L’Oréal

 in  India  
 

Analyze  the  internationalization  process  of  l’Oréal  in  India  

I/  Introduction  :  L’ORÉAL  

In   1909,   a   young   French   chemist,   Eugene   Schueller   developed   the   first   hairdye   which   had   no  

henna  or  mineral  salts  in  it  but  still  gave  the  desired  subtle  colour.    From  two  french  words,  

‘d’or   ’(Golden)   and   ‘auerole’   (Halo)’,   he   named   the   dye,     ‘Ó’reale’   and   sold   it   to   Parisian  

hairdressers.   Hereafter,   the   company   L’oréal   was   born.   The   guiding   principles   that   would  

define  this  company  were  put  in  place  from  the  start  :  research  and  innovation  in  the  interest  

of  beauty.  

L’Oréal  group  currently  has  a  revenue  of  $98.67  billion.  It  is  present  in  130  countries,  with  

77,452  employees  and  ranks  32nd  on  forbes  list  of  world’s  most  valuable  brands,  2014.  The  

company  has  grown  significantly  over  the  past  105  years  and  has  become  a  global  figure.    

In  order  to  analyse  how  L’Oréal  entered  the  Indian  economy,  which  is  the  focus  of  this  study,  

we  will  take  a  brief  study  of  its  geographic  coverage  and  its  internationalization  techniques  

in  other  countries.  

France  :   In   France,   through   its   quality     products,   L’Oréal   grew   and   became   a   household  

name. The  company  embarked  on  creative  marketing  adverts  in  order  to  expand  the  brand,  it  

was   so   innovative   with   its   marketing   tactics   that   Schueller,   the   CEO,     was   awarded   an  

advertising   Oscar   in   1953.     The   Group   acquired   several   companies   like   Lancôme, Biotherm,

Synthelabo, Gemey and Ricils. After the death of Schueller, the founding CEO, François Dalle
became the new CEO and his vision was that of global dominance in accordance with the motto

“Savoir saisir ce qui commence” (seize new opportunities).  

BRAZIL: Though, L’oreal had some export presence in Brazil since the late 1930’s, in 1959,

L’Oréal responded to the increased demand for cosmetic products in Brazil by forming the

FAPROCO (Fábrica Produtos Cosméticos S.A.), building two plants in Rio de Janeiro and Sao

Paulo. Today, L’Oréal Brazil is an export platform for the whole of Latin America and celebrated

its 55th anniversary this year (2014).

JAPAN: L’Oréal’s international development Japan was the future bridgehead of L’Oréal’s

expansion in Asia. In 1983, François Dalle set up an Applied R&D centre for hair and skincare to

tailor the Group’s products to the Japanese market. The new lab is given the task of researching

hair and skincare issues to help develop a range of products in tune with the specific needs of

Japanese consumers.

USA/ AFRICA: L’Oréal went through many acquisitions of US companies in order to achieve its

position as dominant leader in the country and Africa, where its newly acquired companies had

dorminance. L’Oréal acquired Ralph Lauren, Redken, Maybelline, Kielh's, Dermablend, and

SoftSheen. With the acquisition of soft sheen the Group attained a singular expertise in African

hair.

ISRAEL: Though present in Israel since in 1983 via the Migdal Ha Emek plant, which is the

Group’s very first plant in the Middle-East, L’Oréal reinforced its presence in the country by

creating a subsidiary in 1994.

CHINA: In collaboration with Suzhou Medical College, one of the oldest universities in China,

L’Oréal created the company, ‘Suzhou L’Oréal Beauty Products’. In the same year, constructed a

factory within the Suzhou industrial complex and began operations in 1999. Two additional
factories open their doors in the following decade, serving a Chinese market in full economic

expansion.

RUSSIA: To respond to the strong growth of the local market, L'Oréal opened its first factory in

Russia, 85 km south of Moscow in the Kaluga region. The products manufactured in the 10,000m2

factory are designed to serve the whole region: Russia, Ukraine and countries of the

Commonwealth of Independent States (CIS).

Presently L’Oréal is the biggest cosmetic firm in the world and thanks to its R&D (it holds the

industry’s highest research and development budget with the largest cosmetology laboratories in

the world) and strategy. Many developments occurred in L’Oréal and its quest was global

dominance is what took it to India in 1994.

THE INDIAN ECONOMY IN 1994

POLITICAL SECTOR

By 1994, after the International Monetary Fund (IMF) bailed out India through a $1.8 billion loan

when it faced a crisis on defaulting on its loans, the economy was liberalized. There were new

reforms set by Prime Minister P. V. Narasimha Rao and his finance minister Manmohan which led

to easier international trade and investment, privatization, deregulation, inflation-controlling

measures and tax reforms.

ECONOMIC SECTOR

The Indian economy had a Labor force of 284,000,000. It had revenue of $39,200 million but

spent an unequal sum of $41,060 million on national expenditures. Like many other developing
countries, it had higher exports than imports and had external debts of $73,000 million. However,

there was the presence of some multinational companies like Procter & Gamble and Uniilever.

SOCIAL SECTOR

The Indian population in 1994 was 903,159,000 - the second largest in the world and there was a

population growth rate of 1.86. The country recorded higher birth rates than death rates and an

average woman fertility of 3.57. Life expectancy was 59 years for women and 58 for men. Social

caste system in India made a wide hierarchy gap between the higher and lower class. There was no

room for intermarriage or interrelations between classes and as expected, those in the higher class

enjoyed the better things of life. Hinduism was the major religion, with 80.5% of the population

identifying themselves as Hindu. In general, Hindus are vegetarian and see cows as sacred.

Cosmetics and beauty were and still are important in India and are associated with moment of

sharing between generations; beauty rituals are an an old practiced tradition. The canon of beauty

is the one from Bollywood : a clear and satin skin complexion, feminine curves, big expressive

eyes and long dark silky hair. A clear skin is a sign of beauty and social standing. Hindu

conception of spirit, body and environment make the beauty rituals asexual.

TECHNOLOGICAL SECTOR

The Indian government has actively pursued a number of different bilateral programs

simultaneously to promote technology in the country. In 1994, the technology sector of India was

at development stage but showed great prospects for becoming a world leader.

ENVIRONNEMENT

India faced major environmental issues like air pollution, poor management of waste, water

scarcity, groundwater tables, water pollution, under preservation of forests, biodiversity loss, and

land/soil degradation.
LEGAL SECTOR

The country officially practiced the common law system, inherited from its colonial era, first

introduced by the British. However, there were still practices of family law as well as religious

laws for Hindus, Christians, Muslims and Sikhs. Since, the country had just become liberalized,

there where more friendly laws towards international companies and countries coming to do

business in the country. Restriction about importation, production and sales of cosmetic products

were low and taxes are dissuasive. Cosmetic products are regulated by the Drugs and Cosmetics

Act of 1940. It regulated production, sales, import, export and clinical research about medicine and

cosmetics.

HOFSTED ANALYSIS OF INDIA

FRANCE VS INDIA

The essence of this analysis is to show the cultural differences that L’oréal, a French company with

French culture, faced in India.

Power distance
India scores high on this dimension, 77 while France scores 68. This indicates India appreciates

hierarchy and a top-down structure in society and organizations more than France does. Employees

expect to be directed clearly as to their functions and what is expected of them. Control is familiar.

Communication is top down and directive in its style

Individualism

India, with a lower score of 48 than France, shows she is a society with both collectivistic traits.

This means that there is a high preference for belonging to a larger social framework in which

individuals are expected to act in accordance to the greater good of one’s defined in-group(s).

Masculinity

India scores higher than France on this dimension and is thus considered a masculine society. India

is actually very masculine in terms of visual display of success and power. The designer brand

label, the flash and ostentation that goes with advertising one’s success, is widely practiced.

Uncertainty avoidance

India scores times two lower than France on this dimension, which shows that they have a lower

preference for avoiding uncertainty. People generally do not feel driven and compelled to take

action-initiatives and comfortably settle into established rolls and routines without questioning.

There is a saying that “nothing is impossible” in India, so long as one knows how to “adjust”. It is

not wonder the Indian people were receptive to the foreign brand, Lóréal.

Pragmatism

India scores lower on this dimension, which indicates a preference for a more short-term,

pragmatic culture than France.

SWOT ANALYSIS (to show the chances for l’Oréal success in India)

STRENGTHS :
* L'Oreal that can be clearly identified as a company with patent desire to invest in Research and

Development (3% of its budget against 1,5% for its competitors), with this, it is certain that

L'Oreal is an organization that is willing to implement the latest technology in all their products so

that they can efficiently satisfy the needs of the Indian population.

* L’oréal is aware of the importance of knowing the market before internationalization and that

market intelligence forms the basis for their decision process.

* L'Oreal has also shows strength in marketing campaigns and strategies because they know that in

order to be successful internationally you must be flexible and able to adapt to new environments.

WEAKNESSES :

* Majority of the l’Oréal cosmetic products contain animal substances (beef fat) whose use and
origins are against Hinduisme principles of Hindus, many of which are in India.

*A weakness of the company, which is commonly seen in decentralized organizations is in a break

in flow of information and control of the company due to many subdivisions and subsidiaries. It
takes extra effort to balance the flow of information through all the branches.

OPPORTUNITIES :

* Report shows a big part of the indian market do no use any shampoo or cosmetics, therefore,

there is a market to be tapped, especially among the masses.

* Another market to be tapped is the masculine one (which is already more developed than in

other continents) as Hindu conception of spirit, body and environnement make the beauty rituals

for both men and women.

*Another opportunity for L'Oreal to grow is to focus more on their line of dermocosmetics (anti-

aging).
THREATS :

* The Indian cosmetic market is a High competitors market. There are local competitors (Lakmé,

Lotus, Biotique, Himalaya, Shahnaz Husain) present, who already know the Indian market, its

expectation and whose marketing is already adapted to the local market. Other International

competitors like Revlon are there as well.

* L’oréal, a foreign brand has to adapt its products range as well as communication strategies in
order to meet the indian consumers expectations (which are really different from the occidental
one).

* Distribution system is really different from that of the occidental culture. In towns, there are
many small street kiosks called, ‘Kiranas’ which require L’oréal’s deployment of significant
labor force to cover all the régions. Storekeepers order product based the expectations of their
clients. Their are also big malls dedicated to famous brand but they are rare- 310 all over India (50
around Mumbai and only 9 near the capital). A majority of them are situated around urban centers.
INTERNATIONALIZATION PROCESS OF L’OREAL IN INDIA

Until the beginning of the 90s, laws in several Asian countries prohibited foreign companies from

operating on their territories. In 1994, L’Oréal became the 1st international cosmetic group to that

the Indian government grants the status of wholly-owned subsidiary. This allowed L’Oréal to

consolidate its presence in the country and experience tremendous economic growth. Same as the

process of most traditional firms company going global, L’oreal did a gradual internationalization

process; first, it did a Market screening of the Indian market, it then exported a few products in

order to analyse the needs of the market and when it got the green light, it went in full time.

1. Market Intelligence and R&D

L’oréal understood the importance of knowing the market before internationalize. They put gather

intelligence by studying the market in 5 categories : geographic, geopolitical, législative, social

and commerciale intelligence. Due to this intelligence process, L’oreal got to understand the global

market issues and identified the best approach to succeed its implementation. It allowed them to
understand the complexity of the Indian market. In 1995 they understood that only a few part of

their products were adapted to asian skins, which is why they purchased Maybelline, whose mid-

range products match with the ermergent market supply.

Then, Technology and competitive intelligence allowed them to define different axes of

positioning strategy over competitors. Also, L’oréal can be clearly identified as a company with

great desire to invest in Research and Development.

2. Multidomestic strategy

In order to penetrate the indian market effectively, L’oreal adapted their product range as well as

their communication and distribution strategy to suit the Indian market. Products like Colossal

Kajal from Maybelline New York and Garnier Color Naturals have become top-sellers within the

Indian market because they fulfill the needs and meet the tastes of Indian consumers. Maybelline

New York’s Colossal Kajal, with its dark lines and long-lasting qualities, is loved by Indian

women for the bold and sexy look it creates. Meanwhile, Garnier Color Naturals was introduced as

a “modern alternative to traditional coloration with henna,” and with the added benefit that it could

be stored after opening. L’oreal developed products of a green and ethic image in accordance with

the many Indians preferences to accept use only products made out of natural elements, therby,

respecting nature and the environment. They also had to developed products which didn’t contain

any beef fat as its use and origins are against Hinduism principle.

Furthermore, L’Oréal figured out that they couldn’t be successful in the market by implementing

luxury brand as they did in other continents. Thia is because majority of Indian consumers (more

than 70% of the population was in the mid-classe segment) were not interested in those kinds of

products as beauty rituals were more about tradition and nature than about fashion standards. In
addition to change in its brand image and following the local tradition of beauty, its R&D

department developed many products specifically for the indian men as well.

L’oréal’s organisational structure

The structure of the company is decentralised. Each head office manages its own operations

adapting to the various specific needs of its customers but in accordance with the general

principles of the company. The organisational structure practiced by the company is the

Geographic Area Dimensional structure, where there is a L’oreal group CEO and the different

presidents for each geographic location, all of whom report to the L’oreal Group CEO.

3. Entry mode- Internalization

After a brief agreement with MJ Group to distribute its products in India, in order to control its

foreign activities and hence maximize quality, production, manufacturing and marketing processes,

L’oreal terminated the agreement with MJ Group and set up a subsidiary called, ‘Idelor India’. The

company entered the Indian market in the year 1994, offering premium products to urban clientele

that could afford it. The company set up its wholly-owned Indian subsidiary operation in 1994

with the launch of its Garnier Ultra Doux shampoo products. In order to function effectively in this

new market, L’Oreal first segmented the population. First, through sex segmentation, it created

products that specifically catered to Indian women with plans to carve a niche for itself in the

Indian men’s sector as well. Secondly, the company segmented the population based on income. It

initially created and marketed its products to attract the middle class before eventually, in more

recent times, expanding to the masses, a process which is still going on now.

4. Marketing and communication

L’Oréal has a different communication strategy from his competitors. They communicate through

symbolic social indicators of India which give to the Indian consumers the possibility to identify

themselves. The brand ambassadors are famous models or actors who give to the brand a
glamorous image. All adverts are made in 5 dialects so all the consumers can understand it. There

is a deep concern about developping a Customer proximity as well as seducing him. L’Oréal talks

about beauty and family rituals in their advertisement but also insist in their innovation and how it

could replace all this beauty care traditions. They also use occidental codes by showing what we

would like to look like (a clear and satin skin complexion, feminine curves, big expressive eyes

and long dark silky hair). L’Oréal wants the Indian consumers to know the brand and to trust it.

5. Distribution

As part of strategy also, L’oreal followed the traditional distribution system of the Indian market,

through the Small street kiosks (the kiranas) though different from distibution system in France

and USA but key to the success of the company in India. They adapted their prices in order to

make their products accessible to the targeted population (mid-range products).

Table revenu of l’oréal since 1994

HOW INDIA CONRIBUTED TO L’ OREAL’ SUCCESS

The company has over the years achieved tremendous success in the indian market.

Complementary to the proven strategic management of the company, its success in the Indian

market is also attributed to :

*Influence of bollywood : Indians are incredibly interested in beauty and personal care. The

combination of cultural traditions and Bollywood’s influence make the market in India both

exciting and unique. The growing middle class possess increased purchasing capabilities and a
strong fashion sense. Cosmetic sales reached US $4.75 billion in 2011 and those numbers are

expected to see double-digit percentage growth over the next decade. The purchasing of beauty

products here is becoming more universal and not just limited to the upper class.  

•Cultural affiliations : Cosmetics care are associated to moment of sharing between générations,

for example, during wedding ceremonies there are bridal préparations involving doing beauty

rituals for the bride and other female family members. The cosmetic market in India is very much

welcoming.

*flexibility of indian laws towards cosmetics : In India, cosmetic products are regulated by the

Drugs and Cosmetics Act of 1940. It regulates production, sales, import, export and clinical

research about medicine and cosmetics. But based on the constitution, only medical products need

the approbation of the Health ministry Drug controller office in order to be commercialize into the

market. The rules concerning the cosmetics market are not harmonised. Therefore, it is easier for

L’oreal to invent new products without facing hurdles of prohibitions of some or any of their

chemically formed products.

CONCLUSION

So far, L’oreal has achieved great success in India, based on the analysis above, we can say that

the company will most likely continue to succeed. L'Oreal has gone through different types of

management from its creator, to the present CEO Owen Jones. Jones management style has

brought to the company a revolution from a French based cosmetic company to a world leader in

the cosmetic industry. L'Oreal has the ability to acquire local cosmetic brands, re-arrange their

operational strategy and finally place them in a better location among the competitors.

Furthermore, Indian consumers are becoming more and more knowledgeable about beauty and

personal care but it’s not just the consumers who are becoming more knowledgeable and L’Oréal

figured this out which is why it set up 50 academies across the country where it trains and
educates hairdressers. This helps ensure that clients are getting the most out of their products.

Each year, more and more classes are offered at academies in India to meet the education

demands of this growing field. This, in the end, means that customers are given the help, advice,

and instructions they need when purchasing beauty products.

Finally, though L’oreal is frequently ranked among the top two to three cosmetic brands in India,

the company still faces competion from other brand like Revlon, Avon, Colour bar, Street wear

etc. But, research has shown that if the company continues to apply effective strategies and

research in india, it can capture over 150 million (four times the current figure) people in India by

the year 2020.

REFERENCES

* The fashion foot : Francisco Del Toro ; http://thefashionfoot.com/2013/02/18/eugene-

schueller-founder-of-loreal/

*  http://www.forbes.com/companies/loreal-group/

*http://business.mapsofindia.com/india-economy/political.html#sthash.zVcfnq7Z.dpuf

*  http://www.theodora.com/wfb/1994/india/india_economy.html
*  SOURCE: 1994 CIA WORLD FACTBOOK

* VS the indian brand (Lakmé since 1952 : Bollywood glamorous image)

* L’oréal website : http://www.loreal.com/beauty-in/beauty-in-india/loreal-in-india.aspx

* Association ege report : http://bdc.aege.fr/public/Strategie_loreal_pour_conquerir_inde.pdf

* Comment l'Oréal s'adapte au marché indien", l'Express, le 19 septembre 2012