Cultural Differences and International Business Strategies: A Case Study of L'Oreal

This essay discusses the impact of cultural differences on international business strategies, with a case study of L'Oreal. It covers communication, workplace etiquette, and organisational hierarchy.

Running Head: Strategic Management
Strategic Management
Essay
System04104
1/23/2019

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Table of Contents
Introduction...........................................................................................................................................2
Discussion..............................................................................................................................................2
Culture and Cultural Differences in International Business...............................................................2
Culture’s Effect on International Business Strategies........................................................................3
Cultural Factors affecting organisational Business Strategies in foreign countries............................3
Example: L’Oreal International Marketing Strategy considering the cultural differences.................4
Cultural differences and how it influences the business strategy......................................................5
Conclusion.............................................................................................................................................8
References.............................................................................................................................................9

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Introduction
The modern era of business is the era of globalisation and internationalisation, and these both
become of great importance in modern days of business. There are large numbers of
companies are starting to look abroad and expand their business in the world in different
countries as more and more countries are now interconnected with each other. However, to
manage and expand the business in other countries has become a great challenge for
international business in recent days. The globalisation factor and world economy force the
business organisations to come out from their traditional thinking of home or domestic
market, and instead of this, they are required to looking at the business from a global
perspective (Ardichvili, et. al., 2012). To succeed in this tough and throat cutting
competition, it is essential for every business organisation to adopt the global marketing and
business strategies because the moving the business of company from the home market to a
new geographical market is of great importance for the company success and for their
profitability. An organisation faces many challenges such as cultural differences, language
barrier, working conditions, and different government rules and regulations related to
business operations and taxation policy. Apart from this political, legal, and economic
environment is also important for doing international business. However managing cultural
differences is a tough job for any business organisation when an organisation decides to go
beyond the home market for doing business across the boundary (Leung and Cohen, 2011).
Discussion
Culture and Cultural Differences in International Business
‘Culture' refers to a group of community of which share common principles, values, ethics,
tradition, ethnicity, religious views, and experiences that helps them to understand the world.
It includes family, groups, society, or our country where we are born into, such as national
origin, class, gender, race, or religion etc. As international perspective, every country has its
own culture where people live their lives in their own style, follow their own tradition,
belongs to a different religion, and they follow different business culture (Barrera Jr., Castro,
Strycker, and Toobert, 2013).
Although there are numbers of ways to define culture and cultural difference, in an
international business framework, what is accepted or common for a business organisation

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and its professionals in their home territory, could be totally different in other countries
(Matei and Abrudan, 2016).). It might also different for the same organisation and for the
same professionals who are working in other countries.
Most of the HR leaders and CEO's of the international companies recognize that culture plays
a vital role in any business organisation and drives people's actions, novelty, behaviour, and
the customer service. A large number of people believes that culture is a potential
competitive advantage. Culture is a business issue rather than an HR issue.
Culture’s Effect on International Business Strategies
In the business world, culture is always treated as an important factor in success. There are
many accepted ways to classify cultures. The culture of a country can be defined in terms of
values, belief, attitudes, social culture structure and so on. There are two theories on which
culture can be determined: Kluckhohn-Strodtbeck theory and Hofstede theory.
The Kluckhohn-Strodtbeck theory is analysing the cultural differences on six factors such as
Nature of people, focus on past and future events, relationship with nature, the privacy of
space, temporal orientation or belief in individual and group responsibilities for personal
well-being. However, the Hofstede theory analyses the culture differences on six dimensions
such as individualism vs. collectivism approach, Power distance index, the dimension of
national culture, masculinity vs. femininity, and equity vs. inequality etc. (De Mooij, and
Hofstede, 2011).
Cultural Factors affecting organisational Business Strategies in foreign
countries
Attention to cultural factors that create a cultural difference in the international market is very
crucial because language, lifestyle, religious view, values, norms, is different from one
country to another. The Traditions, customs, and culture of products consumptions help a
company to determine its business strategy in a particular company (Gröschl, 2011). For
example, driving seats in some countries are on the left side of the vehicle, while in some
countries it is allowed to be on the rights side. Thus, a car manufacturing company must
research and know that which country prefer what kind of driving seat. An organisation
should research the culture of a country and compile the plan according to consumption
habits, taste, public culture, etc. because a product which is warmly welcomed in one country
may be denied by other market or less received by the consumer in other countries (Vom

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Brocke, and Sinnl, 2011). Apart from this, when an organisation decides to perform overseas
business then it is essential to know the strategies related to packaging style, strategies related
to negotiation pattern, and about the regions of people in the same country. Culture awareness
also reflected the awareness of an organisation about the desired product appearances and its
customized features that are different for different type of people. In different countries, even
the same colour has a different meaning (Čater, Lang, and Szabo, 2013).
For example, MacDonald is a great example of it while serving their Burgers in Europe and
Asian. Thus, the strategy of an organisation must consider the culture of that place where
business has to expand. MacDonald is most famous for its beef burger in European and
Australian countries, but when they served people in the Asian countries then they should
aware that some largely populated country in Asia like India ban the beef burger. Thus, they
can only serve the chicken burger in those countries where beef is not allowed (Peterson,
Arregle, and Martin, 2012). The same situation applied in some Islamic countries where Pork
is not allowed, but beef and chicken are allowed. Thus, before entering the international
market, analyse the culture and understand the difference in culture is essential for any
organisation before formulating their business strategy (Hong and Doz, 2013).
Example: L’Oreal International Marketing Strategy considering the
cultural differences
L’Oreal, which is a French company started in 1909 and known for its first hair colour
products. L'Oreal planed their marketing strategies according to the culture of different
countries in all around the world. The Company dis the research in different countries like
China, Japan, India, and the Netherlands, and understand their culture and living style and
formulate their products according to their cultural needs. This results that the company
became one of the leading cosmetic company in the world and got the highest rating from
customers (Minkov and Hofstede, 2011).
The company started its manufacturing with tight sales and production along with a strong
marketing strategy. After 1912, company's products were distributed in European countries
such as Italy and the Netherlands. In order to build brand Portfolio Company started to
acquire other French companies such as Garnier and Lancome or diversifying in other
markets and that resulted by 1970, eighty per cent of beauty products were come from France
in all over the world. It resulted company became France's leading beauty company and one
of the big names in cosmetic and beauty industry in the world and they after that looking for

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expanding their markets in beyond the domestic market and they entered in a global market
(Thornton, Ribeiro-Soriano, and Urbano, 2011).
L'Oreal mostly focuses on the research and development part, analyse the different cultures
and needs of consumers all over the world. L'Oreal is known for its strong customer
relationship and the company's lifestyle and philosophy to provide more customer satisfaction
by providing quality products. After, 2000 the company focuses on its marketing strategy in
the Asian country especially in India, Japan, and China (Hill, and Seabrook, 2013). Company
analyse the needs of people in different countries and adopt the local cultural values. L’Oreal
analysed the culture of every country and then launched the product according to the need of
their customers. The brands of the L'Oreal are more customary in Asian market while the
brand of product is more of western. Product brands are made up for the persistence of
positioning and differentiation and positioning policies. The company’s more focus is to
know the Asian market and its nature; especially behaviours of customers and what they
prefer and expect as a consumer of Cosmetic products. The large population of Asian
countries also attract the Company to go beyond their domestic market. The company also
tried to know about the skin types of Chinese and Indian people as per their habits. The
cultural and habits of people helps the company to formulate their strategy according to their
need and demands (Cavusgil and Cavusgil, 2012). Thus, Culture was proven to be a crucial
factor that influences the usage of cosmetics. L’Oreal also focuses on Dutch market because
women in the country are assumed to be more independent in compare to other country and
the per capita income of the people is also higher in Netherland. The increasing number of
working females and their habits of using more cosmetics because of their professional lives
attract L’Oreal to enter in the Dutch market. The Dutch women spend a lot on cosmetics and
toiletries products that shows they are more aware of the cosmetics. Therefore, L’Oreal
targets the Dutch market and formulates their cosmetic product marketing strategy according
to the need of females in Netherland.
Cultural differences and how it influences the business strategy
While there are numbers of ways to define culture, but in short it is a set of common and
accepted norms. However, when it varies from one place to another place and even people
work together who belongs to a different community may have a different culture and
thinking style about a particular thing or situation. Although, the cultural differences between
two countries affect the international business strategy of an organisation in three core areas:

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Communication, Etiquette, and organisational hierarchy. Understanding of these three key
areas helps an organisation to understand its customers need, avoid the misunderstanding of
Colleagues and clients in other countries, and provide an excellent growth in the business in
the international competitive business environment.
1. Communication: Effective communication is essential in any business future when
the organisation decides to expand the business in a foreign country. But an
organisation faces difficulties when a real message is not delivered in its actual form
to the employees who belong to other culture or the message getting "lost in
translation" (Andersson, 2011). This communication barrier almost crushes the
organisational strategy of doing business across the boundary with foreign customers
and clients. For example, English is the Facto language of business and it is also an
international language, but more than just a language you speak, it is more important
how an organisation convey and deliver its message to the employees. For example,
while the Finns may value directness and brevity, some Asian countries like China
and India can be more indirect and nuanced in their communication. However, if we
consider China, then an organisation found that people are more usual to speak the
Chinese language rather than English, even English is a business language, and most
of the countries prefer this language as an official business language (Pinto, Serra, and
Ferreira, 2014). Even understanding of non-verbal communication between two
cultures is equally important while doing business internationally. For example, what
might be a place or in a commonplace handshake, making direct eye contact, or kiss
on the cheek could be unusual in some place or even offensive with foreign clients or
colleagues. Thus, dealing with cross-cultural communication can be a challenge for
any organisation. However, approaching these differences with cultural differences
with sensitivity, openness, and curiosity of knowing the different culture help the
organisation to operate the business in a different culture and in different countries
with ease.
2. Workplace Etiquette: Every culture is different and has different types of business
etiquette. Sometimes deals are lost because of misunderstanding and wrong behaviour
of person even between the relatively same cultures. There are many things and
behaviour of a profession determine the direction of business deals while dealing with
a foreign client such as greeting styles, the way of a handshake, the way of addressing
others, communication style, business card etiquette etc. In some countries, business

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cultures are of relaxed in nature while others are serious or disciplined (Ramli, 2015).
For a successful business operation, it is essential that not to offend the people you are
meeting with, adopt the culture of different business culture and operate the business
accordingly in different parts of the world. For example, firmly handshake is the best
way to greet people in Russia and maintaining good eye contact with the people
present during the deal. A business card is recommended to include the Russian
translations shows the respect for Russian culture. However, if we consider Spain,
direct communication and knowing each other at a personal level before a deal is
assumed to be a good thing before a business discussion or deal. Thus, before entering
in international business, an organisation must consider their strategy related to
dealing globally. The concept of punctuality is also an important thing while dealing
in different cultures in an international business environment. Japan is known for their
honesty and punctuality (Shenkar, 2012). Thus, if a business organisation wants to
expand its business in Japan, they must aware about their etiquettes and about their
business culture.
3. Organisational Hierarchy: Organisational hierarchy and attitudes towards
management roles can also vary from country to country or culture to culture.
Whether or not speaking with top-level management, freely speaking in meetings, or
questioning senior decisions etc. are also dictating by the cultural norms. Thus, before
entering in the global business environment, an organisation should understand the
organisational hierarchy in a different country. For example, while operating the
business in Japan an organisation must consider which type of organisational
hierarchy they follow, Japan is known for their traditional values, social hierarchy,
relative status, and respect for seniority (Taras, Steel, and Kirkman, 2012). Thus, an
organisation must change its strategy for determining the organisational hierarchy in
Japan and should bring this work approach in the workplace. The organisation should
formulate their strategy in such a way that defines the roles and responsibility of each
person across the organisation.
However, if consider Norway, which mainly focuses on societal equality tend to have
comparatively flat organisation hierarchy. It means they have relatively informal
communication and they more focus on cooperation across the organisation. The other
example is, where American are tend to arrive few minutes before the scheduled time
of a meeting, Italian or Mexican employees may arrive few or several minutes after

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the scheduled start-time and they are still to be considered on time (Vaara, Sarala,
Stahl, and Björkman, 2012). Thus, an organisation should consider these factors while
expanding the business in such countries.
Conclusion
Awareness about the cultural and social differences is most important for any business
organisation while expanding the business internationally. A variety of culture exists in the
international market and many of them are strange to us. Any organisation want to operate its
business in the global market ought to become acquainted with the culture of the country
where the organisation wants to expand its business. The organisation must aware about the
challenges they face while dealing with the different nature of customer, otherwise, they will
suffer in future and their probability of blundering increases. Adapting the foreign culture and
considering the differences among cultures are the key factors of getting success in
international business. Confrontation with foreign business people is also important because
every culture has its own unique features of dealing and greeting people. However, it is also
considered that the choice of the behaviour of an organisation cannot be inapplicable to the
company's action strategy. Although, an organisation cannot avoid the importance of
appropriate market selection and identification of customer needs. An organisation should
analyse the market needs and then modify their products according to that how different
people in different culture ask same products with a variety of attributes. L'Oreal is a great
example of fine strategy implementation in the international business market. The key factor
behind the success of the company is how they modify their cosmetic products in the Asian
market after analysing the needs of customers, especially in China and India.

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