Cultural Norms Hll a Subsidiary of Lever  Case Study

Excerpt from Case Study :

Cultural Norms

HLL, a subsidiary of Lever, is a cosmetics company that operates in India. The company markets a number of products in the Indian market, including a "fairness cream," which purports to lighten the skin of the user. The Indian market is widely segmented. There are a number of wealth strata, ethnicities, religions, languages, castes and for this product there are also a number of skin tones. Each of these different demographics is a different segment of the market. In particular, there is competition within the fairness cream business at a number of different price points, with some companies catering to the mass market on a cost leadership basis and other firms selling a high end product aimed strictly at the middle and upper classes.

The potential market size in India is tremendous. India is currently the fifth-largest economy in the world, and it has a real GDP growth rate of 7.4%, which is the tenth-fastest growth rate in the world. The growth rate in the Indian economy has remained high for the past several years. This trend is expected to continue for the foreseeable future, a combination of India's cost-competitiveness, open economy and English-language skills that have attracted significant foreign direct investment of $157.9 billion and growing at 28% per year (CIA World Factbook, 2010). In addition to investment, the boom in India's economy is also in part fueled by population growth. Already the world's second most-populous country, India has nearly 1.2 billion people and a growth rate of 1.376%, which ranks in the middle of the world list (Ibid).

There are few competitors in the fairness cream industry. HLL currently has a market share of around 80%, and accounts for 84.4% of all industry advertising. The main competitor is Fairever, a brand with around 15% market share, owned by a local company called CavinKare Ltd. (CKL). Shahnaz-Husain is a herbal care company that is now introducing a product to compete in this segment as well. The result of these new competitors is a dramatic increase in advertising in the industry. The industry is profitable and there are few barriers to entry, so it is expected that more competitors can and will enter the market in the coming years.

In addition to the competitive threats, there is also the threat of changing social norms. Currently, social norms in India are highly supportive of the concept of fairness creams, but these norms are being challenged. Women's rights groups in particular are challenging the norms, as are some within the fashion industry, who view darker skin as equally beautiful. Should these norm changes accelerate in pace, the demand for fairness creams could decline considerably. Even if that does not happen, firms in the industry are subject to negative publicity campaigns from women's rights groups in particular for the messages that they send in their advertising. There are few opportunities in India. There is the potential for brand extension, or the introduction of new brands to compete in a number of different segments, however, it is more likely that new brands and greater segmentation will be driven by the competition than by HLL.

The key success factors for HLL so far are twofold. The first is that the firm had little competition. Without competition, HLL had better pricing power and a captive market. The increase in competition now means that HLL will have to earn its market share by specifically appealing to different customer groups. The second key success factor for HLL is its ability to play up the insecurities of its customers in its advertising. Demand for fairness creams is driven by the insecurity that many Indian women have with respect to their skin color, given that in many circles fair skin is considered more desirable than dark skin. HLL has been able to leverage this insecurity to sell more of its fairness cream.

With the current marketing mix, the main strengths that HLL has are brand recognition and distribution. With a market share that has been as high recently as 90%, HLL has saturation distribution for Fair & Lovely. No competitor has the breadth and depth of distribution that HLL has. The company also has the established brand in the industry. HLL's brand is well-known and is commonly associated with the fairness cream category itself. Thus, HLL is well-positioned with respect to its competitors in both branding and in distribution.

There are weaknesses, however, in the market mix as well. The first is the controversy that the product's ads attract. This controversy helps to provide a platform for opponents of fairness creams, who may be able to spread their message more easily as a result. IN addition, the controversy puts HLL in a bad light because it makes the company look insensitive to women's issues, potentially alienating large portions of the company's customer base.

Another element of weakness in the current marketing mix is that the product lacks differentiation. It is the norm for the industry and as powerful as that is, it also allows for competitors to win market share simply through differentiation. It is very difficult for a product in Fair & Lovely's position to differentiate itself from the competition, given that it is the norm in the industry.

The main source of sustainable competitive advantage for Fair & Lovely is the strength of the brand. The product is marketed in dozens of countries around Asia and therefore has a well-known brand. In addition, its dominant market share and power in the distribution channels means that has the brand value to fend of new competitors, most of whom have little brand value at this point.

To the point that the local Indian culture does not change, the Fair & Lovely product is highly compatible with Indian culture. There is a strong demand in India for skin-lightening products because of a centuries-old belief that fairer skin in more attractive and is therefore closely linked with personal success. This breeds insecurity in those with dark skin, motivating them to buy Fair & Lovely. To the extent that Indian culture shifts away from these long-time values, it is conceivable that Fair & Lovely would no longer be congruent with Indian culture. India's culture is changing rapidly and even the caste system is being broken down within Indian culture, so a change with respect to the views women have on skin color is conceivable. This would have strong negative affects on HLL's business.

It should be noted that at present, HLL has adopted a one-size-fits-all category with respect to fairness creams. This approach holds that Fair & Lovely is a product for all Indians, but in truth the market is much more segmented. As a result, there is considerable opportunity for extensions of the Fair & Lovely brand to meet the needs of a wider range of Indian women.

International expansion is unlikely to succeed. Fair & Lovely already sells in 38 countries, and is the largest fairness cream in the world. The company therefore is unlikely to find any major untapped markets for this product. The cultural norm that encourages the consumption of fairness cream is not present in all countries with dark-skinned people, so there is little room to expand the market by moving into additional countries. Canada has a presence in most foreign markets, at least with respect to trade representation. HLL could take advantage of that reputation to gain access to distributors, local manufacturers and retail channels. Often, consulates and embassies will have trade arms that can help a Canadian company to set establish a presence in a foreign market.

Transportation could potentially be an issue. HLL is accustomed to Indian logistics, and the learning curve in non-Indian countries may be steep. HLL would therefore need to understand the logistics and distribution channels in the target country before entering that market. The company has to this point built its success by pursuing the mass market. The current price of Fair & Lovely is 23 rupees ($0.29) and this low level of pricing should be pursued in overseas markets in order to build dominant market share in any new market that HLL decides to enter.

The marketing strategy for any new market should strike a balance between the sources of success in the Indian market and the potential controversy that could arise from the messages that such advertising sends. There are a number of ethical considerations that must be taken into account. For example, it is ethical to sell a product that is only mildly effective. The product is not medical, so it should not be held to higher ethical standards than a food that isn't nutritious or a haircut that isn't competent. The effectiveness of the product is irrelevant to the decision to market it.

Exploiting cultural norms is a bigger ethical issue. While all firms exploit cultural norms to promote their products, there are questions as to whether or not those norms should be accepted or promoted. Ultimately, to take the view that Western norms should…

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