Lumene in Russia


 1. Noiro had limited experience in international trade; it had only made some occasional exports to Scandinavia and to Russia by mid 1980’s, when it was still part of the Soviet Union. So, when Noiro started exporting all products in the early 1990’s, it was done so without any marketing or exporting strategy, just to make profit for the mother company, Orion. The decision to internationalise was taken after Noiro had secured a strong grip in its home market.

Since Russia was a country whose mentality and culture was already understood by Noiro (and due to its geographical proximity to Finland) it was an obvious first step when internationalising. This is plausible with the concept of psychic distance. Psychic distance is defined as the distance between the home market and a foreignmarket resulting from the perception and understanding of cultural and business differences. (Evans and Bridson, 2005, 70)

The psychic distance between Noiro and Russia was small, making it a natural choice for internationalisation. When the Soviet Union collapsed, a more business-friendly environment was created, and entrepreneurs in Russia and the CIS countries made possible new business opportunities.

Noiro then decided to change its export strategy and the method for foreign operations, by having now 20 distributors in Russsia, that would channel the Noiro products to the stores. The crises of the financial system in Russia of 1995 and 1998 led to the reduction of its distributors, from 20 to 16 and then to only one: Multilink Trading LLC.

This was done in order to change the whole marketing strategy in Russia and to have control over its own brands, since Multilink was the most trusted distributor. This was a risky decision: by consolidating all of its exports to Russia into just one distributor, Noiro was subject to whatever problems would affect the Russian company, like bankruptcy or bad management. In order to prevent this, Noiro eventually moved to FDI when it acquired

Multilink. On the other hand, by staying in the market when many of its competitors left, most notably the foreign companies, Noiro was able to make a strong presence in the Russian market and enjoy that position when the Russian economy stabilized and the markets started growing with the increasing standards of living and purchasing power of the Russian people just a few years later. In the end, we can say that Noiro’s decision paid off as its products now rank among the most sold and profitable in the cosmetics and toiletries markets of Russia.

2. The now Lumene Group faces new challenges in the Russian cosmetics market: with the rise of purchasing power and the new market niches, Lumene must adapt to the new landscape. With stiff competition from the domestic producers and foreign companies, the external challenges are to fend off such competition through new operational and marketing strategies.

Lumene ranks among the highest appreciated brands in Russia amongst women due to its strong connection to the Nordic beauty concept. This is can be fundamental because according to Holt (2004:2,3), brands act as vessels of self-expression and are imbued with stories and ideals that the consumers find useful in helping them build the identities that they want, therefore flocking to the brands that yield those some ideals the consumers admire.

For Lumene to maintain such an imagerie, it is essential that they can control its image and reputation. This means that while dealing with international partners, a strict code of conduct must be held at all times and, as so, Lumene must be able to impose its own marketing strategy on those partners. Another problem is the brand’s awareness in Russia. The Lumene brands, though having a strong loyalty from its consumers, aren’t ranked amongst the highest brands in brand awareness. As such, the marketing strategy should aim at correcting this.

The internal challenges that Lumene face concern which forms of FDI to adopt in the future. It it important to adapt the FDI mode combinations in order to fully grasp the possibilities and potential growth of the market. This will allow Lumene to implement more efficiently its branding and marketing strategies, whether by new joint ventures or simply starting a subsidiary in Russia.

3. Noiro entered in the Russian market by licensing its products to a throng of importers that showed interest in commercializing Noiro products in Russia. Since the Russian business environment was experiencing a fast growth with the downfall of communism and the Russians wanted to import foreign products (which were perceived as having high quality and at affordable prices), it was a natural way of entering the Russian cosmetics market.

The entrance in the U.S. market was done in concurrance with the new exporting strategy after CapMan bought Noiro from Orion. Since the U.S. cosmetics market was in a much more mature stage (low growth and high profitability for the “big players”) than the Russian when Noiro entered it, Noiro had to find a way in which it could reach a strong position fast, otherwise it would take too much time and money to grow and reach profitability.

This was possible when Noiro signed a contract with CVS/Pharmacy, licensing its to products to the drugstore company. CVS is one of the biggest pharmacy and convenience stores in the U.S. – 6,300 stores in 40 states, with approximately $80 billion in annual revenue (data retrieved from CVS Caremark Facts: CVS Caremark [online]) therefore able to reach an ample share of the population and market base of the cosmetics market.

Such contract allowed Noiro to establish itself as a competitor within the U.S. cosmetics market while at the same time free to pursue its marketing strategy of Nordic beauty, which proved to be appealing as well for the north american consumers.

REFERENCESEvans, J and Bridson, K (2005): Explaining retail offer adaptation through psychic distance. International Journal of Retail & Distribution Management, vol. 33, no. 1, pp.6978. Douglas B. Holt (2004): How Brands Become Icons: The Principles of Cultural Branding. Cambridge, Mass.: Harvad Business Press. CVS Caremark Facts: CVS Caremark [online] Available from: http://www.cvscaremark.com/our-company/cvs-caremark-facts [Accessed 2008]