Local companies look set to trump larger corporations

By Louise Prance

- Last updated on GMT

Large multi-national cosmetic companies in developing markets are
at risk of being overhauled by smaller, local businesses due to la
ack of confidence in policies and growing consumer loyalty to the
smaller brands, according to a new report.

This is due to fear that larger corporations hold company profit margins in higher regard than consumer satisfaction, and, with the cosmetics industry expected to grow by 64.3 per cent between 2006 and 2010 in China alone, it could mean worrying times for such businesses.

Consumers in markets such as Brazil, China and Russia are increasingly looking to buy from smaller cosmetic companies which retail local, traditional goods.

Market research company Euromonitor, has stated that the larger multi-national companies should look to invest in local businesses in order to retain faith from consumers and 'keep a strong hold on their local markets'.

A loss of confidence in these brands has arisen after numerous companies have failed to recognise growing product safety concerns, which has been highlighted by claims concerning unsafe ingredients dogging both Proctor & Gambles's SKII in China and Johnson & Johnson's baby products in India.

A rise in the number of domestic companies taking advantage of this mistrust could be on the cards, with many starting to compete with companies such as L'Oreal and Shiseido who continue to dominant the cosmetics industry as a whole.

A Euromonitor analyst, Alexander Kirillov, stated "By failing to respond adequately to this crises, foreign companies are under-estimating the power of public opinion and risk losing valuable market share".

Some of the local businesses are being urged to begin developing strong brand images that further drive home the notion that they are the more reliable option.

However, Euromonitor has suggested that if the larger companies retain awareness of the impending situation, it could be worked to their advantage and hold positive connotations for future investments.

"National brands would be well advised to take advantage of this potential growth by promoting themselves as local brands. The emphasis should be on ensuring a high level of product quality and good customer relationship management."​ Kirillov stated.

The report also suggests that striking up partnerships with consumer groups would be another positive move towards building up consumer trust and to 'decrease both the probability and the impact of potential problems'.

Kivilov said, "By cooperating with consumer associations, multinational companies will be better equipped to predict customers' reactions and develop crises management procedures."

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