Analyze international markets and assess the risk elements, including political, economic, and socio-cultural factors
Nowadays, L’Oreal is considered one of the world’s most commercially successful cosmetic brands. The validity of this statement can be well illustrated, in regards to the fact that, as of 2002 alone, the company declared a gross profit of € 1464 million – an amazing accomplishment, given its field of specialization (Ghauri & Cateora 2013, p. 650). There is, however, is even more to it – as it can be seen on the exhibit below, through the years 1997-2002 the annual amounts of the company’s consolidated sales (in € million) have been increasing in the arithmetical progression to the flow of time.
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|1997||1998||1998 (1)||1999 (1-2)||2000 (2)||2001||2002|
Exhibit 1. (Ghauri & Cateora 2013 p. 645).
Simultaneously, L’Oreal can be thought of as one of the finest examples of how a company’s adoption of a particular marketing strategy may result in this company being able to substantially increase the extent of its competitiveness in the targeted market niche. The reason for this is that the adopted marketing strategy, on the part of L’Oreal, appears thoroughly consistent with the current dynamics in the international market of cosmetics, on the one hand, and with what happened to be the macro-economic effects of the ongoing process of Globalization, on the other. Following, are the brief explanations of how the elements of the adopted strategy allowed the company in question to benefit from its strengths and from the scope of the affiliated opportunities while reducing the acuteness of the equally affiliated weaknesses and threats (SWOT).
- L’Oreal’s top-officials made a deliberate point in promoting the line of the company’s products in an emotionally intense manner so that the targeted consumers would think of them, as such that represent a particularly high ‘perceived’ value. The legitimacy of this suggestion can be shown, in regards to the fact that ever since the early seventies, L’Oreal never ceased taking advantage of the deep-seated purchasing anxieties, on the part of the targeted would-be-buyers, which overwhelmingly consist of women. The foremost of these anxieties has always been women’s (and some men’s) tendency to think of the very act of purchasing, as such that emphasizes the measure of the concerned buyer’s existential uniqueness/worth. As Ghauri and Cateora noted, “The emotional pitch (of the advertisement-slogan) ‘Because I’m worth it’, indirectly conveyed the message that ‘I’m willing to pay more’… it conveyed that, ‘I will prove that I value myself by paying more than I have to” (2013, p. 644). The same allowed L’Oreal to effectively address one of its main marketing disadvantages, as a company affiliated with the cosmetics-industry – the fact that the nature of the industry at stake presupposes a low degree of qualitative differentiation between brand-name products in the same segment of the market.
- L’Oreal heavily invests in scientific research. As it was mentioned in the case study, the company’s annual research-related expenditure accounts for approximately 3% of its overall revenues; whereas, it represents a commonplace practice, among the rest of the world’s pharmaceutical/cosmetics companies, to spend on research no more than 2% of the received annual revenues. The most immediately felt effect of this, is that L’Oreal is indeed able to ensure a high quality of the marketed products – hence, providing the targeted consumers with the rationale-based motivation to consider affiliating themselves with the brand. There is, however, is even more to it – the company’s pre-scientific stance naturally causes potential buyers to think of the brand-name ‘L’Oreal’, as being essentially synonymous with the notion of a ‘scientific progress’. It is needless to mention, of course, that this increases the ethos-based commercial appeal of L’Oreal products even further. The above-mentioned policy, on the part of L’Oreal, implies that, while designing it, the company’s top-managers remained thoroughly aware of what accounts for one of the concerned brand’s main competitive strengths – specifically, L’Oreal’s sheer size, as the world’s largest cosmetics firm. After all, the larger a particular company happened to be; the easier it is for its managers to choose in favor of allocating valuable resources into the company’s ‘future’, which is being done in the form of setting it on the path of reaching a number of different long-term objectives (Sharma 2004). In this respect, L’Oreal will also be able to effectively address the so-called ‘threat of new entrants’, concerned with the possibility for the newly emerged companies to enter the already ‘tight’ market of cosmetics. After all, the policy of investing in research, deployed by L’Oreal, reflects the top-managers’ willingness to make practical use of the ‘offensive management’ concept, “The purpose of an offensive management is to inﬂuence indirectly the behavior of market players in a direction that enhances the competitive position of the business” (Tournois 2013, p. 7). It is understood, of course, that while striving to be just as ‘scientifically friendly’, as it happened to be the case with L’Oreal, the company’s smaller competitors will have no other option but go about achieving it, at the expense of undermining the efficiency of their presently deployed operational strategies – hence, increasing the competitive advantage of L’Oreal even further.
- L’Oreal pursues the policy of an aggressive expansion into the foreign-based market of cosmetics. As of today, L’Oreal acquired the ownership of a number of formerly unaffiliated cosmetics-brands, such as Maybelline, Garnier, Soft Sheen Carson, Matrix, Redken, L’Oreal Professionnel Vichy, La Roche-Posay, Lancome, Helena Rubinstein, Biotherm, Kiehl’s, Shu Uemura, Armani, Cacharel and Ralph Lauren (Ghauri and Cateora, p. 644). In its turn, this allowed L’Oreal to effectively address the operational weakness of having the line of its products strongly associated with the ‘discourse of Frenchness’, which used to simultaneously reduce the commercial appeal of the concerned products in those parts of the world that have never been affected by the mentioned discourse. The rationale behind this suggestion is that the policy in question is fully observant of the qualitative effects of Globalization on the manner of how people make purchasing choices (Suh & Kwon 2002). After all, it is in the very nature of Globalization to result in the unification of people’s aesthetic/perceptual predispositions. The most immediate effect of this is that it reduces the likelihood for the locally franchised cosmetics-brands to fall out of favor with consumers. In other words, while acquiring the earlier mentioned brands, L’Oreal did not face much of a risk, in the first place. Quite on the contrary – the company was able to ensure the additional flow of revenues from around the world, without having to alter its overall marketing philosophy.
Determine the entry strategy for foreign markets such as acquisitions
There can be only a few doubts that L’Oreal’s acquisition of the brand Maybelline in 1996 was indeed a smart competitive move. The legitimacy of this suggestion is quite evident – ever since this acquisition took place, “Maybelline’s market share in the US increased to 15 percent in 1997 from just 3 percent in 1996” (Ghauri & Cateora, p. 648). The move’s success shows the fact that it is indeed fully justified, on the part of the world’s famous companies, to go about purchasing relatively unknown local brands, in order to promote them globally. The reason for this is that, just as it was mentioned earlier, the very process of Globalization creates many objective preconditions for the locally popular products (considered utterly distinctive/unique) to be found emotionally appealing by consumers – regardless of what happened to be the specifics of the concerned individuals’ ethnocultural affiliation.
After all, contrary to what is being commonly assumed, Globalization does not result in the destruction of cultural traditions, but rather in selecting those of them that are truly valuable and in incorporating the selected ones into the very matrix of today’s ‘non-traditional’ cosmopolitical living (Ming 2010). For example; whereas, as recently as a hundred years ago, pizza used to be considered solely an Italian ethnic food, it now can be ordered in just about every part of the world. Therefore, there is nothing accidental about the fact that, while refurbishing the brand Maybelline, L’Oreal made a deliberate point in increasing the brand’s commercial appeal by the mean of encouraging the targeted consumers to think of the brand-name in question, as such that emanates the spirit of ‘street-smartness’. This move was fully consistent with the fact that, as of today, the discursive values of intellectually flexible urban living grow progressively popular with more and more Americans.
The case of Maybelline’s acquisition by L’Oreal also highlights what can be considered the major demerit of acquiring an existing brand (as opposed to creating an entirely new one) and promoting it globally. This demerit has to do with the fact that it requires a great deal of psychological research, on the part of an expansion-seeking company, to be able to ensure that, while marketed locally, a particular ‘foreign-born’ product never ceases to be attuned with the ethnocultural specifics of how the targeted consumers tend to perceive the surrounding reality and their place in it. After having been introduced to the Japanese cosmetics-market as ‘Moisture Whip’ (a lipstick), this particular Maybelline product proved a commercial failure.
Maybelline, however, was able to fix the situation by the mean of rebranding the concerned product as ‘Water Shine Diamonds’ (Ghauri & Cateora 2013, p. 648). The reason for this is, as opposed to what is being the case with Americans (Westerners), the Japanese happened to be endowed with the so-called ‘Holistic’ (Oriental) mentality, which in turn causes them to adopt a strongly defined contextual approach to rationalizing the discursive aspects of a particular object’s significance. As Bower noted, “In a variety of reasoning tasks, East Asians take a ‘holistic’ approach. They make little use of the categories of formal logic and instead focus on relations among objects and the context in which they interact” (2000, p. 57). This is the reason why the name ‘Moisture Whip’ could not possibly appeal to consumers in Japan – being concerned with specifying the actual effects of the product’s usage, it failed at connoting the contextual message of ‘purity’ and ‘shininess’, anticipated by the targeted buyers on an unconscious level.
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Evaluate and assess international marketing strategy and international marketing decisions and activities
While acquiring the mentioned brands, L’Oreal remained thoroughly aware of the sheer importance of making sure that they do not overlap, in terms of what accounts for the particulars of every particular brand’s marketing-appeal. The following, are the brief elaborations of how L’Oreal was able to achieve its agenda, in this respect:
- L’Oreal deployed the marketing strategy of a ‘cross-fertilization‘. The implementation of this strategy was concerned with singling out the potentially overlapping brands and with requiring them to incorporate in the would-be-deployed marketing policy, on their part, the emotionally appealing elements of both: American and French cultures. As it appears from the case-study, the marketing ‘cross-fertilization’ affected a number of the world-famous brands, owned by L’Oreal, such as Redken, Ralph Lauren, Caron, Soft Sheen, and Helena Rubenstein (Ghauri & Cateora 2013, p. 649). As a result, the mentioned brand names attained a rather unique sounding, in the marketing-related sense of this word. Consequently, this led to the creation of the situation when even a few formally overlapping brands (in terms of what accounts for the targeted audiences’ qualitative specifics) would not be considered as such de facto.
- L’Oreal encouraged its sub-divisional brands to pay close attention to the cultural subtleties of the targeted consumers’ sense of self-identity. For example, while being perfectly aware that the US-based brands Soft Sheen and Caron are being traditionally preferred by African-Americans, the company applied a great effort into ensuring that the marketing campaigns, associated with these brands, would focus on convincing potential buyers to take pride in being ethnically unique. At the same time, however, after having been acquired by L’Oreal, both brands have effectively ‘divided’ what used to be their mutually shared segments of the targeted market. This was made possible by the fact that, in the aftermath of the acquisition by L’Oreal, the brands Soft Sheen and Caron began to pay much closer attention to the age-related cleansing/beautifying needs, on the part of consumers.
- L’Oreal introduced many new principles in the very process of choosing in favor of a proper advertisement-approach, within the context of how every particular subsidiary luxury-brand goes about positioning itself in the market. The validity of this suggestion can be illustrated, in regards to what now constitutes the advertisement-related specifics of the brand Helen Rubinstein. Whereas prior to being acquired by L’Oreal, this brand strived to maintain the aura of ‘respectability’, this now effectively ceased to be the case. After all, it nowadays became a commonplace practice, on the part of this brand, to resort to a number of rather unconventional advertisement-techniques, while striving to increase the extent of its commercial competitiveness. For example, there have been cases when the advertisement-posters by Helen Rubinstein, featured the female-models wearing green or blue lipstick. These posters were meant to convey the message that there is no reason to think of the notion of ‘luxury’, as being synonymous with the notions of ‘uptightness’ or ‘boredom’. In its turn, this allowed Helen Rubinstein to substantially expand the targeted market-niche and consequently – to undermine the possibility for competing brands to ‘bite away’ the share of the anticipated buyers.
- L’Oreal relied on the availability of celebrities, as ‘spokespersons’ for different lines of the company’s products. According to Ghauri and Cateora, “Some of the well-known personalities featured in L’Oreal’s promotional campaigns included Claudia Schiffer, Gong Li, Kate Moss, Jennifer Aniston, Heather Locklear, Vanessa Williams, Milla Jovovich, Diana Hayden…” (2013, p. 649). Besides the fact that using celebrities (as the brand’s promoters) is alone able to dramatically increase the chances for the marketed products to prove commercially successful, this type of marketing approach also allows avoiding the overlapping of different brands, which happened to be the subsidiaries of L’Oreal. The mechanics of how it is being achieved are quite easy to understand. After having been exposed to the ‘spokesperson’-led advertisement of a particular cosmetics-product, manufactured and marketed by one of the company’s brands, people will be naturally tempted to think of this product in terms of who was the associated celebrity, rather than in terms of what accounts for the product’s actual functionally.
One of the keys to L’Oreal’s commercial success is concerned with the company’s decision to encourage competition among its brands (Ghauri & Cateora 2013, p. 649). The rationale behind the implementation of this particular policy, on the company’s part, is thoroughly explainable – while encouraged to compete with each other in the same segment of the market, L’Oreal’s subsidiary brands are being provided with a number of performance-stimulating incentives. Consequently, this enables these brands to improve the de facto quality of the marketed products and to justify the claims of being ‘best in the field’. At the same time, L’Oreal’s brands that happened to be in the state of competing with each other, are being discouraged to even think about gaining an upper hand, in this respect, by the mean of ‘cannibalization’, in the allegorical sense of this word. The reason for this is that the very paradigm of an ‘inter-subsidiary competition’ is based upon the assumption that it is specifically by increasing the efficiency of their commercial activities that the competing brands may go about trying to prove their ‘superiority’ over each other – not by pursuing the policy of an aggressive expansion.
The earlier mentioned ‘value-based’ approach to encouraging the company’s brands to compete, is potentially capable of empowering them in a variety of different ways, the most important of which are concerned with:
- Increasing the measure of the L’Oreal brands’ operational flexibility. In order to be able to adequately address the challenges of competition, the top-managers from the concerned L’Oreal’s brands have no other option, but to indulge in the essentially independent executive decision-making. This, of course, results in these brands becoming ‘self-sustainable’ to an extent, within the context of how they define their operational strategy. The most immediately felt beneficial effect of this, is that the company’s subsidiary brands are able to promptly react to the fluctuating demands of the market.
- Bolstering creativity. As it was pointed out by L’Oreal’s Chairman and CEO Owen Jones, “The only way to favor creativity in large corporations is to favor multiple brands in different places which compete with each other” (Ghauri & Cateora 2013, p. 649). The importance of this specific beneficiary effect cannot be underestimated – especially given the fact that in the cosmetics industry, it is namely the managers’ ability to act in a highly creative way while coming up with ideas for the advertisement campaigns-in-making, which reflects the measure of their professional adequacy.
- Making it more likely for the L’Oreal brands to succeed in ‘hitting the right audience with the right product’. In order to have a good chance of winning a competition with its counterpart, each of the company’s brands is required to invest heavily in market research. After all, this is being traditionally considered one of the main preconditions for just any company that mainly relies on the ‘perceived’ appeal of its products, to be able to ensure a high volume of sales. It is understood, of course, that probably the most important effect of the properly conducted market research (on behalf of a particular brand), is the concerned brand’s increased ‘preciseness’, in the context of how it goes about targeting consumers.
- Establishing the objective prerequisites for the process of subsidiary brands choosing in favor of targeting the market’s specific segment, to occur naturally. Nowadays, the cosmetics industry’s segments can be generally classified, as such that concern the luxury, mass-marketed, professional, and pharmaceutical products. Nevertheless, many cosmetics-companies appear to experience a certain difficulty, while striving to differentiate themselves, in this respect. There may be a number of reasons for this, the most common of which is the inconsistency between a particular brand’s former legacy of having been associated with the industry’s specific segment in the past, on the one hand, and the philosophy of its currently deployed marketing approach, on the other. This inconsistency, however, can be successfully dealt with, once the concerned brand decides to focus exclusively on the present demands of the market – even at the expense of parting away with its well-established reputation. While in the state of contending with each other, the L’Oreal brands are being naturally prompted to choose in favor of this specific course of action, which in turn increases the overall extent of their competitiveness.
I believe that the earlier provided line of argumentation, as to what helped L’Oreal to grow into the world’s most successful cosmetics-company (specifically, the qualitative aspects of the deployed marketing-strategy, on its part), is fully consistent with the initially articulated idea that there is nothing incidental about the company’s strongly defined operational effectiveness.
Bower, B 2000, ‘Cultures of reason’, Science News, vol. 157. No. 4, pp. 56-58.
Ghauri, P & Cateora, P 2013, International marketing, McGraw-Hill Education (UK) Ltd., London.
Ming, C 2010, ‘The globalization and localization of persuasive marketing communication: a cross-linguistic socio-cultural analysis’, Journal of Pragmatics, vol. 42. no. 2, pp. 354-376.
Sharma, B 2004, ‘Marketing strategy, contextual factors and performance: An investigation of their relationship’, Marketing Intelligence & Planning, vol. 22. no. 2/3, pp.128-143.
Suh, T & Kwon, I 2002, ‘Globalization and reluctant buyers’, International Marketing Review, vol. 19. no.6, pp. 663-680.
Tournois, L 2013, ‘Mass market leadership and shampoo wars: the L’Oreal strategy’, The Journal of Business Strategy, vol. 34. No.1, pp. 4-14.