Business in Emerging Market: Case Study of L’Oreal in India

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Business in Emerging Market
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1. Title
Business in emerging market: Case study of L’Oreal in India
2. Introduction
Business in emerging markets is a strategic business decision by almost all the companies
around the world. As stated by Ahmed, Coulibaly and Zlate (2017), emerging markets or
emerging economies refer to those nations which are focusing on the investment of increasing
the productive capacity and bringing in faster economic growth. The emerging economies move
away from their traditional economic systems or production systems, such as, agricultural
economic systems and export of raw materials and focus more on the rapid industrialization and
adoption of a mixed or free market economy to foster quicker economic growth. Thus, emerging
markets are an important place for growing the businesses as these economies drive the growth
in the international economy, and therefore, almost all large multinational organizations are
focusing on the emerging economies for their business growth (Obstfeld, Ostry and Qureshi
2017). According to the Morgan Stanley Capital International Emerging Market Index, 23
countries have been identified as emerging economies, and those countries are Brazil, China,
India, Egypt, Greece, Korea, Malaysia, Indonesia, Morocco, Mexico, Qatar south Africa, Peru,
Russia Thailand, turkey, Poland, Philippines, Taiwan, Columbia, Hungary, Czech Republic, and
the UAE (Amadeo 2019). Among all these, China and India are considered to be emerging
market powerhouses. The large population is the strength of these countries in terms of cheap
labor force which contribute in achieving greater production and faster economic growth (Paul
and Mas 2016). This research proposal will explore the business opportunities in the emerging
market and how those can be utilized to gain the maximum benefits for the business as well as
for the economy. In this proposal, the case study of L’Oreal and its business strategies in one of

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the fastest growing emerging economies, that is, India will be evaluated and the trends and future
directions will be addressed to recommend long run perspectives for the growth of the company.
2.1 Research aim and objectives
The aim of this research study is explore the opportunities for growth for L’Oreal, a
leading cosmetics and personal care products brand, in India, which is a fast growing emerging
market and have plenty of opportunities for business growth. The study will also recommend
ways for L’Oreal to capture a larger market share in India to maintain its position as a market
leader in the cosmetics and personal care products industry.
The research objectives are:
 To explore the business strategies adopted by L’Oreal for expanding business in India
 To evaluate the growth opportunities in the emerging markets
 To provide appropriate recommendations to increase the market share of L’Oreal in India
2.2 Research questions
1) What are the business and marketing strategies taken by L’Oreal to make a sustainable
business in a fast growing emerging market like India?
2) What are the opportunities for business growth in India, which is an emerging economy?
3) How the business performance of L’Oreal can be improved for a larger market share in
India?
2.3 Company background
L’Oreal S.A. is one of the largest cosmetics and personal care companies in the world. It
is headquartered in Clichy, Hauts-de-Seine, a suburb near Paris, and has a registered office in
Paris. The company has products under skin care, make up, perfume, sun protection, hair color

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and hair care. L’Oreal S. A. was established in 1909 and currently it operates in almost all the
major countries in the world. The company claims to provide a combination of latest technology
in providing the highest quality of personal care products to the customers, especially women of
all age groups. In the first quarter of 2019, the company has experienced a surge in its revenue
earned from all the operating zones. It increased from €6778.6 million in first quarter of 2018 to
€7550.5 million in the first quarter of 2019 (Loreal-finance.com 2019). It is seen from the
financial report of the company that among the different geographic regions, highest amount of
revenue was earned from Asia Pacific region. The revenue increased from €1838.5 million to
€2398 million in the Asia Pacific region with a reported growth rate of 11.4% (Loreal-
finance.com 2019). L’Oreal has been operating in India since the last 18 years and still
considered as a young player in the cosmetics industry. The company has been able to capture a
sustainable position in the market through low prices, which was possible due to local raw
materials supply and local manufacturing process.
2.4 Justification for choosing L’Oreal and India
L’Oreal S.A. is one of the leading cosmetics and personal care brands in the world. With
the amount of capital available, the company can expand its business globally. The company is
continuously increasing its product portfolio and as per the tastes, preferences and needs of the
customers of different cultures, L’Oreal improvises its products. It also collaborates with local
designers and celebrities to increase its credibility in the respective countries. India, being one of
the largest emerging economies, has provided a great market expansion opportunity to L’Oreal.
The economy has a huge population, creating a large market potential for L’Oreal. India’s
economy is growing at a rapid rate. Along with that, the cosmetic market of India has not been
tapped to its full potential. The level of beauty, make up and personal care awareness and

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knowledge is also increasing due to the availability of smart technology to the mass
(L’Oreal.com 2016). Hence, L’Oreal has been chosen as the case study organization, which is
eyeing the growing market of India to improve its business performance and profit level.
2.5 Significance of the research
Investing in the emerging markets is a conscious business decision by the multinational
companies as there are many advantages in making investments in the emerging markets. There
are high growth rates which the companies want to utilize to bring in more business growth.
However, as there are cultural as well as economic differences in the different countries, the
companies must make business decisions to incorporate the specific aspects of the economies to
get the maximum return from investment in the emerging economy. This research study will help
to investigate the business strategies and marketing strategies taken by L’Oreal while investing
and expanding its business in India. It will also explore the growth opportunities in an emerging
economy with a large number of population and economic growth rate. Based on the findings,
new measures and strategies will be suggested which could help L’Oreal to increase its market
share in India. Thus, this study will contribute in the academic world by providing in-sights
about the business growth opportunities in an emerging economy, with a focus on India and it
will also help the business and similar businesses, that invest a large amount in an emerging
market, to make decisions and strategies to utilize the potential of the emerging economies in the
maximum manner. Hence, there are twofold implications of this study, which will benefit both
the literature section as well as the multinational organizations, which invest in the emerging
economies to achieve faster growth.

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3.0 Literature review
3.1 Emerging markets
Emerging markets or economies are those that make more investments in resources and
strategies to increase their productive capacities and in order to do that, these economies make a
move from their traditional economy or production process towards a new method of products,
that is, industrialization. In this process, the level of production of variety types of consumer
products and services other than agricultural products are increased in a massive way and the
level of trade also increases. Thus, in the emerging economies, there is high rate of growth.
Meyer and Peng (2016) stated that there are few characteristics of the emerging economies.
Firstly, low income is the primary characteristic of the emerging economies, which provides the
incentive and drive for the second important characteristic, that is, rapid growth. The leaders in
the emerging economies are always willing to take measures to bring about rapid changes in the
economic system, industrialization and production process and the business sectors take
measures accordingly to bring changes in their production process and generate rapid growth for
the economy. It has been found that the developing nations, that is, United States, the UK, Japan
and Germany experienced growth of less than 3% in 2017, while emerging economies, Egypt,
Morocco and Poland experienced growth of around 4% and more, and Turkey, India and China
experienced around 7% growth (Cui and Aulakh 2018).
The third characteristic is the high volatility, which is originated from the factors like
instability in domestic policies, external price shocks and natural disasters. All these factors can
affect the traditional agricultural production process and the extent of international trade for the
economies. Fourthly, the growth needs a large amount of investment capital and in the emerging
markets, the capital market is less developed than in the developed countries. Moreover, the level