L'Oréal is one of the most successful cosmetic brands in the world. It well integrated in the market of many different countries. For example, 23% of their turnover is from North America, about 9 % in Latin America, 38% in Western Europe, 7% in Eastern Europe, 3% in Africa/Middle East, and finally 19% in Asia (statistical data from L'Oréal).
L'Oréal has developed an international portfolio with it's different brands such as L'Oréal, Garnier and Lancôme from France, Maybelline and Kiehl's from the USA, The body shop from the UK, Georgio Armani from Italy and even Shu Uemuera from Japan. Each of these brands has a specific target and this is what makes L'Oréal so popular. It is to be noted in 2012, half the sales came from new markets outside Europe and North America, especially in emerging countries. There has been a significant growth of the sales in these countries. L'Oréal has implemented son Research and Development Centers in Europe, the USA, Japan, China, India and Brazil. This enables the enterprise to have a specialized development depending on the localization. Their mission is to study the market but also «understand the habits, the needs and the preference criteria of the local population in regards to beauty. L'Oréal is able to adapt to different types of skins, hair colors and cultures.” – L'oreal.com. Furthermore, L'Oréal produces its products everywhere in the world. This limits the exportations and travel fees.
The company has evolved to reach a point where they have managed to reach clients from more than 130 countries, thus leading it to be the global leader of cosmetics. However, the company had to go through a lot of changes and had to adopt a certain strategy before this. What makes L'Oréal successful is their internalization strategy. According to Béatrice Collin and Daniel Rouach, authors of “L'Oréal's model: the key strategies of a French multinational company,” L'Oréal's internationalization strategy is based on four key ideas: diversification of risks by investing in all countries (L'Oréal has implanted in so many different places that if it fails in one, it will be compensated by its success in another), making international acquisitions, study the economies by scale and maintain the growth on the European and American markets.
However, what is the perfect solution to a successful market penetration and global expansion?
What does international marketing bring? A recipe for success
1. How to expand and penetrate new markets without failing
a. Analysing before going
Today's world is full of opportunities to seize. Companies now tend to export and expand abroad. By sector, the success rate of corporate relocation varies. We will see together what the «recipe» for success abroad is.
Before taking premature decisions, it is important to learn about the place and the people of the country where you wish to implant your firm. Indeed, the first thing to do is to analyze not only the market but also the socio-political, economics and local factors that can influence your success. Pre- research is required; there are some sites on the internet (for example APCE or creersaboite.fr) that are dedicated to entrepreneurs and businesses wishing to expand. Useful information is there, such as the sector (ex: services, hotel business ...) that could succeed in the chosen country, legal status, taxes, the preliminary steps to perform, etc... These preliminary research reveal whether the establishment of the company in the chosen country is possible or not. Certain markets are "closed" because of religious features (non-halal meat in Arab countries for example), or else the fact that there are already many competitors.
After learning the steps to follow, you must study the market, learn about the needs of the local population. For example, the cosmetic needs of the Indian population will not be the same as those for Western or African population because, in fact, skin and hair types are different and have different characteristics and therefore needs. So a company like L'Oréal will have to learn about the population itself, its characteristics, lifestyles, consumption patterns... The whole is to adapt its products to the needs of people. For this, companies establish questionnaires and subsequently statistics that have the ability to predict if a product has a chance to enter the market or not.
We wanted to interview our teacher Sales Forces, Ben Trapman, on the keys to success of a business and its expansion abroad. This is an excerpt of the interview:
• How do we target the expectations or the needs of specific cultures?
Ben Trapman: The initial research is done on the computer but you must have a contact with the population, make your own idea, and meet local people…Look for what is common and what is different. But most of the times you end up by finding patterns all around. For example, the experience of couch surfing is great to immerge in a culture.
• In a word, how do you succeed abroad?
Ben Trapman: You need to adapt.
So stay on your computer is not enough, you must explore the country by yourself. Plus, you'll never know a country as well as its people if you stay over there for a short period, this is why it is often much more interesting to hire the native people of the country because they already know the customs, language and habits of the people living there.
An analysis enables to summarize and see if you have collected all the necessary information for your export, it is the PESTLE (Politic, Economic, Social, Technological, Legal, and Environmental) analysis.
These six criteria are most important. Indeed, if you go to expand your business abroad and that you are not aware of local laws or environmental standards, it can penalize you. Furthermore, this research indicates whether financially, you are able to invest in this country. Subsequently, the budget-making process is clearly needed.
Thereafter comes to all legal proceedings but also the strategies to take. Each company chooses with importance its sales locations, they must be popular and easy to access, rather touristy, where the population is also high. This is why the socio- geographical study is very important for the development of a project such as export business.
Then you need to find local partners, your retailers, just like L'Oréal who sells its products in supermarkets or perfumeries for example (however, other brands like MAC Cosmetics prefer to have their own stores).
Finally, one of the big points is to project, to establish its projects, its budget over the next ten years. Indeed, no company today operates from day to day, they anticipate and project into the future.
In order to enter different markets with clients with specific cultural backgrounds, companies adopt one of the following strategies:
• Exporting : indirect, but direct advertising
• Licensing : a transaction between licensor and licensee
• Franchising: franchisor gives franchisee the right to use the trademark, trade name…
• Joint venture : a foreign country invites an external partner to share stocks
• Contract manufacturing : the components are manufactured in other countries
• Subsidiary : owned entirely by parent company
• Strategic alliance : partnership between companies to achieve the same objectives
Each of the strategies need a different approach. It is “easier” for a company to export than to franchise, but it will be costlier
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