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Importance of Global Marketing And Digital Business

646 Downloads1 I Published: 25 Oct ,2019

Introduction

Global marketing is of utter importance to all the products which have universal demand. The online marketing of these products via digital technologies is termed as the Digital Marketing (Coupey, 2016). L'Oreal is the world's largest supplier in the field of cosmetics laying its focus mainly upon skin care, hair colour, make-up, hair-care and many more. From the past few years, L'Oreal has been upping its digital marketing expenditure and the emphasis is being laid on the influence over the customers. It increased its expenditure from 25 % to 30% and has been focussing on the ways to influence customers online via digital marketing. However, Global marketing helps in conveying their final product and services worldwide. This gives L'Oreal the advantage of meeting global objectives to spread worldwide and take commercial assets. The rapidly occurring changes in technology business, internet, e-commerce, digital communication and transparency in information have led to rise in mobile workforce who are more informative . The assessment lays focus on Global marketing strategies adopted by L'Oreal and its analysation by various models.

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1. Impact on Global marketing via strategic analysis

L'Oreal uses market-oriented business strategies and focuses on using the real financial data for finance based ratio analysis. It serves as a market leader because it provides a diversified range of the products. The organization has many stores across the world and it is working regularly on expanding its existing business operations in the market (Gao and et.al., 2013.). Therefore, in order to globally expand the company, it can consider the following internationalized theories:

  • Upssala Model: Through this model, a better understanding of the gradual intensification of activities by a company in the foreign markets is given. Uppsala model states that an organization will start from low resource commitment mode and move towards higher modes only after gaining experimental knowledge in the foreign market. Therefore, for entering into foreign markets and expanding the organization globally, this model could be considered by L'Oreal. It does not take management bonus into consideration along with its effects on decision making. The reason of direct foreign investment is also not explained by it.
  • Network Model: This model takes the relationship web into consideration which exists between companies, its partners in trading and final customers. The relevant network structures in foreign market are covered through it. Hence, for globalization that is evolving in global economy with information technology, L'Oreal could opt for this model (Gillin and Schwartzman, 2010). Nowadays, as per the changing technology and environment, suppliers along with consumers have become more informative. This has led to an increase in competition which makes it necessary for the firm to strengthen their position internationally. The ongoing relationship in business affects the geographical market which leads the company to expand to a greater extent.

2. PESTLE, SWOT, Value Chain, Porter's Five Forces and Porter's Diamond analysis for L'Oreal

PESTLE Analysis:

This analysis encapsulates political, economical, social, technological, legal and environmental factors which affect L'Oreal as discussed below:

  • Political factors: They serve as a major concern for L'Oreal in expanding their business in various other countries they need to stick by the rules and regulations that have been set by the government for executing all necessary operations related to the organization in the legal and lawful way.
  • Economical factors: These factors states that company needs to look towards various economic policies that the respective country has chosen which has a direct impact on retail sales. Therefore, the organization has to consider various policies of the country in which it is expanding its business thereby considering its impact on the marketing strategies.
  • Sociological factors: Before the L'Oreal initiates its expansion in the desired country, it needs to understand the society, culture and the overall preferences and taste of potential customers .
  • Technological Factors: L'Oreal needs to analyse current developments that have occurred in technology in the respective country to easily reach out the clients. Products and services offered by the enterprise are often sold out with the help of advanced technology which serves as an effective medium (Hudson and Thal, 2013). In order for carrying out various operational activities with respect to enterprise, technology provides innovative concepts and methodologies. L'Oreal could use different methods of advertising to attract customers from that specific region.
  • Political factors: They serve as a major concern for L'Oreal in expanding their business in various other countries they need to stick by the rules and regulations that have been set by the government for executing all necessary operations related to the organization in the legal and lawful way.
  • Economical factors: These factors states that company needs to look towards various economic policies that the respective country has chosen which has a direct impact on retail sales. Therefore, the organization has to consider various policies of the country in which it is expanding its business thereby considering its impact on the marketing strategies.
  • Sociological factors: Before the L'Oreal initiates its expansion in the desired country, it needs to understand the society, culture and the overall preferences and taste of potential customers .
  • Technological Factors: L'Oreal needs to analyse current developments that have occurred in technology in the respective country to easily reach out the clients. Products and services offered by the enterprise are often sold out with the help of advanced technology which serves as an effective medium. In order for carrying out various operational activities with respect to enterprise, technology provides innovative concepts and methodologies. L'Oreal could use different methods of advertising to attract customers from that specific region.Political factors: They serve as a major concern for L'Oreal in expanding their business in various other countries they need to stick by the rules and regulations that have been set by the government for executing all necessary operations related to the organization in the legal and lawful way (Inn, 2016).
  • Legal Factors: L'Oreal should have precise and clear understanding of the legal performance of every country and its effects on the business at global level. This is so because there are various instructions being imposed on import of product and its usage. Different laws and the statuary necessities of various countries are also taken into consideration.

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SWOT Analysis:

It identifies strengths, weaknesses, opportunities and threats of L’Oreal as discussed below:

  • Strengths: The main strength of L'Oreal is its high recognition of brand in market due to quality products. Also, it provides a wide range of products that is hair care, cosmetics, perfumes and many more through its stores which are spread across the world.
  • Weakness: The organizational structure is decentralized. Due to subdivisions of the company, it has become difficult to control L'Oreal. It faces stiff competition from Procter & Gamble's cosmetics brand .
  • Opportunities: Growing markets ranging from affluent, ageing and also people of developed countries could be tapped by L'Oreal
  • Threats: Facing competition from other cosmetic brands has increased. L'Oreal produces best products but sometimes people may skip them because their products do not serve basic needs of them as per people's opinion (Kasemsap, 2014). P&G cosmetics is the biggest rival of L'Oreal. Other threats include Revlon, Chambor, Lakme, Garnier and Yardley.

Value Chain:

In order for identification of activities of an organization value chain analysis as a strategic tool to provide aid in creation of goods or services. It consists the following:

  • Inbound Logistics: The storage, transport and delivery of products are involved within it. L'Oreal's supply chain is integrated and is built around the main sectors of business. This way it is becoming the world's most sustainable retailer.
  • Operations: Investment has been done in variety of the sub brands in order to meet day-by-day changing needs of consumers through in-store customer experience.
  • Outbound Logistics: it deals with the transportation, delivery and storing of goods outside the business. L'Oreal has a number of operation channels. This provides flexibility to customers in terms of delivery and other options.

Porter's Five Forces:

This analysis covers the following points:

  • Threat of competitors: The main competitors of L'Oreal are Revlon, Garnier, Lakme etc. The products of L'Oreal are a luxury that can be hurt by an economic downturn.
  • Threat of Substitutes: A threat in case of substitute occurs when the demand of product is affected by price change of substitute product. For basic needs people might prefer substitute products depending on price. Usually this type of threat is low for L'Oreal.
  • Bargaining power of customers: In case of customers being less sensitive to prices, then if the costs are increased, they will still but that product. L'Oreal is postively affected inelastic demand. The limited barraging leverage helps L'Oreal.
  • Bargaining power of Suppliers: L'Oreal has many suppliers in production of their products. Therefore they have low bargaining power.

Porter's Diamond:

The competitive advantages possessed by a nation or a group due to several products are explained via this theory. It explains the role of government as a catalyst to improve the position of a country in globally competitive environment (Lee and Carter, 2012). It considers mainly four elements that are strategy of organization, rivalry and structure, supporting industries in relation. L'Oreal uses technology, highly- skilled labour and brand recognition to gain competitive advantage.

3. Ansoff Strategy for L'Oreal

It can be used to identify direction of the company. It consists of the following:

  • Market Penetration: The present market and product will be appropriate when the market is not saturated yet and is still growing by attracting non users of product. This strategy could be achieved by aggressive promotion, pricing and using more intensive distribution.
  • Product Development: When the company sells the existing product at new market or a new use has been found out about it, then this comes into action. This can be implemented by making appeals to the marketing sectors that are are not currently catered. Many of the products could be repositioned or even new methods of distribution can be used.
  • Diversification: This strategy comes in consideration when a new product will be sold in new market. L'Oreal can enter into new segments and widen its customer base by diversifying its business in beauty products.

4. Standardisation v/s Adaption

Supporters of Standardisation believe that there is a common environmental and consumer demand around the world. Arguements are made by them that low trade barriers are caused because of technological advances ( Mooij, 2010).

On the other hand, international adaption approach supporters lay their their emphasis on importance of PESTLE analysis and all the constraints such as language4, climate, race, occupations, education, taste, different laws, cultures and societies are taken into consideration. According to them the various aspects of customization should be considered before entering the foreign markets. Supporters of these approaches focus on satisfying the needs and expectations of buyers which will help in enhancing profits and sales of enterprise.

L'Oreal uses adaption strategy to understand demands, preferences and tastes of customers in different countries to ensure customer satisfaction. This is a result of customers long-term relations, loyalty of customers and an excellent local image.

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5. Impact of culture in global marketing

Culture is a learned behaviour that a large group of people follow as inheritance. It serves as a variable in international market and becomes difficult to be isolated and place at a position. L'Oreal has built a portfolio of brands from many cultures including French, American, British, Italian, Japanese etc. In more than 130 countries the offices of L'Oreal are situated. Respecting and better understanding of the new culture can be extremely helpful for L'Oreal as it enables it to gain respect and trust which serves as a competitive advantage.

6. Implementing Global Marketing strategies and Global Business ethics

The newly developed technologies and changes in market environment of a country in particular, with reference to a specific region along with its strategy should be taken into consideration. In order to cope up with the difficulties and for a successful entry in new market the company can use market-knowledge (Mooij, 2013). The global flow of information helps L'Oreal to enhance its profits and also facilitates increased collaboration with players across global value chain. L'Oreal is aggressively pursuing new markets with the hope to capture more than 1 billion customers within the next two years specially in China, Brazil and India. L'Oreal adopts diversified country specific standards of labour. L'Oreal confronts the challenges in accordance with treatment of over 77,500 employees through the global supply chain.

7. Segmentation, targetting and branding

Market Segmentation is defined the method that has been adopted for targetting specific group of buyers towards selling of services along with products; offered by the company. L'Oreal segmented the market into two main segments: the poorer masses and the rest. It market its product at low price to attract the poorer masses. The efforts applied to reduce ingredients for cutting prices reveals their aim of minimizing costs as much as possible (Loreal Paris SWOT Analysis, USP and Competitors, 2017.). It was not yet targetting affluent middle or upper class and did not make any distinct segmentation of richer classes. It further segmented the market on basis of benefits when it introduced Excellence Crème. Now the young effluent middle class females are targetted by L'Oreal and maintains the standards of targetting the masses. Women that sought benefits from using their products are also targetted by it. It introduced Excellence Creme which promised additional benefits apart from just dying of hair. It has however not given up on targetting of lower income masses by introducing products such as Colour Naturals. Brand positioning and awareness of brand helps the market to get aware of various brands and products offered by company (Ryan, 2014). Customers get a clear vision in mind because threat of not accepting product by different markets or low demand for same exists. L'Oreal has a strong, long-term brand positioning specially within the minds of women that are middle age along with teenage girls.

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8. Development of product and pricing strategy

Product strategy describes the life cycle of product and execution plan in order for predevelopment. When a product strategy is being formed various factors are to be kept in mind such as taste, preferences and need of customers, also including various other social factors etc. The main benefits of standardizing a product are perception of same quality brand product, all over the world, by people. It also supports positive attitude of customers towards that product. On the contrary L'Oreal has laid its focus upon adaption method for development of its products that lays emphasis on importance of PESTLE analysis and takes in consideration all constraints such as language, climate, race, society, occupation, taste, different laws & culture (Tiago and Veríssimo, 2014).

Pricing strategy refers to the method that is used by company for analysing the price of products and services keeping in mind various aspects related to consumers in the market which are needed by a product to penetrate. Premium, penetration, skimming, economic and psychological pricing are the various pricing strategies. L'Oreal has set low price to capture global markets and customers in order to reach out wide fraction of market within guaranteed time.

9. Scope of Digital Business and e-commerce

Digital Business considers the of internet and other digital media alonwith various other technologies to support business related operations. It is a collection of techniques that aims at conversion of visitors to consumers and retain its existing potential consumers to maximize business through constant interaction and building of brand. L'Oreal is taking advantage of is huge potential of the new distribution channel of e-commerce (Westerman, Bonnet and McAfee, 2014). There has been 37.9% growth in e-commerce sales. L'Oreal has made collaborations with local leaders of e-commerce. Since 2013 it has been working with Alibaba website. At present online sale account for more than 20% of Consumer Products and Active Cosmetics Division sales. In Us it makes 15% of its sale with help of e-commerce. Thus digital marketing helps in enhancing a business process as well as satisfaction of customer.

Conclusion

Globalization is the integration of economic resources particularly via trade and and finance, around the globe. L'Oreal has expanded its business globally by applying various strategies. Various factors such as social, economical, political, cultural etc. are taken into consideration. Also it is gaining heights in digital marketing via new concept of e-commerce. Considering all these, L'Oreal with market share of 16.8% remains a global leader in industry.

References

  • Coupey, E., 2016. Digital Business: Concepts and Strategies. Routledge.
  • Gao, T.T., and et.al., 2013. Consumers un-tethered: A three-market empirical study of consumers' mobile marketing acceptance. Journal of Business Research. 66(12). pp.2536-2544.
  • Gillin, P. and Schwartzman, E., 2010. Social marketing to the business customer: Listen to your B2B Market, generate major account leads, and build client relationships. John Wiley & Sons.
  • Hudson, S. and Thal, K., 2013. The impact of social media on the consumer decision process: Implications for tourism marketing.Journal of Travel & Tourism Marketing. 30(1-2). pp.156-160.
  • Inn, O. G. P., 2016. Digital marketing. Omni.
  • Kasemsap, K., 2014. The role of social networking in global business environments. Impact of emerging digital technologies on leadership in global business. pp.183-201.
  • Lee, K. and Carter, S., 2012. Global marketing management. Oxford University Press.
  • Mooij, M., 2010. Consumer behavior and culture: Consequences for global marketing and advertising. Sage.
  • Mooij, M., 2013.Global marketing and advertising: Understanding cultural paradoxes. Sage Publications.
  • Ryan, D., 2014. The Best Digital Marketing Campaigns in the World II. Kogan Page Publishers.
  • Tiago, M. T. and Veríssimo, J. M., 2014. Digital marketing and social media: Why bother?.Business Horizons. 57(6). pp.703-708.
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