The word globalization came into limelight in the 80’s. Now in 21st century this has become a household name. Some analyst says that this will swallow whole small and mid cap companies but as my perception the whole concept of globalization has changed the scenario of the world. No one have to fear in this scenario. Everyone has a market to trade in. The world has become a single market. The only thing is the survival of the fittest. If you have to survive then you will have to fight. Otherwise you will be thrown out of the market. With the help of globalization many small and mid cap companies have become multibillion dollar enterprises. This has created a whole new trend of entrepreneurship .Now everyone want his share in the business world. Lots of opportunities are opening. Above all, L’Oreal, the world’s largest cosmetic and beauty company is doing an extraordinary work .L’Oreal is the one of that kind of company, which is taking full profit of globalization (L’Oreal: The Beauty of Global Branding (int’l edition)).
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As we all now, every coin have two sides, same goes with globalization. It is opening new market, new opportunities, with these it is also bringing new challenges. Because every country has different culture, different government rules and many more factor. So management has a large burden for expanding business. But business is not about only expanding business; it should also be profitable (Strategy Analysis of L’Oreal). Otherwise there is no need of expansion. So every company has a tough task in maintaining a balance between growth and profit. Also in newer market there are local competitors, who get a lot of subsidies, this makes business worst competition. Also there is a challenge of making a relationship with customers. Customers should feel about products. Product range should be also large, because market is full of different kind of customers. Every customer has a different taste, and to satisfy all of them is a very tough task. There also genre problem, youth like far different thing than older people and middle aged people. The product also should be a household name, like when we go to buy a cold drink we don’t ask shopkeeper to give any cold drink. We say them to give either PepsiCo or coke product. This same goes to L’Oreal, which has now become a household name in many new emerging marketing many countries, where L’Oreal have started its business has become leader of that market or it is climbing the leader of success too fast.
There is a very bigger problem regarding the globalization for the companies about the suitability of the products in new markets. Every country is diversified. Environment and condition’s are too different. So product suitability is very important for a global company. These all make research and development section very important for any MNC’s. It is like backbone of a company. If any company has to survive in newer market then R&D is a very key factor for a company. L’Oreal’s R&D part is too much smart and innovative. L’Oreal is leading the market with its new range of product for all genres, all environment.
Innovation is very important in today’s market. Since every company is coming with a whole new range of products so to survive in market any MNC should be one step ahead from its competitors. L’Oreal is leading at this front also .Nanotechnology is a key sector now for whole world .it has the largest number of innovation to come in future. Every product is shrinking. It has also touched cosmetic industry. L’Oreal is the top Patent holder in United States and leading this industry from front.
About L’Oreal
L’Oreal group is the largest cosmetics and Beauty Company of the world in terms of both shares and sales. It has registered office in the city of fashion i.e. Paris and the head office in Paris and Clichy, France .It’s area of business spread in the field of cosmetics and other beauty and makeup products both for men and women. L’Oreal is mainly concentrating on hair color, skin care, sun protection, make-up, perfumes and hair care. L’Oreal also has a wide interest in the dermatological and pharmaceutical fields and is the top nanotechnology patent-holder in the United States.
The idea of L’Oreal came to mind of a young French chemist Eugene Schuler when he developed a hair dye formula called aureole in 1907 and sold it to local Persian hairdressers after self formulating and manufacturing the product. In 1909, he registered his company as the societal franquise de teintures inoffensives pour cheveux, translated as the safe hair dye company of the France which later came as what is now known as one of the best brands of the world i.e. L’Oreal (Reddy, 2010)
L’Oreal has 23 global brands with a total gross revenue of $17.5 billion 2009 and $19.5 billion in 2010 and a total profit of $2.4 billion dollar in 2010 which is considered as a very remarkable achievement.
Main stock holders of the company are Bettencourt family which holds around 31% of the total shares, nestle which holds around 30%, 2.4% by treasury shares and 36% are publicly traded shares.
The current scenario of the global trade between different countries refers to the situation where it is clarified that no country can be independent in terms of economics, or in other words every country is becoming interdependent on each other. The trade between countries is increasing day by day as one country is dependent on another country for satisfy their needs and demands for different products like almost every country in this world is making trade relations with the gulf countries for satisfying their needs for fossil fuels as fossil fuels like patrol and diesels is of immense use in many industries like the automobiles industry, aircraft industry, machinery, almost everywhere.
Therefore it is very important to maintain good economic and trade relations with the other countries if a country wants to survive in the global market.
L’Oreal for ex. had increased the scope of trade throughout almost every country of the world, L’Oreal has to face many problems in the meanwhile like there are many countries who doesn’t allows trade relations so flexibly like for ex. Japan had a trade policy that doesn’t allows the USA to sell much of their products while they are selling their products to the USA, there are many countries in the world that doesn’t allows flexible and open trade relations.
The company is facing both tariff and non-tariff related issues in doing trade with the countries, fortunately for L’Oreal tariff problems had been reduced to a record level but the trade barriers are still one of the major problem that hinders in the way of making trade relations to other countries.
Previously L’Oreal was concentrating on selling its products and doing business deals with countries like Western Europe, United States, and Japan as the market in these countries was very much open for foreign trade and there were not many opportunities for the company to trade, but nowadays as the concept of globalization is spreading around the globe, countries like Latin America, India, china, Russia, Asia, eastern Europe, and Africa are emerging as the major players of the market and is considered the economies that is likely to be the major economies of the world in future, these countries are continuing to open its trade with outside countries and offering policies which are very attractive for companies of different countries. Likewise L’Oreal is taking advantage of the open market and the concept of globalization and is opening its retail stores in many countries of the world including India and china which are considered the fastest growing economies of the world. This policy adapted by the company is not only helping them in trade with other countries and spread its business across the globe but also giving a firm advantage to peoples of different countries as well as benefitting them with the best technology of different economies. As the consumer now has a very large range of products to chose from, and this is giving L’Oreal a good competition while increasing its market shares in the global economy.
With the introduction of the world trade organization (WTO) the open trade between countries had went up at a record breaking speed in terms of economics and had opened gates for trade among countries. And after the introduction of general agreements of tariff and trades (GATT), L’Oreal had increased participating in maintaining close economic relations with other countries and also opening their franchises in different countries. L’Oreal had developed a global management committee for foreign trade as well. After the introduction of the WTO, L’Oreal had also introduced new products and brands as well under the tag to increase the interest of peoples in the brand.
Global marketing strategy
As I stated in my introduction part, I shown that globalization is very important in today’s world. So for every company there should be a good global marketing strategy. Here are some of the examples of global marketing strategy of L’Oreal.
The four major strategies consists of four P’s i.e. product, price, place, promotion
product
This is the one of the most important part for marketing strategy for loreal to trade in countries which have all together a different economy.
L’Oreal has five worldwide research and development centers: two in France, one in the U.S. New Jersey; one in Japan Kawasaki, Kanagawa Prefecture; and in 2005, one was established in Shanghai, China. A future facility in the US will be in Berkeley Heights, New Jersey. In 1920 the company has only 3 chemists and now it is reaching the peak with a sum of 2000 chemists.
Five worldwide research and development centre shows how much dedicated team is of L’Oreal to fulfill customer’s satisfaction and make sure what should be the product variations according to the countries.
The production and marketing of product Research and Development part has also a lot of cultural problems. Many countries have liberal government and liberal media. But in many part of the world research for new products according to the environment are a sensitive area for L’Oreal to look for. Like in America group of protestors from the NGO nature watch protested to Company that it continues to test new ingredients on animals without proper measures. So there should be research in proper manner so there should be no protest as it deviates the consumer mind. Ultimately the company has to suffer the revenue with a loss. Moreover selecting a product to sell according to countries is a much bigger task for both the production department and the research and development department.
price
L’Oreal has spread its reach in 130 countries and trying to spread it more. It is necessary to expand area to become global and company is best at it.
L’Oreal has 23 global brands which make it a versatile company for all consumers. Large coverage is not of worth if there is not profit. And company is waving flag at this corner, in 2009 it had total revenue of 17.5 billion dollar and in year 2010 it reached to 19.5 billion dollar with increase in net profit. Increase in profit and revenue in this competitive condition is very fruitful for country.
But the major emphasis of L’Oreal is on selecting a price band for all the products which L’Oreal deals in countries like consider the Asian continent, in Asian continent the price band for products is selected in the range of moderate to low price depending on the country and in the united states the price band for products is very high from the perspective of the Asian continent.
So the pricing structure should be the major factor that should be kept in mind and also considering the quality that L’Oreal delivers.
place
It has 64,600 employees worldwide. This big dedicated and intelligent team Of L’Oreal makes operation successful of company and delivers best product to consumers.
With large number of human resources also come a lot of problems. Like Problems related to wages and many other issues are painful for any company. But L’Oreal is handling this very well with no any employee problem that is picture perfect case for L’Oreal.
L’Oreal has a very good employee base which is very highly qualified as their training methodology is very good, L’Oreal picks up their employees from the country itself within which they are trading. L’Oreal’s strategy changes place to place for ex its strategy of trading in the Asian continent is very much different as that of the European continent and the north American continent as the peoples of the European continent and the north American continent is very much obsessed with the lifestyle and other things but the peoples of the Asian continent is not so obsessed and not so much interested in the lifestyle products like cosmetics and hair products. That is why L’Oreal has a totally different strategy depending on places they are trading in.
promotion
To increase market cap sharply, acquisition is so important. So in March 2006, company bought “The body shop “in 652 million. And thereby promoted themselves among various countries where the companies that L’Oreal acquainted trades.
These acquisitions increased the brand value of L’Oreal too much. This is good for global strategy of company also company is searching for new fresh opportunities to acquire new few good companies.
L’Oreal is also serving society in many ways .This part is also important in global marketing since these things attaches customers to the company. Company is encouraging an outstanding researcher every year for scientific progress with “L’Oreal-UNESCO Awards for Women in Science”. It also organizes L’Oreal Brainstorm every year with prize money $10000 for students in 43 countries. Thus delivering a message of a company with human values, this helps in promoting themselves around the globe as a descent companies and thus help L’Oreal to promote themselves and trade healthy business across the globe.
These society serving cause make a good relationship with customers also the tag line is important. The companies is changing it as per customers initially the slogan was “because I’m worth it” now has been changed to “because we’re worth it”. The shift of us from I makes customer feel nearer. This is best for the company, since company faithful customers are heart of the company.
According to the concept of globalization, a company which is guided by and run on the global marketing orientation or philosophy is generally referred to as a global company and so is L’Oreal a global company according to the concept. The global market analysis says that L’Oreal should have to focus on a standardized marketing strategy that can be implemented across the boundaries.
Global strategies for different continents
Asian continent
Consider for ex Asia, most of the countries in the Asian continent are developing countries like India, china, Indonesia, and sri lanka etc. the economies of these countries are considered developing. And in the future these countries like India and china promises to be a fully developed and one of the biggest economies. And moreover India is one of the hot spots for global cosmetic players like L’Oreal.
Therefore L’Oreal needs to definitely look upon to the pricing strategies and product specifications in great details; moreover there are some more objectives that L’Oreal need to look upon to improve their business in India.
L’Oreal has various strategies and concerns that needs to be sharpen, L’Oreal is focusing on to adopt local culture for the development and promotion of their product in the Asian subcontinent.
The major business of L’Oreal in the Asian continent is divided in two parts first in the developed countries like Japan, Singapore, and UAE etc. and second in the developing countries that majorly includes India and china.
L’Oreal is having a very good strategy for selling their products in the European continent. As the peoples of the Asian continent is not so obsessed with the premium products and is satisfied with simple daily use products of L’Oreal, therefore L’Oreal is having emphasis on only selling their regular use products in the Asian continent and not very much obsessed with selling their premium products in the Asian continent.
Therefore L’Oreal is developing strategies for trading in these countries, for e.g. take India for consideration, L’Oreal is going local on all levels for trading in India, as they have a totally different pricing structure for the peoples of India plus they are having an Indian brand ambassador for promoting their brand in the country.
These strategies are enabling L’Oreal to improve their trading in the Asian continent. The major thing that L’Oreal is focusing right now is the promotion of their brand on a grand level so that they can trade with more and more countries of Asia.
L’oreal in India
L’Oreal entered into the India market in the year 1997 in order to capture the loophole in the hairdressing industry in the country as there was not a sniff of structure in this industry. At present the hair industry of the country has Rs. 200 Crore business and L’Oreal is the market leader in the hairdressing industry in the country. L’Oreal professional products are very well known in the country and the company spends a big amount of the manufacturing into the research and development of the products.
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The main strategy on which the company works in India is that it skims top 100 cities of the country and created largest salon bases which contribute around 40 percent of the total revenue by L’Oreal. Many of the competitors in the country try to follow same strategies but could not reach the same level (L’Oreal’s success story in India, 2005).
European continent
As European continent is the base and the major market of L’Oreal therefore L’Oreal is focusing more and more on trading in the European continent that includes majorly Paris, England, Germany, and the Italy.
These countries i.e. Italy and France are considered as the fashion capital of the world and as L’Oreal is based in the France therefore the major emphasis of L’Oreal is to deliver best in quality products for the peoples of the European continent so as to earn customer satisfaction and also to promote them.
The major emphasis of L’Oreal is to make a firm base in the European cosmetics market and the pricing structure of L’Oreal is also of premium category in the European market as the peoples of Europe is considered rich and wealthy in terms of economy and moreover the lifestyle of the peoples in the European continent is such that L’Oreal can make at most advantage of that in terms of sales and promotion. According to figures the European continent is the biggest consumer of the products made by L’Oreal.
The main advantage that L’Oreal enjoys of trading in the European continent is that the culture of the peoples of the European continent is very advanced and they could pay whatever it takes for a cheerful and healthy lifestyle. Not only the women but mans are also very much obsessed about the living lifestyle in terms of looks and presentation.
L’Oreal is having a lot of consumers for the consumption of their premium products in the European continent therefore they have no need to change strategies to deal on the premium products in the European continent.
L’Oreal is getting a very good competition from other brands in this field, therefore they needs to focus on their pricing and promotional strategies to trade in the European continent.
L’Oreal in Italy
In order to get success in the beauty product sector, L’Oreal employed more than 2000 employees and got more than one billion Euros. Company created several offices all around the world. The problem with the directors of L’oreal in Italy was to manage the information as there was not effective flow of information and also decision making in the company was poor.
In order to give a dramatic impact on the productivity of L’Oreal in Italy, management of the company proposed a better management of the email and improvement in access to the corporate data in order to improve the informational flow and decision making of the company so that the productivity of the company could be better. This was the main strategy played by L’Oreal in Italy (Lano, 2008).
North American continent
Like the European continent, the peoples of the north American continent is also very much obsessed about their looks and presentation, therefore L’Oreal has a very good chance to trade in this country and that is what L’Oreal is doing for past many decades, the major consumers of L’Oreal in the north American continent is from the united states of America and the Canada.
As the United States of America is the biggest economy till date therefore L’Oreal’s business is blooming in the states. The major states of the USA such as New York which is one of the fashion capitals of the world and the Las Vegas and the Los Angeles which is considered as one of the most happening cities of the world where people is highly obliged to fashion, L’Oreal has the biggest market in the US after the European countries like France and Italy.
L’Oreal is also facing a great challenge from other major competitors of the USA but still they are finding themselves at the top of the list because of their policies of products, promotion and pricing according to the place. The peoples of the north American continent can afford premium products therefore the main source business of L’Oreal in the north American continent is the premium products unlike the Asian continent where people are not very much interested in the premium products.
The peoples of the North American continent mainly youths are very much impressed with the products offered by L’Oreal, and the pricing structure of the products of L’Oreal is also very nominal in these countries therefore people are keen to use these products.
L’Oreal in US
L’Oreal success in US mainly depends on the anti aging cream which has been launched in recent time in the country. It is predicted that future success of L’Oreal in the country mainly depends on this product by L’Oreal. Main reason behind this is that anti aging skin care cream has the marketing leading growth in the country and there is more and more number of competitors emerging with this product in the market. Hence, it has become necessary for the company to keep a real focus on the anti aging cream segment.
Skin care segment in US is heavily competitive and hence L’Oreal research team is trying to maintain its share in the market of 13.5 percent and is not focusing to increase the share (Pitman, 2010).
L’Oreal in Mexico
In order to get success in the beauty industry in Mexico, L’Oreal Mexico has chosen Digimind for the marketing and intelligence need for the company. Company mainly focuses on the innovation and creating a large customer base with new and successful product line for the customers. In Mexico, L’Oreal has been one of the leading cosmetic companies and has a real quest for the innovation and excellence. Digimind has been hired by the company which is considered as one of eh most profitable company since its inception and has a constant growth rate of 50 percent (L’Oreal Mexico trusts Digimind for its Competitive Intelligence system, 2010).
Oceania
Oceania includes countries such as Hawaii, Philippines, and some minor islands such as Bonin Islands etc.
The trading links of L’Oreal is not so much in these countries but it is increasing day by day since the concept of globalization is introduced, L’Oreal promises to have a very good trade in these countries in the future as the trade of L’Oreal is growing.
The major product that is consumed in these countries includes sunscreen and other products like body lotions and other sun blocking creams. The strategy of L’Oreal to deal in the Oceania subcontinent is quite different from what we have discussed earlier.
The pricing structure of the products of L’Oreal is very much in accordance to the needs and demands of the peoples of the Oceania subcontinent.
The Oceania subcontinent is still to be explored by L’Oreal and L’Oreal is promised to do a good trading business in the subcontinent as the needs of peoples in this subcontinent is shifting from mere sun screen to other products offered by L’Oreal.
Understanding of different cultural distinctions for international market
The knowledge of different cultures is very important for L’Oreal in order to make a firm base in the market of any country. The different factors that are very important for L’Oreal to look upon are:
The effect of culture of the country is one of the major aspects that L’Oreal needs to look upon as cultural factors like whether the country is agriculture based or industry based country had a direct impact on the survival of the company in the targeted country, the understanding of the cultural variations is also very important for any company in order to make business and forming a firm base for their products in an economy. The success of any multinational company or a specific product depends very much on the purchasing power of the peoples of that country and also the effect and success of the product in the country. For ex. L’Oreal is having a different pricing structure for different country and also the product specification changes according to the culture for e.g. the product used in England may be of no use in Asian country and vice-versa. Therefore before making a trade with any organization or country it is very important for L’Oreal to check out the feasibility of the product in that country and the end user.
Effect of geography is also a very important factor that should be kept in mind while trading with any country. For L’Oreal especially this factor is of immense importance in deciding the feasibility of trade with the country because there are many things that should be kept in mind while doing any trade within any country like checking out the feasibility of the transportation and goods to places like countries in which terrains are very rocky and full of mountains and plateau it is very hard for L’Oreal to transport its products through any mode of road and by air if there is not an efficient air transport services in the country, though it is easy for the storage of cream and related products in such type of areas in which the temperature are low. On the other hand if the road transport system is good in some place then there is a possibility that the place lies in a tropical region where the temperature is very high therefore it would be very difficult for the company to have a proper storage at a low temperature. Therefore feasibility of the trade in geography like this should also be considered (Wahlen, 2006).
Technology and economics should be considered while having a trade between any countries. I.e. the project manager who is working on to check the feasibility and the trade chances with the country should also see if the country have enough technological advancement so that they can store and produce their goods at the place itself i.e. constructing a manufacturing unit rather than importing the product from the head manufacturing unit in the parent company. Thus this is very important for L’Oreal to make sure if the companies to whom they are going to make trade relations are equipped with advanced technology so that they can produce the products in the quantity they want to without having many problems. Another important thing that should be kept in mind is the economic condition of the country i.e. the company has to be made sure that if they are investing some money in a project of establishing a business in a country than they are getting enough returns in turn, and that could only be defined by the economic condition of the country like in the western European countries like France and England and in the united states where the economy is very solid and established it is very easy to L’Oreal to have a better customer base, and likewise L’Oreal can invest much money in the developing countries like India, china or Latin American countries where the lifestyle of peoples is enhancing and peoples are more keen to use products that are considered luxury and of a very high quality.
Another major point that L’Oreal should kept in mind while doing trade within any different country is the political economy of that country i.e. the policies of doing trade within that country like for e.g. the united states are having a very open trade policy which allows any company to trade within the country without having much restrictions of trading, but in some countries like the china and Japan who is not so open in terms of open trading and lays emphasis on selling their own country made products rather than supporting some foreign brand, therefore it would be very difficult for L’Oreal to have a business base in these countries, and in countries like India which is a developing economy and which allows trading without having much restrictions and peoples of whom are developing with the developing economy with change in the lifestyle (Comezz).
Therefore the major things that should be kept in mind for L’Oreal while doing business in the global market according to the very concept of globalization is to form an effective global strategic team for defining the trading policies to work in any country, the globalization strategy should comprises of major factors like cultural differences, economic policies of the country etc. moreover the changing lifestyles of the peoples and the rapidly changing economies should also be kept in mind
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