more attractive than Estee Lauder.
On the other hand, about 45% participants slightly agree and about 15% participants
strongly agree that Estee Lauder’s marketing strategy is better. It can be seen that both
companies have almost the same supporters about their marketing strategy.

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Figure 1. Marketing strategies comparison of L’Oreal and Estee Lauder Cosmetic
companies

When it comes to the question that which company has more effective brand
strategies in various aspects (Figure 2), about 50% participants would like to slightly
prefer L’Oreal Company and 14% of them strongly prefer L’Oreal Company. While
40% of the participants slightly agree that Estee Lauder Company has more effective
brand strategy in various aspects and 16% of the participants strongly agree with such
point. As can be seen from the data, more participants hold the opinion that L’Oreal
Company has designed much more effective brand strategies in various aspects.

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Figure 2. Effective brand strategy comparison of L’Oreal and Estee Lauder Cosmetic
companies

As in the aspect of design process in strategic brand management for L’Oreal and
Estee Lauder Companies (Figure 3), about 38% participants slightly agree that they
are more interested in L’Oreal’s products than another brand when they are similar
and about 11% of the participants strongly agree with such point. While about 40 %
of the participants slightly agree that they are more interested in Estee Lauder’s
products than L’Oreal brand when they are similar and about 15 % of the participants
strongly agree with such point. It can be seen that most participants show more
interest about Estee Lauder’s products when the products are similar, which can be
caused by various reasons, such as different marketing strategy, brand image and
reputation influence, product quality level during the design process in strategic brand
management.

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Figure 3. Product appeal comparison of L’Oreal and Estee Lauder Cosmetic
companies

When it comes to the question that which quality is better when both company come
up with new product (Figure 4), 30% of the participants slightly agree that the new
product of L’Oreal is better and about 10% of the participants strongly agree with
such point. While about 59% of the participants slightly hold the opposite opinion that
the new product of Estee Lauder is better and about 10% of the participants strongly
agree with such point. It can be seen that in the mind of most participants, they think
the product quality of Estee Lauder is better than L’Oreal. Therefore, most customers
hold the opinion that Estee Lauder has high quality reputation than L’Oreal.

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Figure 4. Product quality comparison of L’Oreal and Estee Lauder Cosmetic
companies

As in the aspect of the design environment of L’Oreal and Estee Lauder companies
(Figure 5), about 61% of the participants slight agree that the of L’Oreal make them
feel comfortable when the sales recommend goods to them when they are shopping in
the store and about 12% of the participants strongly agree with this point. While about
41% percent of the participants slight think that Estee Lauder make them feel
comfortable when the sales recommend goods to them when they are shopping in the
store an about 11% of the participants strongly agree with such point. Overall, more
participants think that the service of the L’Oreal sales in the store is higher than Estee
Lauder. As a matter of fact, the service of the sales is an important part in design
environment management of both companies as the sales can directly and first reach
their target audience and they can directly deliver the company’s business value and
brand image to their customers. As in this aspect of business environment design,
L’Oreal Company manages better than Estee Lauder Company.

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Figure 5. Design environment comparison of L’Oreal and Estee Lauder Cosmetic
companies

6. Comparative Analysis of Marketing Strategies between L’Oreal

and Estee Lauder

6.1 L’Oréal Company

6.11 Company Introduction

As one of the Fortune 500, L’Oréal Company was established in 1907. After almost a
century of endeavor, L’Oréal Company has changed into the leading company in the
world of cosmetics from a small home-based business. Meanwhile the company is
also on Fortune's World's 50 Most Admired Companies list and also has become the
expert in the cosmetics business within the recent century (Katsuki, 2013). The
various cosmetics offspring of the company have been highly popular across the
world. Meanwhile, the company owns comprehensive and complete sales pipelines
across the department store, supermarkets, hypermarkets, cosmetics exclusive shops,
duty-free shops, hair salons, community pharmacies and any other channel, bring the
high-quality products of L’Oreal to every corner of the world and lead the trendy

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beauty with passion and innovation (Born, 2005). For a century, the mission of the
company is consistent and persistent, which is to create beauty, spread beauty and
lead the beauty trend, thus the company is called the united nation of beauty and the
beauty ambassador.

The L’Oreal Company has great strength in the high quality assurance of the products,
the unique brand managing strategy, its distribution and marketing channels, great
investment in innovation and patent research, the sales team of strong ability, paying
attention to the purchase decision and consumer lifestyle of men's skin care products.
The company also invests much in the aspect of advertising and propaganda. The
strong innovation ability and the unique packaging of the company also increase the
company’s comprehensive power (L'Oreal's model of innovation: Strong research,
2013). As for the weaknesses, the acquisition and integration of resources in the
market has not been unified; the low-level market is not enough; mid-market brands
face high competition from local companies；the waste of resources; lack of low level
products. However, L’Oreal’s market always has great potential, especially for the
market in the developing countries and the raw material supplying still has much
chance of reducing the cost (Ibbad et al. 2015). However, the company also the strong
competition from the competitive competitors of high popularity; the pressure and
competition from local companies; the preference of customers are changing
constantly and the changes of regulations and rules in local areas all bring threats for
the booming development of the company.

6.12 PEST Analysis

The PEST analysis is to analyze the general environment around the whole company.
As for the political environment, the legal element plays a significant role in the
developing environment of L’Oreal Company. With the fast developing speed of the
world economy, the political environment is rather steady and the trend of world
democratization, openizatio，legalization as well as scientification of decision-making
is getting more and more clear (FDA Authority Over Cosmetics - Food and Drug
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Administration, n.d). However, in recent years, the issues of quality and security has
attracted more and more attention in society, many countries like China constantly
launched a series of regulations and rules to enhance the supervision over the
cosmetic products’ quality and control the industry behaviors of the production
process and the operation process for the cosmetics companies. To some extent, it
controls the developing space of the L’Oreal Company (Ibbad et al. 2015).

As in the aspect of economic environment, with the economic globalization, the world
product and the national products in most countries is becoming higher and higher,
people’s purchasing power is also surprisingly increasing and the per capita national
income as well as their living standards are highly rising (Larson, 2014). The
increasing of individual income will change customers’ shopping behaviors, shopping
awareness and shopping level and they will pursue goods of higher level, and
especially have higher demands for individual makeup products and skin care
products. For instance, currently the cosmetic market in China is the largest fresh
market across the world as China’s cosmetics market is worthy of 26 billion dollars
per year with the biggest online beauty market across the world. Therefore, it can be
quite a competitive market for L’Oreal Company and Estee Lauder Company as well
as the local cosmetics companies in China (Key figures: Brands, employees, sales.
2013). So when China’s mainland economic has increased greatly in recent years, it
will highly improve consumer’s purchasing power and stimulates them to buy more
cosmetics products (Katsuki, 2013).

As for the social and cultural environment, due to the difference of local cultures,
climate, customs and other elements, customers have different preference and
demands for the makeup products, especially during the western market and the
eastern market. For instance, different from the European, American and Japanese
market, Chinese market has more different levels of customers’ gradient consumption
(Born, 2005). The company’s core culture is to create beauty for every woman, all
ages, all races, and all areas, and the company aims to deliver beauty to every corner
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of the world. Such company culture can easily win a large number of consumer’s
favor to a great extent (Hae-Jung & Doz, 2013). Besides, as China is the largest
cosmetics market with great potential, and the country issues a series of regulations
against the animal testing on a certain number of brands. So in order to dig the market
and gain support from consumers, the company sells itself as an animal-testing-free
brand and claims that testing on animals are not necessary(Born, 2005).

As for the aspect of technology, cosmetics are knowledge technology intensive

compound industry, involving more than ten professional knowledge of fine chemistry,
medical science, biology, pharmacodynamics, toxicology, cosmetic science, aesthetics,
psychology, packaging study and information technology. Within current information
age, the rapid development of information technology and biotechnology exerts huge
influence on the development of cosmetic industry. The large-scale cosmetics
companies splash out cash for the research and development of cosmetics and new
products, which is the key element to ensure the quick development of cosmetics
companies. Innovation is always a key element for L’Oreal Company, and the
company usually takes about 3.7% of the annual revenue out, about billion dollars to
invest the money in the products innovation, which shows the company really pays
much attention in the development of products innovation and technology
development (L'Oreal's model of innovation: Strong research, 2013) .

6.13 Management of Strategies

The strategic goal of L’Oreal Company is to always ensure the high quality products,
especially the effectiveness and safety of the products, which is the priority of the
strategic goals. Through constant innovation, the company tries to produce the best
products so as strengthen the portfolio of profitable brands. The strategy core of the
company is to use the different brands strategy to keep differentiation and spare no
efforts in market segments, market positioning as well as market precision to locate
consumers, thus gain more benefits on the base of enlarging the number of consumers.
The missions of L’Oreal Company is to help all people in the world to realize their
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beauty wishes and show their uniqueness; keep highly increasing developing speed;
making great contribution in the development of society (Domingo, 2014).

The strategies of the company can be based on two levels. As in the aspect of the
company level, the company uses the strategy of globalization, diversity and
localization. As in the aspect of business level, the company uses the strategies of
differentiation and merger and acquisition strategy (Hae & Doz, 2013). L'Oréal, the
company runs different bands sections to main its unique brand identity. Each brand
of L'Oréal keeps its unique retailing channels so as to maintain the brand image
complete. For instance, the premium brands like Yves Saint Laurent and Lancôme are
mainly marketed across its department store. While for the mid and lower level mass
brands like Garnier and L'Oréal Paris have similar retailing channels in the western
market but they are different in the product offerings and price. The company also
markets the premium products under the name of L'Oréal Paris when the demand of
premium brands decrease. The company also uses Garnier to attract the consumers
with low income in the emerging markets while the brand L'Oréal Paris is usually
used to attract urban consumers. The economic decline demands the company to
manage its brand portfolio more carefully to explore any possible growth potential.
For instance, L’Oréal Paris has managed the whole hair care section because it is the
original hair care brand. As for the color cosmetics like Maybelline, this mass brand is
used to drive sales growth. Besides, the company uses mid-level sections like
Lancôme to attract a wider scale of consumers across the world while the company
uses premium brand Yves Saint Laurent to attract western consumers (Key figures:
Brands, employees, sales. 2013). For mid-tier and premium brands, the company
marketed many targeted products for mass brands as most of the brands focus on
multifunctionality.

It is important to analyze the environment of competitive strategy for L’Oreal

Company and analyze its internal capacity and resources and external environment.
The current major competitors of the company include US consumer products
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magnate Procter &Gamble Company, Estee Lauder Companies and The Shiseido
Group. Those large companies have intense competitive relationship between each
other (Ibbad et al. 2015). The threat of latent competitors is less for L’Oreal Company
because the latent company must have some disadvantages such as small economic
scale, short of technology support, low popularity and so on, which will severely
disrupt the plans and enthusiasm of developing (Key figures: Brands, employees,
sales. 2013). However, it can be denied that the latent competitor may have the
chance of entering the market and gaining success, which will need excellent
objectives and managing strategies (Dutton, 1999). The pressures because of
substitute products always exist for cosmetics with customers’ rising awareness of
skin health and body health, which makes health protection products like vitamin
popular among customers and develop with fast speed. Some customers use the fruit
juice and vegetable juice to smear on skin and hair to replace the function of
cosmetics products. As for the pressure from suppliers and purchasers, the problem of
suppliers depends on the distribution and marketing channels as well as the reputation
of the products. And the decisions of the buyers mainly depend on the reputation and
price of the products. How to gain the distribution and marketing channels has less
relationship with the popularity of the products because it is mainly in charge of the
sales department. As for the prices of the cosmetics, the differentiation strategy by
L’Oreal Company is to meet the needs of different customers with different
purchasing power, which is rather reasonable (Kang, 2012).

6.2 Estée Lauder Company

6.21 Company Introduction

Estée Lauder Company was established in 1946, aiming of producing and marketing
high-end skin care, cosmetics and hair care products with product selling network
extended to more than 130 countries and areas. Owning a large number of
well-known brand such as LA MER, Estée Lauder, Aramis, Clinique, Prescriptives,
Origins, M·A·C, Bobbi Brown, Tommy Hilfiger, Donna Karan, Aveda, Stila, Jo
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Malone, Bumble and bumble, Kate Spade Beauty, Darphin, Michael Kors, Rodan &
Fields, Sean John, American Beauty, Flirt and Good Skin. The headquarter of Estée
Lauder Company was established in New York, America, and its manufacturing
factories distribute to America, Belgium, Switzerland, British, German, Japan and
Canada with more than 20 thousand employees on the global scale. In the fiscal year
2004, the global sales of Estée Lauder Company reached to 5.8 billion dollars and
realized 56 straight years of sales growth, following the company listed on the New
York Stock Exchange in the US (Larson, 2014).

Estée Lauder Company is in the leading position during the cosmetics industry and
ranks No. 360 among the Fortune 500 company list. The major advantages of the
company are as below: the products are mainly made for women customers aging 20
to 50 years; the products have high value, great service, great effect, substantial
investment in production and creation; targeting higher-end consumers and improving
their quality with the high position of scarcity and uniqueness; the company targeting
on a large number of customers; the products are at popular prices with high
performance price ratio; the brand has high popularity and fame among customers;
the company’s products have more convenience to users in their purchase in stores
(Lin, 2013). While Estée Lauder Company still has its weak points: the newsstand
revenue of the company's products is not widespread and the occupation rate of
market is low; the high price of most high-end products can not be accepted by
general customers; the variety of products need more investment in the advertising,
marketing and production; with different brands and products in the company, the
collaboration is not so effective.

6.22 PEST Analysis

The PEST analysis can be regarded as the external environment analysis of various
macro-environmental elements business industries have to consider. It is said that
(Kotler, 1998) PEST analysis is an effective and efficient tool to understand the
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company’s potential, position, direction as well as the growth or decrease in the
business market. The ongoing and radical changes happened in society make an
unsteady environment and exert significant influence on the function and
management of the entire organization (Tsiakkiros, 2002). Therefore, the analysis of
the macros environment plays an important role in ensuring the factors can affect
different arrangements and variables in the organization. The analysis of the big
environment helps Estee Lauder to focus more on the appropriate changes of the
environment so as to enhance its strategic plans through enlarging its market and
industrial analysis. The PEST analysis can be used to explore the company’s strategic
direction, which can be discussed below.

As for the political factors, the political elements in the environment can exert great
influences and cause far-reaching consequences. In most case, the political
environment can manage on the national scale while the political environment also
can operate at interactional and local levels. Estee Lauder adapts its strategies to the
different political environment of different countries when launching its strategic
deployment. The company is not only full aware of the politics in each country but
also cognizant with the industry, labor leaders and the media. The political factors that
can influence the whole business environment can be listed as below: the extent of
government involvement in the business stability, taxation, liberation, integration and
cooperation (Antoinette, 2005). With the global economization, the government in
different countries like China launches a series of cosmetics specifications to guide
the development of cosmetics industry, such as Hygienic Standard for Cosmetics 2017,
meanwhile ensure sthe benefits of the cosmetics industry.

As for the economic factors, they are put into consideration with the direction and
nature of the economic decline or growth in which environment the company operates.
Estee Lauder focuses on the mutual influence of the marker power that affects the
condition of the economy and the development of the business and non-business
organizations (Economy – OECD, n.d). Usually the prices of different brands or
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different products vary from each other, which is the big part in the industry (Larson,
2014). The political factors can be listed as below: the exchange rates, purchasing
power, interest rate, employment and inflation. The growth of GDP in different areas
means that consumers have greatly improved their income and purchasing power,
which means that they have solid economic power in buying the non-essentials like
cosmetics.

As for the social and cultural factors, different culture and social factors in different
countries affect the business variously. Those factors can influence the national’s
basic values, preferences, perception as well as behaviors. It is important that those
factors are put into consideration if the company wants to have some achievement and
realize its objectives in the country. Those factors include the influence of the
language about the products propaganda when entering the markets, the religion
dominance, belief and education. When the consumers have time to shop, the role of
the female and the male in the society plays a significant role in determining whether
the products will be purchased or not. Besides, the company has received serious
complaints from customers that new products are tested first on animals. In order to
avoid such negative influence on the company’s brand reputation, the company deals
with such matter seriously because it can arouse serious problems with their
customers. For instance, China has demonstrated a requirement to remove a term of
controversial animal test for some cosmetics which has been advocated by animal
rights protectors. In order to enter China’s cosmetics market, the company has cut
loose about their animal testing policy in order to gain more support from Chinese
consumers (Hae-Jung & Doz, 2013). Estee Lauder’s core cultural strategies are to
deliver different culture values to consumers of different levels so as to avoid the
competition among different products within the company and adapt the demands of
different consumption groups (Hae-Jung & Doz, 2013). The company is good at
creating high-level products like lamer, though with the price of usually several
thousands dollars, sold out within a short time, which is a strong demonstration of the
high-end products’ unique cultural influence.
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As for the technological factors, more and more companies and business are
influenced by the development of technologies. Such factors influence the common
management of the company as the changes of technologies can prevent obsolesce so
as to improve the innovation in the business industry. Estee Lauder always focuses on
the technological changes in the products that can be purchased online through the
Internet. Those technological factors include the innovation, rapid growth of IT, and
government investment on technological research, new development and discoveries,
life cycle of products as well as R&D expenditures (Larson, 2014). The company
pays much attention to the development of innovation and technology and usually
about one third of the total annual sales come from the newly created products within
three years.

6.23 Management of Strategies

The strategy is described as making a decision of using which way to secure the
significant objectives with the available resources in front of possible challenges like
public opinion, competitors, taboos forces and legal status. The strategy is to establish
a solid business base with diversified possibilities and they believe such strategy can
help them boost the business growth globally. The companies focus on remaining a
reputable leader during the prestige cosmetics across the world (Antoinette, 2005).
They growth strategies include the expansion of their business geographic presence
and the product categories and the enhancement as well as the diversification of their
distribution channels.

One of the most important and competitive strategies of Estée Lauder Company is the
differentiation. The implementation of differentiation strategy aims at high-end
female customers who pursue fashion and trend. The major points in the
differentiation strategy are to invest in production and produce creative products,
promote high-end marketing strategies, increase different channels in various
22
countries and areas. The tactics of the differentiation strategy include distribution
policies, prices policies and brand marketing strategies. As for the distribution tactics,
the company’s products use a number of different steady channels to provide products
for the customers at the right time and place with the reasonable prices, thus
overcoming the contradiction between the customers and producer and realizing the
marketing strategies of the company in the competitive market. In the aspect of the
prices tactics, as the element of prices is the highly sensitive element and hard to
control, which is directly influencing the acceptance level of the market to the
products and affects the quality of the products (Born, 2005). As for the brand
marketing tactics, the company maximizes the brand impact for packaging and
product design, which can highly improve the brand tone and position in the
perception of the brand.

6.3 Comparative Analysis

The cosmetics giant L’Oreal has faced constant stiff competition from its strong
competitor Estee Lauder, especially in the field of skin care industry. Both brand
provide different products to different segments of consumers. Both companies run
neck to neck in the skincare industry and both brands have successfully differentiated
their products on the basis of customer segments through marketing various products
for various age groups. For example, the Urban Decay of L'Oreal and the Mac of
Estee Lauder are quite popular among the young customers while the brand Age
Perfect of L'Oreal and Revitalizing Supreme Lotions brand of Estee Lauder focus
more on the mature customers with certain purchasing power (Because You're Worth
it, n.d). A recent report by Merrill Lynch indicated that Estee Lauder is highly popular
among women age 18 to 29 and this demographic research may help boost the
company’s development in the coming years (Because You're Worth it, n.d). Estee
Lauder has always focused on the product quality and has well-known reputation
among its customers. In order to catch the steps of Estee Lauder in the aspect of
product quality development, L’Oreal Company starts pay much more attention to the
23
products quality and invest much more in improving the product quality so as to
provide high-quality products for customers. Therefore, L’Oreal recently signed a
contract with Organovo in order to study and develop the skincare products through
using the bio-printing platform of NovoGen. L'Oreal now also prepare to expand the
market to Africa and enhance its comprehensive power in order to face any adverse
economic situation in the future during the developed areas.

As a matter of fact, L'Oreal has suffered a dim year in 2015, as the company went
through a sluggish growth in its major market (Ashraf, et al. 2015). And the growth
begun to pick up during the end of the year and the company stood on the top of the
cosmetics industry again, with its brand value of almost $11.2 billion, with 15%
growth within 52 weeks (All the L'Oreal brands, n.d). Though with great growth, the
company still has to face stiff competition from its major rivalry, Estee Lauder. Both
companies continue to dominate the top market in the cosmetics filed and both of
them manage to be the industry leaders and maintain their exclusiveness though both
companies offer premium products with higher prices. L'Oreal Company gains about
74% of the revenue from the market of Western Europe and North America while
Estee Lauder produces its own bulk of revenue about 42% from the United States (All
the L'Oreal brands, n.d). However, it is not easy for both companies to control and
manage the developed markets because customers in these areas have high demands
for technological progress and innovation development. Meanwhile customers also
demand on ethical standards of both companies, especially stressing that they should
not do any innovation by using animal testing. In the aspect of innovation, Estee
Lauder did not do well in the U.S. market, especially in the segment of skin care
during the first quarter of 2015 (Ashraf, et al. 2015). Comparing to the digital
development of the company, Estee Lauder is weaker than L’Oreal. Recently Estee
Lauder has faced obstacles because the company is not capable of providing more
innovative ideas in products to meet customers’ demands. In order to reduce cost and
reap benefits, the company implements diversity of products concept in the integrated
strategy through application of the core model, which makes L’Oréal capture the best
24
performance in the management of supply chain, production, product quality and
operation within the organization by implementing the practice and application of the
design management worldwide (Waterschoo & Bulte, 1992). In this way the company
can define and implement the changes within the business process. In the aspect of the
company itself, L’Oréal implements the globalization strategy (Schultz, 2009). On
one hand, the company always insists taking over the global brand or purchases the
local brands which can be integrated into the global brands (Larson, 2014). In 2008,
L’Oréal purchased YSL Beaute. In 2011, L’Oréal purchased Essie and Clarisonic. In
2013, L’Oréal purchased Urban Decay and next year purchased Decleor. In 2016, the
company had the largest acquisition in the recent 8 years through the takeover of the
high-end brand IT Cosmetics with 1.2 billion dollars (Lennard, 2011). By constant
takeover of other cosmetics brands, the company is quickly expanding. As a matter of
factor, both companies all want to expand their market through constant acquisitions,
L’Oréal prefer to purchase brands with huge value and potentials while Estée Lauder
usually prefer to purchase high-end brands. Considering the different situations of
both companies, Estée Lauder should invest more in its local brands like what
L’Oreal does. As for L’Oréal, the company is always good with marketing with
luxury brands, even in the developing areas with low income, but the company needs
to focus more on the competition against the local companies and carefully deal with
the investment in local brands (Larson, 2014).

On the other hand, by implementing the strategy of market diversification, L’Oréal

create different brands of cosmetics ranging from the top cosmetics HR to the
second-line products Lancome, Biotherm, Giorgio Armani Parfums, and POLO as
well as the third –line products. Besides, the company also implements the
localization strategy in different countries (Lennard, 2011). For instance, in the
Chinese market, as many women consumers have a favor of the Korean and Japanese
products, the company introduced the Japanese products Shu Uemura into Chinese
market to compete against its rivalries (L'Oréal Finance : Beauty and nutrition, 2002).
As in the aspect of business level, the company implements the strategy of products
25
differentiation strategy and merger and acquisition strategy. On one hand, the
company has designed the unique features for each product to satisfy different target
consumers. On the other hand, the company has become a powerful cosmetics giant
through the constant merger and acquisition of other bands. Though L’Oréal company
has purchased so many brands, the products of Estée Lauder enjoys more popularity
among the populace, which shows that L’Oréal company still needs improvement in
the innovation of its products (Tynan, McKechnie, & Chhuon, 2010). Besides，
L’Oréal company invests much in the aspect of advertising ,which may increase the
financial burden and it can be controlled to a certain level.

Both companies all want to have more growth opportunities and fresh vigor through
the technological innovation of the products. The giant of premium beauty, Estée
Lauder still maintains its pioneering position in beauty industry and recently launched
a skin sensors that can detect the exposure of the wearer against ultraviolet rays,
which is the first step that the beauty company invent the wearables stuff for
customers. And this product will help educate consumers about the exposure to the
ultraviolet rays and it is released under the company’s skincare brand (Ashraf, et al.
2015). Actually, L’Oreal Company had already launched a stretchable product of skin
sensor, My UV patch, which was also designed as a wearable product to inform
consumers of their exposure to the ultraviolet rays. Under the pressure of the
innovation growth of Estée Lauder Company, L’Oreal indicates that the company will
bring much more sophisticated software and hardware technologies into its products
to better understand consumer’s behaviors. L’Oreal Company has always been in the
leading position in the aspect of technological advancements during the beauty
business, which can bring great pressure for Estée Lauder Company (Ashraf, et al.
2015).

While Estée Lauder Company is also one of the world leading cosmetics
manufacturers and marketers of, makeup, skin care of high quality, products of hair
care and fragrance. In the competitive market and the challenging economic situation,
26
Estée Lauder designs a global management strategy to keep market share as well as
retain the market leadership in the cosmetics brands (Hawkins, Best, & Coney, 2004).
The key motive of the strategy is the enabler of talent retention and innovation,
leadership. The company develops a comprehensive leadership strategy and
framework for the profiles of leadership success and different leadership levels (Kang,
2012). Therefore, Estée Lauder use E3 which focuses on the three levels of leadership,
including leading oneself, leading a whole team as well as leading other people.

As one of the world’s leading cosmetics companies, L’Oréal is step-by-step

implementing its integrated strategies management through all the factories across the
world. The philosophy of L’Oréal is the key element to make the company a success
and important in the integrated management implementation of the company. The
company consistently applies such principles to the employees, customers, society as
well as the environment. All design management and operational objectives are all
around this philosophy, including ensuring the environment protection and people
safety, high product quality, being innovative in the packing and processes, ensuring
the high level of service and minimizing the cost and investment of the production
and logistics (Larson, 2014). In order to develop the leadership program, Estée Lauder
starts by defining and designing the leadership strategy though conducting interview
with the major stakeholders to catch the insights, such as behaviors, attitudes and
capabilities of leaders can be the key factors to make successful leaders in the future
(Schultz, 2009). Meanwhile the company also adds reward strategy in the design
management so as to motive the development of the leaders. Estée Lauder pays much
attention to the personnel management and there is ownership of the implementation
for the new strategies at each site, which is significant to the success of the company’s
design strategy (Dutton, 1999). The company use cross-functional teams consisting of
company members and operations members during each implementation. It can be
regarded as a great factor in the success of gaining the competitive advantages in the
system design, management, and implementation.

27
In such design strategy, the company can maximize the traceability and quality of
products and virtually guarantee the client and personnel safety (Kapferer & Bastien,
2009). As the information of the supply chain and traceability are available at real
time within the company, which can provide additional agility and it offers a highly
flexible platform to promote the production, logistics and quality management as the
company required. Estée Lauder Company thinks highly of employees and the
company implements the Enterprise Resource Planning (ERP) program and
comprehensive training system to encourage the innovation and development of the
personnel. Within the ERP program, the employees can actively create ERP team to
make plans for the company products. Currently within the company, more and more
young people try to be the leaders in the company. Besides, Estée Lauder Company
provides the hillock system and sends employees to study overseas as well as work
across departments to dig the potential of every employee (Rayport, 2006). The
company will continue the personnel strategy and build the home of the talent
employee, and brings the sense of home to every employee. Though Estée Lauder
Company has advantages in the section of luxury makeup brands, and the company
has less financial strength in the section of the mass market. So with the changing of
the cosmetics market, Estée Lauder Company needs more patience to deal with the
challenges and make more aggressive strategy to win the market.

7. Conclusion

The cosmetics giant L’Oreal has faced constant hard competition from its strong
competitors like Estee Lauder in the aspect of skin care industry. Both brands offer
various products to different segments of consumers. Both companies run neck to
neck in the skincare industry and both brands have successfully differentiated their
products on the basis of customer segments through marketing various products for
various age groups (Ashraf, et al. 2015). The strategic design management has highly
influenced the brand strategies of L’Oreal and Estee Lauder Cosmetic companies.

28
Through conducting an analysis of the major elements of the design process in
strategic brand management for L’Oreal and Estee Lauder Companies, L’Oreal and
Estee Lauder companies have both modified the business environment for brand
design process and brand strategies. Currently both companies are catching up with
each up and doubling down upon the increasing developed makeup category as well
as under pressure to take dominance. However, in such an accelerated beauty market,
the comparative value of each brand over another has less to do with the forces that
make success for L’Oréal and Estée Lauder initially but has more to do with the
vision and their strategic management when both brands grow (Nagasawa, 2009).

29
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List of Images/Figures

Market Segmentation, Source: Secondary research and AMR analysis

35
Top winning strategies in world cosmetics market, Source: Secondary research and
AMR analysis

Top factors impacting Global cosmetics market, Source: Secondary research and
AMR analysis

36
Organizational Flow Chart

(Domingo, 2014)

Chain of Demand

(Domingo, 2014)

37
Questionnaire

Dear Participants:
Greetings!
I’m a postgraduate student from the University of Southampton, and I’m engaging in
my final project entitled “Strategic Design Management between L’Oréal and Estée
Lauder”.
This research aims to indicate the comparative strategy and compare those strategies
between L’Oréal and Estée Lauder, and specifically chooses L’Oréal and Estée
Lauder as the research brands. Therefore, I would like to invite you to participate in
the research.
This research is absolutely confidential and anonymous that no personal information
or your privacy will be leaked to the public or any third party. This research has no
time limit, and you may answer the questions in accordance with your feelings and
actual situations.
Heartfelt thanks to your help and cooperation!
Best Regards,
Name:
Email:

Part 1: Basic Information

(Please tick one that corresponds to your actual situation)
1. Your Gender: Male Female
2. Your Age: 18-25 26-40 41-55 above 55
3. Your Educational Background: A Level and below Undergraduate Graduate
PHD
4. Your monthly consumption: Below Pound 1000 Pound 1000-2500 Pound
2501-4000 Pound 4001-5500 Above 5501

38
(The form below involve some vocabularies that describes company’s traits, please
tick the number that corresponds to your perception of Estée Lauder and L’Oreal)

1 2 3 4 5
Strongly disagree Slightly disagree Neutral Slightly agree Strongly agree

No. Aim and Question items 1 2 3 4 5

Objective
I think L’Oréal’s marketing     
strategy is more attractive
I think L’Oréal has more effective     
brand strategy in various aspects.
I think L’Oréal is a more     
customer-focused brand
I’m more interested in L’Oréal’s     
products than another brand when
they are similar
Brand strategies I can purchase L’Oréal’s products     
1 of L’Oreal and more through a variety of channels
Estee Lauder I think which Estee Lauder’s     
Cosmetic marketing strategy is more
companies attractive
I think Estee Lauder has more     
effective brand strategy in various
aspects.
I think Estee Lauder is a more     
customer-focused brand
I’m more interested in Estee     
Lauder’s products than another

39
 brand when they are similar
I can purchase Estee Lauder’s     
products more through a variety of
channels
I think which L’Oréal’s tone is     
more consistent in its design
processs

I think the shapes of L’Oréal’s     

products are designed to satisfied
costumers’ demands all the time
2 Design process I think L’Oréal is expanding its     
in strategic brand brand with a quicker speed
management for I’m more interested in L’Oréal’s     
L’Oreal and products than another brand when
Estee Lauder they are changing the design of the
Companies products
I think L’Oréal’s products’ quality     
is better when they come up with
new products.
I think which Estee Lauder’s tone is     
more consistent in its design
processs
I think the shapes of Estee Lauder’s
products are designed to satisfied     
costumers’ demands all the time

I think Estee Lauder is expanding     

its brand with a quicker speed
I’m more interested in Estee     
Lauder’s products than another

40
 brand when they are changing the
design of the products
I think which Estee Lauder’s     
products’ quality is better when
they come up with new products.
I think L’Oréal’s decorative style     
makes me stay longer

I think L’Oréal’s service makes me     

more comfortable when I shop in
the store.
L’Oréal show strong brand     
awarenss when customers step
Design inside the company
3 environment of The changes of the furnishing style     
L’Oreal and in L’Oréal’s store is more fit for the
Estee Lauder tone of the company
companies The sales of L’Oréal makes me     
feel comfortale when they
recommend products to me when I
am shopping in the store.
I think Estee Lauder’s decorative     
style makes me stay longer
I think Estee Lauder’s service     
makes me more comfortable when I
shop in the store.

Estee Lauder show strong brand     

awarenss when customers step
inside the company
The changes of the furnishing style     

41
 in Estee Lauder’s store is more fit
for the tone of the company
The sales of Estee Lauder makes     
me feel comfortale when they
recommend products to me when I
am shopping in the store.

42