Modern Business: Adapting to the Global Technology Revolution - Essay Sample

Introduction

The advancement of technology has altered the way companies conduct business transactions significantly. Technology has turned the world into a small global village; therefore, companies have to develop strategies that can accommodate global demands. Currently, companies are working to utilize emerging technology to improve their profits as well as gain a competitive advantage in the industry. The modern globally competitive environment means that companies cannot compete as independent entities but rather through their supply chain networks. The success of companies is now dependent on its managements' capability to integrate the firm's vital network of business associations.

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A prime example of a company that is making strides to advance its global business is the French personal care company L'Oreal. The company is not only popular in the cosmetics industry but is also ranked as the world's largest cosmetics company. Despite having innovative products focused on human skincare and hair care, among others, they have developed a system that enables them to reach their clientele effectively (Courtin, 2013). The following essay focuses on global supply chain management while reviewing how it can improve a company's competitive edge. Alternatively, it explores the strategies that have been most effective for L'Oreal in giving the company a competitive advantage in the industry.

Global Supply Chain Management

The flow of a company's products, as well as information associated with the supplier to the consumer, is referred to as a supply chain (Courtin, 2013). Key supply-chain aspects include production planning, sales management, and forecasting, marketing, advertising as well as customer service. As mentioned, technology has significantly altered the parameters of the supply chain. Innovations such as electronic business and the internet have changed how customers to access product information, make orders and purchases, as well as access products and receive services.

Previous supply chains comprised of suppliers on one end of the network and the consumers on the other end. The two nodes were, however, interconnected through manufacturers, distributors among others. Technology, on the other hand, has led to the emergence of modern business-to-business supply chains. Current supply chains are not product-focused but rather customer-focuses. Further, they enable companies to provide customized products and services in response to customer demands and needs (van Hoek, and Wagner, 2013).

Qualities of Effective Supply Chains

According to Kluyver, there are three primary characteristics of effective supply chains. A good supply chain is flexible enough to accommodate sudden changes in supply or demand. The supply chain is required to react timely if the customer or supply preferences shift; otherwise, compromise the process. Secondly, a good supply chain can adapt over time to accommodate new trends in the market, its structure, and changes to environmental conditions. Finally, effective supply chains must be in-line with the requirements of every participant of the supply-chain network to improve its productivity (Kluyver, 2010).

It is vital to note that the flow of Knowledge between the supply chain members is the only way to achieve the three primary characteristics of an effective supply chain (Kluyver, 2010). Knowledge flow promotes transparency and offers all members a clear view of customer needs and value propositions. Alternatively, the flow of information harmonizes the supply network in a means that improves the value chain for all nodes while broadening knowledge. Broad knowledge of the market environment, as well as customer needs provides additional advantages in the production process (Kluyver, 2010). These advantages include comprehending market shift; therefore, improving decision making in marketing, planning, product development, and overall productivity.

Today, companies have been driven by the ability of the web-based business to enable customers, to move from the traditional customary "push" plan of action; whereby, firms, producers, distributors, and advertisers have the vast majority of the power, to a client-oriented "pull" model. The innovative plan of action is less item driven and but all the more straightforwardly centered around the shoppers. The new model demonstrates a change in power from producers to clients.

In the previous "push" model, numerous participants in the supply chain were generally separated from end clients. The modern "pull" model has every member rushing to set up direct associations with the end client. The outcome is that electronic production network availability offers end clients the chance participates in the production process and provide guidance to providers (Kluyver, 2010). The net outcome is that clients presently have an immediate decision in the working of the supply chain, and organizations can all the more likely serve client needs, convey less stock, and send items to the market more effectively.

L'Oreal Successful Supply Chain

L'Oreal is a global personal care manufacturing firm that is based in Paris. With annual sales of approximately 26 billion Euros, it is the largest cosmetics company in the world; moreover, it has surpassed the performance of its peers in the industry for over the last ten years. The company's continuous success makes it a multi-year Supply Chain to the Admire award winner from 2014 to 2018 (Cecere, 2019). The Supply Chain to AdmireTM is a methodology by Supply Chain Insight that aids in understanding supply chain excellence. The Supply Chain Insights team announces the supply chains that they admire based on their performance, productivity and improvement annually.

Qualities of Effective Supply Chains

According to Kluyver, there are three primary characteristics of effective supply chains. A good supply chain is flexible enough to accommodate sudden changes in supply or demand. The supply chain is required to react timely if the customer or supply preferences shift; otherwise, compromise the process. Secondly, a good supply chain can adapt over time to accommodate new trends in the market, its structure, and changes to environmental conditions. Finally, effective supply chains must be in-line with the requirements of all participants of the supply-chain network to improve its productivity (Kluyver, 2010).

It is vital to note that the flow of Knowledge between the supply chain members is the only way to achieve the three primary characteristics of an effective supply chain (Kluyver, 2010). Knowledge flow promotes transparency and offers all members a clear view of customer needs and value propositions. Alternatively, the flow of information harmonizes the supply network in a means that improves the value chain for all nodes while broadening knowledge. Broad knowledge of the market environment, as well as customer needs provides additional advantages in the production process (Kluyver, 2010). These advantages include comprehending market shift; therefore, improving decision making in marketing, planning, product development, and overall productivity.

The L'Oreal Luxe supply chain has two primary tasks, with over 1500 staff members worldwide. The chain ensures the effective distribution of the division's products. This strategy ensures that similar products are available across the world and at the same time. Secondly, it ensures that the customers are offered a luxurious experience. Luxurious experiences include exceptional company products that can be customized to fit the buyer's needs; moreover, it offers memorable shopping experiences such as having the point of sale as a display showcasing the company's products (Loreal.com., 2019). L'Oreal's executives insist that the ultimate purpose of the supply chain is having perfect control of point of sale execution.

The demand for both perfection and quality is sought cost-effectively, effectively using the firm's assets, stocks, and industrial investments. The supply chain is maintained by sales forecasts and revenue-building on each of its markets in close collaboration with the division's business departments and retail clients. Alternatively, it is backed by the suitability of the company's industrial resources to actual sales flows, the same applying to its suppliers. It requires information sharing at each link in the chain and its updating as sales evolve to build supply and demand equation globally (Loreal.com., 2019).

Comparison Between L'Oreal and Estee Lauder

The company's largest competitor, Estee Lauder performance can be used for comparison to better understand L'Oreal's success. Spanning over a decade, from 2006 to 2016, both companies L'Oreal and Estee Lauder had an operating margin of 17% and 13%, respectively. Additionally, L'Oreal's stock turns were marginally over 3.06 outpacing Estee's stock turn estimation of 1.95 (Cecere, 2019). While the two firms are initiating improvement, L'Oreal is pushing both improvements while beating the competition. On the other hand, Estee is driving improvement, yet not beating its peer group.

It is vital to realize that the company is at an average on the growth of the cosmetic industry (average growth is at 2.7% while the company's growth is at 2.6%). It, however, outperforms the average on operating margin (0.10 to 0.14), inventory turns (2.9 to 3.0), return on invested capital (10.6% to 14.6%, market cap ($9,463 to $91.398), price to tangible book (3.9 to 6.7) (Cecere, 2019). The company has numerous tactics it utilizes to ensure it remains at the top of the cosmetic industry. L'Oreal employs a global strategy that accommodates globalization while focusing keenly on its customers. Currently, it utilizes a customer-centric supply chain successfully. A customer-centric supply chain refers to a supply chain with order management, product strategies, and distribution channels that are customized for different customer needs.

L'Oreal utilizes this strategy to acquire products developed in various regions of the world and making them accessible globally in a short duration. The customer is the company's initial focus in global distribution by utilizing an agile supply chain method that can continuously adapt to customer needs. Agility, according to L'Oreal is the ability of the company to deliver the same price, quality and customer experience is given the level of demand and supply volatility.

According to the head of L'Oreal's digital department, Stephane Lannuzel, Agile supply chains are vital to meeting current customer needs. He insists, "To meet today's beauty consumers' expectations, you have to bring supply chain operations to the next level of agility. The consumer has changed more in three to five years than in the last 30 years." He accredits these changes to technological innovations such as e-businesses and the internet (Loreal.com., 2019). The internet has offered a platform for the company to carry out operations digitally.

Lunnuzel gives an example of China, where more than half of the firm's business is done through eCommerce. The company's products in China are purchased online; therefore, the company needs to implement supply chains that meet such demands. In 2017, the company saw a growth of 34% in its global online business and the management expects the growth to continue. The management team is making strides to transform the way they address their business. Currently, more than 40% of the company's advertising budget is being invested in digital technologies (Cecere, 2019). The digital transformation has however not been a single improvement but a radical change. Lannuzel said factories were closed for a "digital day" when technology was showcased to employees to demonstrate what it could do for consumers and how it could be used in the wo...