L'Oreal's Entry in the Chinese Market - Coursework Example

 1. Introduction The increase of globalization has led many firms to develop their presence in markets internationally aiming to improve their position towards their competitors. Despite the fact that the development of the firms in the international market has been unavoidable, it seems that the strategies employed for the establishment of firms in markets worldwide has not been appropriately reviewed; in this context, many firms have to cancel their plans for expanding in new markets while other suffer severe damages from the specific initiative; however, expanding internationally remains one of the most important strategic decisions in terms of the benefits for a firm’s performance. L’oreal is one of the most known Fast Moving Consumer Goods (FMCG) worldwide; one of the factors that led to the firm’s development in the global market has been its ability to adapt its operational policies on the local ethics/ principles – referring to the foreign markets in which the firm has entered successfully. Current report focuses on the plan of the firm to enter the Chinese market; its employees have supported the firm’s efforts but issues of communication have appeared. These issues need to be appropriately addressed early in order to avoid severe damages later. The relevant literature has been used in order to highlight the key communication issues related in the efforts of firms to enter the Chinese market; the specific initiative of L’oreal is strategically valuable but need to be appropriately reviewed – taking into consideration current market trends, the similar policies of competitors but also the consumer preferences in the targeted market – these preferences are likely to affect the firm’s performance in the particular market. 2. L’oreal (UK) limited - Internationalization of the firm – issues for consideration The entrance of a firm in a foreign market needs to be developed through a specific methodology – aiming to reduce the risk related with this initiative. In most cases, firms that operate in the international market have the necessary strategic framework in order to face the problems that would be related with such projects (Stanco, 1995, 24); however, there are cases where the local cultural and social characteristics are difficult to be addressed – especially in cases where the targeted market has a different social background compared to the firm’s culture – for instance Asian markets have different ethics and culture compared to the markets in the West or the markets in Middle East (Kotler et al., 2008, 35). For this reason the firms that are interested in entering a foreign market need to take into consideration the following issues: a) the support of employees in these projects is critical for the success of the whole effort; if resistance is developed within the organizational environment it is difficult for the firm’s managers to develop the appropriate schemes for the firm’s expansion, i.e. if operational problems in the existing firm’s units need to be resolved no critical projects – like the expansion of the firm in a foreign market – would be developed since the chances for their success would be limited, b) the culture of the firm’s place of origin is important to understand the culture of the target market; however, if major differences exist between the two cultures, then there would be no particular point in using the former (culture of the place of origin) as a basis to develop the policies for entering the foreign culture, c) the existing resources need to be taken into consideration when developing such plans; in fact, the firm’s available resources would be reviewed in advance, i.e. at the planning phase of these projects, d) the similar practices of competitors – especially those that already operate in the targeted market – would be of particular importance in order to identify the strategies that would be appropriate for the specific initiative, e) towards the same direction, the performance of such initiatives in the past would be taken into consideration; through these initiatives it would be possible to identify the potential risks but also to evaluate the chances for success. At this point, it would be necessary to refer to the role of the firm’s leader; effective leadership is a prerequisite for the successful development of a firm in the international market; in cases of firms that already operate globally – like in case of L’oreal – the ability of their leaders to respond to the challenges of the global competition have been tested; however, each time that a new strategic initiative is planned it is important that all its phases are carefully reviewed – even if the experience on such projects is important and no major difficulties are expected in this project’s realization. Regarding the above, the development of the firm’s activities in the Chinese market would be related with specific criteria: a) the ability of the firm’s leaders to understand the local market’s needs and characteristics, b) the ability of employees to respond to the demands of customers in the specific market – understanding of the local culture and ethics is critical in order for the firm’s employees to be able to perform well within the Chinese market taking into consideration that the cultural differences from the Western market is significant, c) the communication between the employees and customers in the Chinese market may be problematic; the understanding of local culture, as explained above, is an important criterion for responding to this market’s demands but there are also other issues that need to be addressed, for instance the ability of the customers to understand the marketing policies or the customer support schemes used by the particular firm. Under these terms, the effective communication between the employees and customers in the Chinese market is a key criterion for the successful operation of the firm in the particular market – the other challenges related with the specific project can be effectively addressed using appropriately customized policies, in the context described above; however, communication remains a critical factor of the specific initiative since it is difficult to be developed – referring to the effective communication in the context of the promotion of the firm’s products in the Chinese market. 3. Entry in the Chinese market – communication issues As noted above, the effective communication is a prerequisite for the success of L’oreal in the Chinese market; at this point, the concept of communication needs to be revised; communication does not involve only in the customer services sector but it can rather involved in all the firm’s activities – referring to the attempted initiatives – in the Chinese market. In this context, the firm’s marketing campaigns in China is a form of communication between the firm and its potential customers (Kerin et al., 2003, 15). The negotiations between the firm’s managers and the local authorities regarding the expansion of the firm in the Chinese market are another form of communication. In accordance with the above, the communication issues that the firm may face in China would be involved to the following facts: a) differences in the ethics regarding the marketing campaigns; in the Chinese market the rules regarding the ethics in media and the press – and any message that can is published so that it can be accessed by all people – are quite strict; this fact should be taken into consideration by the firm’s marketers when the firm’s marketing campaign in China is planned (Mukerjee, 2007, 64), b) differences in the consumer preferences compared to the Western market; these differences are not expected to be major but still the consumption trends and characteristics are likely to be slightly differentiated compared to the markets of the West – taking into consideration especially the British market where the firm is based, c) the terms of trade in China are different than in countries of the West; negotiations with the local authorities is critical for the successful entrance of a firm in the Chinese market; on the other hand, even after the establishment of the firm in the local market, the communication between the foreign entrepreneurs and the authorities need to be continuous and detailed; the failure of a firm to respond to the standards of the Chinese market – referring especially to the quality of products may lead to severe consequences – the existing legal framework for damages in health through products of mass consumption is extremely strict (Hollensen, 2009, 17). Under these terms, communication is an essential part of the firm’s attempt to enter the Chinese market; communication in this case is related to different phases of the specific project and can have different forms – in the context described above. Therefore, the policies developed by the firm’s managers in relation to the specific initiative should address all communication issues that are expected to appear during the effort of the firm to enter the Chinese market – these issues are also likely to affect the firm’s performance in the Chinese market – referring to the post-entrance period. 4. Conclusion The expansion of L’Oreal in the Chinese market is depended on the ability of the firm to resolve a series of communication problems that are likely to be involved in the specific initiative. The fact that the firm already operates in the global market can be characterized as an advantage – regarding the ability of the firm’s managers to identify the challenges related with the expansion of the firm in China. However, each country worldwide has its own legal and commercial framework (Mooij, 2009, 14). In this context, even if certain practices have been proved effective in a specific market, it is not guaranteed that will have the same performance in a market with different cultural and social characteristics. Successful communication is a prerequisite for the development of a firm’s activities in a particular market; therefore, the aspects of communication in the context of commerce – as indicatively described above - need to be carefully reviewed if the entrance in a foreign market is attempted. References Hollensen, S. (2009). Essentials of global marketing. Pearson Education Kerin, R., Hartley, W. (2003). Marketing: The Core. McGraw Hill Professional Kotler, P., Armstrong, G. (2008). Principles of marketing. Pearson Education Mooij, M. (2009). Global Marketing and Advertising: Understanding Cultural Paradoxes. SAGE Mukerjee, K. (2007). Customer Relationship Management: A Strategic Approach to Marketing. PHI Learning Pvt. Ltd. Stanco, J. (1995). Utilizing the strategic marketing organization: the modernization of the marketing mindset. Routledge Online sources L’oreal UK Limited, available at http://www.loreal.com/_en/_ww/careers-l-oreal.aspx Read More