Assessing the strategy of firms that compete globally in alliances in the cosmetics industry: The case of L’oréal in Latin America

Abstract

The cosmetics industry, especially in Latin America, was hardly affected by the recent global recession. As consumer goods that do not require significant investments and offer well-being to their users, cosmetics tend to remain on consumers’ shopping lists, even during recessions. However, the increasingly competitive global scenario drives firms to sustain their efficiency by way of strategic alliances, so as to better meet their customers’ requirements. Even leading multinationals, such as L’Oréal, face challenges to maintain their competitiveness and have to reassess regularly their strategies. This article presents the results of research that sought to assess the adequateness of the strategy of L’Oréal Latin America, considering the opportunities and threats of the cosmetics industry, of the firm’s alliances and given the global competitive strategy of the L’Oréal Group. The results confirmed what had been verified in other sectors: global alliances create more opportunities than threats, and, in many cases, global relational opportunities, i.e. pertinent to global alliances, mitigate global non-relational threats. Latin America is a potential market for the strategic objective of L’Oréal to conquer one billion consumers and its transnational strategy ensures coherence of its products launched in this geographic region with its targeted consumer requirements. Its strategic alliances contribute to responding better to market demands and ensure a better exposure of the products launched. The study thus adds value to research on strategic management from a global relational perspective, by complementing findings of similar investigations into other sectors. From a business administration viewpoint, the case of L’Oréal offers insights on how strategic alliances can help sustain competitive advantage in firms that compete globally.