Business Strategy : Sample Assignment

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Application of framework to analyse impact and influence of macro environment..............1
TASK 2............................................................................................................................................5
P2 Analysis of internal environment and capabilities of the company........................................5
TASK 3............................................................................................................................................9
P3 Evaluation and application of Porter's five force model.........................................................9
TASK 4..........................................................................................................................................11
P4 Application of models, theories and concepts......................................................................11
CONCLUSION..............................................................................................................................15
REREFRENCES............................................................................................................................17

INTRODUCTION
Business strategy can be defined as the plan which is formulated to achieve long as well
as short term objectives. Main aim behind it is to analyse ways in which organisations may
attain growth and development. All the companies form strategic decision in order to analyse
available opportunities of market and grab them for the betterment of the business (Adner, 2017).
The organisation which is selected for this report is L'Oreal which is personal care product's
company and founded in year 1909. Currently the organisation is operating its business all
around the world.
This report covers various topics such as impact and influence of macro environment on
business and assessment of internal environment and capabilities of the organisation. Apart from
this, evaluation and application of Porter's five force model and other theories is also covered
under this assignment.
TASK 1
P1 Application of framework to analyse impact and influence of macro environment
Different types of frameworks: There are various types of frameworks which may leave
impact upon macro environment of the organisation. All of them are as follows:
PESTLE analysis: It is a tool which is used for the purpose of analysing different market
conditions with the help of different factors such as political, economic, social, technological,
legal, environmental etc. With the help of it managers of L'Oreal will be able to analyse
influence and impact of it for the organisation.
Stakeholders analysis: It is a framework which is used to analyse organisation's system
and assess the changes that may take place due to modification in to interest of stakeholders of
organisation. With the help of it managers in L'Oreal can analyse needs of all the stakeholders.
Porter's five forces model: It is a model which is used by business entities such as
L'Oreal for the purpose of analysing competitive market so that effective strategy can be
formulated.
From both the frameworks stakeholder and PESTLE analysis are going to discussed in
detail as it can help the managers to analyse the factors which are impacting and influencing the
organisation.
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Macro environment: All the factors that are uncontrollable and affect decision making
of the managers. Such type of elements directly leave impact on the growth of the company. In
order to identify all these components PESTLE analysis is being conducted for L'Oreal.
Pestle analysis: It is a framework which is used by large business entities to analyse the
factors that are available in the industry may leave negative impact on growth of the company
(PESTLE analysis, 2019). An analysis of all of them for L'Oreal is as follows:
Political: All the rules, regulations and policies that are imposed by the political parties
of the country are considered as the part of such factors. For L'Oreal it is vital to take all of them
in to consideration so that their negative impact can be reduced.
 Opportunity: As L'Oreal always comply with all the governmental factors which is an
opportunity for the company to reduce interference of political parties from its
operations.
 Threat: If managers of L'Oreal does not implement the policy imposed by political
parties of UK the it will become more difficult for the company to sustain in the market.
(Source: PESTLE analysis, 2019)
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Illustration 1: PESTLE analysis, 2019

Economic: Exchange, inflation, deflation and interest rates are the economic factors that
may influence a company in both ways positive as well as negative. Currently it has become
essential for organisations like L'Oreal to focus of all such type of elements in order to conduct
operational activities (Grayson and Hodges, 2017).
 Opportunity: Economic factors such as recession does not affect cosmetic industry so it
is an opportunity for L'Oreal to operate its business appropriately whether economic
conditions are positive or negative.
 Threat: Whenever such factors fluctuates, it affect purchasing power of customers.
Increment in inflation rate results in decrement of buying capacity of clients that may
influence sales of L'Oreal.
Social: Customer's taste, preference, needs, culture, social trends etc. are the part of these
factors that may influence sales and profits of the business entities such as L'Oreal. In order to
survive in the market managers of L'Oreal are required to consider all of them at the time of
strategy formulation so that plan to reduce their negative impact can be formulated in advance
(Habib and Hasan, 2017).
 Opportunity: As modern society pays attention to fashion trends and it is a great
opportunity for L'Oreal to comply with them to attract large number of customers.
 Threat: There are various ethical issues related to L'Oreal products have identified and
all of them may result in decreased market share of the company.
Technological: Technological changes, innovations etc. are the part of such factors that
influence buyer to switch form their brand to another. For L'Oreal it is essential to focus on all of
them in order to meet technological requirement of clients (Hart, Sharma and Halme, 2016).
 Opportunity: L'Oreal can operate its business appropriately by establishing alignment
with digital innovation and focusing ion all its research and development strategies to
reach the competitive edge.
 Threat: Ignoring latest technology mat result in a huge reduction in the number of brand
loyal customers.
Legal: Taxation, laws, legislation and government regulations are the legal factors that
leaves impacts and influences organisations. For L'Oreal it is very important to fulfil all the legal
requirements in order to keep its graph of success high.
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 Opportunity: In UK legal authorities are trying to reduce trade related tax for cosmetic
industry because it helps to develop the economy. It is an opportunity for L'Oreal as it
can operate its business in UK with low taxation on its trading.
 Threat: Sometimes organisations that operates under cosmetic industry forget to follow
the acts such as the federal food, drug and cosmetic act and at that time government take
strict action against the sector. In this situation L'Oreal may also get influenced because
the whole sector get affected due to actions of the government.
Environmental: Environment protection acts, climate and weather are the part of these
factors. The government of UK is very much concerned about the environment of UK and
implemented various rules. For all the organisations such as L'Oreal it is very important to
follow all of them to operate business successfully in the nation (Kono, 2016).
 Opportunity: As L'Oreal is part of go green campaign and planning to use eco-friendly
packaging for its products which is an opportunity for the company to comply with all the
environment protection rules and establish a good market image.
 Threat: If L'Oreal is not able to follow the environment related rules then it may leave
negative impact on its number of customers and market share.
Stakeholder analysis:
Illustration 2: Stakeholder analysis, 2019
Source: Stakeholder analysis, 2019
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Low power low interest: All the stakeholders who have low interest and power within
the company are known as apathetic. Employees who are getting fixed salaries whether
organisations such as L'Oreal are in profit or loss are known such stakeholders who do not have
power and interest within the organisation.
Low power high interest: All the stakeholders who have low power and high interest in
company are known as defenders. Partner sales and consultants of the L'Oreal are such types of
stakeholders who take interest in the entity and have low power to take participate in decision
making procedure of company.
High power low interest: All the stakeholders such as directors, suppliers, creditors have
high power of decision making and low interest within the organisation. These are known as
latent as they have power to make changes in strategy of L'Oreal (Stakeholder analysis, 2019).
High power high interest: Stakeholders such as lead generators, investors, shareholders
etc. have high interest and power in L'Oreal and they are known as promoters. They get higher
returns is the organisation is generating higher returns.
The above analysis states that various stakeholders of L'Oreal are having high interest
and power some of them are having low interest and power. With the help of stakeholders
analysis framework it has been analysed that organisation is required to maintain interest of
external parties in order to execute business operations effectively.
TASK 2
P2 Analysis of internal environment and capabilities of the company
Internal environment: It is combination of such factors that are available within the
organisation and are required to be focused by the managers and top authority of the company in
order to reduce their negative impact. There are various types of tools that can be used to analyse
the internal environment. One of them is SWOT analysis which is as follows:
SWOT analysis: It is useful technique that can guide the managers to analyse strengths,
weaknesses, opportunities and threats for the company (SWOT analysis, 2019). All these four
elements of this tool, for L'Oreal are as follows:
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(Source: SWOT analysis, 2019)
Strengths Weaknesses
 L'Oreal is the largest cosmetic brand
which has captured a large area of the
market.
 The organisation conduct continuous
research and development activities
which helps it to collect data of
customers.
 Profit margins of the company is very
low as compare to other organisations
which are operating business under
cosmetic sector.
 Organisation spends huge amount on
research and development activities
which results in lack or monetayr
resources for operations.
Opportunities Threats
 As customers always look for new
products so L'Oreal may expand its
 The cash flow of the company is very
tricky that may put L'Oreal in to
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Illustration 3: SWOT analysis, 2019

product line in order to attract large
number of customers.
 Organic beauty and cosmetic items can
be launched by the company in the
market to meet the requirements of the
customers.
problems at the time of economic
changes.
 Quick changes in products of cosmetic
industry may leave negative impact on
the organisation because it results in
changes in the choice of customers.
Findings: From the above table it has been analysed that L'Oreal have various strengths
such as continuous market research, good brand image etc. Its weaknesses are lower profitability
and spending more on research and development. In order to overcome this situation managers
of organisation are required to form strategic decisions.
Mc Kinsey's 7s model: It is a model which is mainly used for the purpose of analysing
organisational effectiveness which helps to execute all the business operations. It can also be
used by L'Oreal to analyse its internal capabilities and resources. All the elements of this model
are as follows:
Strategy: In L'Oreal various plans are formulated for the purpose of maintaining
competitive advantage and to compete with competitors. Managers pay attention on
organisation's ability to compete with other companies in order to execute business effectively.
Structure: In order to organise L'Oreal appropriately matrix organisational structure ios
followed which helps to manage all the departments, teams and employees in a proper manner.
Systems: Daily procedures of L'Oreal are conducted in systematic way which is
beneficial for effective execution of business operations.
Shared values: These are commonly accepted standards and norms which influences
behaviour of employees and managers. In order to motivate them top work hard it is very
important to provide them good working environment.
Skills: In order to build talent and capabilities in employees, top level executives in
L'Oreal conduct training and development programs for them which helps to make them skilled
and experienced.
Style: In order to enhance productivity, performance and corporate culture managers in
L'Oreal pay attention towards democratic management style in which they take opinion of staff
members.
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Staff: For all the business entities it is very important to motivate staff members as they
are responsible to execute operational activities. For this purpose, managers in L'Oreal train them
accordingly and provide them growth opportunities.
Findings: The above analysis depicts that L'Oreal is having highly skilled and motivated
staff members because of its decentralised management style, matrix structure, systematic
manner to execute business etc.
VRIO model: It is a tool which is used analyse capabilities of a company. There are four
different aspects are assessed by the managers such as valuable, rare, inimitable and organised
(VRIO model, 2019). For L'Oreal analysis of all four elements is as follows:
(Source: VRIO model, 2016)
Capabilities Valuable Rare Inimitable Organised
Plant and
Machinery
✔ ✗ ✗ ✗
High man power ✔ ✔ ✗ ✗
Market share ✔ ✔ ✔ ✗
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Illustration 4: VRIO model, 2016

Brand image ✔ ✔ ✔ ✔
Valuable: There are for valuable items of L'Oreal plant and machinery, high man power,
market share and brand image. All of them are considered as valuable aspects because they help
to conduct operational activities in appropriate manner. For all the companies it is very important
to have these factors so that executional activities can be performed effectively (Lai, Melloni and
Stacchezzini, 2016).
Rare: Plant and machinery of L'Oreal are not rare because other companies from same
sector may use them for the purpose of manufacturing their beauty products. High manpower is
rare because for all the businesses is not possible to have and retain them. Market share of
L'Oreal is rare as the large number of customers are being retained by the company and captured
a larger area of the market. Brand image of the organisation is rare because it has been
established by offering good quality products to the customers.
Inimitable: High man power are not inimitable because by putting higher efforts any
organisation can hire large number of employees. Market share and brand image are inimitable
because it is tough to maintain these elements for a long period a single and small mistake
related to product quality can harm the market share and image of the products (Linder and
Williander, 2017).
Organised: Market share of L'Oreal is not organised because by offering same products
on low prices any company can capture large area of market. Brand image of the enterprise is
organised because it takes long period to establish a positive image in the mind of customers and
for other entities it is not possible to harm its image.
TASK 3
P3 Evaluation and application of Porter's five force model
Porter's five force model: It is a competitive analysis model which was developed by
Michael E. Porter in year 1979 in order to help the organisations to analyse the competitive
market place (Porter's five force model, 2019). There are five different elements of it that may
guide the managers to focus on essential elements such as competitors, substitutes etc. A five
force analysis for L'Oreal is as follows:
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(Source: Porter's five force model, 2019)
 Existing rivalry among competitors: Competitive rivalry for L'Oreal is very high
because there are end number of competitors that are available in the market and trying to
capture the market share of the company. Some of them are Mac, Dior, Maybelline,
Lancome, Estee Lauder etc. It is very important for the organisation to form attractive
strategies that may help it to compete with its competitors in appropriate manner.
 Bargaining power of suppliers: In Cosmetic industry bargaining power of suppliers is
very low because there are end umber of suppliers in this sector and if one is selling
material on high price then companies may shift to another. As L'Oreal is a part of this
industry so the bargaining power of suppliers will also be low for the company which is a
positive point for the organisation (Orna, 2017). It can help the enterprise to buy material
for beauty products from suppliers on cheap price.
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Illustration 5: Porter's five force model, 2019

 Bargaining power of buyers: As there are end number of beauty product companies
which are operating under cosmetic industry so for L'Oreal bargaining power of buyers is
very high that may leave negative impact on its profitability and number customers. In
order to deal with customers while they bargain L'Oreal may focus on its pricing
strategies and set appropriate price for its products that may attract large number of
customers.
 Threat of new entrant: In beauty and cosmetic products industry, it is not possible to
enter easily and for this purpose huge investments are required hence the threat of new
entry for L'Oreal is very low. As larger market area have been captured by the company
so it will be difficult for a new organisation to survive in the market.
 Threat of substitute: When one product can be used on the place of another it is known
as substitute. For L'Oreal threat of such items is low because people are highly concerned
with their skin that's why they does not prefer to replace their products by some other
(Taneja, Pryor and Hayek, 2016). The substitutes for L'Oreal are home remedies and
other skin care items but as it has a good market image so customers trust its items. It
helps the company to retain clients and convert them in brand loyal consumers.
Capabilities which can help to increase sales and launch new products: L'Oreal is
having highly skilled workforce and good competitive advantage which is beneficial for the
organisation to enhance revenues. With the help of such capabilities company will also be able to
compete with other organisations effectively.
TASK 4
P4 Application of models, theories and concepts
Ansoff matrix: It was was defined by H. Igor Ansoff in the year 1957 in an article
“Strategies for Diversification”. This matrix helps an organization to determine its product and
marketing growth strategies. The growth strategies of such matrix are Market Penetration,
Product Development, Market Development and Diversification. It can help to identify best
growth strategy that may help to achieve long term business goals (Ansoff Matrix, 2019). All the
four aspects of this matrix have been analysed for L'Oreal. Detailed description of all of them is
as follows:
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(Source: Ansoff Matrix, 2019)
 Market Penetration: Market penetration is a growth strategy which is based on selling
existing products in the existing markets. Any organization formulates various strategies
to increase their market share by making various changes in the existing product
considering the taste, preferences, of its customers (Tongur and Engwall, 2014). L'Oreal
can implement this strategy to gain market share of its existing products in the existing
market by applying various strategies like decreasing prices to attract customers,
increasing promotional activities of the existing products.
 Product Development: Product development is a strategy which includes
introduction and development of a new product in the existing market. After considering
various factors and their associate risks, an organization offers new products to its
customers. L'Oreal may adopt this strategy in order to attract its existing customers by
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Illus
tration 6: Ansoff Matrix, 2019

using different quality development, acquiring and merging resources of with the
competitors and making improvements in technology to provide innovative and attractive
products to the existing market.
 Market Development: Market development is an approach where strategies are
formulated to enter into a new market with the existing product. Various moderate risks
are associated with the implementation of such strategy. L'Oreal can adopt market
development strategy to reach those markets where its products are not sold. It will help
to expand the business in more geographic locations (Saebi and Foss, 2015).
 Diversification: Diversification is approach adopted by an organization to enter in a new
market with the new product at a same time. L'Oreal can formulate and implement the
diversification strategy to enter into new market with the new product in order to capture
more market share and to make innovative products as per the markets demand to
maintain its profitability.
L'Oreal should focus on product development strategy in order to capture larger market
share by launching new products in its existing market. It will be beneficial for the organisation
because it can help to retain current and attract new customers from the its market segment.
Justification: Product development strategy should be selected by L'Oreal because it
does not requires higher promotions and market research. As the company is having good brand
image and loyal customers so it is a less risky method of development because the manufacturers
already have information regarding requirements of clients.
Ansoff matrix is effective for L'Oreal because it can help the company to analyse best
way to attain growth in future and execute business effectively. It can provide guidance to the
managers to find the way in which company achieve huge success.
Porter's generic model: There are three different types of strategies which are considered
as the part of this model which helps to find out the best way to attain growth for business. All
the strategies under this model are as follows:
Cost leadership: In this type of strategy organisations such as L'Oreal are required to
focus on cost of the product in which they set low cost for products in order to achieve
competitive market.
Differentiation: This strategy states that companies such as L'Oreal are required to make
their product unique as compare to others so that it can attract large number of customers. There
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is high risk involved in this strategy because organisation does not have any idea that customers
will adopt the new product or not.
Focus strategy: There are two different focus strategies which could be adopted by
L'Oreal for the purpose of launching new products in the market. These strategies are formed by
taking nich market in to consideration.
 Cost focus: In this strategy L'Oreal will launch its products on low prices in niche market
in order to analyse response of the customers regarding its new products. With the help of
it customers could be attracted toward products.
 Differentiation focus: According to this strategy L'Oreal is required to launch unique
products to niche market so that it can be analysed that company will be able to increase
profitability or not.
It has been recommended to L'Oreal to use different-ion focus strategy and launch unique
products in the market in order to capture larger market area and increase profits.
Strategic management plan: It is a detailed plan in which information regarding
organisation's objectives, strategies, mission, vision, tactics etc. are mentioned. As product
development strategy is recommended to L'Oreal, so for this purpose a strategic plan for the
company is as follows:
Objective: Main objective of the company is to increase its profits by 15% in next two
years by launching natural body care products in the market (Vom Brocke and Rosemann,
2014).
Vision: The organisation is willing to be on the top of the beauty or cosmetic industry.
Mission: Mission of L'Oreal is to enhance productivity, profitability and achieve higher
competitive advantage for the betterment of the company.
Strategies: Following strategies are going to be used by L'Oreal for the purpose of
launching new products in its current market:
 Promotions: Promotional strategy is going to be used by L'Oreal as it can help to aware
large number of customers regarding the products that are introduction by the company in
the market. It helps to reach maximum number of prospects so that higher profits can be
achieved.
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 Research and development: This strategy will be used by L'Oreal for the purpose of
identifying requirements of customers. It can help to retain existing clients and attract
prospects towards the company.
Tactics: These are the set of strategies that are formulated to achieve long term goals of
business. Following tactics are going to be focused by L'Oreal:
 Arrangement of funds: It is one of the major requirement of the company and the
managers may arrange funds from external as well as internal resources. These are bank
loan, selling of old assets etc. Technological enhancement: As L'Oreal is planning to launch new products in the
market so the another thing which is required to be focused by the organisation is
technological enhancement because it can help to attract large number of customers.
STP: It is a set of three different strategies in which decisions regarding launching of new
products are being formulated by the company. All the three elements of STP that are required to
be focused by L'Oreal are as follows:
 Segmenting: Under this strategy L'Oreal will divide market in different segments and
then select on of them to launch new natural beauty care products in the market. For
example if UK is selected by the company then London will be the segment where the
new items will be introduced (Westerlund, Leminen and Rajahonka, 2014).
 Targetting: The process of identifying target customers is known as targetting. The
target market for L'Oreal will be the females of London as the new natural beauty care
products are going to be launched for women.
 Positioning: In this procedure organisations try to use attractive procedures in order to
set a good brand image in the mind of customers. L'Oreal is going to use impressive
promotion strategy such as free sample, discounting etc. to aware clients regarding the
products.
CONCLUSION
From the above project report it has been concluded that business strategy is the process
of formulating strategic plans for the organisation in order to achieve predetermined goals. For
all the business entities it bis very important to identify factors of internal as well as external
environment that may leave negative or positive impart on the company. PESTLE is used to
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analyse external and SWOT is used to determined internal environment. Porter's five force model
is also used by enterprises in order to identify competition in the industry.
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REREFRENCES
Books and Journals:
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Grayson, D. and Hodges, A., 2017. Corporate social opportunity!: Seven steps to make
corporate social responsibility work for your business. Routledge.
Habib, A. and Hasan, M. M., 2017. Business strategy, overvalued equities, and stock price crash
risk. Research in International Business and Finance,. 39. pp.389-405.
Hart, S., Sharma, S. and Halme, M., 2016. Poverty, business strategy, and sustainable
development.
Kono, T., 2016. Strategy and structure of Japanese enterprises. Routledge.
Lai, A., Melloni, G. and Stacchezzini, R., 2016. Corporate sustainable development: is
‘integrated reporting’a legitimation strategy?. Business Strategy and the Environment.
25(3). pp.165-177.
Linder, M. and Williander, M., 2017. Circular business model innovation: inherent uncertainties.
Business strategy and the environment. 26(2). pp.182-196.
Orna, E., 2017. Information strategy in practice. Routledge.
Saebi, T. and Foss, N. J., 2015. Business models for open innovation: Matching heterogeneous
open innovation strategies with business model dimensions. European Management
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Taneja, S., Pryor, M. G. and Hayek, M., 2016. Leaping innovation barriers to small business
longevity. Journal of Business Strategy. 37(3). pp.44-51.
Tongur, S. and Engwall, M., 2014. The business model dilemma of technology shifts.
Technovation. 34(9). pp.525-535.
Vom Brocke, J. and Rosemann, M. eds., 2014. Handbook on business process management 2:
strategic alignment, governance, people and culture. Springer.
Westerlund, M., Leminen, S. and Rajahonka, M., 2014. Designing business models for the
internet of things. Technology Innovation Management Review. pp.5-14.
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<https://www.business-to-you.com/scanning-the-environment-pestel-analysis/>
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<https://www.business-to-you.com/vrio-from-firm-resources-to-competitive-
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