Another 100 wonderful years for the daring and pioneering spirit to the continued commitment to women
How the global brand has influenced or is influenced by the global context through the choices they make in their innovation practices or innovation management practices.
L’Oreal has committed itself to all kinds of cosmetics in the world for over 100 years. L’Oréal’s skincare, makeup and perfume products represent a world of elegance and luxury. They have constructed “a unique portfolio of 28 international, diverse and complementary brands. With sales amounting to 22.5 billion euros in 2012, L’Oréal employs 72,600 people worldwide” (L’Oreal, 2013). The Group offers iconic brands including Lancôme, Giorgio Armani, Yves Saint Laurent and Kiehl’s. L’Oréal has always elected to develop strong research because beauty is highly concerned wherever in the world. Its Research and Innovation model enable it to respond to the world's vastly diverse beauty expectations. The brand was built to meet the human being’s beauty desire, in the other way around the intimidate pursing for being good looking pushes the brand to grow and innovate and reform itself. L’Oreal group has set up a classic example for innovation studies not only on biotechnology science research but also integrates marketing strategy, global knowledge sharing, local decision-making and greater collaboration, global innovation transformation and also at human resource management field as a whole to achieve the its mission. According to the article from Harvard Business Review the “10 Rules for Managing Global Innovation”, it mentioned that “adopting only one or two may result in fleeting success in some projects but will not produce a stream of positive outcomes. These best practices all need to be put in place and honed over time”(Doz& Wilson, 2012). Our video shows that L’Oreal has been applying a supportive innovative corporate culture through the century and will be encouraged to be honed in the future. As showed in the video in response to the 10 rules mentioned above.
Describing the nature, function, and the rationale behind the innovation practices, or innovation management practices of the global brand.
1) Expand and establish the new Research Center
(Reaching new customer & local dynamic needs influences the expand of new Research Center)
In the article written by Michael Doyle: “There’s no need to re-create the wheel with expensive experiments or tests that have already been done for other product launches, for example, as long as the knowledge gained through previous work is applicable to the new market strategy” (Doyle, 2010). We found that this statement is somewhat similar as the L’Oreal’s reserve innovation strategy which we are going to elaborate more in our second point. Thus, being only relies on the headquarters' R&D might not be able to gain the local knowledge and local expertise for innovation so they must expand worldwode. The expansion and establish of new Research Center gives them opportunities to get closer to consumers and strengthened the global presence.
2) Reverse innovation is about creates value for customers
(Developing world influences developed world)
L’Oreal has committed itself to all kinds of cosmetics in the world for over 100 years. L’Oréal’s skincare, makeup and perfume products represent a world of elegance and luxury. They have constructed “a unique portfolio of 28 international, diverse and complementary brands. With sales amounting to 22.5 billion euros in 2012, L’Oréal employs 72,600 people worldwide” (L’Oreal, 2013). The Group offers iconic brands including Lancôme, Giorgio Armani, Yves Saint Laurent and Kiehl’s. L’Oréal has always elected to develop strong research because beauty is highly concerned wherever in the world. Its Research and Innovation model enable it to respond to the world's vastly diverse beauty expectations. The brand was built to meet the human being’s beauty desire, in the other way around the intimidate pursing for being good looking pushes the brand to grow and innovate and reform itself. L’Oreal group has set up a classic example for innovation studies not only on biotechnology science research but also integrates marketing strategy, global knowledge sharing, local decision-making and greater collaboration, global innovation transformation and also at human resource management field as a whole to achieve the its mission. According to the article from Harvard Business Review the “10 Rules for Managing Global Innovation”, it mentioned that “adopting only one or two may result in fleeting success in some projects but will not produce a stream of positive outcomes. These best practices all need to be put in place and honed over time”(Doz& Wilson, 2012). Our video shows that L’Oreal has been applying a supportive innovative corporate culture through the century and will be encouraged to be honed in the future. As showed in the video in response to the 10 rules mentioned above.
Careers at L'Oréal - A Thrilling Experience, A Culture Of Excellence
L’Oreal has influences the
consumers by using the philosophy of staying “one step ahead of his customer”
and “the ability to dream rather than simply plan” (L’Oreal, n.d.). L’Oreal has invests a lot of money in Research and Innovation and advertisements compared to other
brands. L’Oreal’s Innovation and Research is not only being creative but also
enthusiasm for inventing high-performing cosmetics for men and women all over
the world. L’Oreal’s Innovation and Research department has divided into 4 important branches:
advanced research, applied research, development and support functions, which
all the branches take up challenges of innovation and sustainable development. For
integrates marketing strategy, L’Oreal advertising pays an important factor
that affected consumer purchasing decision and also the role in people’s daily
lives. In the following video Anke, Assistant Vice President for Research and Innovation, shares her views of delivering breakthroughs of the trends.
L’Oreal did not fully take account the cultural and consumer behavior differences in adapting products and promotion in the mass market, which historically they have been an ethnocentric company. In other words, many promotion and products features are standardized in certain mass market areas. However, there are exceptional in the emerging markets which they used adaptation strategy.
Conversely, global context of local demands and cultural factors have influences L’Oreal’s choices of being adaptation. L’Oreal used a mix between standardization and adaptation methods for their emerging markets. For example, during the expansion to emerging markets like Brazil, India and China, these markets have very strong desires for beauty to be fulfilled and demand for quality cosmetics. In order to penetrate in the emerging markets, L’Oreal has justified their marketing strategy methods and planned activities to meet the local customers’ preferences and values, “responding to local problems linked to climatic conditions, to physiology or traditions means that L’Oréal Research is continually innovating as it strives to provide beauty for all. Local developments drive advances in knowledge, and can then be applied all over the world, a process known as “reverse innovation”” (L'oreal, 2012). This concept is related to our reading from Micheal Doyle that in order to penetrate into the new market it need “to quickly establish a foothold in a new location, proven formulation must be cost-effectively adapted to meet demographic needs and preferences of new target consumers” (Doyle, 2010). For instance, European and Asian markets have many differences in their characteristics and consumers preferences, which the differences have influenced L’Oreal to understand the dynamic of the market: “L’Oréal is shifting its strategy in China to a more geocentric approach, recognizing the local aptitude to better understand local needs and culture” (L'villeneuve, n.d.). Hence, the Asian market has its own values and specificities that the researchers must understand the needs and wants of the local consumers. In its adaptation strategy, L’Oreal adapts many product strategies such as modifying the product formulations, physical attributes, packaging attributes and marketing strategies.
Anke,
Assistant Vice President for Research and Innovation -- L'Oreal USA R&I
L’Oreal did not fully take account the cultural and consumer behavior differences in adapting products and promotion in the mass market, which historically they have been an ethnocentric company. In other words, many promotion and products features are standardized in certain mass market areas. However, there are exceptional in the emerging markets which they used adaptation strategy.
Conversely, global context of local demands and cultural factors have influences L’Oreal’s choices of being adaptation. L’Oreal used a mix between standardization and adaptation methods for their emerging markets. For example, during the expansion to emerging markets like Brazil, India and China, these markets have very strong desires for beauty to be fulfilled and demand for quality cosmetics. In order to penetrate in the emerging markets, L’Oreal has justified their marketing strategy methods and planned activities to meet the local customers’ preferences and values, “responding to local problems linked to climatic conditions, to physiology or traditions means that L’Oréal Research is continually innovating as it strives to provide beauty for all. Local developments drive advances in knowledge, and can then be applied all over the world, a process known as “reverse innovation”” (L'oreal, 2012). This concept is related to our reading from Micheal Doyle that in order to penetrate into the new market it need “to quickly establish a foothold in a new location, proven formulation must be cost-effectively adapted to meet demographic needs and preferences of new target consumers” (Doyle, 2010). For instance, European and Asian markets have many differences in their characteristics and consumers preferences, which the differences have influenced L’Oreal to understand the dynamic of the market: “L’Oréal is shifting its strategy in China to a more geocentric approach, recognizing the local aptitude to better understand local needs and culture” (L'villeneuve, n.d.). Hence, the Asian market has its own values and specificities that the researchers must understand the needs and wants of the local consumers. In its adaptation strategy, L’Oreal adapts many product strategies such as modifying the product formulations, physical attributes, packaging attributes and marketing strategies.
L'Oréal's worldwide
performances in 2012, http://www.loreal-finance.com/eng/world-presence
Therefore,
in our point-of-view that L’Oreal is both the global brand has influenced the global
context and the global context has influenced the global brand’s choice of
innovation practices. L’Oreal is an interesting brand that the two issues are
interlinked together because R&D and supply chain streamline the flow of information to driven the market on the other hand local demands and
cultural factors have influences L’Oreal’s choices of being reverse innovation.
Describing the nature, function, and the rationale behind the innovation practices, or innovation management practices of the global brand.
1) Expand and establish the new Research Center
(Reaching new customer & local dynamic needs influences the expand of new Research Center)
Having invested in research centers in
India and Indonesia, and a new portfolio of luxury products launched in China,
L’Oréal has been giving Asia-Pacific special focus and says it will continue to
do so in the future in order to meet the dynamic needs in this region, “to take advantage of
emerging opportunities, today’s beauty brand owners need to be able to quickly,
nimbly and cost-effectively adapt proven formulations to meet the unique
geographic, physical, environmental and personal preference requirements of new
markets” (Doyle,
2010). Take South
Asia for example, L’Oreal plans invest a total of 140 million euros to open up Product
Development Center in Mumbai and an Advanced Research Center in Bangalore. The
need to open new Research Center because they see the great opportunities potential in
South Asia for reaching the blue ocean market for one billion new consumers and
understand the culture’s specific needs. The activity for new research
center in Mumbai is to gain knowledge of Indian hair and skin specificities and a deep
understanding of consumers’ beauty expectations. For the Bangalore Advanced
Research Center the main purpose is to explore biological, chemical and analytical
methods. Therefore, these new Research
Centers have the mission to specific the features of the markets and meet the
local customers’ needs for innovation.
L’Oreal Research center, http://www.loreal.com/Map.aspx?On=IMPLANTATIONS&TopCode=CorpTopic_Group_Activity_World
In the article written by Michael Doyle: “There’s no need to re-create the wheel with expensive experiments or tests that have already been done for other product launches, for example, as long as the knowledge gained through previous work is applicable to the new market strategy” (Doyle, 2010). We found that this statement is somewhat similar as the L’Oreal’s reserve innovation strategy which we are going to elaborate more in our second point. Thus, being only relies on the headquarters' R&D might not be able to gain the local knowledge and local expertise for innovation so they must expand worldwode. The expansion and establish of new Research Center gives them opportunities to get closer to consumers and strengthened the global presence.
2) Reverse innovation is about creates value for customers
(Developing world influences developed world)
L’Oreal fights commoditization with
reverse innovation. Reverse innovation is a term referring
goods developed to meet the needs for “the developing world
before spreading to the industrialized world” (Wikipedia, 2013). This is a pulled strategy which they find areas where customer
needs. The new markets segment such as Asian,
Latin America, Middle East and Africa become L’Oreal high growth markets, which
the use of reverse innovation strategies can meet the local needs and consequently it can
transfer to worldwide
with its success. In other words, the reverse innovation requires
local knowledge, local expertise and tested in local markets. The benefits of using reverse
innovation is that it
can create unique
differentiation that can drive the growth, target
the local needs and meet the depth and breadth of consumers` expectation. If the products are successful developed in the local market
it can eventually repackaged/upgraded to sale in the developed world.
First example, take
the Brazil`s shampoo Elseve Total Repair 5 for example, the product originally
developed in Brazil to meet the consumer needs locally, later on
it became successful internationally.
Second example, L`Oreal
developed Water Shine a gloss-effect lipstick for Japan and China markets; however, these
two markets are tough markets. Today, the success of Water Shine not
only sells in Asia but also around the world.
Third example, after L’Oreal’s hair care products first conquered in South America then
the established formula was then added bit by its to reach worldwide popularity. By doing this it save
research costs but only marginal incremental cost would occur.
The success of using
reverse innovation can creates unique value proposition and gain in-depth
knowledge of customers:
“Business innovation is about new value, not new things. Innovation is relevant
only if it creates value for customers… Customers are the ones who decide the
worth of an innovation by voting with their wallets”
(Arroniz et al.,2006).
3) Supply chain influences the choice of products.
(Supply
chain influences the global market)
Supply Chain plays a key part in L’Oreal
development. L’Oreal has extremely diverse
distribution circuits so it is important for L’Oreal to integrate and
structured their supply chain properly: “A supply chain is the sequence of activities and
agents that moves goods, services and information from source to delivery of
products and services. To innovate in this dimension, a company can streamline
the flow of information through the supply chain, change its structure or
enhance the collaboration of its participants” (Arroniz et al.,2006). With
operations in 130 countries, L’Oreal’s supply chain must be generalize and
diversify enough to deliver their products. To be able to have fast and
flexible supply chain, it required them to streamline some of their products and simplify
their supply chain: “Beauty-care consumers
have specific wants, and manufacturers and retailers are obliged to ensure the
desired products are on the shelf. Brand recognition turns heads, but efficient
supply chain management seals the deal” (O'reilly, 2010). The advantage of product generalizations is that it
can streamline the innovation options that ‘one size (product) fits all’ and
benefit marketers to create product line
extensions in future. However, the argument is that consumers
would like to have as much as choices as possible because generally they are
evil and like to have product diversity. Also more products offer can have
better competition for shelf space; however, it wills complex and put
more burdens to the supply chain. As a result, L’Oreal needs to leverage and balance between the demand sense and control the product selections.
Richard, Supply Chain Director - L'Oreal Operations
4) Achieving growth sustainably
(Company commitment/ customers’ concerns influences sustainability commitment)
L’Oreal continues to committee to achieve growth sustainably by offering both the sustainable and desirable. Since the current market situation that the increase demands of customers' concerns for the scientific claims and origin of the ingredients and products, therefore it influences suppliers to source into the natural supply chain. L’Oreal will need to continue to look for the organic niche and sustainably raw materials in order to accelerate the innovation to drive the market. Moreover, their demand must need to continue remanufactured through innovation and perhaps seize on the label organic as a marketing scheme. Ingredients of natural and organic play a crucial role part when consumers come to purchasing decision. The important factor for sustainable innovation practice is that R&D needs to continue to prove and maintain the efficacy and purity of their products. According to L’Oreal CEO, Jean-Paul Agon, he stated that “L’Oreal has a strong legacy in sustainability and a thorough ambition for the future. We are proud to announce “Sharing Beauty With All”, our sustainability commitment for 2020. We believe consumers are at the heart of our sustainability drive and we want to reach the next billion consumers while making a positive impact on the world. By accelerating sustainable innovation within our business, and harnessing the power of our brands to inform consumers, we will raise awareness about sustainability and encourage consumers to make more sustainable choices.” (L’Oreal, 2013). By 2020, L’Oreal plans to commit in four areas such as innovating sustainably, producing sustainably, living sustainably and developing sustainably, which these areas will improve company environmental or social profile, reduce environmental footprint, empower consumer to make sustainable consumption and developing sustainably for employees, suppliers and communities. Thus, sustainable innovation is a key concept for the beauty industry that companies will always pursuit for environmental friendly initiatives.
L'Oréal Announces Ambitious Sustainability Commitment for 2020, http://www.sustainablebrands.com/news_and_views/communications/jennifer-elks/loreal-announces-sharing-beauty-all-its-new-sustainabili?utm_source=newsletter&utm_medium=brandsweekly&utm_campaign=oct24&m
5) L'Oreal marketing team based on creativity and a sense of beauty
(Create marketing strategies that influences brand image, positioning and trend)
Since the market of cosmetic
trend changes very quickly nowadays, L’Oreal’s marketing team also changes strategy
very rapidly to react to the marketplace. The mission of L’Oreal marketing team is focused “to make consumers the world over aware
of products designed to meet their needs and to be one step ahead of trends in
order to transform them into sources of beauty and well-being” (L’Oreal,
n.d.). L’Oreal continues to change the
world’s market and renovate its brands to compete against the competitors.
Ali, Marketing Vice President for Brand - L'Oreal USA Marketing
EverStrong digital promotion campaign, http://www.slideshare.net/carlottamaragno/loral-brandstorm-2013-17062178
Comment on the need for and the impact of innovation and innovation practices in the global context
1)
The target to realize the growth opportunity
Through the new announcement made by
Agony, the CEO of L’Oreal, that “L’Oreal’s ambition is to win one billion new
consumers by means of its universalization strategy.” L’Oreal’s Research and
Innovation comes closer to its major markets, for the Asian-pacific, South
America market are the new and highest growth market and promises to be an
amazing growth opportunity for L’Oreal. Therefore, the cosmetic firm expects
the laboratory to accelerate the growth of innovative products tailored for the
some trial markets that may potentially be marketed in other locations around
the world. Also the move to build a laboratory in some emerging market, like
Brazil and India is in line with L’Oreal’s globalization strategy of meeting
every beauty inspiration by providing the most local innovations for consumers
and adapting to each culture’s specific needs. Thus, the tailored products will
have better respond to all the local women as these elaborate products make
them feel better and have a confidence for themselves. These products and
deeper intention are like a warm and kind special private cosmetic professional
that will make the consumer feel like VIP and have the respect for them.
Latin America and Asia Pacific the new frontier
for growth, http://prezi.com/4q4b6smmzwjz/copy-of-loreal-international-marketing-strategy
2)
The ambition to build the sustainable brand
While targeting on the reaching the next
billion consumers, L’Oreal also wants to make a positive impact on the world
for consumers are at the heart of the sustainability drive. L’Oreal has a
strong legacy in sustainability and a thorough ambition for the future. Part of
the group’s growth strategy is its commitment to produce more with less impact
and to engage consumers, to make better choices by offering them products that
are both environmentally friendly and desirable. The corporate has the social
responsibility as well when doing the business and the target is getting a
better life for all the human beings. So building a sustainable brand will give
the public a good image and reputation for that.
3)
The impact of the innovation
The innovative specially tailored products
will enlarge the brand’s market share and help the company reach the target of
one billion new consumers. For example, The R&I center in India, will serve
to accelerate the growth of innovative products tailored for the Indian market
and will help the company reach the target of Rs. 7000 corers in sales and 150
million consumers in India by 2020.
By accelerating sustainable innovation
within the business and harnessing the power of our brands to inform consumers,
the movement will raise awareness about sustainability and encourage consumers
to make more sustainable choice. By committing to “sharing beauty with all”,
the innovation implemented by L’Oreal will improve 60% whist bringing beauty to
one billion new consumers. At the same time, the commitment will empower every
L’Oreal consumer to make sustainable consumption choices while enhancing the
beauty of the planet. It also realizes the Community sustainable development,
the investment made by L’Oreal will allow local people have the access to the
job opportunities by hiring local specialized talent and scientific
partnership. For example, the investment
in Mumbai and an advanced research center in Bangalore, and will employ over
100 India researchers and scientists from the fields of Physical Chemistry,
Organic Chemistry, Analytical Chemistry, Biotechnology, Chemical Engineering,
Physics and Biology by end 2013. Meanwhile, the investment and new lab will
help the respond even better to the expectation of women by offering them
specific, high quality products. At the same time, the innovation laboratory
symbolize further development socio-economic and environmental road to
progress.
References:
Arroniz,
I., Sawhney, M. & Wolcott, R. (2006). The 12 different ways for companies
to innovate. MIT Sloan Management Review, 47 (3), 75-81.
Doyle,
M. (2010). Transferring Innovation to Global Markets. Product Development, 64-66.
Doz, Y. L. & Wilson, K. (2012). 10 rules for
managing global innovation. Harvard Business Review, 86-90.
L'oreal
(2012). Global brands attentive to local trends. Retrieved February 9,
2014 from http://magazine.loreal-finance.com/en/global-brands-attentive-local-trends.htm
L'oreal
(2013).
L’Oréal announces its new sustainability commitment for 2020 "Sharing
Beauty With All" . Retrieved February 9, 2014 from http://www.loreal.com/press-releases/loreal-announces-its-new-sustainability-commitment-for-2020-sharing-beauty-with-all.aspx
L'oreal
(n.d.). Marketing.
Retrieved February 9, 2014 from http://www.loreal.com/careers/who-you-can-be/marketing.aspx
L'oreal
(n.d.). One of the world’s most influential people. Retrieved February
9, 2014 from http://www.loreal.com/who-we-are/awards-recognitions/one-of-the-worlds-most-influential-people.aspx
L'villeneuve,
K. (n.d.). The entrance of L'Oréal in the Chinese Market . Retrieved
February 9, 2014 from http://www.karlvilleneuve.com/categories/nouvelles-b2b/the-entrance-of-loreal-in-the-chinese-market.html
O'reilly,
J. (2010). Snapshot: Cosmetics And Skin Care . Retrieved February 9,
2014 from http://www.karlvilleneuve.com/categories/nouvelles-b2b/the-entrance-of-loreal-in-the-chinese-market.html
Wikipedia
(2013). Reverse innovation. Retrieved February 9, 2014 from http://en.wikipedia.org/wiki/Reverse_innovation
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