Analyzing Loreal Rural India Market: Case Study

This assignment requires you to recommend an overseas market to expand the activities of an organization of your choice.

The assignment involves research within the context of existing knowledge. You may use both primary and secondary data to provide a logically structured argument. It is important to note that mere reporting of facts will be inadequate and I will look for evidence of critical review and analysis.

You must also ensure that there is a clear link between your arguments, appropriate theory and available evidence. You may choose an appropriate model from the recommended textbook or other acknowledged sources.

You are required to develop a report proposing a new overseas market which an organisation should enter or alternatively an existing overseas market where significant expansion should be implemented.

Background of L'Oreal

The purpose of this study is to analyze and indentify the challenges faced by a company while expanding its business operations and functions from the home country to the host country or one country to another (The times of India, 2016). The current study is based on one of the famous cosmetic brand that is L’Oreal which is French company and now the company wants to expand its business organization in the market of other countries like India. The focus of the company is to extend the supply of their cosmetics in rural India. It helps in growth and development of the business in an international market that provides various types of opportunities as well as threats (Akrani, 2011). The internationalization of business is very important but the management and marketing of the same is equally important to sustain the business for a longer period of time. The industry sector of the L’Oreal is personal care and cosmetics sector (Masterstudies, 2016).

The aim of this report is to study the glimpse and also to understand the L’Oreal and its international marketing strategy in rural markets of India. The company has expanded their business to the international markets by using effective theories and approaches which will be discussed in this study (Doz, 2011). Due to the fine management and quality of goods, the brand is one of the famous brands for the cosmetics. The consideration of international business for L’Oreal is very important to have overall knowledge of the company (Agarwal, S., 2013).

The L’Oreal is a French company which was initiated in the year 1909. It is a manufacturing company of cosmetics products and the world’s first hair color producing company. In the beginning, the products were firstly sold in the Parisian parlors and salons with a very tight production, marketing and sales strategies (Altaf, & shah, 2015). In the year 1912, the products of the L’Oreal were sold in the markets of Europe such as Italy and the Netherlands. The branches and subsidiary of this brand are scattered all over the world. L’Oreal SA Paris is the world famous brand and a leading company of cosmetics (Kumar, 2012). The company is specialized in the hair care, hair color, skin care, color cosmetics, perfumes, fragrances, etc.

The company L’Oreal is the largest company that deals in personal care and beauty care. In the markets of India, the company that give competition to L’Oreal are Hindustan lever, Himalaya, and Emami, etc. (Asian Development Bank, 2017) the products in the product mix of L’Oreal are of higher standard, and carries international brands  and they also cover a wide range of product. The aim of the company is to satisfy the rural customers of India by providing them a good range with top quality in reasonable prices (Azhar  and Hakim, 2014). The products of this brand have passed the entire test related to the international standard. The product is scattered around the health care, skin acre, hair color, make-up, fragrance, perfumes, etc. there are four main division of L’Oreal in India-

1. There are active cosmetics that includes brands like inneov, sonaflore, etc
2. The other department is luxury products like diesel, YSL, Ralph Lauren, etc.(Bishnoi, & Choudhary, 2014)
3. There professional products like matrix, mizani, essentials, etc.
4. The last and most common products are personal care products that include Maybelline, Garnier, colorama, magic, etc. that are famous in the markets of rural India (Blogs.wsj, 2016)

L'Oreal's Business in India

The company started their operations and business in Indian market with the name L’Oreal India. With the growth of 3.9 %, the current market is strong but only 0.2% belongs to rural India. Now, the company is planning to extend to rural markets. The estimated total of the market share of L’Oreal is 203 billion Euros, which will expand gradually as per the present condition of the market share of L’Oreal (Chand, 2017).

The market share and sales of L’Oreal in Indian rural market is very slow. However, the market share and sales in French market is highest as compared to any other market. The worldwide market share of L’Oreal was shown a high growth rate in 2015. In North America the sale was 13.7 percent (Groth, 2012). In the beginning, 1994 the L’Oreal gradually grew up with the growth of 21.7 % over the past years. As the India is a growing and developing market, this is the country that has the youngest population in the entire world and more than 65 % of the total population lives in rural areas.  The overall growth of the company is +11 % in the last 7 years in rural markets. The L’Oreal company is third leading company in the Indian urban cosmetic marketing the market share is 8.5 % in the urban areas which is € 322 million in 2014 (Hong, & doz, 2013).

The L’Oreal brand has huge potential and this is the reason due to which the company is able to survive and become a leading brand. The global marketing strategy used by this company is broad (IBEF. 2017). In order to enter into the new markets of rural India, the company has performed lots of research and development, identified the marketing conditions, customers preference, etc. who live in the villages, small towns of India.

It is important to be aware about the problems related to the side effects of the cosmetic products are increasing. This has raised the challenges to L’Oreal as they have to maintain a good quality, reasonable price and high standard to establish their business in the Indian markets. Excessive use, improper use, expiry date products, side effects, etc. leads in down fall in the reputation of the company in future (Kumar, 2013). In rural India, the use of expensive products is very less. So the company have to focus on the pricing strategy (Kumar, & Singh, 2008).

Challenges of Expanding Business in Rural India

Many times, the people of L’Oreal use traditional methods like sample selling and discounts as a platform (L’Oreal India, 2017). They also raise many issues related to the Hindu Muslim conflicts due to which many lives were taken to gain the attention of rural customers. The specialists stand against the government and political parties and raised issues (Live Mint. 2017).

The rural Indian cosmetics market for L’Oreal was around 50 billion Indian rupees in the year 2011 but there is a low growth that is 14 % more due to the fact that the Indian market and rural customers have weak purchasing power. There is a increase in the deflation, the lowered literacy rate for the rural class people of India, and there is no fashion awareness among the people of rural India (Makeinindia, 2017). These all are the unfavorable factors for the company like L’Oreal to establish their business operations in the Indian rural market. It is expected that this growth will expand in the few years in future (Masterstudies, 2016).

The producers and other people related to the L’Oreal are using various platforms to promote a social cause in rural India. They support the social cause present in the rural areas to promote their product. It helps the company as well as country to work for the social issues and to increase the promotional and marketing of the company. It helps in raising many for the charity for the needy people, donations, flood victims, terrorist attacks, etc. (Modi, 2017). In this way, the companies like L’Oreal using India as biggest platform for the promotion (Parameswaran, 2017).

L’Oreal is a company which used hi-tech machineries the production of the goods and services of the company. They are trying to set up their factories in rural areas to provide them employement, lifestyle, standard of living etc. The company had performed lots of search before entering into the Indian rural market because of the fact that Indian rural markets are very much customized and rigid due to the culture and social factors (Pavan, & Dangi 2013). The company understands the amount of technology that is required in Indian markets and then established their operations in the same (Saha, 2017).

The porter’s diamond model was developed by strategy guru Michael porter in a practical way. It helps in competitive advantage and powerful strategy of the company (Singh, 2012). First of all, there is a need to understand that what porter’s diamond analysis? This model is also known as porter diamond theory of national advantage which states that all the factors are relevant (Singh, 2017).

Marketing Strategy in Rural India

Michael porter suggested that there are clusters of various types of identical products which faced various types of competitive pressure. These clusters help to increase the productivity, improve business results and also bring innovation (Suharwadi, 2014). The L’Oreal is company that use porter diamond model as it works in extension. In order to move in the international markets, it has become important to L’Oreal to take advantage from the porter’s diamond model. It helps in management, maintenance the presence of the company in the international market (The Economic times. 2017). It also guide that how L’Oreal manage the international competition. L’Oreal is one of the big examples of large cluster business organisation.

The main objective to apply porter’s diamond model is to gain competitive advantage in the company. The L’Oreal is using this model from the beginning when they establish their business operation in rural India (The timesofindia, 2017). It helps in establishing national and international business strategies. It provides government support, manage international issues, build advantages in global competition, etc. (Thehindubusinessline, 2017)

Factor conditions

It helped the L’Oreal Company to analyze the infrastructure and knowledge about rural India. These both are the relevant factor in international business (Trading Economy. 2017). It also helped in management of human resources, commitment, qualifications, stock markets, mineral oil, climatic condition, etc. (Masterstudies, 2016)

Supporting and related industries-

The success of L’Oreal market in rural India can only depend on the presence of the related stakeholder and supplies (Trefis, 2015). It helps in brining innovation, expansion and internationalization. This model provides an in-depth study of all the supportive and related persons.

Home demand conditions

It is related to the reasons of successful market, nature of market, size of market, etc. it helps in making interaction related to the transportation, economies of scale, other costs, size of home market, etc. (Vilas m. Kadrolkar, B., & shreeshail g. 2011)

Strategy structure and rivalry-

This factor is related to the way in which L’Oreal is managed and organized, the corporate objectives of the company, measurement of the rivalry, management of diversified culture, etc. (Cavusgil, and Knight, 2015)

The cultural management plays an important role in the success of the company. According to this model, the rivalry and domestic competition is very relevant for the growth of L’Oreal in rural India (Zarrouni, 2015).

Government

Government is a factor that helps in the development and growth as it is one of the powerful factor for L’Oreal. Government provides, infrastructure, finance, invest in the cosmetics and health care. The innovation takes place when the company takes chances and risk (Achtenhagen, Naldi, and Melin, 2010). Many companies start and expand their business in their home countries where they do not have any economic advantage whereas; the company L’Oreal takes chance and move to the international market to utilize ore opportunity.

Porter's Diamond Model and L'Oreal

Chance events

Chance is also important because it provide opportunity to L’Oreal to expand their business in Indian rural markets.

It is highly recommended to L’Oreal Company to maintain the leading position in the cosmetic and fashion industry by effective management of the innovation and creativity. These are the two pillars due to which any company can have competitive advantage. The other thing that can help in maintenance of leading position is product differentiation and effective marketing. It is the specialty of Indian rural markets that can help products in becoming the most famous products. Here are lots of future challenges that will be faced by L’Oreal in Indian rural market as there is stiff competition and local producers in rural India. The rural Indian people believe that local Indian brands and domestic products are most suitable to their skin. As a cosmetic company, they have to analyze the competition from the Indian local market, the ingredient they use in the production, the type of marketing strategy framed by them, etc. so that the company would be able to sustain for a longer period of time. There is a need of proper advertising and promotion of the goods and services.

Conclusions

The conclusion of the present study is that the company L’Oreal is trying to establish good reputation in the Indian rural markets. The market and industry of beauty products is very much competitive and attractive in which various companies are fighting with each other for the market share and to have competitive advantage. The company L’Oreal has everything to be a market leader of cosmetic products. The company is trying to be successful by using all the components of market mix, SWOT analysis, Pestle analysis, etc. before entering into any rural market. It will provide an advantage to the company. However, the company has faced various types of challenges and problems in the beginning when they are about to start their operations in the Indian rural market. The rural people of India are not very much into fashion products, cosmetics, etc. The women of villages and towns of India believe in natural beauties and they use natural products as their cosmetics. So it was a long journey for L’Oreal to become a successful company in Indian rural markets.

References

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Conclusion

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