L'oreal: A Real World Example - Market Driven Strategy for New Products Development in Focus

Market Driven Strategy for New Products Development in Focus

L'Oreal: A Real World Example

William Cruz

Herzing University

Market Driven Strategy for New Products Development in Focus

L'Oreal: A Real World Example

Market driven refers to a business orientation that is based on understanding and reacting to the preferences and behaviors of players within a given market structure. Market driven organizations are those organizations who uses supreme marketing, who understand the likes and dislikes of a customer and adapt accordingly where as they bond the channels which are used for the marketing and selling of the goods. The process, which engraves their super capabilities, is well understood and effectively controlled to deliver superior customer satisfaction. Generally there are two processes in an organization, internal change and external change, market driven organization push this change in the organization towards the outer understanding or the outer change of the environment.

The underlying logic of market-driven strategy is that the market and the customers that form the market should be the starting point in business strategy formulation. "Considerable progress has been made in identifying market-driven businesses, understanding what they do, and measuring the bottom-line consequences of their orientation to their markets. Importantly, market-driven strategy provides a company-wide perspective, which mandates more effective integration of all activities that impact on customer value.

A market-oriented organization continuously gathers information about customers, competitors, and markets; views that information from a total business perspective; decides how to deliver superior customer value; and takes actions to provide value to customers. An organization that is market oriented has both a culture committed to customer value and a process of creating superior value for buyers. Market orientation requires a customer focus, intelligence about competitors, and cross-functional cooperation and involvement. This initiative extends beyond the marketing function in an organization. Customer Focus The marketing concept has proposed a customer focus for half a century, yet until the 1990s that emphasis had a limited impact on managers as a basis for managing a business. There are many similarities between the marketing concept and market orientation, although the marketing concept implies a functional (marketing) emphasis. The important difference is that market orientation is more than a philosophy since it consists of a process for delivering customer value. The marketing concept advocates starting with customer needs and wants, deciding which needs to meet, and involving the entire organization in the process of satisfying customers. The market-oriented organization understands customers' preferences and requirements and effectively deploys the skills and resources of the entire organization to satisfy customers

Market-driven strategies begin with an understanding of the market and the customers that form the market. The characteristics of market-driven strategies include developing a market-orientation, leveraging distinctive capabilities, finding a match between customer value and organizational capabilities, and obtaining superior performance by providing superior customer value. The available evidence indicates a strong supporting logic for adopting market-driven strategies, recognizing that a long-term commitment is necessary to develop those strategies. Achieving a market orientation requires a customer focus, competitor intelligence, and coordination among the business functions. Becoming market oriented involves making major changes in the culture, processes, and structure of the traditional pyramid organization that is organized into functional units. Several interrelated actions are required, including information acquisition, sharing information within the organization, inter-functional assessment, shared diagnosis, and decision making. The objective of market orientation is to provide superior customer value. Leveraging distinctive capabilities is a key part of developing a market-driven strategy. Capabilities are organizational processes that enable firms to coordinate related activities and employ assets by using skills and accumulated knowledge. Distinctive capabilities are superior to the competition, difficult to duplicate, and applicable to multiple competitive situations. Capabilities can be classified as outside-in, inside-out, and spanning processes. The outside-in processes provide direction to the inside-out and spanning processes by identifying customer needs and superior value opportunities. The creation of superior customer value is a continuing competitive challenge in sustaining successful market-driven strategies. Value is the trade-off of product benefits against the total costs of acquiring the product.

As the globalization of markets continues at a rapid pace, L'Oreal has to face the challenge of staying current with the development of new products. Standardization or adaptation is an important issue in globalization. Therefore secondly, the author discuss the degree of standardization and adaptation that L'Oreal needs to follow in relation to the potential risks of launching up to 2,000 products a year into global markets. There are three important issues which will be discussed in this part, Costs and Benefits, Market-Entry Timing, and Marketing Strategy.

Driven by consumer demands and with the development of new technology, many companies have to bring some new products to the market, if they want to remain their competitive advantage and sustain the profitable growth. That is why new product development can become the most important business process.

At L'Oreal case, innovation is its driving force, in terms of both technology and fashion, L'Oreal has invest so much in innovation, innovation is quite important and essential to L'Oreal which wants to keep continuous growth and perform well in the global market, and there are many forms of innovation, new products and services are one aspect of them, it is very important for L'Oreal to know how to identify innovation opportunities and transform some good and useful ideas into new product development.

There are several items to consider about why L'Oreal has to develop new products, most importantly, the customers

Because

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