L'Oreal India: where beauty meets tradition

L'Oreal India
Problem Statement and Analysis
The main problem facing L'Oreal in India is that it faces intense competition from both local and global brands. The market is rapidly growing, and demographic factors forecast strong future growth, and L'Oreal's recent performance has been strong. However, the intensity of competition is high, and L'Oreal needs to build market share, while fostering loyalty that will allow that market share to be sustainable.
L'Oreal has developed strengths in local production, understanding of the local markets, and ability to spot market opportunities. It still has some weaknesses, such as not having a well-established brand in the country, and still not knowing as much as local competitors about the needs of Indian consumers.
Strong opportunities still exist in the salon sector, but also in consumer products, and in the growing urban markets. Competition and evolving consumer tastes are the major threats that the company faces. It has to stay ahead of the competition but also react to changes in consumer tastes, or better yet drive those tastes.
Strategic Alternatives
The first alternative is to modernize the marketing. The case is set in 2013, and India is shifting towards smartphone adoption at a rapid rate at this point in time. The use of social media in marketing is becoming more prevalent, and lifestyle brands are establishing strong marketing practices. The first recommendation is to respond to that by bringing in marketing talent from outside – east Asian countries, Europe or North America – to ensure that the company is the leader among its peers at modern marketing practices, to capture the large number of young Indian women who are becoming educated and entering the workforce.
The second alternative is to invest more heavily in new categories, such as expanding the Bangalore lab for organic and ayurvedic products. It might be worth studying what Indian communities in the UK, Canada and the US are doing in this regard – if these niches are gravitating to these products, that bodes well for the Indian market, though with the caveat that there are probably some differences between the Indian consumer and overseas Indian consumers and it is worth understanding those differences before going too far down this road.
The third alternative is to invest more heavily in the salon as a distribution channel. Retail sales in India, outside of the established malls, remains very challenging, and salons are therefore among the strongest distribution channels. For example, if L'Oreal establishes a salon training program with imported instructors to teach Indian stylists, and eventually have Indian instructors, such a program would allow it to carve out a leadership position in the business, and create a generation of loyal salon owners who have benefitted from L'Oreal's expertise. This is a more proactive approach that has been done elsewhere, but necessary given the disorganized and informal nature of the Indian market.
The fourth strategic alternative is to partner with a local firm in order to build out levels of products ranging from the high end to the low end. This would also help L'Oreal to gain critical market intelligence that might allow it to excel where its competitors struggle.
These alternatives are not necessarily mutually exclusive, but they are quite different in terms of what L'Oreal sees as being the priorities to build its market position. The best alternatives, and therefore recommended, are the first and the third. The salon training program, focus in a handful of major cities initially, to create L'Oreal-certified stylists, has tremendous potential to build out that distribution channel. In addition, the first option of bringing in marketing talent who can work with local marketers to ensure that L'Oreal is the marketing innovation leader in India will go a long way to building relationships with consumers. Both of these alternatives are symbiotic in that they focus on the individual relationship-building aspects of business, which is how a lot of business is done in India.