Business Environment and Strategy

This assignment delves into the concept of the business environment and its multifaceted components. It requires students to analyze various internal and external factors influencing businesses, such as economic conditions, legal regulations, technological advancements, and social trends. The task involves evaluating how these factors shape business strategies and exploring relevant theories and examples to illustrate the interplay between the business environment and organizational success.

Business Environment

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
Task 1...............................................................................................................................................3
1.1 Different types of organizations.............................................................................................3
1.2 Various stakeholders of L’Oreal............................................................................................4
1.3 Responsibilities of L’Oreal....................................................................................................4
TASK 2............................................................................................................................................5
2.1 Economic Systems (ES) to allocate resources effectively.....................................................5
2.2 Impact of fiscal and monetary policies on organization........................................................6
2.3 Impact of competition policy and regulatory mechanism on business activities...................7
TASK 3............................................................................................................................................7
3.1 Impact of market structure on pricing and output decisions..................................................7
3.2 Market forces shapes organizational responses.....................................................................8
3.3 Impact of working practices and nation's culture on L'Oreal................................................8
TASK 4............................................................................................................................................9
4.1 Significance of international trade.........................................................................................9
4.2 Impact of global factors on BA............................................................................................10
4.3: Impact of EU policies on L'Oreal.......................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCE.................................................................................................................................12

INTRODUCTION
Business environment is a framework in which the activities and responsibilities of
organization are being carried out. It is a combination of all external and internal factors of
organization which affect the functions and practices of organization. The nature of business
environment is dynamic because it keeps on changing and they are unpredictable. The
organization survives only if they accept all the changes in both internal and external
environment (Björklund, 2011). These changes affect the business practices. This report throws
light on business environment of L’Oreal and also to understand the objectives and assessment of
organization. Further this report contains the concepts of L’Oreal's stakeholders and government
policies and regulations that give impact on working of L’Oreal.
TASK 1
1.1
There are various types of organizations, few are described as below:
 Company- This is a type of organization in which the directors function on the behalf of
company's stakeholders. They have objectives to share the earned profits in the form of
dividends. This is categorized in public and private companies.
 Partnership- In partnership, two or more firms work together and own the company.
They share equal amount of earned profits and equally pools the required money, skills
and resources (Welford, 2013).
 Sole proprietorship- A single person owns company with a motive of earning profit.
 Non-Profit Organizations- In this form, group of individuals come together and share a
common objective to work for the needs of society (Iskanius, Page and
Anbuudayasankar, 2010.).
Mission, Vision and Objectives of L’Oreal
L’Oreal is the world largest beauty and cosmetics organization.
Mission- The mission of L’Oreal is to offer all men and women the beauty and cosmetics
innovations through providing the best quality products.

Vision- L’Oreal's vision statement is “Because I am worth it”. With this statement,
company sets its target policy and marketing to capture more market.
Objectives-
Main objective of L’Oreal is to increase the consumer base by 2 billion in 2020.
To provide the best quality of cosmetics products worldwide.
To be helpful and friendly with staff and customers.
1.2
Stakeholders are the individuals who have interest in the practices and activities of
organization. The stakeholders are customers, trade unions, employees, suppliers, shareholders
and government, etc. These stakeholders have different objectives and roles in the organization.
The stakeholders of L’Oreal are described as below:
 Customers- Customers are mainly concerned with the quality and benefits from
company's product. These stakeholders purchase the products and services of L’Oreal and
they contribute in profit on the basis of sales.
 Suppliers- These stakeholders supply raw materials and services to L’Oreal and their
concern are to get a fair payment on time (Who we are, 2015).
 Government- Government manages the economy of country and they have objective to
improve the employment and implementation of laws and creating taxes.
 Shareholders- Shareholders are the stakeholders of company who owns the shares of
L’Oreal. The objective of shareholders is to earn profit on their investment.
 Employees- Employees are the internal stakeholders of L’Oreal and their work and
practices affect the performance of business. The concern of these stakeholders is to have
truthful communication, job security and fair compensation (Xue, Shen and Ren, 2010).
L’Oreal plans the strategies to fulfill objectives of all their stakeholders. Company has
some responsibilities towards stakeholders by meeting their needs and demand. For this purpose,
L’Oreal follows all regulations of government; provide job securities to employees, pays
payment on time to suppliers and fulfill the corporate social responsibilities.

1.3
L’Oreal has various responsibilities towards stakeholders, employees, environment,
management and society. The responsibilities are discussed as below:
 Legal- L’Oreal always pays taxes on time. Also, it provides employment opportunities,
follows the rules, policies, regulations and also takes care of the surrounding
environment.
 Shareholders- L’Oreal takes care of all shareholders because they purchase the shares of
company and if firm’s performance is low than shareholders will invest in company's
share (Craig and Campbell, 2012.).
 Employees and Management- Employees are the assets of L’Oreal, so, company fairly
distributes profits to all employees and provides various services to company's
management. Firm also provides insurance and medical facilities to take care of their
physical health. According to their working practices, company appraises their work by
rewarding them in both financial and non financial terms.
 Social and Environmental- L’Oreal always try to meet the needs and requirement of
community. It is the biggest responsibility of firm. Cited firm conducts various CSR
activities to give respect and concern towards the society and environment.
 Public relation- L’Oreal maintains and develops healthy relationship with customers and
public. Accordingly, it always tries to meet and satisfy their demand (Chavis, Klapper
and Love, 2011).
TASK 2
2.1
Economic system determines the allocation and optimum utilization of all available
resources. The categories of economic system are described as below:
 Market economy- In market economy, companies have full rights over the decision of
production of products and goods and in this, prices are determined by free price system.
 Command economy- In this economy, government takes decision about quantity and
quality of products and decision of resource allocation and its prices are taken by the
government.

 Mixed economy- The economy of L’Oreal is mixed economy and it contains all features
and characteristics of both market and command economic systems. In this economy
system, company takes the decisions regarding production and resource allocation but
follows all the regulations which are formulated by the planning body of nation (Laumer,
Eckhardt and Weitzel, 2010.). Firm allows government to do interference in their
activities to achieve the social demand. L’Oreal has to meet out the laws and regulations
of government in parallel with the framework and policies of organization.
All these economic systems attempt to allocate and utilize all available resources. In this,
prices also play an important role to determine that whom to produce, in what quantity and for
whom to produce the product. It also indicates L’Oreal to utilize all its resources to meet out the
demand of its target customers. In this, government defines the prices and also has partial
interference in the resource management of L’Oreal.
2.2
Policies are the set of actions which are used for making and running activities of
organization. The government policies such as fiscal and monetary gives direct impact on the
working of L’Oreal (Aterido, Hallward-Driemeier and Pagés, 2011). The impact of fiscal and
monetary policies on business activities and practices of L’Oreal have been stated as follows:
 Interest rates- Government and regulatory bodies takes various actions to control the
interest rates to monitor the economy of nation. The changes in interest rates directly
affect the overall functions of L’Oreal like rise in interest rates and decrease in the
spending level of customers. Due to this change, productivity of L’Oreal also increases
because customers of L’Oreal will buy more cosmetic products at affordable prices.
 Exchange rate- Exchange rate is a rate on amount and this rate on amount is exchanged
in the form of payment made to earn money from consumers. L’Oreal faces the
difficulties in case of increase and decrease in exchange rates.
 Tax rates- To monitor the economy, government adjust the spending level and tax rates.
Government can influence the level of productivity by increasing and decreasing the rates
of tax because fluctuation in tax rates affects the prices. However, if tax rates are high
then L’Oreal will also increase the prices of its products (Klapper and Love, 2010). The

increment in tax rates will decrease the spending level of customers and overall this
situation will directly affect the productivity of L’Oreal.
2.3
L’Oreal is the manufacturer of beauty and cosmetics products and in personal care
industry; they face many competitors like P&G, Unilever and Estee Lauder, etc. The impact of
competition policy and regulatory mechanism on the business practices of L’Oreal have been
stated as follows:
Competition policy- In personal care industry, L’Oreal faced many competitors such as
Procter & Gamble and Unilever. Cited company focuses on both cosmetic products and demand
of customers. Competition policy is the set of norms and policies which are defined for the
activities and working of company. The firm which is possessive, excessive market power can be
protected with the help of competition policy (Hamilton and Webster, 2015). The reason of
implementing this policy is to ensure about the proper flow of business operations without any
restriction in the practices of organization. The changes in competition policy also affect the
working affairs of L’Oreal as well. In this policy, firm will charge the competitive prices for its
products. In this context, Competition Act 1998 is concerned about providing correct and right
services to customers. According to this act, all cosmetics products that are offered by cited firm
should always maintain the quality in fair manner. In this, fair refers that L’Oreal is not involved

in any type of unethical operations. Under this act, few policies focus on firm's advertisement
that product of firm is fulfilling the things which are described in advertisement.
Regulatory mechanism- To operate the business effectively, L’Oreal follows all the
policies and regulations of UK government. If government gives order doing modification in
security of customers then L’Oreal is liable to develop the security standard as its policy
framework (Oh, 2010). Few regulatory policies are such as Ofwat (Office of Water Services
Regulation Authority) and Ofgem (Office of Gas and Electricity Market) basically focus that
demand of commodities are satisfied or not.
TASK 3
3.1
The market structure influences the decisions such as pricing and output of L'Oreal
business. There are different type of market structure such as monopoly, oligopoly and perfect
competition etc. Monopoly competition- In monopoly market structure, the prices of products and
services are decided by the company itself. In this market size of customers are many and
supplier is one, so, customers are fully dedicated to purchase and pay the products. In this
structure the company have only aimed to make and earn more profits (Yu and
Ramanathan, 2012).

 Oligopoly competition- In this oligopoly market structure, prices of products are decided
by the top competitors of industry and demand for the products are defined by the
customers. In this only few firms offers the similar products and if one firm reduces their
prices then it would also affect the other competitor firms. Perfect competition- In perfect competition market structure, number of customers and
sellers are very large (What is Business Environment?, 2015). In this, companies have
strong market structure and prices are set according to the demand of customers and
decision of industry.
 Monopolistic competition- L'Oreal comes in this market structure in which competition
is fierce among all companies (Cordes, Richerson and Schwesinger, 2010). In this, size of
customers and sellers are large and all produces same products but different branding
with respect to other. In this, firm which offers their products in high quality with low
prices then they are highly preferred by consumers.
3.2
In many various ways market forces shapes and affects the organizational response of
L'Oreal. The market forces such as demand, supply, their elasticity, customers and their
perception. The long term and short term organizational responses like cost control, pricing,
collaboration, merger and acquisition. In business general forces would be demand and supply,
these forces affects the prices and production of L'Oreal (Popescu, 2013.). If the demand of the
product is high then the L'Oreal would increase their prices in line with demand. However, if
supply of the product increases then L'Oreal would be required to reduce the prices to increase
and maintain their revenues and profitability. With the increment in output by L'Oreal, there is a
need to increase the cost as well. The way of high cost of production is to maintain and increase
the profit share in market (The impact of fiscal policy, 2010).
The buying behavior and attitude of customers always fluctuate, L'Oreal has to meet
these demands and needs by providing them different quality cosmetics products which are
available in various colors, fragrance and features (Siewiorek and et.al., 2012). If the demand of
the product is fall then company can adopt merger or acquisition option.

3.3
The business and cultural environment such as cultural diversity, changes in economic
situation and lifestyles of customers shapes the behaviour of organization. The changes in
cultural and business environment affects the working of L'Oreal have been defined by pestle
analysis. The pestle analysis of L’Oreal has been stated below:
 Political- L'Oreal has to focus and follow all the re4gulations of various countries in
which it is operating. The cited company is obligated to produce the safe products for
customers (Teece, 2010). Company has to follow rules and policies which are set by the
advertising standard authority. Government also bans the cosmetics testing on animals.
 Economical- Company should adapt all problems of economic environments in which
L'Oreal is operating. The crisis in economy affects the business of L'Oreal and economy
downturn will affect the development and productivity of company. The changes in tax
rates and growth direct affect the business.
 Social- The countries culture in which L'Oreal is operating also gives impact on the
business activities of L'Oreal. The culture of country includes attitudes, beliefs, values
and religion of its people. The customer's awareness is increasing they are focusing on
the company's image and products features (Cantwell, Dunning and Lundan, 2010).
 Technological- The update of technology means update in cosmetics products. The
changes in technology affect the functionality of business.
 Legal- The legal team of L'Oreal makes an important contribution on legal decisions and
their mission is to make L'Oreal legally secure.
 Environmental- L'Oreal is also concerned for the environment, for this purpose
company uses the natural ingredients which environment friendly.

TASK 4
4.1
The international trade means exchange of capital and cosmetic products to different
countries. This helps in business expansion because it gives more opportunities to meet the new
market and its customers. The benefits of international trading play an important role in
development and growth for the L'Oreal which are discussed below:
 Unemployment- If Company start doing international trading than it would be great
opportunity for those countries because it will decrease the size of unemployment in
those countries.
 Competition- Company would face many competitors in international market, to attract
the customers company can develop the quality of cosmetic products. The competition
and its policy would directly affect the business of L'Oreal. In new market, increment in
demand also increases the market share of company (Ullah and Lai, 2011). Basically it
encourages the competition.
 Expansion- International trading gives opportunity to expand the business of L'Oreal in
new market. In also helps to increase the global market share of organization.
 Tax rates- In each country, tax rates are different from others. This factor will help
L'Oreal to increase their profit. Tax rates are high in that country, in which company
wants to do international trading than L'Oreal will face the few difficulties to expand
their business in that country (Trkman, 2010). L'Oreal can take the opportunities from
low tax rates of countries.

The negative impact of international trade are such as:
 It consumes lots of time to gain the global market share.
 For trading purpose, organization have to firstly take the license.
 In case, if firm fails to meet the demand of commodities than shortage of products may
cause the chances of inflation.
4.2
With the help of pestle analysis, it has been analyzed that factors of external environment
affect the business practices of organization. There are global factors such as environmental,
technology, economic etc that influence the operations of organization such as Unilever:
 Environmental- The global crisis directly affects the practices and activities of Unilever.
In case, if country is facing recession than it would affects the spending of customers. At
this time the spending level of customer would decrease and they would not prefer to buy
cosmetics at the time of recession period (Carroll and Shabana, 2010).
 Technology- Unilever needs to be updated according to new changes in current
technology because with the help of updated technology cited company could meet the
demands of their target market.

 Interest rates- The inflation and interest are linked with each other and both affects the
business of Unilever. If increment in interest rates than customers have less money to
spend on the firm's product and this situation directly affects the productivity of Unilever.
 Exchange rates- All countries have different exchange rates and with this cited firm's
revenue and profits also affected.
4.3:
The European Union policies also impacts the business of Unilever, it encounters both
positive and negative impact on the business. It is important to analyze both type of impacts on
business operations.
Advantages of European Union Limitation of European Union
 This policy helps to balance the
prices of Unilever's product.
 This EU policy increase more
employment options.
 This is analyzed to be more costly.
 All its policies are not that much
efficient.
 Sometimes this policy leads to

 The working and rights of the people
are protected from this policy.
overcrowding situation.
The impact of European Union policies are such as: Environmental policies- The government of UK promotes the business which provide
job opportunities to people. Inflation policies- The monitory policy committee (MPC) is very useful in setting up the
interest rates.
 Taxation policies- By paying the taxes amount on time, cited firm supports the
government and with the help of this amount, government constructs the roads and
buildings etc.
Unilever has to follow all policies related to economics, business, labour, regulations and
social laws of European Union. If company would not follow policies of European Union than it
may give the adverse impact on business such as decrease in sales, profit and growth of the
company (Carroll and Buchholtz, 2014). Its policies basically focus on the social protection and
living standards of people.
CONCLUSION
With the help of this report it can be articulated that it is important to understand the
environment of business. This report has been determined by the evaluating the idea and
concepts which are considered to carry out the operations of organization. In business it is
important to analyze it’s both internal and external environment of organization because changes
in environment affect the business. This report concluded that L'Oreal has monopolistic market
structure which supports the company to meet its both short and long term goals and objectives.
The main on the customers and their demands. The operation and activities are mainly based on
the policies such as fiscal and monetary.

REFERENCE
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