qwertyuiopasdfghjklzxcvbnmq wertyuiopasdfghjklzxcvbnmqw ertyuiopasdfghjklzxcvbnmqwer tyuiopasdfghjklzxcvbnmqwerty LOreal The Case of A Global Brand Dr.

. Sue Bridgewater - International uiopasdfghjklzxcvbnmqwertyui Marketing opasdfghjklzxcvbnmqwertyuiop asdfghjklzxcvbnmqwertyuiopas dfghjklzxcvbnmqwertyuiopasdf ghjklzxcvbnmqwertyuiopasdfgh jklzxcvbnmqwertyuiopasdfghjkl zxcvbnmqwertyuiopasdfghjklzx cvbnmqwertyuiopasdfghjklzxcv bnmqwertyuiopasdfghjklzxcvbn mqwertyuiopasdfghjklzxcvbnm qwertyuiopasdfghjklzxcvbnmq wertyuiopasdfghjklzxcvbnmqw
3/15/2012 Author: Thanh Vu

LOreal
Why is LOreal a Global Brand?
In 1909, a French chemist established a small company that retailed one sole hair dye product but a century later, LOreal has developed into one of the biggest players in the beauty and personal care industry, operating in 130 countries and owning 32 brands. LOreal covers 3 business branches including cosmetics, the Body Shop and dermatology brands (LOreal International Website, 2012). The scope of this paper will focus on the core business of LOreal, the cosmetics branch. The cosmetic s branch consists of consumer, professional, luxury products, and active cosmetics (Appendix 0). This paper uses a number of frameworks to assess the extent of LOreals global brand and later discusses its implications on the degree of standardization and adaptation of its marketing mix in India. Lastly, the paper will also assess how the current marketing strategy may need to evolve due to the challenges that LOreal will face in the Indias market in the next 5 years.

A Global Brand
Despite the liberal use of the term global brand, the lack of consensus in its definition leads to difficulties in assessing how global LOreal is as a brand. Outside the world of academia, BusinessWeek ranked LOreal at No. 44 in Top 100 Global Brand in 2009. To be qualified for such ranking, a brand must derive at least a third of its earnings outside of its home country and the brand must be recognisable outside of its customer base (BusinessWeek, 2009). This definition of a global brand used by marketing practitioners is a loose derivation of Ohmaes broad triad markets of NAFTA, the EU and Asia (Rugman, 2003). Under Ohmaes board triad markets, a brand must obtains at least 20% of its sales in each part of the triad to be qualified as global. It must also have equal sales representation in all three regions of the triad to be considered a triad power (Ohmae, 1985). In this stricter sense, LOreal is a near miss, having only 17.6% of sales from Asia Pacific but almost 40% of sales from Western Europe (Appendix A). Furthermore, to truly be a global company or a triad power, a corporation must fulfil Ohmaes (1985) two criteria: (1) equal penetration and exploitation capabilities, and (2) no blind spots, in each of the triad regions. Although LOreal does not strictly meet the first criteria, it eliminates the blind spots by establishing consortia, joint ventures and wholly-owned subsidiaries. Japan, China and India were such examples (Appendix B). Over 100 years, LOreals strategic approaches to internationalisation were diverse. In this case, the company generally followed the phases of the internationalisation process described by the Uppsalas model (Banerjee, 2012). In Israel and Brazil, it introduced the products via exporting, manufacturing and finally created wholly-owned subsidiary (Appendix B). Hence, it is appropriate to assess the extent of LOreals global brand by its international marketing orientation and its exploitation of Levitts global convergence to benefit from lower cost and more market knowledge (Cateora, 2000) in order to serve the increasingly homogenised customers needs (Levitt, 1983). These bases for assessment are similar to the regiocentric or geocentric philosophy (Douglas, 1973) where companies are global if they seek standardization of certain elements and adaptation of others in the marketing mix (Perlmutter, 1969). A number of LOreals locally-acquired brands have been made global and standardized, including Matrix (US), Maybelline (US), Shu Uemura (Japan) (Euromonitor International, 2011). The US was accounted for 90% of Matrix s sales at the time of acquisition. Now it is established as a high-end product sold all over in Brazil, Russia, India, Mexico and China (EI, 2011).

Determinants of LOreals degree of standardization and adaptation in the India market

Why India is an important market? India has risen to become one of the top strategic markets for LOreal along with China and the US (Neff, 2011). LOreal placed its sixth global R&D centre in Mumbai in 2011 in addition to the existing manufacturing plant in Pune (Kasabe, 2011). Although sales from India only accounted for 1% of LOreals cosmetic sales in 2011, India had the highest like-for-like growth among other emerging markets at 24.5% (LOreal Finance, 2012). Furthermore, Indias large and young population, GDP growth averaging at 8% (EI, 2011) and low-risk profile (Coface, 2012) (Appendix C) are favourable factors that promise a key strategic market in the near future for beauty and personal care products. Currently, all four product groups of LOreal (consumer/mass-market/colour cosmetics, professional, luxury and active cosmetics) are present in the Indian beauty and personal care industry. However, since the consumer product group yield the main revenue stream for LOreal and the presence of the higher-end products are still limited (EI, 2011), this paper will limit the scope of LOreals marketing mix in India to the former group. The next section will examine the level of adaptation and standardisation of elements in the marketing mix, relative to other competitors in the market (EI, 2011) (Appendix D). As cultural dimensions are important determinants of the consumers wants and behaviours (Kotler, 1999), LOreals practice will be looked at under Hofstedes cultural framework (Appendix E).

LOreal Marketing Mix in India:

Like many other global brand, LOreal faces the issue of adaptation or standardization in its marketing mix to achieve cost efficiency and recapture innovation cost (Ohmae, 1983), especially in a price-conscious market like India (Bhattacharya, 2007). Both Perlmutters EPRG scheme (1969) and Riesenbecks (1991) survey (Appendix J) of successful global brands suggest that firms can benefit from a standardized, geocentric brand name. In the case of LOreal Paris, the companys flagship brand, this can be true due to a positive country-of-origin effect that a French name can give to beauty products (Cateora, 2000). However, the two frameworks differ in other elements of the mix. Products: In terms of products, most of LOreal products in India are standardized as they are also available in other markets with the same name, quality, packing and design (LOreal 2012). However, the preference for fair looks and darker skin tones in India requires LOreal to offer a different product mix including whitening products (Appendix F) which means the company must adopt a regiocentric orientation for this particular element, as suggested by the EPRG framework (Appendix G). In contrast, its biggest competitor, Hindustand Uniliver has taken a polycentric philosophy in the Indian beauty and personal care market. It is a public company and a subsidiary of Uniliver in India. It caters to the market with Fair & Lovely, Lakme and other brands that it has developed specifically for the Indian market. Fair & Lovely is also the countrys number one skin-lightening cream for women. Hindustand Unilivers colour cosmetics has a value share of 28.6%, far exceeding LOreals 13.9% (LOreal, 2012).

Price: The pricing scheme for LOreal products are more or less standardized across markets as suggested by Riesenbeck (1983). Although LOreal consumer products are at the lowest spectrum of its product lines, the lower average disposable income in India means that LOreal products are still considered expensive. Its rival, Hindustan Uniliver, has adopted a polycentric approach in pricing and Unilivers products are priced lower. It was able to do so because it possesses a much more extensive manufacturing network. It has over 40 manufacturing units and ties to a network of 150 third party manufacturers. Hindustand Uniliver is also able to export products in home care to other Uniliver companies all over the world (EI, 2011). Place: While LOreal sticks to its standardised distribution channels and utilised mostly Westernised stores and retailers, Hindustand Uniliver has a much more extensive distribution network including a direct selling marketing initiative to reach the rural areas (Rao, 2010). Taking into the consideration of Indias collectivistic culture and long-term orientation (Appendix E), a higher level of adaptation in LOreals distribution channel may increase the companys success. A direct selling marketing initiative can create benefits because the Indian collectivistic culture means that consumers may enjoy establishing relationships with the marketers. Members of a collectivistic culture expect to be well-taken care of by their in-group members (Hofstede, 2012). Furthermore, the long-term orientation tends to create high propensity to save and preference for thriftiness (Hofstede, 2012). This means that direct selling in rural areas may be appeal to the average citizens than selling through distributors or retailers in modern shopping malls. Although LOreal may not fulfil the high level of adaptation as Riesenbeck (1973) suggested for this particular element of the marketing mix, it is congruent with the EPRG framework. By selling in modern stores and through reputable retailers, its ethnocentric approach conveys prestige and higher quality. Promotion: LOreal takes a geocentric approach to sales and promotion consistent with Perlmutters framework, which contradicts Riesenbecks suggested practice of high level of adaptation in regards to this marketing element (Appendix J). LOreal Because Were Worth It is a standardized advertising campaign that uses the celebrities such as Eva Longoria, Jennifer Lopez and Beyonce Knowles and a few local ambassadors to promote LOreal products. The same practice is also used in Brazil, China and other markets. LOreals ambassador also includes Aishawa Rai, the famous former Miss Universe and Bollywood actress (LOreal, 2012). Hindustand Uniliver also uses the same approach and hires a number of ambassadors to promote its brand (EI, 2011). In addition, LOreal has also standardized most of its websites for different markets with identical elements such as forums for LOreal consumers to connect and create feedback about the products. Challenges in the next 5 years in the Indian Beauty and Personal Care Market Although Levitts suggestion (1983) of exploiting homogenised consumer needs with more product standardisation to achieve efficiency from economies of scale, the idea is hardly viable in practice. Moojis study concludes that divergence in consumption at country-level behaviour exist due to cultural variables, which can be explained by Hofstedes model (Appendix E). In another word, LOreal needs to enhance its level of adaptation in relevant elements of the marketing mix, taking cultural factors into consideration.

Colour cosmetics have been growing at a steady rate of more than 30% annually between the period of 2002 and 2007 (Bhattacharya, 2007) and it is expected to experience total growth of 114.8% and 46.6% in premium cosmetics and mass cosmetics respectively during 2010 and 2015 (Appendix H). The collectivism in the Indian culture translates into group conformity which means once innovators in the society start using a new product, other groups of consumers quickly follow suit to avoid the discomfort of being left out (Bhattacharya, 2003). The result of such behaviour is higher product diffusion rate. In addition, there is an increasing number of women in the age group of 22 to 45 who are becoming more independent with more disposable income and decision-making power. The implication for LOreal, therefore, is a need to invest heavily on promotion and advertising to capture the anticipated demand growth and to combat increase in illegal distribution channel encouraged by high import tariffs (Appendix I). It must enhance its distribution channel, produce focused promotion and events catering specifically toward this group of customers. Practically, LOreal needs to take advantage of more malls opening in big cities such as Delhi, Mumbai, Hyderabad, Chennai and Kolkata. This can also mean increasing floor area in shop-in-shop concept and establishing more stand-alone branded beauty stores to accommodate the growing appetite for leading global brands. LOreal may also want to diversify its channel to maximise product accessibility and increase its consumer base at all income levels (Bhattacharya, 2007). LOreals promotional strategy in India can benefit from higher level of adaptation as the majority of the Indian population can identify with Indian singers and film actors than American celebrities (Bhattacharya, 2003). To learn from its biggest rival in the Indian market, LOreal will also need to focus on adapting product innovation to cultural differences in order to capture more shares in the market. Competition in the skin whitening products will continue to remain fierce since it will remain a reliable source of revenue due to cultural factors. The high power distance in the culture means status plays a very important role in India and people often associate fair complexion not only with beauty, but also a symbol of higher social class. Demand for skin whitening products is high among men and women of all ages. Indian men believe lighter complexion make them look smarter and can increase their chances in succeeding in a job interview. Product innovation in skin whitening products is necessary to succeed in this market. The increasing trend toward natural beauty and personal care in the emerging markets poses a valuable opportunity here (EI, 2011). Hence, establishing an R&D centre in India is a prudent decision for LOreal to stay ahead of the competition with product innovation in the foreseeable future. Conclusion While the validity of Levitts global convergence of consumer needs and wants may not apply in the cosmetics world in India, LOreal still benefits from adaptation and standardization in certain elements of the marketing mix. The optimal strategy must take into consideration the uniqueness of the Indian culture and its cultural dimensions to achieve an optimal market mix. India has various qualities which indicate a significant strategic market so it is part of LOreals priority to establish a strong market presence in the country. It will face many challenges in the foreseeable future with the considerable presence of Hindustand Uniliver in the market. However, by adjusting its level of adaptation in certain marketing mix elements to align with the cultural needs of the Indian consumers, LOreal will succeed in this strategic market.

APPENDIX Appendix 0 LOreal Product Groups Consumer Products (Mass-market) Professional Products LOreal Paris Garnier Maybelline New York LOreal Professionnel Kratase Matrix Kraskin Esthetics Lancome Giorgio Armani Ralph Lauren Diesel Kiehls Vichy La Roche Posay
Source: LOreal India Website

Luxury Products

Active Cosmetics

Appendix A LOreal Sales by Region

Appendix B LOreal Global Emergence France Founded in 1909 US 1956 Brazil 1959 Japan - 1963

Moved into the North America after 3 years of market research Had present in Brazil since the 1930s but built 2 plants in Rio and Sao Paulo to establish direct present Created a partnership with Kose Corp in 1963 and in 1996, formed a whollyowned subsidiary under the name of Nihon LOreal (Hamada, 2011). In

Israel 1994 India 1994 China 1996

Africa 2000

1983, it established Japanese Research Centre to customise products to this Asian market Had a presence in the market since 1983 with a plant and in 1994, created a subsidiary Was the first international cosmetic group that received permission to establish wholly-owned subsidiary Strengthened its presence in Chinas market by partnering with Sozhou University to create a joint venture named Sozhou LOreal Products and constructed a plant in the same province With the acquisition of Carson, a hair product customised for African ethnics, LOreal hoped to strengthen its position in Africa
Source: LOreal Website

Appendix C: Coface India Risk Assessment A3

Appendix D: Largest competitors in the Beauty and Personal Care Company shares by NBO 20062010 (% of retail value rsp) Competitors Hindustan Unilever Ltd Colgate-Palmolive India Ltd Dabur India Ltd Godrei Consumer Products Ltd LOreal India Pvt Ltd 2006 6.6 4.8 4.0 2.2 2007 34.6 6.8 4.9 4.1 2.5 2008 34.7 6.8 5.0 4.2 2.8 2009 33.5 6.9 5.0 4.4 3.1 2010 32.9 6.8 4.9 4.7 3.4

Source: Euromonitor International

Appendix E: Geert Hofstedes Cultural Dimensions Comparison between India and France

Source: Geert Hofstedes Website

Appendix F LOreal Paris Product Types, Lines and Ranges in India

Skincare Face Hydrafresh UV Protection
UV Perfect

Cleanser Hydrafresh

Men Skincare Men Expert Hydra Energetic

For Normal to Dry Skin Lip Balm Instant Freshness For Normal to Combination Skin

Anti-Dullness Purple Tint Transparent Skin Non-Tinted

Foaming Cream For Normal to Dry Skin Toning Water For Normal to Combination Skin

Foaming Cleaning Gel Anti-Irritation Caring Shave Gel Anti-Fatigue Moisturising Lotion Hydrating Boost PostShave Balm

Pearl Perfect

Pearl Perfect

Men Expert Vita Lift

Scrub Day Cream Night Cream Revitalift White Anti-sagging Moisturising Cream

Revitalift

Men Expert White Activ

Day SPF18 White Essence

Milky Foam Aqua Milky Toner Brightening Foam Moisturing Fluid SPF 20 PA+++

Youth Code

Youth Code Range Day Cream Night Cream Eye Cream Concentrate Rejuvenating Home Facial Day Cream SPF18 Anti-Wrinkle and Firming Night Cream Day Cream SPF18 Anti-Wrinkle and Firming Night Cream Day Cream SPF18 Anti-Wrinkle and Firming Night Cream

Revitalift

Cosmetics

Face True Match

Eyes Extra Volume Collagene

Lips Color Riche

Color Riche Crme Color Riche Star Secrets Colour Rich Made for Me Colour Riche Made for Me Intense...

Nails Resist & Shine Titanium

Powder Liquid Foundation Roll on Super Blendable Concealor True Match Minerals

Waterproof Black

Pure Transparent Pearlescent Rose Misty Pink Antique Rose Boise En Rose

Matte Morphose

Volume Millions Lashes

Glam Shine

Rose Ivory Golden Ivory Beige Natural Rosy Sance Apricot Beige Amber

Black

H6 Reflexion

Double Extension

Contour Parfait

Renewable Serum Inside Mascara

Contour Khol

Honey Plum Black Brown Toffee Coppered Plum Black Red

Dark Chocolate Jet Black Golden Brown Super Liner

Ebony Paris Blue

Cocoa Expresso

Pencil Perfect Self Advancing Eyeliner

Ebony Paris Blue Cocoa Expresso

Hair Colour
Casting Crme Gloss Excellence Crme

Maghony Plum Medium Brown Dark Brown Praline

Natursl Black Natural Darkest Brown Burgendy Natural Dark Brown Deep Plum Nutri-Gloss Smooth Intense Total Repair 5

Hair Care
Colour Perfect

Shampoo Conditioner

Shampoo Conditioner

Shampoo Conditioner Instant Smooth Serum

Shampoo Conditioner Masque

Source: LOreal Paris India Website

Appendix G: EPRG Framework

Source: Douglas, Perlmutte &Wind. Guidelines for Developing International Marketing Strategy

Appendix H: Forecast Sales of Premium & Mass Cosmetics in India: % Value Growth 2010-2015

Source: EI Appendix J: Successful Global Brands Marketing Mix Elements Survey

Source: Riesenbeck & Freeling. How Global are Global Brands? The Mackinsey Quarterly 1991 Number 3

Appendix I: LOreal India SWOT Strengths First mover advantage when LOreal established the first wholly-owned subsidiary in 1994 Increasing company shares which seems to be taken away from Hindustan Unilever R&D centre located in Mumbai and manufacturing plant in Pune Establishing head of marketing for the region (Middle East and Indian subcontinent) Opportunities Potential growth for premium and higher-end products with Indias steady strong economic growth1 Robust forecast sales growth in the industry (2010-15): Premium Cosmetic s at 16.5% and mass cosmetics at 7.9% CAGR2 Weaknesses Has yet to achieve further efficiency in cost by exporting products to LOreal companies in other locations Brand diversity leading to brand cannibalism with lack of consumer education

Threats High rate of import duty encourages the illegal distribution channel in India which requires extra effort to promote products3 High market growth attracts more competition in the high-end product group such as Chanel, Estee Lauder, MAC, Versace4

Appendix K: LOreal Competitive Position in India 2010

1 2

Euromonitor Beauty and Personal Care in India Euromonitor BPC in India Table 14 3 Bhattacharya 4 Bhattacharya

Appendix L Sales and Market Growth by Region

20% 17.5% 15% 11.2% 10% 4.1% 5% 5.4% 2.4% 0% 4.1% 1.7% 0.8% 4.1% 13.1% 8.1% 5.7% Sales Growth Market Growth

Asia North Latin Eastern Western Africa & Pacific America America Europe Europe Middle East

Reference: Books: Cateora, P. Ghauri, P., 2000. International Marketing. European Edition. Berkshire: McGraw-Hill. Kotler, P.,1999. Marketing Management. New Dehli: Prentice Hall Ohmae, K., 1985. Triad Power: The Coming Shape of Global Competition. New York: Free Press. Lectures: Banerjee, S. 2012. International Promotion, International Marketing IB3880. Warwick Business School, unpublished. News Articles accessed via Websites: Kasabe, N., 2011. LOreal plans R&D Centre in Mumbai. The Financial Express, [online] 1 Jul 2011. Available at: http://www.financialexpress.com/news/L-Oreal-plans-R-D-centre-in-Mumbai/811139/ [23 Feb 2012] Neff, J. 2011. 2011 MARKETER A-LIST: LOREAL. Advertising Age, [online] 7 Nov 2011. Available at: http://adage.com/article/special-report-marketer-alist/marketer-a-list-l-oreal-focuses-u-s-marketbeautiful-effect/230833/ [22 Feb 2012] Journals accessed through Databases: Author, Initials., Year. Title of article. Full Title of Journal, [type of medium] Volume number (Issue/Part number), Page numbers if availalble. Available through: name of database [Accessed date]

Bhattacharyya, S., Rahman, Z., 2003. Sources of first mover advantages in emerging markets - an Indian perspective. European Business Review;15, 6. pg. 361. Available through: ABI/INFORM Global [3 March 2012] Bhattacharya, P., 2007. Cosmetics Retail in India: Obvious Excitement, Global Cosmetics Industry, [online] Vol. 175, Issue 2, pg 38-40. Available through: ProQuest [6 March 2012] Douglas,S. Perlmutter, H. Wind, Y., 1973. Guidelines for Developing International Marketing Strategy. The Journal of Marketing [pdf], Vol. 37, No. 2, pp. 14-23 Available through: JSOTR [6 March 2012] Levitt, T. 1983. The Globalization of Market. Harvard Business Review, [pdf] May/June pg 92-102. Available through: ProQuest [28 February 2012] Perlmutter, H., 1969. The Tortuous Evolution of the Multinational Enterprise. The Columbia Journal of World Business, [pdf] 4(1): 9-18 Available through ABI/Global [5 March 2012] Riesenbeck,H. Freeling, A. ,1991. How Global are Global Brands?. The McKinsey Quarterly, No.3, pg 102-109.Available through: ProQuest [6 March 2012] Rugman,A. Verbeke,A., 2003 (draft) Regional and Global Strategies of Multinational Enterprises. Kelley School of Business, Indiana University Department of Business Economics and Public Policy . Available through ProQuest [3 March 2012] Reports: LOreal, 2012. Annual Results, [Online pdf] Available at: http://www.loreal-finance.com/_docs/us/annualreport_2011/JP_AGON_02_14_2012_UK.pdf [Accessed 23 January, 2012] Euromonitor International, 2011. Beauty and Personal Care in India. [online] US: Euromonitor. Available through: Euromonitor International [20 January 2012] Euromonitor International, 2011. Beauty and Personal Care 2011 Corporate Strategies in and Beyond the BRICs. [online] US: Euromonitor. Available through: Euromonitor International [20 January 2012] Euromonitor International, 2011. India Country Factfile. [online] US: Euromonitor: Available through: Euromonitor International [20 January 2012] Euromonitor International, 2011. LOreal. [online] US: Euromonitor: Available through: Euromonitor International [20 January 2012] Euromonitor International, 2011. LOreal India Pvt Ltd. [online] US: Euromonitor: Available through: Euromonitor International [20 January 2012] Euromonitor International, 2011. Hindustand Uniliver. [online] US: Euromonitor: Available through: Euromonitor International [20 January 2012]

Websites: BusinessWeek, 2009. Top 100 Global Brands. Available at: http://images.businessweek.com/ss/09/09/0917_global_brands/58.htm [Accessed 20 January 2012] Hamada, K., Shimbun, Y., 2011. A STUDY OF BRANDS / L'Oreal success not skin-deep. [online] Available at: http://www.yomiuri.co.jp/dy/business/T110521002795.htm [Accessed 20 January 2012] Rao, Arati., 2010. All About: Khushiyon Ki Doli. Campaign India. [online] Available at: http://www.campaignindia.in/Article/230079,all-about-khushiyon-ki-doli.aspx [Accessed 19 Feb 2012] Hofstede, G., 2012. India. Geert Hofstede. [online] Available at: http://geerthofstede.com/india.html [Accessed 19 Feb 2012]