L’Oreal is a beauty and cosmetic global company and is vastly spread company all over the world. The company is large sized as it is a Multi-National Company (MNC).L’Oreal offered a number of cosmetic products and beauty services through its fourteen brands they had in 2000, segmented on the basis of price and target markets. Some of the brands were Biotherm which exclusively offered skin care products
Kerastase offered only hair care products
PCI offered only fragrances and ancillary products
Helena Rubinstein & Lancôme offered skin care as well as make-up products L’Oreal Paris covered hair colours, skin care, make-up and hair care products. L’Oreal Professional offered services such as hair colouring and hair care treatment Maybelline was exclusively used for make-up products
Garnier only dealt with hair colours.
L’Oreal offered their expertise in the service of women and men worldwide, meeting the diversity of their beauty desires with a number of brands which targeted different markets accordingly. Biotherm, PCI, Lancôme covered the very high end market, L’Oreal Paris and L’Oreal Professional covered the high end and Maybelline and Garnier covered mostly mass market.
L’Oreal Thailand had been performing poor after Asian crisis and was facing a decline in market share, low sales and profitability. Chris Martins, was appointed as a Managing Director in order to help increase the profitably, sales and market share of L’Oreal in Thailand. L’Oreal Thailand had two different local agents which were Slampar and Thailor. Slampar was the oldest one which had a joint venture with a local conglomerate. Due to the high import duties on luxury products Slampar manufactured some Lancôme products locally and imported the rest of the line.
Chris Martins, the new managing director was appointed to create a truly ‘L’Orealized’ company which upholds the long term values and deliver healthy profitable growth. The Asian crisis had negatively affected the market share, sales and profitability of L’Oreal Thailand. Thailand with a population of 63 million had the beauty market of Bt 26.6 billion. Thailand had faced a retail revolution as foreign retailers had entered the market and dominated all sectors. This had increased the level of competition and professionalism for L’Oreal Thailand as well as local companies.
L’Oreal had two entities in Thailand, Siampar and Thailor which were later merged to form a single multi-division entity L’Oreal Thailand Ltd. But even after the merger the two companies did not talk to each other and had odds with each other. They also lacked media support due to which some of their brands not even known in the market. The current goal of the company is to solve their issues and further professionalize and stimulate their teams so as to survive in the Thai market. Internal Environment
L’Oreal’s two major brands L’Oreal Professional and Kerasotes are market leaders and had an excellent image among top professional salons. Chris Martin, who is a well experienced person in the L’Oreal industry, has been well utilized by the company in Thailand during the Asian crisis. From this we get to know that those who work sincerely with complete dedication & talent are given a chance to make use of it.
The new managing directorr knows the seriousness of the issues faced by the company and is ready to implement changes in the organisation. The new MD is willing to work on the issue as a team rather than a self-centered approach. For a company’s success, working as a team will overcome any barriers. The company is able to identify the type of consumer’s whereby they can improve the quality of their business by concentrating on the type of consumers. L’Oreal in Thailand operated three divisions-luxury divisions, consumer division, professional division .
This decentralized approach to handle respective responsibilities is a good characteristic whereby these three divisions can analyze their own areas and find the key areas to work on. Weaknesses
L’Oreal Thailand is facing high turnover and is losing staff as the staff doesn’t see any future of the company. The staffs are just considered to be mechanical employees. The company is not considered about their well-being. Thus experienced employees are lost, young people are to be hired that lack in maturity and motivation. They are not able to catch up with the budget and are facing financial problems due to limited sales.
The working environment in the organistaton is not inspiring and motivating for the employees as well as the reward system is out of touch with the market. They lack media support as they do not have enough funds to advertise their brands.Thus there was no clear positioning of the brand in the minds of Thai consumers. The organisation is much leaner and less bureaucratic than the international competitors.This company did not have a good tie up with the Thai government that were more protective about the local companies. A company can thrive only in a well-coordinated and cooperative environment. Martin noticed that there was bitter rivalry among most of the retail sectors. The business was restricted to beauty products only.
The company had to think out of the box in order to compete with the counter brands L’Oreal, Paris management turns out to be self-oriented and not concerned about the well-being of the organization. They are not willing to spend beyond the assigned budget. Turnover is highest in the support functions as
there is no HR Director at present. This is solely due to the narrow hiring criteria.
L’Oreal Thailand has the opportunity to come up in the market as it has a number of good quality brands which lack awareness among consumers due to less advertising They could use direct sales for make-up and skin care products instead of retail sales as this would help them to have direct interaction with their customers and know about their needs.
L’Oreal can make specialised products specifically for Asian women so as to target the women’s in the Thai market and increase sales. L’Oreal can expand their business to non-beauty products also to increase their bar of business in comparison to the other leading brands. Beauty products can also be focused on men apart from women, thereby increasing a chance of rise in market. Online marketing should be put to best use to ease the customer needs and provide a niche solution in this technology driven generation. Threats
L’Oreal Thailand has a lot of intensive competition in the beauty market due to the entrance of many strong foreign companies. One of the major threats would be the government regulations which could turn out to be deadly to shut down the business as the government tends to be more protective about their local companies. When similar products are introduced in market by different companies, consumers tend to choose the product with minimal price to satisfy their needs. The involvement of local companies in marketing of cosmetics can be a threat to the mass-cosmetic marketing.
Methods of Pursuing Strategy
External Environment Analysis:
Analysing & Studying the current market situation :
– Current competitors in the market (Existing companies and new foreign companies)
– Finding out the Current Trends in the market
– The Current Pays based on the market condition
– Identifying the customer needs, what is being sold in the market and the products having high demand in the market. Internal Environment Analysis
Analysing the Internal Environment:
– Improving the working Environment of the employees i.e. creating a positive office ambience in which the employees feel enlightened to work – Providing deserving remuneration for the employees based on their expertise – Coordination within departments
– Meeting the Working Capital Requirements
– JUST IN TIME strategy can be applied for the production process – The HR Manager should be broad minded and should recruit new staffs and assign their position in the organisation based on their area of expertise and only skilled workers should be selected.
– Motivation of the employees by the Top Management.
FOUNDATIONS FOR COMPETITIVE STRATEGY (Marketing Strategy)
Promoting their products with the help of media
Specifically advertisements in televisions through which a large number of people can be reached over a vast geographical area. Various Sales Promotion methods can be used:
– Price Reduction(Discount) Quantity gift, Providing free samples, Product combinations, Sampling, Personal selling.
– Promoting products based on the customer needs (selected products having demand in the current market and excluding other products that are least preferred by the customers)
As there were multiple foreign retailers and industries making their way in Thailand, the market share by L’Oreal was slowly and steadily declining by the entry of similar products in market. In order to increase the market share and revenue for the company, the managers should: Study about the competitor’s strategy for sales and try to study the consumption of their products by different age groups. This can help them gain an additional advantage over other competitors. Internal Environment
1. L’Oreal has different departments but there was very little or no communication between the departments. So there is a need to improve the inter-department communication so the information can be reached throughout all the organization and they can work efficiently. This can be done by:
a) Team Building activities for the employees
b) Holding events like dinner or party so the employees can know each other.
2. The organization also faced the problem of the employees leaving their job. The main point here is that the employees didn’t have a satisfying work environment and adding to that the un-satisfying wages. This problem can be solved by the following;
a) They should offer employees some incentives or bonus for extra time, extra paid leaves in case of better performance.
3. The company also faced the problem of slow generating revenue. This was happening due to various factors. a) They were selling their products only through 2 types of retail outlets. This was not helping them to make the products in everyone’s reach. b)The company was issuing invoices to the retailers but receiving the payments only when the products were sold. These issues can be solved by:
• Selling the products through more retail stores which help increase the sales. • Collect the payments immediately while distributing the products to the retailers. Marketing Strategy
The problem in marketing department was that it didn’t have the sufficient funds for promoting more about their products. The solution for this problem is that:
• Reduce their operating expenditure by introducing JUST IN TIME strategy. This will reduce the cost for storing the raw materials and as a result, the
company can have a better margin over each product they sell.
Development of alternative strategies enables to select the most apt strategy through proper evaluation of the success rate of each strategy. To make the selection of strategic process more effective, team members should have a clear understanding about the strategic goals thereby reducing uncertainties in decision making. Implementation of the pricing strategy, customer service and product development will definitely improve the firm’s performance.
For the successful implementation of strategy there should be integration among the strategy implementation team and functionality between the various departments within the organization. If the corporate culture within the internal environment copes up with the rapid changes of external environment, the performance of the organization increases. Quality of communications plays a major role in the selection of strategy process. High quality communications within the organization can improve the firm’s market performance. Concerning the distribution of products, organisational and tactical planning needs to be done by selling of products through multiple retail stores in attractive ways by: improving the ambience
introducing new products through a trial
including beneficial offers or discount rates to stay competitive introducing raffle draws to allure customers
JUST IN TIME strategy will reduce the storage cost of raw materials and as a result, the company can have a better margin over each product they sell. It is important for an organization to be well aware of the software potentials to improve the organizations efficiency. Employee empowerment in an organization can be done by:
providing necessary skills to the employees
providing them authority to take up right decisions required for their job providing adequate information and resources to do their job rewarding the employees for their hard work
building confidence in them
Human resource management can improve the organizational performance by: Introduction of leadership training programs and enhancing the skills and capabilities of the employees mentoring by the senior employees to give deep insight to the kind of work they are doing promoting positive attitudes and increasing motivation and job satisfaction increasing budget scales to allow experimentation within the company in order to take risks to meet the rapid changes of the external environment Allotting responsibilities to the employees so that they can make full use of their capabilities.
These are the ways to improve the relationship of the employees within the company, thus producing highly committed employees in the development of the company.
CONCLUSIONS AND RECOMMENDATIONS
In conclusion, L’Oreal is still the market leader in the cosmetic industry of Thailand because it is providing quality products to its customers. They need to pay more attention to the relationships within the organization and between Tailor and Siampar as this will help them achieve their goals in the future. . Last but not least, well skills of managing conflicts, politics, controlling of power and the structured decision-making approaches within the organization structure and culture will assist L’Oreal Thailand to tackle with the challenges and come with a positive financial performance in order to remain the leader of cosmetics industry in Thailand.
We would like to recommend the following to L’Oreal Thailand, firstly that each department should have a different decision making processes. Secondly the Managers should and need to learn from their mistakes as this will help them gain new information from their past failures. Thirdly they need to avoid the conflicts within the organization, the company should implement matrix organization to run the organization by listening more different ideas and respect the voice of colleagues, so the problem solving can be more flexible and objective. Next the company should find out the current trends in the market and try to differentiate their product in order to face competitions. Finally the managers need to motivate the employees if they want the best from all of them.