The Impact of Innovation Intelligence and Entrepreneurship in the Cosmetic Industry in UK and China: A Comparative Case Study of L’Oréal (the UK and China)

Abstract

This research aims at L’Oréal’s innovation intelligence and entrepreneurship in the UK and China. The company has been maintaining great performance in the UK, and it has taken advantage of its entrepreneurial experience and innovation capability to penetrate in China. The purpose of this research is to compare innovation strategy of Loreal in China and the UK so as to provide recommendations for the company.

This research used the following research methodologies including a mixed research-based realism philosophy, deductive approach, case study, questionnaires and convenience sampling technique.

This research finds that localised innovation and customer-driven innovation are two significant factors affecting competitive advantages of Loreal in both the UK and China. Localised innovation, customer-driven innovation and technology-driven innovation have moderate impacts on competitive advantages in China. Technology-driven innovation is the weakest factor in both the UK and China while it is weaker in the UK. Customer-driven innovation is the strongest factor in the UK, but it is the second strongest factor in China. Localisation innovation is the strongest factor in China. This dissertation makes the following recommendations to Loreal. To improve its performance of localised innovation in China, the company should further learn Chinese market and gain insights in order to overcome cross-cultural issues. The company can increase its customer innovation programs in the UK and China enabling more customers to participate in its innovation, thus facilitating customer relationship, loyalty and thus competitive advantages. Technology-driven innovations of Loreal have weak or poor impacts on competitive advantages. It is hard for the company to generate valuable, rare and non-imitable resources and capabilities by technology-driven innovation especially in the Industry 4.0 age.

Further research is advised to use interviews to directly collect primary data from Loreal to further identify those uncovered variables affecting its competitive advantages. Further research can adopt surveys and positivism philosophy to test the generalisation of this dissertation’s results. Additionally, exploring what kind of customer-driven innovations can promote customer relationship effectively is advised.

1.0 Introduction

1.1 Research background

1.1.1 Innovation Intelligence and Entrepreneurship

1.1.2 L’Oréal and its Market Context

1.2 Research Significance

1.3 Aims, purpose and objective of the research

2.0 Literature Review

2.1 Introduction

2.2 Innovation Intelligence and Entrepreneurship

2.2.1 The Impact of innovation intelligence and entrepreneurship on competitive advantage

2.4 Conceptual Framework

2.4.1 Customer-driven Innovation

2.4.2 Technology-Driven Innovation

2.4.3 Localised innovation

3.0 Research Methodology

3.1 Introduction

3.2 Mixed research

3.3 Deductive approach

3.4 Case study

3.5 Data Collection

3.6 Sampling technique

3.7 Data Analysis

3.8 Ethical consideration

4.0 Results

4.1 Introduction

4.2 Qualitative Analysis

4.2.1 Customer-driven innovation

4.2.2 Technology-driven innovation

4.2.3 Localised innovation

4.3 Quantitative Analysis

4.3.1 Demographics of Respondents

4.3.2 Customer-Driven Innovation

4.3.3 Technology-Driven Innovation

4.3.4 Localised Innovation

4.3.5 Correlation Analysis

4.3.6 Regression Analysis

4.3.7 Summary

5.0 Discussion

6.0 Conclusions

6.1 Summary of Findings

6.2 Recommendations

Reference

1.0 Introduction

1.1 Research background

1.1.1 Innovation Intelligence and Entrepreneurship

Innovation has been arising wide attention from both scholars and entrepreneurs. Many previous studies suggest a positive relationship between innovative entrepreneurship and competitive advantages (Dekker et al., 2014 and Unay and Zehir, 2012). Innovation and entrepreneurship have an interrelationship (Drucker, 1985). Entrepreneurs take advantage of innovation to improve organisational performance. They actively identify opportunities for innovations (Drucker, 1985).

However, with the rising technological revolution especially incoming Industry 4.0, innovation is becoming increasingly more challenging and requiring more costs. Large companies need unique human resources and large capital investment for their R&D activities. In the age of Industry 4.0 when AI and big data are becoming mainstreams, many innovations require more expertise and talents related with information technology. However, not all companies have sufficient such human resources and infrastructure for IT-oriented innovations. It is more challenging for non-IT companies to implement innovation. In cosmetic industry, competitors are pushed by the upgrading technology (Szutowski and Szułczyńska, 2017). Competition environment is becoming increasing more intensive when players are more relying on innovations to obtain competitive advantages (Szutowski and Szułczyńska, 2017).

Under such context, it is significant to identify effective approach to conduct innovations. The concept of open innovation aroused that can overcome a company’s own limited resources and capability. Open innovation acquires knowledge and ideas from external environment (Chesbrough, 2006). Under the concept of open innovation, customer-driven innovation has arisen that allows customers to involve in innovation processes and have a collaboration with a company. Customer-driven innovation is expected not only to learn customers’ needs and wants but also to develop customer relationship, show concerns to customers and thus improve customer loyalty (Alam, 2002 and Archer, 2004). This strategy could be effective in those industries where customer relationship is prominent such as retailing and cosmetic industry.

Meanwhile, technology-driven innovation focuses on technological capabilities and resources and starts with technology changes in a company or external environment. In the age of Industry 4.0, technological change is apparent and significant. All companies have to adapt to new generation IT such as 5G. Thus, it appears that technology-driven innovation also is important.

1.1.2 L’Oréal and its Market Context

L’Oréal Ltd is a global leader in beauty products and operates in about 130 countries across five continents. The company’s mission is to offer the best in cosmetic innovation to both men and women throughout the world (Belussi et al., 2015).L’Oréal’s innovation model is anchored on strong research since it deals in beauty products that require application of science to enable it respond to the diverse beauty expectations (L'Oréal Group, 2020). Smart hairbrush is another innovation established through a partnership with Withings and Kerastase, and it helps the company to respond to customers who want to reduce their bad-hair days (Marr, 2019). These innovations have kept L’Oréal alive and competitive in the cosmetic industry. Following great diversity of beauty needs, the company remains open to new exploration fields, which for many years have been its source of inspiration.

In cosmetic industry, product innovation acts a significant role in securing competitive advantages (Kumar et al., 2006). The product lifecycle of cosmetics is relatively short, pushing industry players to continuously involve in product innovation to ensure their competitiveness in the market. Szutowski and Szułczyńska (2017) study product innovation in cosmetic industry and find the strong and more product innovations of L’Oréal enabling the company to have greater competitive advantages against its competitors including Estee, Lauder, and Shiseido. For instance, in 2015, the company launched the Makeup Genius – a mobile app which enables the customers to see hair colour as well as makeup on their faces prior to buying the product (Marr, 2019).  Marr (2019) finds that L’Oréal innovated the Makeup Genius App that has been helping customers to virtually experience the company’s brands in online environment thus increasing sales revenue. The APP was developed on the basis of Augmented Reality (AR) technology simulating and calculating what a customer would look like if she were using L’Oréal’s products and showing the image to the customers. Based on the finding of Szutowski and Szułczyńska (2017) and Marr (2019), it is reasonable to induce that the company has stronger innovation intelligence allowing it to have stronger competitive advantages.

Given that L’Oréal has strong innovation intelligence and entrepreneurship, it can take these strengths to explore Chinese market. With the rise of Chinese middle class, Chinese cosmetics industry is promised to boom. In 2018, China accounted for 12.7% of global cosmetics market, and it is estimated that the market value is expected to reach 485.2 billion in 2021 (Statistics, 2020b). According to Prnewswire (2020), the market share of China is far above the UK (12.1%), the US (10.9%), and Japan (9.2%), and China is expected to have an AAGR of 8.16% between 2017 and 2022. Thus, it is significant to study the Chinese market. Under the fast-increasing trend, it is prominent for Loreal to penetrate Chinese market. According to Mornings (2020), the company’s revenue mainly comes from Western Europe (28%) and Asia-Pacific (32%). Apparently, Chinese market acts an important role in the company’s revenue streams.

However, L’Oréal has to consider a significant issue other than innovation – long cultural distance between China and the UK. Based on Hofstede’s national culture dimensions, the two countries are cultural diverged in power distance, individualism, uncertainty avoidance, long-term orientation and indulgence (Figure 1). In other words, every culture dimension expect masculinity. These cultural differences cause differences in customer’s demands, desires, preference, expectation, attitudes and opinions, based on Hofstede’s culture theory (Hofstede et al., 2010). Also, they affect communication style and perception in accordance with the theory. This means that Chinese customers need different products, promotion and distribution, which requires the company to have different innovations in products, promotion and distribution.

Figure 1: Hofstede’s national culture dimensions, China VS. the UK

(Source from: Hofstede-Insights, 2020)

1.2 Research Significance

This dissertation makes managerial contributions. As mentioned, L’Oréal expect to take advantage of its innovation intelligence and entrepreneurship to explore Chinese market, whereas it faces long cultural distance. Therefore, it is significant for the company to solve this issue. Localised innovation strategy can be a potential solution to improve innovation performance of the company in China. This dissertation offers the company the recommendations about the impact of localised innovation strategy in China based on empirical evidences.

Meanwhile, this dissertation has academic contributions. It attempts to cover three research gaps. Firstly, customer-driven innovation exploits underserved customer demands and offers new products/processes to meet these demands, and in return it can gain customer satisfaction and loyalty (Prahalad, 2000). Many researches prove that customer relationship, satisfaction and loyalty have positive impacts on competitive advantage (Baru, 2019 and Giese and Cote, 2000). However, this research finds no research studying the impact of customer drive innovation on competitive advantages in cosmetic industry

Another research gap is that there are two contrasting viewpoints about technology-driven innovation strategy. This strategy is important that develops corporate resources and capabilities to develop technologies for innovation (Brem and Voigt, 2009). However, such innovation strategy involves high risks and high costs of such innovation (Hervas-Oliver et al., 2014).

Furthermore, the arguments about localised innovation essentially is conflicting. Localisation clashes with standardisation strategy (Ryans et al., 2003 and Muga and Santamrai, 2008) but it can improve local responsiveness thus improving competitiveness (Albaum and Tse, 2001).

1.3 Aims, purpose and objective of the research

This research aims at L’Oréal’s innovation intelligence and entrepreneurship in the UK and China. The company has been maintaining great performance in the UK, and it has taken advantage of its entrepreneurial experience and innovation capability to penetrate in China. The purpose of this research is to compare innovation strategy of Loreal in China and the UK so as to provide recommendations for the company. The expected results can show which innovation strategy (customer-driven innovation, localised innovation and technology-driven innovation) is more effective. Also, the expected results can indicate how to use these strategies in an effective way.

Research Objectives:

To critically review literature related with innovation intelligence, entrepreneurship, customer-driven innovation, localised innovation and technology-driven innovation

To analyse customer-driven innovation, localised innovation and technology-driven innovation in the UK and China, respectively and then make comparison

To discuss results from data analysis with the literature review to conclude research findings and recommend Loreal

2.0 Literature Review

2.1 Introduction

This chapter critically discusses previous literature and starts with innovation intelligence and entrepreneurship. Then, it discusses their impacts on competitive advantages and evaluates previous researches related with them. Finally, it clarifies its own theoretical framework for a quantitative research.

2.2 Innovation Intelligence and Entrepreneurship

Drucker (1985) defines innovation as a specific instrument adopted by entrepreneurs to use change as chance to enhance organisational performance. Brown and Ulijn (2004) illustrate that entrepreneurship is the process of finding out opportunities that hide in environment or can be generated by innovation so as to produce value. Meanwhile, this also aligns with Wickham (2004)’s argument that entrepreneurs operate business in an entrepreneurial manner and develop more innovations to find and take advantage of market opportunities. Based on above arguments of innovation and entrepreneurship, Unaya and Zehir (2012) illustrate that innovation and entrepreneurship is viewed as the art of fully exploiting business ideas and use creatives inputs in cosmetic industry.

A high degree of innovativeness and entrepreneurship encourages companies to improve creativity and increase R&D activities by two approaches: using existing own skills to support incremental innovations; and largely improving own skills or external resources to produce radical innovation (Unaya and Zehir, 2012). Unaya and Zehir (2012) highlight that the purpose of innovation is to facilitate sales performance and competitiveness. This argument is consistent with Carvalho and Sugano (2016)’s interpretation of entrepreneurship orientation theory that a company’s entrepreneurial orientation is related with risk-taking, proactiveness, competitive advantage, and innovativeness. Blumentritt et al. (2005) explain that the factors affecting a company’s processes, decision-making and activities can affect their entrepreneurship.

Since 1934, the value and importance of innovation were identified that drove economic development and entrepreneurs were viewed as sources of innovation (Schumpeter, 1934). There is an interrelationship between innovation and entrepreneurship (Schumpeter, 1934). Then, Drucker (1994) argue a positive correlation between innovation and entrepreneurship.

2.2.1 The Impact of innovation intelligence and entrepreneurship on competitive advantage

Innovation and new ideas come from both internal and external environment of a company (Chen et al., 2006 and Chong et al., 2011). To begin with internal environment, novel ideas and innovation normally result from knowledge transfer between employees regardless of whether they work in one department (Distanont et al., 2012). In other words, cross-departmental knowledge transfer is helpful. For external environment, ideas from suppliers, partners, customers and competitors are important to arouse an innovation (Distanont et al., 2012; Distanont & Khongmalai, 2018). This argument aligns with open innovation theory that highlight the necessity and benefits of absorbing external capabilities and ideas for internal innovation (Chesbrough, 2003). Chesbrough and Crowther (2006) highlight that none of organisations can have all resources and capabilities for innovation. Thus, using external resources and capabilities for own innovation is necessary and beneficial that helps a company to overcome the problem of its limited resources and capabilities (Chesbrough, 2006). Innovation from both internal and external environment can contribute to a company’s competitive advantages. Szutowski and Szulczynska (2017) find that great innovativeness and entrepreneurship empower companies to create those products in accordance with their target customers’ needs and wants.

Dekker et al. (2014) explain that entrepreneurs adopt innovation to push their competitiveness. In order to develop competitive advantages, they have to make new combination of knowledge and then perform their innovation projects. The new combination can bring new manufacturing methods, new products and new process (Dekker et al., 2014). This argument is consistent with resource-based view. The resource-based view argues that resources and capabilities determine a company’s competitive advantages (Barney, 1991).

Unay and Zehir (2012) study the innovation intelligence and entrepreneurship in fashion industry and suggest the importance of innovation management. They mention the impact of product and process innovation on a company’s future competitive advantage. This argument is supported by (Robert, 2004). Unay and Zehir (2012) also illustrate that high flexibility in innovation is important to improve innovation performance. The high flexibility in Unay and Zehir (2012)’s argument accords with some parts of open innovation that offers a company a variety of ways to absorb external resources for its own innovation. Okonkwo (2007) argue that fashion companies have to manage a group of well-developed management instruments supporting great creativity and innovation because customers are becoming increasingly more sophisticated and have higher expectations. Customers in cosmetic industry also show the similar trend. Hence, this suggests that cosmetics companies also need such management instruments.

Unay and Zehir (2012) study innovation intelligence and entrepreneurship in fashion industry by grounded theory. This means that their research does not cover any empirical evidences. Instead, the research deduces the relationship between innovative entrepreneurship and competitive advantages. They highlight high level of innovation and entrepreneurship is necessary and critical for competitive companies. However, this research did not identify any specific strategy or technique related with innovation intelligence and entrepreneurship and offer any empirical evidences.

2.4 Conceptual Framework

2.4.1 Customer-driven Innovation

In order to exploit opportunities, it is necessary to understand target market especially customers’ needs and wants, competitors’ activities and trends, which is associated with market-lead innovation (Prahalad, 2000). Customer-driven innovation strategy aims to identify underserved demands and needs, conduct innovation and meet them (Johnsen et al., 2006). Therefore, in essence, it can improve customer satisfaction and thus loyalty. Furthermore, customer-driven innovation aligns with market-driven innovation that starts with examination of market opportunity, which is consistent with entrepreneurship. Market-driven innovation has positive impacts on corporate performance and increase a company’s responsiveness to market (Bryan and Ferrell, 2000). Also, customer-driven innovation is related with market orientation that emphases on needs and desires of target customers. Market orientation positively affects innovation outcome as it allows a company to rapidly and timely meet constantly changing demands and market environment (Prahalad, 2004).

Customer-driven innovation puts customers as innovation driver and develops products and process to meet their needs and demands (Janssen and Dankbaar, 2008). This innovation priorities the needs and wants of customers and improves products and processes to meet changing customer demands. Data collection for customer-driven innovation is significant that determines the innovation performance. Artificial Intelligence (AI) and big data analytics have been used to collect customer data and increase customer insights. Desouza et al. (2008) illustrate that customer-driven innovation includes the two important processes: to identify the customers and analyse customer information.

Customer-driven innovation is consistent with open innovation that absorbs knowledge and ideas from customers (Janssen and Dankbaar, 2008). At present, many innovation practitioners add customers into their innovation process that develops new products, processes and services (Evans, 2008). Customer participant in innovation process is a new trend and concept and requires changes in organisational structure and strategy (Fuller, 2010). Fuller (2010) agrees that companies recognise the importance of innovating with customers to confront with intensive competition. Innovation orientation has become ‘innovation with customers’, which is consistent with value co-creation theory that highlight the partnership and collaboration between companies and their customers to create more added values (Alam, 2002 and Archer, 2004). Meanwhile, customers show interest in such value co-creation. A customer-driven innovation theoretically can improve customer relationship that contributes to customer loyalty and thus long-term profitability of a company (Alam, 2002 and Archer, 2004). Customers feel that they are concerned and valued when they involve into an innovation program or value creation, which allows the company to facilitate customer relationship and loyalty (Alam, 2002 and Archer, 2004).

Generally, customer-driven innovation exploits underserved customer demands and offers new products/processes to meet these demands, and in return it can gain customer satisfaction and loyalty. Also, such innovation collaborates with customers which facilitates customer relationship and then customer loyalty (Baru, 2019) Many researches prove that customer relationship, satisfaction and loyalty have positive impacts on competitive advantage (Baru, 2019 and Giese and Cote, 2000). However, this research finds no research studying the impact of customer drive innovation on competitive advantages in cosmetic industry. Thus, based on above discussion, this research sets the following hypothesis:

H0: there is no relationship between customer-driven innovation and competitive advantages in cosmetic industry.

H1: there is a relationship between customer -driven innovation and competitive advantages in cosmetic industry.

2.4.2 Technology-Driven Innovation

Technology-driven innovation starts an innovation with technological change (Brem and Voigt, 2009). It also is strongly associated with the resources and capabilities that a company can access or possess (Brem and Voigt, 2009). This innovation is pushed by technological advancements. At present, technologies of Industry 4.0 are rising including AI, big data, blockchain etc. that changes technological landscape and competition environment as well as business model (Ende and Dolfsma, 2005). Under such context, technology-driven innovation is becoming increasing more significant and necessary. This means that some companies adopt technology-driven innovation because of the pressure of market and competitors. Even though technology-driven innovation has no customer participation, it does not mean that such innovation cannot meet customers’ demands and desires. Most of technology-driven innovations have the purpose to improve efficiency and effectiveness (Ende and Dolfsma, 2005).

Technology-driven innovation requires a company to have sufficient resources and capabilities. If these resources and capabilities are value, non-imitable and rare, they tend to allow a company to have sustaining competitive advantages based resource-based view (Brem and Voigt, 2009). Technological innovation performance theory stands at the viewpoint that a company’s technological innovation activities such as R&D activities can predict its speed of technological change (Azubike, 2013). In other words, the inputs in innovation activities affect technological change. To develop value, non-imitable and rare resources for sustaining competitive advantages, a company must have large investment. Therefore, technology-driven innovation tends to be highly costs and risky. Unexpected results of innovation can threat a company’s cash flow and financial health (Ende and Dolfsma, 2005).

Therefore, there are two contrasting viewpoints about technology-driven innovation. The advocators of such innovation highlight the importance of developing corporate resources and capabilities to develop technologies for innovation (Brem and Voigt, 2009). On the other hand, opponents of technology-driven innovation show the empirical evidences supporting the high risks and high costs of such innovation (Hervas-Oliver et al., 2014).

To address the two contrasting viewpoints, this dissertation sets its research hypothesis 2:

H0: there is no relationship between technology-driven innovation and competitive advantages in cosmetic industry.

H1: there is a relationship between technology-driven innovation and competitive advantages in cosmetic industry.

2.4.3 Localised innovation

Localised innovation is to develop new products, process and model for target customers in a host country (Albaum and Tse, 2001). It offers special products and services especially for these customers. Thus, localised innovation can largely meet local customers’ needs and wants and thus allow a company to gain competitive advantage in the host country. This innovation strategy largely improves the company’s local responsiveness, which is associated localisation strategy in international expansion.

Furthermore, localised innovation allows an MNC to demonstrate its concerns and attention to its target customers so as to improve its customer relationship (Hussian and Khan, 2013). By localised innovation, customers feel that they are respected and concerned who therefore tend to have a better relationship with the MNC (Hussian and Khan, 2013).

More importantly, localised innovation aligns with localisation strategy. Localisation is an important strategy for MNCs to explore a foreign market (Albaum and Tse, 2001). It allows MNCs to achieve high level of local responsiveness and strong capability to meet the needs and wants of local customers, thus gaining competitive advantages (Albaum and Tse, 2001). Innovation for localisation is to develop localised products for local demands, which contributing to local competitive advantages.

Cultural differences have strong and negative impact on a MNC’s expansion and performance (Beguelsdijk et al., 2018). They cause divergence in value, attitude, perception and opinion. For MNCs, cultural differences result in variants in communication style, customers’ perception and demands (Ryans et al., 2003). For those foreign markets which are culturally different with home market, standardised process, model and products tend to be hard to meet customers’ demands (Ryans et al., 2003). Target customers in these markets have different demands and expectations for products (Ryans et al., 2003). These show the importance of innovating products and process especially for customers in a host country.

Nevertheless, localised innovation essentially clashes with standardisation strategy. The opponents of standardisation reveal that localisation is costly and negatively affects the consistence of a global brand image (Ryans et al., 2003). Furthermore, the successful outcomes and knowledge from localised innovation in a host country are less transferable and applicable in other countries (Muga and Santamrai, 2008). Thus, the costs of localised innovation are high. Localisation strategy is unable to help an MNC to enjoy economies of scale.

To address the two conflicted viewpoints about localised innovation, this research sets the following hypothesis.

H0: there is no relationship between localised innovation and competitive advantages in cosmetic industry.

H1: there is a relationship between localised innovation and competitive advantages in cosmetic industry.

Figure 2: Conceptual Framework

3.0 Research Methodology

3.1 Introduction

This chapter justifies the rationality of the research methodologies used this dissertation, including a mixed research-based realism philosophy, deductive approach, case study, questionnaires and convenience sampling technique. Also, it illustrates data analysis techniques used for quantitative data (regression, correlation and frequency) and the techniques adopted to address qualitative data (documentary analysis). To be noticed, this set of research methodologies was developed based on Saunders et al. (2019)’s research onion framework starting with research philosophy to data collection techniques.

3.2 Mixed research

This is a mixed research including qualitative and quantitative parts. The qualitative part collected and analysed secondary data related with Loreal’s innovation in the UK and China. This part allowed the dissertation to analyse the company’s innovation in a comprehensive way and to discover insights. Nevertheless, qualitative research’s results are arguable and less convincing (Warren and Karner, 2005), so this dissertation has conducted a quantitative research. Secondly, the quantitative part analysed primary data from 134 questionnaires including 67 China and 67 from the UK. This part analysed data from two countries respectively and made comparison. The quantitative part can offer empirical evidences and use the strict conceptual framework (discussed in section 2.4) to produce reliable and valid findings. However, quantitative research is less effective to study behaviour and attitudes because not all of them can be precisely quantified (Heale and Twycross, 2015). By this mixed research, this dissertation can overcome the shortages of both qualitative and quantitative research and then generate reliable recommendations for Loreal.

The mixed research is developed based on realism philosophy. This philosophy stands at the assumption that reality is independent from people and it uses scientific approaches to develop knowledge (Kothari, 2004). Realism can be divided into two groups: direct realism and critical realism. Direct realism assumes that human perception is the reality in the world, which is related with qualitative research (Kothari, 2004). Critical realism however argues that human perception and sensation cannot validly describe the world (Saunders et al., 2019). Therefore, this dissertation developed its qualitative research by direct realism while its quantitative research was built based on critical realism.

Only use of either quantitative or qualitative is not suitable for this dissertation’s purposes and objectives. Based on interpretivism, a qualitative research focuses on researchers’ perception and experience with the research phenomenon (Saunders et al., 2019). However, it is very easy to bring the researchers’ personal feelings and bias into data collection process thus compromising the reliability and validity of research results. Furthermore, the generalisation of qualitative research’s results is low. This dissertation only has one researcher who was unable to collect a large sample size by qualitative data collection tools. Even though this dissertation focuses on Loreal as a case study, these results are less applicable for the company’s strategy for whole China or the UK. Also, a quantitative research on the basis of positivism has strict research framework and rigour research methodologies which ensure validity of its research but hinder researcher to explore insights and variables outside of the framework (Warren and Karner, 2005). Therefore, this dissertation used a mixed research.

3.3 Deductive approach

Deductive approach was applied to accomplish the dissertation’s objectives and purpose. It makes explanation of an observable phenomenon based on previous knowledge (Saunders et al., 2019). In other words, its findings are supported by previous knowledge. Hence, its findings are convincing and valid. Under a deductive approach, the whole dissertation was built based on reliable knowledge and results of previous researches. With a reliable foundation, it collected valid data and conducted proper analysis. Thus, deductive approach contributes to validity and reliability of the research’s results. Even though deductive approach cannot find out any new theory, this dissertation does not have such plan. Moreover, deductive approach directly aims at research questions and therefore can save research time. This research must be completed within 3 months, so the use of this approach is appropriate.

On the other hand, inductive approach is mainly used to explore new insights and theory, but these new insights can be arguable because they do not have supports of other theories. This approach firstly uses observations to devise research question or objective and then conduct formal research (Thanh and Thanh, 2015). However, reviewing existing theory was enough for this dissertation to design its research question and objective.

3.4 Case study

This research adopted case study as research study that can gain in-depth findings and effectively address those phenomena which incorporated into their context. Case study allows researchers to gain insights (Warren and Karner, 2005). More importantly, it supports data from a variety of sources including primary data, secondary data, interviews, numerical data, news and documentary, etc. (Saunders et al., 2019). In other words, case study can carry out a mixed research, which therefore is applicable for this dissertation. Moreover, case study can effectively address those research phenomena which strongly correlate with their contexts (Saunders et al., 2019). This dissertation targets at the phenomenon of Loreal’s innovation and competitive advantages in the UK and China. This phenomenon is strongly associated with the contexts of the UK and China. Thus, the use of case study is proper.

This dissertation used Loreal as its case study because the company is representative in the industry and it is easy to collect secondary and primary data related with the brand. There are large numbers of Loreal’s customers in both China and the UK.

On the other hand, survey does not fit a mixed research because it can only analyse primary data. Also, survey is more consistent with quantitative research. Furthermore, focused group is more effective in collecting qualitative data. The use of focused group requires a researcher to design all variables and control them during data collection process and to find proper participants, whereas these requirements make focused group hard to operate (Saunders et al., 2019).

3.5 Data Collection

The secondary data used for the qualitative analysis came from reliable resources including Loreal’s official websites, annual reports and academic sources.

For primary data, the dissertation collected 134 questionnaires including (67 China and 67 the UK). Questionnaire is the most effective technique for this dissertation to collect quantitative data (Saunders et al., 2019). By a group of well-designed questions, a questionnaire can quantify respondents’ answers. The data from questionnaire can be fast analysed by statistical analysis software. This dissertation adopted SPSS to analyse its primary data. Also, questionnaires can be spread to a wide range and access various respondents by the internet (Saunders et al., 2019). By questionnaires, researchers do not need to involve in data collection and their task focuses on spread.

This dissertation designed its questionnaire based on the conceptual framework (section 2.4). It identified the features of each variable in the framework and designed questions based these features.

Variables	Foundation for Questions	Source	Question
Customer-Driven Innovation	New innovations can meet underserved customer demands. Customers can offer companies innovative ideas. Companies collaboratively work with customers for co-value creation.		Loreal’s new innovations satisfied   some of my demands which are neglected by others. My innovative ideas were collected and concerned by Loreal. Loreal allowed me to involve in innovation.
Technology-Driven Innovation	New innovations are developed on the basis of new technology. New innovations have the purpose to improve efficiency and effectiveness. New innovations are developed under technological trends, market trends and competitors’ practices.		Loreal offered new innovations based on advanced technology Its innovations improved efficiency and effectiveness. Other cosmetic brands also have such innovations, and these are the trend.
Localised Innovation	New innovations can meet local customers’ special demands New innovations are effective in the market of a host country New innovations consider a local market’s context		Loreal’s innovative products and process meet most Chinese/British consumers’ special demands. Its innovations are welcomed in China/the UK Its innovations consider the contexts of China / the UK.

Table 1

Furthermore, to measure competitive advantage, this dissertation used customer satisfaction, loyalty and customer preference. Because it collected data from customers, the three factors can be effective. All of above questions were measured by Likert Scale including strongly disagree, disagree, I don’t know, agree and strongly agree. The scale from strongly disagree to strongly agree is 1 to 5.

Additionally, this research also designed questions to measure the respondents’ consumption of Loreal including purchase frequency and consumption amount. These questions can identify whether a respondent has sufficient experience to offer data. Demographics of respondents are measured including age, gender, income level and education background.

The questionnaire was spread by the internet. The research devised the online questionnaire at WJX.cn.

3.6 Sampling technique

The use of convenience sampling was suitable for this dissertation. By this sampling technique, the researcher collected data from those respondents east to access expect friends and family. Nevertheless, the dissertation did not use any profitability sampling technique because it could not ensure that each consumer of Loreal in the UK and China had the same possibility to be selected.

By convenience sampling technique, the researcher found three saleswomen (2 Chinese and 1 British) and asked them to help spread questionnaires. The researcher involved into some chatgroups of Loreal’s customers in China and then shared the link of the questionnaire. Many members of these chatgroups were responded. In the UK, the researcher took advantaged of Facebook and Instagram and posted the link into comment zone to attract respondents.

3.7 Data Analysis

For qualitative analysis, documentary analysis was applied.

To address quantitative data, it used regression, correlation and frequency analysis. Frequency analysis measured to the respondents’ consumption of Loreal including purchase frequency and consumption amount and their demographics including age, gender, income level and education background. Correlation and regression measured the research hypothesis.

3.8 Ethical consideration

This research is completely honest to respondents by revealing the research purposes and aims to them. Thus, it involved zero deception. It informed respondents’ rights and the research purpose by a consent letter. They have the right to withdraw their data before 19^th August 2020.

This is a confidential research. The data collected by this research is only available for the university and will be destroyed as the end of November. It has been well protected by the researcher who uses passwords to lock the data. The research involves no debriefing and commercial secrets. Furthermore, it did not collect respondents’ identity information including name, contacts and social media accounts.

4.0 Results

4.1 Introduction

This chapter has two parts. The qualitative part adopted documentary analysis to address secondary data from reliable resources. The quantitative part used frequency, correlation and regression analysis to analyse the data from China and the UK respectively and then makes comparison.

4.2 Qualitative Analysis

4.2.1 Customer-driven innovation

Loreal focused on data-driven product innovation and provide personalised customer experience with the help of big data and AI (Loreal, 2019). The company collects data from customers, analyse the latest customer demands and market tends and then develop new products accordingly. By big data and AI, it builds a customer profile for each customer including purchase records, search history and consumption amount and use AI and big data to predict their demands and needs. As a result, the company can offer personalised services and new customer experiences. However, in this model, customers barely perceive that they have involved in innovation process.

Furthermore, the company has the campaign known as ‘imagination-innovation-communication’. In its official website, it claims that it is glad to work with all people including customers to implement innovation. This campaign mainly targets at customers, encourages them to participate into innovation and offer them personalised experience (Loreal, 2020). This campaign focuses on customer relationship and shows the company’s concerns to customers.

4.2.2 Technology-driven innovation

Loreal pays heavy attention to technology-based innovation. To overcome its constricted resource and capabilities, it adopts open innovations by collaborating with over 2,5000 start-ups (Loreal, 2020b). The company are willing to develop partnership with new ventures to absorb their creative ideas and new technologies.

4.2.3 Localised innovation

Loreal has been focusing on localisation by implementing R&D activities especially for Chinese customers (Loreal, 2020). Furthermore, the company recognises the booming online retailing market in China. It finds that Chinese people have stronger preference to online purchase who seek high efficiency and great convenience. Therefore, the company focused on innovations in distribution. In 2017, it firstly involved in live streaming personal sell model. In this model, Key Online Leaders (KOLs) acted as salesmen who also develop personal relationship with their follower or fans and then use live steaming to sell cosmetics. This model aroused a phenomenon in Chinese retailing market. The company partnered with Taobao (Alibaba) to implement this model. In 2019, it was rewarded the Grand ONE Business Award by Alibaba Group (Loreal, 2019). More importantly, the company has been using personal retailing and online distribution during the burst of Covid-19. By its live steaming retailing model, the company aroused customers’ purchase desires who they were required self- quarantine.

4.3 Quantitative Analysis

There are totally 134 respondents including 67 Chinese and 67 British.

4.3.1 Demographics of Respondents

The demographics of Chinese and British respondents have some differences. To begin with gender distributions, there are British male respondents accounting for 7.5% while no Chinese male respondents.

In terms of age distributions, British respondents are generally slightly older than their Chinese counterparts. 31.3% of Chinese are 20 to 25 years old and another 31.3% of Chinese are 26 to 30 years old. They are two largest age groups in China, followed by 31 to 25 years old (20.9%). However, the largest age group of the UK is 31 to 35 years old, followed by 36 to 40 years old (22.4%) and 26 to 30 years old (23.9%). In China, only 4.5% of respondents are over 45 years old, while the figure in the UK is 7.5%.

British respondents generally have a better education background than Chinese respondents. 53.7% of British has a bachelor degree, followed by college degree (28.4%) and master degree (14.9%). However, less half of Chinese respondents (43.3%) has a college degree and 34.3% of Chinese respondents has a bachelor degree. 16.4% of Chinese only got a high school education while the figure in the UK is 1.5%.

British respondents show a higher income level than Chinese respondents, which can be explained by the UK’s economic status and their education level higher than those Chinese. 67.2% of British respondents have a monthly income over £3,200 while the figure in China is 10.4%. Over half of Chinese respondents’ monthly income is lower than CNY 12,000 (53.7% of Chinese versus 1.5% of British).

The differences in demographics between Chinese and British respondents can be explained by the two country’s gap in economic development and contexts.

Demographics		China (%)	UK (%)
Gender	Male	100%	7.5
	Female	0	92.5
Age	20 to 25	31.3	11.9
	26 to 30	31.3	23.9
	31 to 35	20.9	31.3
	36 to 40	10.4	22.4
	41 to 45	1.5	3.0
	Above 45	4.5	7.5
Education	Graduated from high school	16.4	1.5
	Graduated from college	43.3	28.4
	Graduated with a bachelor degree	34.3	53.7
	Graduated with a master degree or above	6.0	14.9
Income per month	Below CNY 12,000 (£1,200)	53.7	1.5
	CNY 12,000 to 2,2000 (£1,200 – 2,200)	14.9	4.5
	CNY 2,2001 to 3,2001 (£2,201 – 3,200)	20.9	26.9
	Above CNY 3,2001 (Above £ 3,201)	10.4	67.2
	Above CNY 1,500 (£150)	4.5	9.0

Table 2

In terms of frequency of visiting Loreal ‘s stores, the results show that Chinese distribution is more equal and balanced than British distribution. To be specific, 34.3% of British respondents visit the stores very often and 29.9% of them visit the stores occasionally. This means that there is a group of fans and a group of customers with fewer connections with the company.

In terms of consumption amount, British respondents purchase much more than Chinese. 52.2% of British spent over £100 in Loreal the last month while only 17.9% of Chinese had this level of consumption. More Chinese spent CNY 501 to 1,000 (£50 - 100) in Loreal, accounting for 68.7%.

Consumption		China (%)	UK (%)
How often visit Loreal’s store	Barely	3.0	3.0
	Occasionally	10.4	29.9
	Sometimes	31.3	17.9
	Often	32.8	14.9
	Very often	22.4	34.3
Consumption of Loreal in the last month	Below CNY 500 (£50)	9.0	4.5
	CNY 501 to 1,000 (£50 - 100)	68.7	34.3
	CNY 1,000 – CNY 1,500 (£100)	17.9	52.2

Table 3

4.3.2 Customer-Driven Innovation

To begin with China, 56.7% of respondents agree that Loreal’s new innovations satisfied some of my demands which were neglected by other companies including 37.3% agree and 19.4% strongly agree. This means that Loreal’s new innovations solve many underserved demands.

However, fewer Chinese respondents perceived that their innovative ideas were collected and concerned by Loreal (including 16.4% strongly agree and 13.4% agree). More Chinese disagree with this (25.4% strongly disagree and 31.3% disagree). Meanwhile, 56.7% of respondents disagree that Loreal allowed them to involve in innovation. Only 23.4% of respondents agree with this. The two results suggest that Loreal consider less customers’ opinion and ideas and collaboration with customers in its innovation process. The company has middle lower of customer-driven innovation in China.

China (%)	Strongly disagree	Disagree	Don’t know	Agree	Strongly agree
Loreal’s new innovations satisfied some of my demands which were neglected by other companies.	16.4	11.9	14.9	37.3	19.4
My innovative ideas were collected and concerned by Loreal.	34.3	23.9	11.9	13.4	16.4
Loreal allowed me to involve in innovation.	25.4	31.3	19.4	10.4	13.4

Table 4

The distribution of the result in the UK is close to that in China. Lightly more British respondents agree that Loreal’s new innovations satisfied some of their demands which are neglected by others (58.2% British vs 56.7% China).

56.7% of British disagree that their innovative ideas were collected and concerned by Loreal, which has a same level with Chinese. 55.2% of British respondents disagree that Loreal allowed them to involve in innovation, while the figure in China is 56.7%.

Generally, the differences in customer-driven strategy between the two countries are small and insignificant. This suggests that the company adopts the same customer-driven strategy in the two countries. Loreal concern less customers’ voices and collaboration with customers in its innovation process in two countries. It has middle lower of customer-driven innovation.

UK	Strongly disagree	Disagree	Don’t know	Agree	Strongly agree
Loreal’s new innovations satisfied some of my demands which are neglected by others.	10.4	4.5	26.9	34.3	23.9
My innovative ideas were collected and concerned by Loreal.	19.4	37.3	16.4	13.4	13.4
Loreal allowed me to involve in innovation.	19.4	35.8	14.9	17.9	11.9

Table 5

4.3.3 Technology-Driven Innovation

In terms of technology-driven innovation, Chinese and British respondents have a similar perception. 64.1% of Chinese respondents agree that Loreal offered new innovations based on advanced technology while 67.1% of British respondents have the same agreement.

43.3 % of Chinese respondents perceive that Loreal’s innovations improved efficiency and effectiveness. 44.8% of British also agree with it. This means that less than half of respondents believe that Loreal’s technology-driven innovations are efficient and effective. Hence, these innovations generally have a moderate performance.

56.7% of Chinese respondents recognise that other cosmetic brands also similar technology-based innovations similar with Loreal’s and these are the trend.  61.2% of British respondents feel the same way.  This reflects that Loreal’s technology-driven innovations are not distinctive capabilities and resources.

Generally, Loreal adopts the same level of technology-driven innovation in the two countries, whereas the performance of these innovations is not high and other brands also can follow its technology-driven innovations.

China	Strongly disagree	Disagree	Don’t know	Agree	Strongly agree
Loreal offered new innovations based on advanced technology	11.9	9.0	14.9	31.3	32.8
Its technology-based innovations improved efficiency and effectiveness.	9.0	20.9	26.9	23.9	19.4
Other cosmetic brands also have similar technology-based innovations, and these are the trend.	6.0	16.4	20.9	31.3	25.4

Table 6

UK	Strongly disagree	Disagree	Don’t know	Agree	Strongly agree
Loreal offered new innovations based on advanced technology	4.5	9.0	19.4	34.3	32.8
Its technology-based innovations improved efficiency and effectiveness.	11.9	10.4	32.8	23.9	20.9
Other cosmetic brands also have similar technology-based innovations, and these are the trend.	6.0	11.9	20.9	31.3	29.9

Table 7

4.3.4 Localised Innovation

Loreal has a much better localised innovation in the UK than China. 49.3% of Chinese respondents feel that Loreal’s innovative products and process meet most Chinese consumers’ special demands. However, 77.6 % of British also feel this way. Localised innovations of Loreal can only meet about half Chinese consumers’ special demands but they can meet .6 % of British consumers’ special demands.

31.3% of Chinese respondents agree that Loreal’s innovations are welcomed in China. However, 62.4% of British respondents agree with this. This result shows that Loreal’s innovations receive more positive views in the UK than China.

Only 39.9% of Chinese respondents agree that Loreal’s innovations consider the contexts of China whereas there are 64.2% of respondents who agree this in the UK. Thus, Loreal’s localised innovation is more effective in considering the UK’s contexts.

Generally, the company’s localised innovations are much more effective in the UK than China.

China	Strongly disagree	Disagree	Don’t know	Agree	Strongly agree
Loreal’s innovative products and process meet most Chinese consumers’ special demands.	16.4	11.9	22.4	20.9	28.4
Its innovations are welcomed in China	23.9	14.9	29.9	14.9	16.4
Its innovations consider the contexts of China	20.9	13.4	25.4	17.9	22.4

Table 8

UK	Strongly disagree	Disagree	Don’t know	Agree	Strongly agree
Loreal’s innovative products and process meet most British consumers’ special demands.	0	4.5	17.9	55.2	22.4
Its innovations are welcomed in the UK	13.4	4.5	14.9	41.8	25.4
Its innovations consider the contexts of the UK	6.0	17.9	11.9	25.4	38.8

Table 9

4.3.5 Competitive Advantages

In the perspective of customers, Loreal’s competitive advantages in the UK are higher than in China.

53.7% of Chinese respondents shows customer satisfaction with Loreal’s innovations. However, 69.7% of British are satisfied with these innovations. Thus, these innovations have a higher customer satisfaction rate in the UK.

Only 37.3% of Chinese respondents show strong repurchasing attitude toward Loreal’s products in the future. 44.8% of British respondents demonstrate such attitude. Repurchase behaviour is stronger in the UK than China.

29.8 of Chinese respondents agree that they will prefer Loreal if there is a product similar with its products. However, 46.2% of British respondents agree with this. This question measures strong customer loyalty. More British respondents show strong customer loyalty than Chinese.

China	Strongly disagree	Disagree	Don’t know	Agree	Strongly agree
I am satisfied with Loreal’s innovations.	14.9	10.4	20.9	32.8	20.9
I confirmedly continuously purchase Loreal’s products in the future.	17.9	14.9	29.9	23.9	13.4
I will prefer Loreal if there is a product similar with its products.	22.4	14.9	32.8	16.4	13.4

Table 10

UK	Strongly disagree	Disagree	Don’t know	Agree	Strongly agree
I am satisfied with Loreal’s innovations.	7.5	9.0	23.9	40.3	19.4
I will continuously purchase Loreal’s products in the future.	7.5	14.9	32.8	23.9	20.9
I will prefer Loreal if there is a product similar with its products.	19.4	13.4	20.9	31.3	14.9

Table 11

4.3.5 Correlation Analysis

To begin with China (Table 12), the correlation co-efficient of customer-driven innovation is 0.487 (between 0.399 and 0.699), suggesting a moderate relationship between customer-driven innovation and competitive advantage in China.

In the correlation analysis, technology-driven innovation receives a 0.457 co-efficient (<0.699; > 0.399). This result shows that it has a moderate relationship with competitive advantage in China.

Localised innovation’s co-efficient is 0.527, suggesting a moderate relationship with competitive advantage in China. The strongest factor is localised innovation, followed by customer-driven innovation and then technology-driven innovation.

China

Relationship with Competitive advantage	Correlation Analysis Results	Status
Customer-Driven Innovation	0.487 0.000 (< 0.05)	Moderate and significant H1 is accepted
Technology-Driven Innovation	0.457 0.000 (< 0.05)	Moderate and significant H1 is accepted
Localised Innovation	0.527 0.000 (< 0.05)	Moderate H1 is accepted

Table 12

However, in the UK (Table 13), technology-driven innovation has a 0.378 co-efficient, so its relationship with competitive advantage is poor. Co-efficient of localised innovation is 0.543, showing a moderate relationship with competitive advantage. Customer-driven innovation receives a 0.610 co-efficient, suggesting that it has a moderate relationship with competitive advantage.

UK

Relationship with Competitive advantage	Correlation Analysis Results	Status
Customer-Driven Innovation	0.610 0.000	Moderate and significant H1 is accepted
Technology-Driven Innovation	0.378 0.002	Poor and insignificant H1 is accepted
Localised Innovation	0.543 0.000	Moderate and significant H1 is accepted

Table 13

Technology-driven innovation is the weakest factor in both the UK and China while it is weaker in the UK. Customer-driven innovation is the strongest factor in the UK, but it is the second strongest factor in China. Localisation innovation is the strongest factor in China even though more Chinese respondents are less satisfied with its localised innovation. These results can deduce that Chinese respondents have more desires for better localised innovation because localisation innovation has strongest impacts on their customer satisfaction and loyalty. Meanwhile, British respondents have more desires for increased participants in Loreal’s innovation process as customer-driven innovation is the strongest factor affecting their customer satisfaction and loyalty.

Meanwhile, technology-driven innovation has the weakest relationship, which can be explained by that respondents recognise that competitors also have similar innovations and consider them as market trend. In other words, they perceive low level of differentiation from these innovations. Loreal’s technology-driven innovations are not distinctive capabilities and resources and have a moderate performance in improving efficiency and effectiveness. As a result, these technology-driven innovations have weak or poor impacts on competitive advantages.

4.3.6 Regression Analysis

4.3.6.1 China

This research adopted the following equation to test its conceptual framework.

Competitive advantage = beta + beta (localised innovation) + beta (customer driven innovation) + beta (technology driven innovation)

In this equation, R is 0.652 showing a moderate relationship between the independent variable and the dependent variable. R Square is 0.425. Hence, the three independent variables can predict 42.5% of variants in competitive advantage.

Model Summary
R	R Square	Adjusted R Square	Std. Error of the Estimate
.652a	.425	.398	.80933
a. Predictors: (Constant), Localised innovation, customer driven innovation, technology driven innovation

Table 14

P-value is 0.0001 showing a significant relationship between the independent variable and the dependent variable.

ANOVAa
		Sum of Squares	df	Mean Square	F	Sig.
	Regression	30.495	3	10.165	15.519	.000b
	Residual	41.266	63	.655
	Total	71.761	66

Table 15

In Table 16, the P-value of localised innovation is 0.01 (<0.05). Hence, localisation innovation significantly affects competitive advantage in China. Meanwhile, customer-driven innovation (P-value = 0.008 < 0.05), showing that it can significantly affects competitive advantage in China. On the other hand, technology driven innovation receive a 0.085 P-value, larger than 0.05. It does not have significant relationship with competitive advantage in China.

Competitive advantage in China = 0.576 + 0.264 (customer driven innovation) + 0.205 (technology driven innovation) + 0.335 (localised innovation)

Coefficientsa
		Unstandardized Coefficients		Standardized Coefficients	t	Sig.
		B	Std. Error	Beta
	(Constant)	.576	.401		1.437	.156
	Customer driven innovation	.264	.096	.294	2.743	.008
	Technology driven innovation	.205	.117	.193	1.751	.085
	Localised innovation	.335	.095	.367	3.512	.001
a. Dependent Variable: Competitive

Table 16

4.3.6.2 UK

To test the conceptual framework in the UK, the research runs the same equation.

In the UK, the equation receives a 0.708 R. This means that the relationship between the independent variables and the dependent variable is moderate but stronger in the UK than China. With a R Square = 0.502, these independent variables can predict 50.2% of variants in competitive advantages.

Model Summary
R	R Square	Adjusted R Square	Std. Error of the Estimate
.709a	.502	.478	.71496
a. Predictors: (Constant), localised innovation, Technology driven innovation, customer driven innovation

Table 17

In Table 18, P-value is 0.000 suggesting a significant relationship between the independent variables and the dependent variable.

ANOVAa
Model		Sum of Squares	df	Mean Square	F	Sig.
1	Regression	32.463	3	10.821	21.170	.000b
	Residual	32.203	63	.511
	Total	64.667	66

Table 18

With the results in Table 19, two significant factors are identified: customer driven innovation (P-value = 0.000) and localised innovation (P-value = 0.000).

Competitive advantage in the UK = -0.60 + 0.375 + 0.264 (customer driven innovation) + 0.189 (technology driven innovation) + 0.425 (localised innovation)

Coefficientsa
		Unstandardized Coefficients		Standardized Coefficients	t	Sig.
		B	Std. Error	Beta
	(Constant)	-.060	.520		-.115	.909
	Customer driven innovation	.375	.097	.405	3.874	.000
	Technology driven innovation	.189	.116	.159	1.636	.107
	Localised innovation	.425	.114	.359	3.715	.000
a. Dependent Variable: Competitive Advantage

Table 19

4.3.7 Summary

The main findings of quantitative analysis are showed in Table 20.

	Analysis	China	UK
Customer driven innovation	Frequency	Moderate	Strong
	Correlation	The second strongest factor	The strongest factor
	Regression	Significant	Significant
Technology driven innovation	Frequency	Moderate	More Moderate
	Correlation	The weakest factor	The weakest factor
	Regression	Insignificant	Insignificant
Localised innovation	Frequency	Weak	Strong
	Correlation	The strongest factor	The second strongest factor
	Regression	Significant	Significant

Table 20

5.0 Discussion

Technology-driven innovation is the weakest factor in the two countries while it is weaker in the UK. This is because customers recognise that its competitors also have similar innovations and consider them as market trend. Perceived differentiation of its technology-based innovations is low. Furthermore, Loreal’s technology-driven innovations are not distinctive capabilities and resources and are relatively weak in improving efficiency and effectiveness. This can be related with the finding from qualitative analysis. The company collaborates with new start-ups rather than large research institutions in its open innovation. These collaborations are more inclined to creativity innovations and its Corporate Social Responsibility (CSR) practices. In resource-based view (Barney, 1991), these innovations are not rare, valuable and non-imitable, so they cannot offer competitive advantages. As a result, these technology-driven innovations have weak or poor impacts on competitive advantages. Also, it can be explained the argument that it is challenging for non-IT companies to develop unique and distinctive innovations (Szutowski and Szułczyńska, 2017). In cosmetic, all larger players are able to collaborate with high-tech companies to develop innovation, which results in the homogeneity of their innovations. This aligns with the finding that customers perceive that Loreal’s technology-based innovations follow market trends and its competitors also have similar innovations.

The difficulty of technology-driven innovations pushes Loreal to move to customer-driven innovation strategy. It is the strongest factor in the UK, but it is the second strongest factor in China. British customers have more desires for increased participants in Loreal’s innovation process as customer-driven innovation is the strongest factor affecting their customer satisfaction and loyalty. This is consistent with (Alam, 2002 and Archer, 2004)’s argument that customers feel that they are concerned and valued when they involve into an innovation program or value creation, which allows the company to facilitate customer relationship and loyalty. Baru (2019) and Giese and Cote (2000) agree that customer relationship, satisfaction and loyalty have positive impacts on competitive advantage. The company can increase its customer innovation programs in the UK. It also can expand and promote the ‘imagination-innovation-communication’ program allowing more customers to participate. By such programs, it can develop customer relationship, loyalty and thus improve competitive advantages.

Localisation innovation is the strongest factor in China although more Chinese respondents are less satisfied with its localised innovation. It means that Chinese customers have more desires for better localised innovation because localisation innovation has strongest impacts on their customer satisfaction and loyalty. The qualitative analysis finds that the company has great commitment to Chinese market. The low performance of its localised innovation can be explained by the cultural differences. Based on Hofstede’s national culture dimensions, the two countries are cultural diverged in power distance, individualism, uncertainty avoidance, long-term orientation and indulgence (Hofstede-Insights, 2020). Therefore, the company needs to further learn Chinese market and gain insights.

6.0 Conclusions

6.1 Summary of Findings

This research finds that localised innovation and customer-driven innovation are two significant factors affecting competitive advantages of Loreal in both the UK and China. Localised innovation, customer-driven innovation and technology-driven innovation have moderate impacts on competitive advantages in China. Technology-driven innovation is the weakest factor in both the UK and China while it is weaker in the UK. Customer-driven innovation is the strongest factor in the UK, but it is the second strongest factor in China. Localisation innovation is the strongest factor in China. Chinese customers have more desires for better localised innovation because localisation innovation has strongest impacts on their customer satisfaction and loyalty. To improve its performance of localised innovation, the company should further learn Chinese market and gain insights in order to overcome cross-cultural issues.

This research finds that customer-driven innovation is the strongest factor affecting customer’s customer satisfaction and loyalty. British customers have more desires for increased participants in Loreal’s innovation process. Customers perceive that they are concerned and valued when they involve into an innovation program or value creation, which allows the company to facilitate customer relationship and loyalty. The company can increase its customer innovation programs in the UK and China allowing more customers to participate in its innovation, thus facilitating customer relationship, loyalty and thus competitive advantages.

The research finds technology-driven innovation has the weakest impacts in China and the UK. Customers perceive low level of differentiation from these innovations. Loreal’s technology-driven innovations are not distinctive capabilities and resources and have a moderate performance in improving efficiency and effectiveness. As a result, these technology-driven innovations have weak or poor impacts on competitive advantages. It is hard for the company to generate valuable, rare and non-imitable resources and capabilities by technology-driven innovation especially in the Industry 4.0 age.

6.2 Recommendations

This research’s regression analysis finds that there are other factors affecting its competitive advantages. Further research is advised to use interviews to directly collect primary data from Loreal to further identify those uncovered variables affecting its competitive advantages. This research adopts case study as research strategy, so its results have a lower generalisation. Further research can adopt surveys and positivism philosophy to test the generalisation of these results. Additionally, exploring what kind of customer-driven innovations can promote customer relationship effectively is advised.

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Questionnaires

Dear respondents

I am a postgraduate of Loughborough and inviting you to involve into my research if you are a customer of Loreal. Your data is important to me. I appreciate your participation.

This research aims at L’Oréal’s innovation intelligence and entrepreneurship in the UK and China. The company has been maintaining great performance in the UK, and it has taken advantage of its entrepreneurial experience and innovation capability to penetrate in China. The purpose of this research is to compare innovation strategy of Loreal in China and the UK so as to provide recommendations for the company.

This research is completely honest to you. You have the right to withdraw their data before 19^th August 2020. This is a confidential research. The data collected by this research is only available for the university and will be destroyed as the end of November. It will be well protected by the researcher who uses passwords to lock the data. The research involves no debriefing and commercial secrets. Furthermore, it did not collect respondents’ identity information including name, contacts and social media accounts.

Thank you very much!

What is your gender

Male

Female

What is your age?

20 to 25

26 to 30

31 to 35

36 to 40

41 to 45

Above 45

How do you describe your education level?

Graduated from high school

Graduated from college

Graduated with a bachelor degree

Graduated with a master degree or above

What is your monthly income?

Below CNY 12,000 (£1,200)

CNY 12,000 to 2,2000 (£1,200 – 2,200)

CNY 2,2001 to 3,2001 (£2,201 – 3,200)

Above CNY 3,2001 (Above £ 3,201)

How often do you visit Loreal’s store including both online and offline?

Barely

Occasionally

Sometimes

Often

Very often

How much did you spend in Loreal in the last month?

Below CNY 500 (£50)

CNY 501 to 1,000 (£50 - 100)

CNY 1,000 – CNY 1,500 (£100)

Above CNY 1,500 (£150)

Please read the following statement and choose the option that can show your opinion the most.

Customer-Driven Innovation

Loreal’s new innovations satisfied some of my demands which are neglected by others.

Strongly disagree

Disagree

Don’t know

Agree

Strongly agree

My innovative ideas were collected and concerned by Loreal.

Strongly disagree

Disagree

Don’t know

Agree

Strongly agree

Loreal allowed me to involve in innovation.

Strongly disagree

Disagree

Don’t know

Agree

Strongly agree

Technology-Driven Innovation

Loreal offered new innovations based on advanced technology

Strongly disagree

Disagree

Don’t know

Agree

Strongly agree

Its technology-based innovations improved efficiency and effectiveness.

Strongly disagree

Disagree

Don’t know

Agree

Strongly agree

Other cosmetic brands also have similar technology-based innovations, and these are the trend.

Strongly disagree

Disagree

Don’t know

Agree

Strongly agree

Localised Innovation

Loreal’s innovative products and process meet most Chinese/British consumers’ special demands.

Strongly disagree

Disagree

Don’t know

Agree

Strongly agree

Its innovations are welcomed in China/the UK

Strongly disagree

Disagree

Don’t know

Agree

Strongly agree

Its innovations consider the contexts of China / the UK.

Strongly disagree

Disagree

Don’t know

Agree

Strongly agree

Competitive advantages

I am satisfied with Loreal’s innovations.

Strongly disagree

Disagree

Don’t know

Agree

Strongly agree

I confirmedly continuously purchase Loreal’s products in the future.

Strongly disagree

Disagree

Don’t know

Agree

Strongly agree

I will prefer Loreal if there is a product similar with its products.

Strongly disagree

Disagree

Don’t know

Agree

Strongly agree

Inquiry Product

Quantity

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Tel

Fax

Company name

Your Name

Your Email

Your Message