Task 1: Service-Dominant Logic
Lusch and Vargo established the S-D (Service-Dominant) logic in the fiscal year 2004. The perspective is a kind of a lens offering novel approaches for comprehending both the marketing trends and marketing problems. When compared to the customary goods oriented perspective, the S-D logic assists in the analysis of the global markets as it reveals the shifting worldviews.
The S-D logic integrates various non-mainstream and leading marketing strategies including relationship marketing, services marketing, market orientation, and IMP interaction perspective (Ballantyne & Varey, 2008). Thus, the S-D logic assists in the sharing of new-fangled knowledge and ideas within the microeconomic firm levels as it enables organizations to set aside the old mental marketing models.
Just like other conventional marketing strategies, the S-D logic embraces service as its fundamental principle and focuses on the interactions and services incorporated.
Customer value creation
The S-D logic assists in the establishment of the operant resource dominance including those acting upon various assets to generate advantage or benefits. The operant resources include money, goods, as well as other natural resources. The S-D logic asserts that the underlying sources for the creation of value are the operant resources namely the skills and knowledge.
Value creating resources according to the S-D logic are hardly limited to the firms (Grönroos, 2006). Various stakeholders including the suppliers, customers, producers, and consumers equally contribute to the creation of value and therefore comprise the operant resources.
Service-Dominant logic generally contends that the co-creation of value always incorporates all the stakeholders including the clients, consumers and others. In the S-D perspective, the creation of customer value accrues contextually through clients who are the service beneficiaries (Ballantyne & Varey, 2006).
This implies that, it is difficult to generate value for the clients until the service beneficiaries, usually the clientele, are integrated into the value creation process. The clients are duty bound to apply and assimilate the service providers’ resources with various other assets in its personal, specific, and accessible resource contexts including any other resources that accrue from further service systems (Ballantyne & Varey, 2008).
The value co-creation in the S-D perspective entails the application and incorporation of the integrated resources by the service beneficiaries from service providers namely the public, private, firms as well as the market facing resource integrators. However, given that, value is often beneficiary and contextually definite; the customers (beneficiaries) determine the created value because they are the final product consumers.
The S-D perspective conceptualizes the co-creation of value, which necessitates the invitation of the client to take part in the process of designing, and producing needed value. Vargo and Lusch (2008c) suggest that value cannot be created without necessarily integrating the client in the firms’ production and design processes.
Clients play the collaborative roles in the creation of values, and this responsibility is not optional since value must always be co-created. It is indeed difficult for the firms or the customers to create value in isolation or independently even if each one of them possesses sufficient resources (Lusch & Vargo, 2006a).
Relationship strategies
According to the study literature, the S-D logic offers several relationship-marketing strategies that are apparent in the ten FPs which capture the employee-firm viewpoints.
Under FP1, it is clear that service appears as the primary exchange source of product marketing. The application of FP1 in the firms’ micro-cosmos assists in shifting the customers’ focus on the structure of the integrated activities and the derived quality. Firms and employees tend to optimize their activities by concentrating in the production of a particular product.
Since each firm that specializes in the production of a given product employs workforces with different weaknesses and strengths, every worker is assigned a specific responsibility to distinguish them from the rest of the employees. However, all workers jointly offer the desired client services. The S-D logic applies to the B-to-C, B-to-B as well as to the intra-firms relationships (Vargo & Lusch, 2008b).
Under FP2, the elementary exchange source is masked by the indirect exchange. The exchange has shifted to the indirect skills exchange from the one-on-one focused skills trading that are apparent in the increasingly hierarchical, bureaucratic, and outsized organizations and vertical marketing systems (Vargo & Lusch, 2004).
Despite the fact that outsized corporations distract our service for service awareness and interactions, customers can still trade services for further services. The only exchange vehicles that are commonly used include the vertical marketing systems, organizations, goods, and money. The essential competitive advantage source in FP2 is the direct relations (Lusch & Vargo, 2006b).
In FP3, the provided services are distributed through the goods mechanisms and this level is the most imperative premise of the Service-Dominant perspective. It is apparent that the relationship amid the firm and clients hardly ends subsequent to the exchange. The process is ongoing and this assists in the co-creation of value while the goods are being consumed.
Value can just be generated if there is interaction between the co-creators, and not prior to or after. Hence, in the service provision, the distribution mechanisms are the information and ideas (Vargo, 2007).
In FP4, it emanates that the primary competitive advantage sources are the operant resources. At this level, the S-D perspective acknowledges that the workforce skills and knowledge are the essential sources for competitive advantage. However, the info and ideas are deemed valueless whenever they not utilized.
Alternatively, FP5 makes it clear that each economy should be recognized as a service economy. FP5 highlights the significance of service although it hardly provides further findings or viewpoints (Lusch, 2007).
According to FP6, the value co-creator is always the client. This implies that each intra-departmental and intra-personal association is a supplier-client association. The consumer and employees in this case co-create value by receiving ideas and offering responses to the suppliers’ ideas. Each thought, each value proposition, and every idea is limited awaiting their entrance into the interactive processes.
Conversely, in FP7 it emanates that the venture merely offers value propositions, although it can hardly deliver value (Zineldin & Philipson, 2007). In fact, it is true that the employees can just supply ideas, but necessarily delivering values.
In conclusion, in the S-D perspective, any view that is service centered is believed to be essentially client relational and consumer oriented. The view should include a complement as well as a player within the relational background.
In this case, all the financial and social players are regarded as resource integrators for instance the organizational departments and all employees. Besides, S-D logic asserts that the consumers also dubbed as the beneficiaries phenomenologically and exclusively establish value (Rust et al., 2006).
Task 2: The international operations of L’Oreal
Company Background
Currently, L’Oreal Corporation is amongst the leading beauty companies across the globe. This beauty company, L’Oreal, has stretched its global operations to serve five continents and 130 states. With over one hundred years in the universal beauty operation, L’Oreal has established its offices in approximately fifty-eight different nations.
In fact, L’Oreal is now an international premium cosmetic products corporation aspiring to advance the people’s daily lives and beauty since its establishment in the fiscal 1907. Schueller Eugene who offered superior leadership to tailor the provision of essential products including the initial man made hair care and color products strategically started the L’Oreal Company (L’Oreal, 2011).
Some years later, L’Oreal Corp products could be found in the global markets such as Netherlands, Europe, Italy, and Australia. The company initiated its market operations in the US immediately after the Second World War where it offered various beauty products.
While going global to capture and dominate the emerging beauty products markets, L’Oreal Corp encountered numerous market rivalries that required it to adopt different entry, marketing, and operational strategies (L’Oreal, 2011).
This report assesses and critically discusses the international operations strategies adopted and implemented by L’Oreal Corporation to be successful in the global markets.
The adaptation vs. standardization strategies of L’Oreal
Having been in operation for over a century, L’Oreal Corporation has concentrated its business operations towards the provision of beauty products. The business undertaken by L’Oreal Corp is rich in significance given that it allows all people to open up to the rest of the population, gain self-confidence, as well express their personalities.
Thus, to most of the L’Oreal products consumers, beauty has been the renowned language. For instance, L’Oreal has standardized beauty products including both the flat ad high heeled shoes that are fairly priced and of the right quantity to meet the demands of the consumers namely men and women.
The global beauty products provided by L’Oreal are considered the best since the company embraces different technological or innovative capabilities to ensure that the products are safe, valuable, and of high quality (L’Oreal, 2011).
The company has comprehensive knowledge about the consumer’s expectations and particularities that helps the employees to produce client tailored beauty products including, fragrances, skincare, as well as flat and heeled shoes. Most of the newly developed beauty products are intended to suit the purchasing power, beauty habits, and different lifestyles of various groups of people.
In this case, the new designs of shoes are offered in varied colors and sizes. There are high-heeled and flat soled shoes having similar logos intended to differentiate the company’s brand from those other market rivals.
L’Oreal Corp has no distinctive global model or strategy meant to universalize and market its beauty products. Despite the fact that L’Oreal Corp targets additional one billion fresh consumers to purchase and use its beauty or cosmetic products, the company is assured that no single unique model can serve the demands of all consumers in the beauty and cosmetic industry.
However, to distribute and market beauty products such as the flat and high heeled shoes, L’Oreal ensures that it offers immeasurable forms of beauty that are associated with personalities, history, cultures, and periods (L’Oreal, 2011). To conquer a billion fresh consumers, the company has to reach out to varied populaces with the aim of globalizing beauty.
Thus, to universalize beauty does not imply making it uniform or international, but making it easily available to every consumer and adapting it (Wilson & Giligan, 2005).
Organizing for the development of new product and management of innovation
Given that a researcher instituted L’Oreal, the company has been drawing on the body of knowledge to manage its innovations and create new products such as the flat and high-heeled shoes. For instance, L’Oreal has a brilliant faction of investigators who endlessly prepare goods and survey the original merchandize terrains.
Science and commitment are the pillars for ensuring beauty and the development of both flat and heeled shoes will follow the trend. L’Oreal Corp musters its pioneering capabilities to sustain the neighboring society, safeguard the terrestrial attractiveness, and present entries and consumptions of merchandizes that enhance human comfort.
The management of the innovative shoe products as well as the innovation process is a collective responsibility. The company draws on a pool of diversified teams that easily comprehend the richness of L’Oreal Corp brand portfolios and the new designs of shoes. In fact, the company recognizes beauty and has made it its universal project for the prospective years.
However, research is perceived to be the focal point for L’Oreal designs of shoes. For example, the company reported a remarkable performance in the fiscal 2011 from the development of a new molecule called the LR 2412. The molecule is a dynamic anti-ageing products ingredient that has outstanding properties that mark the opening of an extrapolative assessment center, which can hardly be emulated by global market competitors.
To the management of L’Oreal Company, research and innovation reinforces the corporation’s global presence by making every market to act as a creative source for globalization and market dominance.
To manage its innovative capacity, L’Oreal has considerably increased its research investments in the development of new products designs such the flat and high-heeled shoes. For the company to develop to a novel shoe product, the groups are motivated to carry out research on the product viability.
For instance, if the clients show interest in a particular beauty or design of shoe product that is likely to increase the company’s profitability, L’Oreal will ensure that adequate resources are invested in the product to warrant its safety, efficacy, and quality. Its team of employees comprising of 69,000 workforce shares the innovative and excellence culture by drawing on over 100 years beauty and cosmetics expertise experience (L’Oreal, 2011).
These clearly demonstrate the L’Oreal workforce collective willpower to realize further advancements in the universal beauty via scientific research and innovation. The design of shoes and their packaging are simple but unique hence can be easily managed using the available packaging and manufacturing machines.
The new designs of flat and high-heeled shoes will tailored to meet the demands professional women aged thirty years. The production cost will be minimized to ensure that quality shoes are traded at lower prices to increase the quantity of shoes sold, augment sales returns, and increase the number of purchases. In fact, the newly designed L’Oreal shoes will keep the brand image, but introduce a newfangled logo while satisfying the demands of consumers with middle and high incomes.
The distribution channel and sales management strategies
The market for shoes is varied and comprises of the individual consumers aged between the years 15 and 64. These categories of customers are always inclined to buy products that are unique or innovative. However, the newly designed L’Oreal shoes are meant for the professional, working, and middle aged women who earn between high and middle incomes.
To ensure that the newly designed L’Oreal product brands reach the intended pool of consumers, the company uses various distributing channels such as the international and external distributors (Miércoles, 2012). All the distributors are strategically located to ensure that the global consumers can easily access them to buy the new brands of shoes.
Given that the global shoe market currently undergoes significant transformations, the company will annually take decisive steps to warrant that the best, innovative, unique, beautiful, and priced shoes are availed to each consumer. With an administrative structure founded on the distribution channels and different global brands, the new designs of shoes will reach all clients regardless of their purchasing power and behavioral patterns whereas permitting the company to distribute its products in all the targeted nations (Gay, Charlesworth & Esen, 2007).
Understanding and fulfilling the demands of the targeted markets is somehow complicated given that consumers hardly trust new products in the market (The Boston Matrix, 2012). Nevertheless, L’Oreal Corporation strategically manages its product sales by researching and understanding the consumers’ tastes as well as considering and producing what the consumers look for, their targets, and motivations.
As a fresh product in the global market, L’Oreal will adopt various sales management strategies to increase its market presence and dominance. First, the company will offer different designs of the new shoes including high heeled and flat-soled shoes with different colors.
The strategy is intended to differentiate L’Oreal shoe brands from those of other market competitors and satisfy the varied consumers’ demands. Second, all the designs of L’Oreal shoe brands will be packaged in golden boxes bearing the company’s names in front of the wrapping box.
Marketing mix strategies will be applied when marketing the L’Oreal shoe products in different regions. First, in the principal markets such as Pacific, Asia, and Western Europe, each pair of shoes will be sold to the target market at around $ 60-80.
The pricing strategy will ensure that the company does not charge higher prices for its products when other competing corporations offer almost similar products are lower prices (West, Ford & Ibrahim, 2010). In fact, charging a price that falls within this bracket will assist in keeping L’Oreal in the market while increasing its total sales.
Second, the company’s sales of the new designs of shoe will be maintained via tactically placing the L’Oreal flat and high-heeled shoes in the luxury shoe stores and outlets such as the Kurt Geiger. Besides, L’Oreal will aim at distributing, serving, and placing most of its shoe products in the principal markets such as Pacific, Asia, and Western Europe (L’Oreal, 2011).
Third, the sales and marketing of L’Oreal Corporation shoes will be enhanced through the utilizations of various advertising and promotion strategies. For instance, the company plans to use point of sales discount, billboards, discount coupons, television, and the internet in promoting the newly designed shoe products. The company also intends to maintain the quality of its products while minimizing the production costs to boost the global share in the shoe market (Piercy, 2009).
The ethical and social issues
While L’Oreal Corp intends to introduce a newfangled product (shoe) in the global market, the company is strongly committed to observe and spearhead sustainable and shared growth. The company has laid groundwork for long-lasting growth while anxiously protecting the future.
L’Oreal employees and management strives to build up its presence in the emerging markets through the application of the basic principles of good corporate inhabitants. In fact, the shoe and beauty products tendered by L’Oreal to the clients meet the maximum excellence principles. The company’s commitments towards social and ethical issues are identical in all the outlets run by L’Oreal (L’Oreal, 2011).
Furthermore, each of the manufacturing centers adheres to the standards concerning reducing ecological footprints and minimizing discharges. L’Oreal Corp conducts audits at the plant suppliers whereas all subsidiaries take part in various community funding programmes. For instance, the company has set up various initiatives to ensure that local suppliers are committed towards supporting the deprived workers as well as the disable employees.
In matters pertaining to safety, L’Oreal ensures that the operating segments closely attend to problems encountered by employees working in the manufacturing sites. The workers are adequately trained to examine the safety minutes and comply with security regulations to shun and prevent the occurrence of daily accidents (L’Oreal, 2011).
The recommended control and evaluation methods
L’Oreal Corp is yet to introduce its newfangled shoes into the global market. However, it is important for the company to shun price wars to have its shoe and beauty product first established in the international markets. Price wars may make the products lose their eminence and report a decline in sales. Besides, the company must reduce its product promotion costs as well as the coupon discounts offered at the point of sales to avoid incurring unnecessary costs.
To evaluate how L’Oreal beauty and shoe products perform in the global markets, it is important for the company to utilize marketing metrics. The marketing metrics must incorporate the corporation and its business division returns, marketing return on investment and marketing profits on the new shoes, along with the product performance measures.
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