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Introduction
At the heart of every global business lies a tension that is never fully resolved. The tension
between global integration and local responsiveness is especially high when product
development and marketing require complex knowledge. Achieving economies of scale and
scope, demands, some uniformity and integration of activities across markets are some complex
situations. However, serving regional and national markets requires the adaptation of products,
services, and business models to local conditions. As developed market companies increasingly
look for customers in emerging economies, both the advantages of global scale and the need for
local differentiation will only increase. This report tries to give an idea how businesses exploit
opportunities available in growing emerging markets with their different strategies. LOral, the
cosmetic giant and its entering to Indian market was selected to explain the above scenario.
saturation
Amplify the possibility to enter large potential markets
Characteristics
different regions and countries help them to come out of the CAGE by studying each location
and adopting their strategies.
Hyper growth
Deregulation & Infrastructure Developments
High population with high spending
Many countries with unfulfilled needs
Rich Resources and Young work force
Hyper Growth
As discussed earlier emerging markets maintain a growth rate of 5-10% on
average where as that of developed market is ranging from 1-3%. Further
the world growth rate is driven by emerging markets trends. Therefore this
is a critical attractive determinant of the emerging markets. Following graph
clearly demonstrates this scenario.
LOreal has managed its global-local tensions by developing new products to cope up with the
multicultural backgrounds as it is the companys vital source for competitive advantage.
According to the top management of LOreals the above strategy is the main reason for their
impressive success in emerging markets.
As the company transformed itself from French beauty products to worldwide, multicultural
executives have got the opportunity to play a critical role in product development not only in
Paris all over the world such as Tokyo, Shanghai, New York and Mumbai. (Jung Hong and Doz,
2013). They have above 14 research and development centers to innovate products best fit with
each of their markets. Innovations through their R & D is their core strategic capability to exploit
the emerging market opportunities.
LOreal is using equity methods as their internationalization strategy. They go for green
field investments by establishing their own plants in different emerging markets. As a result of
that they establish 5th regional research center in Mumbai India as management see it as essential
to their universalization strategy. Then regional wise they practice export base method too for
their global presence. With that global presence, LOreal attempts to achieve three strategic
objectives of Bartlett and Ghoshal model as discussed below.
Effectiveness
2012 also marked a milestone in LOrals internationalization process, as the New Markets
became the groups number one geographic zone in sales terms which contributed 40% of the
total revenue .As per their annual report, over half of its sales came from new markets outside
such as Europe and North America. In spite of the financial crisis occurred in North America and
Europe, LOreal has been developing and increasing market share effectively. It proves from the
sales grew in the Middle East and Africa by17.6% and Asia Pacific region by 18.4% in 2012.
Since 2004 LOreals profits have increased by double and revenue by half along with a growth
in net profits of 17.6%, in 2012 has been achieved the same without an effort.
Flexibility
One of the critical success factors of LOreal is customization of the products country and
regional wise by adopting to local trends. Hitting the right audience with the right product at the
right place Present in India for the last 18 years, LOrals growth rate in the country is 23.3% +,
making it one of the most dynamic in the beauty market. The group inaugurated its new Research
and Innovation hub, which consists of a Product Development Centre in Mumbai and an
Advanced Research Centre at Bangalore. Ultimately the hub employed more than 100 Indian
researchers and scientists. The aim is to develop products adapted to the Indian market by
drawing on a thorough knowledge of local consumer preferences and on the distinguished local
scientific community.
As an example COLOSSAL KAJAL by MAYBELLINE NEW YORK The inspiration came
from an ancestral Indian beauty ritual: the application of a black paste that women use to
emphasize and care for their eyes. By combining five different ingredients, Maybelline New
York has designed a modern KAJAL that guarantees intense colour, reduces puffiness and
soothes the skin.
Learning
LOreal also invest money and time in innovating at 14 research centers around the world,
spending 3% of annual sales in Research and Development. Understanding the unique beauty
routines and needs of different cultures, countries and consumers is crtical to LOreal. Skin is
different from one part of the world to another. Therefore continuous learning and innovation is
required for their success in international markets. According to their evaluation centers of
beauty rituals, came across that the natural ingredients utilized on a daily basis there, out of 66
skin shades listed worldwide, 44 of them can be found in India. (LORALS INDOVATION, 2014). This helps them lot when they share the common features studied in one
market.
As clearly given in the LOreals Strategies in India it is evident that they practice the multi
domestic strategy.
Individualism vs Collectivism
Individualism/Collectivism is the relationship between individuals and their fellow individuals.
Hofstede said that individualism means everyone is trying to look after him or herself and their
immediate families only. Collectivism means a society in which people are integrated into strong
cohesive groups, which protect them throughout their lives. Individualism is often regarded as
Power Distance
Hofstede proposed Power Distance as the extent to which cultures expect and accept the unequal
distribution of power. A high Power Distance ranking indicates that inequalities of power and
wealth have been allowed to grow within the society. These societies are more likely to follow a
caste system that does not allow significant upward mobility of its citizens. A low Power
Distance ranking indicates the society de-emphasizes the differences between citizen's power and
wealth. In these societies equality and opportunity for everyone is stressed.
In India cast system is highly valued and income inequality is also high suggesting a high power
distance. LOreal has to identify their market segment clearly base on these power distance.
Masculinity/Feminine
India has Masculinity as greater the gap between values of men and women. It may also
generate a more competitive and assertive female population, although still less than the male
population. Male is dominating the society. Main decision maker and the influencer is a male.
Therefore Business should focus on influencers and decision makers in their marketing
programs.
Uncertainty Avoidance
India has high tolerance of uncertainty and ambiguity since they have not specific rules and
techniques to deal with uncertainties. That depend on the sub cultures and casts. Doing buinsess
in such an environment is easier.
Strengths
Global / International Brands
Eg: Three different business
segments
(Make-up Fragrances, and
Skincare)
Global sales, growth and
profitability
( strengthening the core
products)
Increased and Interactive
training
(Hair care and cosmetic experts )
Offerings to all women and men
Opportunities
Provides products that helps to
strength the Skin
Market position
Weaknesses
Advertising Issues (use of
beautiful woman and
product testing rules)
Handling and adopting to
local cultural market
Responsibility of
divisions
Threats
Growing competition
Consumer Spending
manner
Economic Downturn in
few countries
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