Table of Contents

ABSTRACT

II

INTRODUCTION

III

RESEARCH QUESTION

III

METHADOLOGY/FOCUS

SWOT ANALYSIS

VI

PORTERS FIVE FORCES

ANALYSIS

VIII

ANSOFF MATRIX

CONCLUSION

XII

[Type text]

Abstract
The paper aims to answer the question To what extent has VLCC's growth strategy
been successful to expand their operations in cosmetics in Gurgaon.
Through the companys profile, general information on the companys product and
the current structure of the cosmetics industry were obtained, this paper analyzes
the extent to which their marketing style has been successful and how it has
benefitted the particular organization, moreover based on the study
recommendations and suggestion have been given throughout in each sub-essay.
This particular company was selected as it was relatively new in the cosmetics
industry having been launched in 1989, and in this short span of time VLCC has
managed to create uneasiness among the market leaders by mainly focusing on
building consumer equity through aggressive point of purchase merchandising, as
well as with their extended portfolio and successful market segmentation in
Gurgaon.
With reference to my secondary research, it was found out that the companys core
competitors consisted of strong multinationals that have been in the cosmetics
industry far longer than VLCC; these firms had an added advantage of over VLCC in
terms a high market presence, as well as their products being relatively inelastic,
however these companies unlike VLCC showed a decline in their market share as
companies entered the industry while VLCCs went up.
This paper came to a conclusion that the companys ability to increase its presence
may lie in its focus on its core competencies, which included successful market
segmentation by offering products that catered to the different demographics of
society, however these products lack value for money. Likewise, it was also noted
that the companys promotional mix needed substantial improvement as use of
mass media adverts were only initiated in 2011 onwards and that too with a
strained budget.

[Type text]

Research Question: To what extent has VLCC's growth strategy been

successful to expand their operations in cosmetics in Gurgaon?

Introduction/Rationale

VLCC, is a pioneer in the beauty and slimming category. Since its establishment in
1989 VLCC has gradually diversified to the complete domain of health, fitness,
beauty and wellness, including manufacturing and retailing of herbal personal care
products. It is considered as one of Indias largest Wellness Brand. The services
being offered by them and their current market situation have been listed below:
Slimming and fitness centers-Slimming and welfare centers were only recently
opened in Gurgaon, they were part of VLCCs diversification strategy to enter the
Spa industry, the market for this is estimated at around Rs. 49,000 crore with VLCC
commanding approximately 24 % of the market share.
Branded beauty services- The market for branded beauty centers in India is
estimated at USD 500 million and is expected to grow at 25% per annum, with
demand from over 3 million additional personal care services users over the next 35 years. I personally feel that with Gurgaon being a developing metropolitan, the
firm should open these stores like these, and if successfully penetrated in the
market can result in high profits.
Personal care - The value of the market of Cosmetics products is valued at Rs. 300
billion for product retailing. VLCC is well penetrated in the cosmetics industry in
Gurgaon but the market leaders such as Hindustan Lever, P&G, CavinKare and
LOreal still command significant market share. Some of their best selling products
such as shape up have gained wide popularity in Gurgaon particular between the
ages of 30-64.
Education/Institutes- VLCC is also the only cosmetics firm which has opened an
educational institute in Gurgaon. This institute has its own Training & education
facility which allows them to recruit new people and upgrade skills of existing staff
(each employee undergoes a specified minimum level of training). Whats unique
about these institutes though is that they utilize vocational beauty and nutrition
training which only consists of 3.5% of the USD 40 billion dollar education industry
in India.
The business mix for VLCC for the year 2011-2012 is displayed below:
[Type text]

This extended essay aims to answer the following question To what extent has
VLCC's growth strategy been successful to expand their operations in
cosmetics in Gurgaon?

[Type text]

Approach/Methodology:Relevant data was collected about the firm and its location the firm was based in,
the accuracy and relevancy of the data was confirmed with the firms CEO Mr.
Ashutosh Bhardwaj. Secondary research included annual reports, online published
material, Magazines such as Business Times, confidential slideshows provided
by the marketing in charge, Delhi NCR. Primary research on the on the other hand
was based on interviews with various general stores managers, and to test the
validity of their responses, informal discussions with the local pharmacies such as
98.4 and Guardian Pharmacy were also held.
Business Tools Used:-

Swot Analysis- A SWOT analysis was conducted in which highlighted the firms
characteristics in the district of Gurgaon; following this a brief evaluation has also been
conducted.
Porters Five Forces Analysis- This tool was used to assess the firms current standing in
contrast with the competitors in the industry.
Ansoff Matrix- Primarily to get an idea of their current/future products and services that
are/going to be offered in Gurgaon.

Primary Research (qualitative and detailed):

Interviews with the Firms CEO, VLCC Personal Care.

Informal discussions with Pharmacists.
Interview with managers of Cosmetics stores.

Secondary Research (quantitative and generic) :

Online literature On VLCC

Marketing and Promotional Strategy by Darren Gelder, Paul Woodcock
Annual Reports distributed for the firm
Press Releases present on the Firms Website.

Focus:
This study evaluates the current marketing mix used by VLCC as well as an in depth
analysis of the companys current implemented strategies, post a thorough analysis.
I will also be suggesting some ways which help them increase their profits and
increase their firms presence throughout Gurgaon.

[Type text]

Before divulging into a deep analytical study of their marketing strategies, I would
first like to outline the companys chief characteristics as it would be appropriate to
get a gist of the companys internal as well the external standpoints. I have done
this through a SWOT analysis. This is basically an analytical tool which evaluates the
internal strengths, Weaknesses as well as the external opportunities and threats
involved with in the firm. Note: This analysis is for the firms Gurgaon
Division.

Strengths
-

Relatively strong capital base.

Strong brand equity, through aggressive
point of purchase merchandising and
display
Focusing on all age groups.
Attractive marketing schemes to lure
customers.
Personal Care category strongly supported
by socio-economic change
A diverse product range.
Strong control over its own distribution
channel.
Strong E-commerce base through
Flipkart.com

Opportunities
-

Gurgaon largely influenced by Western

culture.
Booming Indian Economy.
Indian market getting more fitness and
fashion conscious.
Age distribution in Haryana accounts for
66% of the population aged between 15-64
years, this age group is more versatile to
skin care products.

Weaknesses
-Product availability
-Target Market
-Relatively High pricing as compared to
its competitors
-Promotional strategies

Threats
-

Highly competitive industry, leading to

price wars.
Very Low barriers to entry.
Unexplored markets.
Inflation
Rupee depreciation, leading to reduction in
consumer spending.
Due to currency depreciation, prices of raw
materials have also increased

Gurgaon is one of Indias fastest growing metropolitans, and as such VLCCs rapid
growth in the cosmetics industry is only justifiable. VLCC has successfully
penetrated the cosmetics market by segmenting the market by using diverse
product portfolio that is focused on all age groups; they have also taken advantage
of the rapid socio-economic changes (the degree to households have changed with
respect to their income) as most of their diversification ventures such as their day
spas have turned out to be a success. However VLCC products are not freely
[Type text]

available throughout Gurgaon, for example in the past their products were only
being sold in prime locations such as Galleria market and high end shopping malls
such as MGF metropolitan. But VLCC has taken this problem into account and has
only recently started distribution to general stores such as Big Bazar and
pharmaceuticals such as 98.4, Guardian etc. However Pharmaceuticals in some
cases often persuade a customer to buy a product from the market leaders such as
Lakme, LOreal, and Unilever as they are market leaders in the industry. Another
issue that I have identified through primary research is that a consumers
perception of VLCC products is that of a premium brand, this may be due to higher
pricing combined with lack of promotional activities taken by them. VLCC does
however have a number of rivals largely due to the fact that that this industry has
low barriers to entry, mainly because the demand of cosmetics is considered to be
inelastic. On the other hand, VLCC cosmetics store which go by the name of VLCC
Personal Care are threatened by their rivals The body shop which have similar
outlets spread strategically in Gurgaon. The body Shop however does have a
competitive edge over VLCC as their outlets offer more variety in terms of
Accessories, Accessory bags as well as ayurvedic products. 1

1 http://www.indiaretailing.com/news.aspx?
topic=1&Id=6576http://www.thehindubusinessline.com/industry-andeconomy/economy/article2686826.ece

[Type text]

The cosmetics industry is a highly competitive one, and for a business to grow, it
needs to have some degree of control over its stakeholders, as well as a competitive
edge in the industry. VLCC through the years has built up a reputation as an
emerging market leader and through its marketing strategies it has also managed
to increase profitability. Porters five forces analysis is a business tool which
basically showcases the businesss position and current situation in the industry.
THREAT OF NEW ENTRANTS: High
Gurgaon mainly consists of nuclear families, with the presence of double incomes.
The increament in the employment of woman has also boosted growth for the
cosmetics industry as women are more susceptible t buy cosmetic products. Low
barriers to entry are perhaps the main reason as to why new entrants can enter the
industry so easily, therefore VLCC must be more competitive with their pricing as
newer firms such as Bare Essentials and Bioline have their products priced below
the average market prices.
Brand Awareness plays a key role here; VLCC has successfully advertised its
products using media and has planted their exclusive stores shopping districts such
as Galleria and MGF shopping mall. However VLCC products are not widely available
in stores yet, because of this VLCC have not completely been able to achieve high
economies of scale. VLCC products are also marginally overpriced when compared
to its rivals for example: Shahnaz Husain Forever Herbal Sunscreen costs 130
while VLCCs sunblock costs 215
THREAT OF SUBSTITUTE: HIGH
The cosmetics industry already boasts of a large number of firms, for VLCC to create
awareness among the consumers; it must offer in innovative products. The
company faces stiff competition from companies such as BIOTIQUE, Olay and
Aroma Magic. Although the company has its prices set lower than the market
leader Olay, its prices are still higher than its other competitors.
Post-Interviews with local pharmacists, it was found out that the sales of VLCC
products have also declined due to people preferring Ayurvedic products from firms
such as Forest Essentials. The negative hype created by the media regarding the
harmful chemicals involved in cosmetics has only made the situation worse, which
has resulted in sales of VLCC products have declined.

[Type text]

BARGAINING POWER OF CUSTOMERS: VERY LOW

VLCC products are given a fixed retail MRP which is decided by the company.
Pharmacists, general stores and even their exclusive stores are not permitted to
offer a price over and above the MRP of the product; VLCC however does offer
promotional schemes from time to time, these are mainly seasonal or festive
discounts which attract the buyers attention.
Cosmetic products tend to elastic in Gurgaon, due to the large number of firms
already in the industry, however firms closely follow the prices set by the market
leader Olay, VLCC on the other hand positioned itself as a brand with value for
money.

BARGAINING POWER OF SUPPLIERS: HIGH

Although VLCC is a well-established brand, it will easily be able to bargain with its
suppliers on raw materials. The reason being that there are a large number of
suppliers in the industry and switching costs involved from switching to one supplier
to another is negligible. VLCC therefore has a high degree of control over the price
of the raw materials.
With reference to their distribution system, the company strictly follows a channel
one distribution system which consists of VLCC first supplying to the wholesaler,
then to the retailer and finally to the consumer. Since VLCC has its own factory
operating in Haridwar, it therefore has some control over the two stages between
the producer and the consumer, i.e. wholesaler and retailer. By having a strong
distribution channel, it will allow VLCC to produce their product without any
bottlenecking.
COMPETITIVE RIVALRY WITHIN THE INDUSTRY: VERY HIGH
VLCC faces stiff competition from the likes of BIOTIQUE, Aroma Magic and Suncross
Ranbaxy. Many players exist in the market besides VLCC, and any change in price,
quality, technology, service or innovation by one firm will affect VLCCs performance
in the industry.
The firm however also has spa chains spread across the district with the name of
VLCC WELLNESS, which is an advantage in terms of a promotional technique.
VLCC wellness centers use VLCC products for spa treatments. The consumers
attraction towards the product will only increase because they are more willing to

[Type text]

buy the products used in the spa. The only other firm doing an operation similar to
this is Lakme who have Hair Saloons operating in posh areas. 2

To determine as to which market growth strategy had been the most successful in
Gurgaon, I will be using the Ansoff Matrix, the Ansoff matrix shows four ways
through which a business can grow, and helps firms think about the risks associated
with each option. The matrix showed below shows VLCCs current growth strategies.

Products
New

Existing
Market Penetration
-

Existing
Market

No. of outlets increased from 1 to 3.

Products priced above Rs.150 have select
beauty outlets
The implementation of modern trade
facilities has made more products available
in a short span of time.

Product Development
-

Introduction of spa services, ayurvedic

massages, hair streaking service, nail art.
Select spa outlets for example: in Palam
Vihar feature high end body massages and
skin treatments.

2 http://www.gcimagazine.com/marketstrends/regions/bric/30806969.html?
page=3http://www.indianexpress.com/news/govt-reduces-excise-duty-service-tax-by-2-percent/427514/
http://www.gcimagazine.com/marketstrends/regions/bric/5950166.html
http://www.gcimagazine.com/marketstrends/regions/bric/30806969.html
http://www.carefair.com/skincare/Nanotechnology_in_Cosmetic_1420.html
http://nanogloss.com/nanotechnology/applications-of-nanotechnology-in-perfumes/

[Type text]

Market Development
-

New

Residents Welfare Association contact

programmer.
Advertisements in newspapers, magazines
and Televisions.

Diversification
-

Open day Spas.

Introduction of laser therapy and Botox
services in Existing VLCC wellness
outlets.

Evaluation
1) Market penetration is a low risk growth strategy that aims to achieve growth by using existing
products to increase its market share; VLCC has adopted this strategy by opening its VLCC
Wellness spa in DLF Galleria, as well as VLCC Health Care facility in DLF Phase I and Palam
Vihar. These stores offer the same services in each store, and often sales promotions such as their
Valentines Fest offer which offered females a full makeover for a discounted price of Rs. 999 as
compared to the pre-discounted price of Rs. 1600. VLCC has also opened exclusive cosmetics stores
by the name of VLCC beauty care in high profile locations such as the MGF metropolitan mall;
these stores house high priced FMCG products such as their gold, diamond and Pearl Facial kits.
Their staff manly consists of rookie VLCC wellness employees initially being trained in the
cosmetics store. A market penetration however has limits and once the product has been saturated, the
firm must advance to another strategy, as for VLCC to gain higher market share, it will need to
account for lower profitability and higher expenses.
2) When launching an existing product in a new market i.e. market development, a firm must largely
focus on promotional activities. This strategy is a very risky one the firm will need to heavily invest
in admininstrative and promotional expenses, however due to VLCC being already established in
Gurgaon, this strategy may be beneficial for them. In recent times they have launched many products
with the most recent being their mens range. To promote this range they had held various advertising
campaigns across Gurgaon, such as associating with the Residents Welfare Association (R.W.A) of
Uniworld City (a residential compound), they had distributed trial sachets to create awareness
amongst the residents. They have also advertised in various magazines such as Mens health and
Femina, as well newspapers such as Times Gurgaon which is the most popular newspaper
supplement being read in Gurgaon. VLCC annually spends around 15% of their marketing budget
which is approximately 45 crores on digital advertising and their investment in this sector has proved
to be highly beneficial for them, as shown by success of their anti-pollution range which was heavily
marketed in 2011.
3) Product Development is a high risk growth strategy, since it primarily involves introducing a new
product in an industry; it requires high investment in the Research & Development department,
however a company such as VLCC which is already established in the market will greatly saving on
promotional as well as marketing costs, as they will be catering to a similar market as well using the
same distribution channel. For example, VLCCs health care facility which was first inaugurated in
2011 provided services such as slimming, beautification as well as being a fitness center, at first this
facility proved to be a success however as time passed it began to face competition from outlets like
The Nail Lounge and The Body Care which offer similar services, however to combat this VLCC
has introduced unique services such as such as ayurvedic massages, hair streaking services and nail
art. These services were only launched in Q1 of 2012 to diverge their customers from their
[Type text]

competitors. To test their effectiveness Performance for Q2 was then evaluated, and it was found that
approx. 30% of their revenues were from customers who had previously visited the spa in 2011, and
10 % of their addition revenue was from customers who were previously accustomed to going to The
Body Care.

4) Diversification is a strategy that stands out in the matrix, as it requires a company to innovate and
develop new skills and techniques, although it is considered as a risky one, if properly honed it can
reap great benefits for the company, however it must only be adopted once a company has managed
to become financially strong. VLCC through the years has not only gained a high market share in the
cosmetics industry, but has also diversified into the spa industry by launching open-day spas by the
name of VLCC Wellness. The only one currently operating in Gurgaon is in the DLF Galleria
Market. This is an appropriate location as it is surrounded by huge residential complexes such as The
Hamilton Court and Ridgewood. This spa however faces stiff competition from The City Club
which is a resort cum spa and is placed directly in front of Galleria market. Nonetheless, unlike
VLCC who charges an amount of Rs.1600 for its Abhyangam (Full body massage) and
Shirobhyangam (Head massage). City Club demands a down payment of Rs. 80,000 as well as an
annual yearly amount of Rs. 10,000 for continuous usage of the clubs amenities such as its salon and
Sauna&Steam facilities. The company may also diversify in the industry by introducing add-ons for
their current products, for example VLCC can follow The Body Shops strategy of introducing
pricing schemes for their cosmetics hand which are given free along with a minimum purchase of Rs.
1500. 3
Conclusion
This paper came to a conclusion that although VLCC has marked a niche for itself in the Cosmetics
industry, their marketing style can further be improvised to increase their presence in Gurgaon.
Firstly, the company must penetrate deeper into the market and increase distribution by enhancing their
service levels, Market leaders such as Unilever had initially started distribution in medical stores but as
the demand for their products increased, they were forced to increase distribution to malls and grocery
stores, employing more distributors was the key to because the existing number could not handle the
demands of the consumers. Similarly, VLCC must step out of their comfort zone and employ more
intermediaries other than Rahul enterprises as they simply cannot handle the increasing demand. This
is a risky strategy as it high investments, however if successful this can greatly increase the companys
market share.
Secondly, Consumer trials must be encouraged using aggressive penetration pricing for their product
samples and salesmen be placed at densely populated areas such as the IIFCO Chowk Metro Station
and Ambience Mall , this will not only maximize the potential of existing markets but increased
awareness of the products will help the consumers make a comparison between their existing
consumables and VLCCs products. Nonetheless widespread test marketing, can also make the product
available to their competitors particularly Biotique, it can also give them the opportunity to set their
pricing or research and development according to the product. Also if the product being marketed has a
3 http://www.vlccwellness.com/India/center-locator/http://www.marketing91.com/ansoffmatrix/
http://mmoorejones.com/tag/ansoffs-matrix/
http://www.exchange4media.com/46023_vlcc-to-focus-on-tv-gets-jwt-on-board.html
http://glamgold.com/?p=10478

[Type text]

short product development lifecycle, it will appear as though the product has been copied as products
following a similar concept may start appearing in a short time span. An alternative is to conduct this
marketing at a small scale with tight privacy requirements.
Marketing wise, the company must use through the line advertising techniques, as it has focused more on
BTL(Below the line) rather than ATL(Above the line). For BTL techniques, the company can cross
promote with gyms such as Golds Gym and local beauty parlors in terms of them using the companys
products. The particular advantage of this sort of promotion is that it gives the company the ability to
target customers which it may have not even considered in the first place for example: fairness face
washes target for men may be discovered and then used by teenagers; this will in turn broaden the market
reach. Moreover for ATL, VLCC can use mass media such as television and radio advertising to promote
their Fuel for Men, grooming range which is directly competing with Garniers Mens Fairness
Wash. Furthermore, Television advertising has the added advantage of being a visual medium, as it
attacks the pathos of the viewers by conveying their message with sight, sound and motion. Also the
increased availability Independent stations and cable offer new opportunities to pinpoint local
audiences that may be unaware of VLCCs products.
Overall, considering the young age of the company compared to their rivals VLCC has garnered a
respectable market stand through its successful market segmentation and product differentiation.
Although a great amount of investment will be involved solutions suggested in this study, if implemented
they will reap higher profits for the company as well as accomplish their objective of a higher presence in
Gurgaon Cosmetics industry.4

4 http://smallbusiness.chron.com/three-major-disadvantages-test-marketing20409.html
[Type text]