Speaking as a guest of Professor Rajiv Lal at the Harvard Business School, Monsieur Jean Jacques Lebel, outlined the logic behind the universalization strategy that L’Oréal has been implementing throughout the French cosmetics firm. This policy aims to leverage the advantages of having a global brand and adapt them to emerging markets in order to give new consumers a product that they feel in relevant and adapted to their needs.
Reasons behind Universalization
Having joined L’Oreal in 1981 and having gradually risen to the Board of Directors over the last 3 decades, M. Lebel has seen many changes within the company. As Worldwide President for the Consumer Products Division, M. Lebel insisted on the need to constantly create innovate particularly in rapidly new developing Asian markets. A lot of this innovation is done centrally at the French cosmetics HQ in Paris, but the past few years has seen greater autonomy being given to local personnel.
In fact, consumers behave differently in countries across the world and there is a need to adapt to this. In China L’Oreal’s product is quite different because Chinese women want to whiten their skins. In India there is less difference compared to cosmetics sold in Western countries but the products are sold in small quantities. L’Oreal’s new policy is a concerted effort to adapt efficiently to such challenges.
Implementation of the Universalization Policy
One of the major challenges of this new policy was the development of the matrix system and get people to take initiatives. M. Lebel that tension is an important part of creative meetings and getting people to openly get their ideas onto the table.
Similarly, the company encourages local employees to take certain controlled risks. The matrix structure of the company means that up to 6 people could be considered to be responsible for their Japanese market. Each person will give a different perspective. However, if something needs to be done the company actively encourages any one of them to step and do it.
Of course, such a structure could be wasteful of resources. L’Oreal therefore works on products where there is the potential to develop them in several countries.
“We need to find three or four markets at least for each product.” Insists M. Lebel. “You also need someone to guarantee that sufficient resources are allocated to research and that can only be coordinated by management in the Headquarters.”
Talent Management at L’Oreal
In order to achieve the right blend of company and local knowledge L’Oreal is encouraging specific policies for talent management. In fact, new employees are encouraged to do an MBA, work with L’Oreal in France for a year and then back to their home country. This is deemed to give the company greater and more diverse managers who still understand the constraints of the company as a whole.
“This policy is a huge step forward for us.” claims M. Lebel. “Dynamic risk taking people are very important to drive the company forward in different markets.”
The L’Oreal Brand in the new environment
Of course, branding is as important as ever in this sector. M. Lebel considers that the company still has some strongly central brands but more and more it has other that are becoming local too. The objective of L’Oreal is to cover all the different price levels and major countries and it has even bought some new brands to complete its portfolio. The role of the Headquarters in Paris is to ensure the protection of the brand equity.
“Someone has to do it and this can only be done from HQ.” states Monsieur Lebel. “L’Oreal is the premium and must be protected. It must be better than the competition with a premium price to live up to the “Because I am worth it slogan””.
Indeed, M. Lebel directly refuted the idea that the quality of the product varied according to the country in which it was sold insisting that all the products came from the same factory.
And the future?
M. Lebel underlined that this policy was still being modified and adapted and that there was room for improvement in different management teams. He believes that in the coming years many more products will emerge from new markets such as China. Indeed, this may be as much as 50% within ten years. Brazil will become an important source as well. In fact, it is the creativity of such new markets that is helping L’Oreal in more mature markets of Western countries.