Table of Contents INTRODUCTION..........................................................................................................................1 TASK 1............................................................................................................................................1 a)PESTLEandSWOTanalysisofcompanyalongwithanalysisoforganisational capabilities...................................................................................................................................1 b) Prepare an analysis of the competitive environment of company by using porter's five force model...........................................................................................................................................4 TASK 2............................................................................................................................................6 a) To include evaluation of various kinds of strategic directions available to the organisation.6 b) Justification and recommendations to most appropriate growth platforms & strategies........7 c) Strategic management plan including strategies, objectives and tactics.................................7 Strategic management plan.........................................................................................................7 CONCLUSION................................................................................................................................9 REFERENCES..............................................................................................................................10
INTRODUCTION Business strategy is defined as a course of action that supports an organisation to achieve its desired business goals and objectives. It is a strategic plan that is used by management in a company to sustain a strong and competitive position within marketplace, satisfying customers and achieving desired outcomes. An appropriate business strategy will benefits the firm in attracting millions of customers without any complex procedure(Barberá and et. al., 2012). This assignment is written in context with Loreal which is a France based personal care company, situated in Clichy, France. Company have a registered office in Paris. This report will cover internal and external analysis that will offers a basis for strategic planning to the organisation. Also, evaluation of various typesof strategic directions are mentioned. Justification and recommendations associated with appropriate growth platform and strategies are discussed. At last, an effective strategic management plan is produced which includes organisational strategies, objectives and tactics. TASK 1 a) PESTLE and SWOT analysis of company along with analysis of organisational capabilities. Loreal isa French company with registered officein Paris, France. Company is considered as world's largest cosmetic organisation and offers hair colour, sin protection, perfume, hair care, skin care products to the customers. In order to achieve high revenue and market-shares within market, it is very important for the company to properly analyses internal and external business environment. In case of Loreal, an PESTLE analysis is mentioned below that will helps in analysing external business conditions in a desired manner: Political factors:These factors are associated with the rules and regulations of the country in which Loreal has been working or planning to work. As it is a French company, governmental policies and regulations of France impacts the organisation very much. Different import and export policies of a country also plays a vital role in the popularity of company in that particular region. As cosmetics is a wide industry and people form all age group prefer to use cosmetic products, government of different countries support these organisations and formulate those policies and laws which are in the favour of company(Blackburn, Hart and Wainwright, 2013). When we consider political aspects of a country, tax rate posses a major impact, current rate is 20% where as 1
last year it was 17.5%. Increase in tax rate of UK will impact the company in a negative manner as expenses of company will increase. Economical factors:These factors involves exchange rates, GDP and per capita income of the country in which Loreal is operating. Economic recession which takes place in 2008 have a considerable contribution in upbringing Loreal. Beside this, price of a product also impacts popularity of the company among people. In some regions such as, United states and United kingdom, price of cosmetics are high due to which these countries promises high revenue and profitability to company rather than regions Africa and middle east Asia. Corporate tax rate in UK is low due to which it will be beneficial for company to expand its presence there. Social factors:It encompasses the modern trends and value which are associated within society. As UK is a developed country and people living there favour more trendy products, it is beneficial for Loreal to invest more in UK. Those societies which are modern and likes to incorporate contemporary trends such as US, UK, France etc. will always accept new innovations carried out by company without considering their price. Manager in Loreal needs to consider the ingredients of product before producing them so that wide number of population can readily accept it due to its advantages. Technological factors:Along with people, technology is also becoming advanced day by day. Changes in technology can impacts the requirement of products in the mind of people. Updating technology means improvements in products otherwise new products can overtake their place and a firm will have to face losses and disadvantages.If marketing manager in Loreal will uses online and digital media to advertise about products, more people will get to know about them in less time and without spending much money(Chang, 2016). Legal factors:As Loreal is operating at global level, there are many competitors of company. If the firm wants to gain competitive advantage over rival companies, they needs to follow all the legal policies and regulations associated with a specific country. There are different legal laws associated which are adopted by every nation such as employment law, health and safety laws etc. Following these regulations will benefits the company in sustaining a positive brand image within market. If company will not take legal aspects seriously, they may have to pay heavy taxes and revenues. 2
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Environmental factors:It includes different laws and factors which are related with environment safety. As people are educated and wants to make earth as pollution free planet, it is important for Loreal to stop those activities which can adversely impacts environment. Company can initiate different campaigns and programs in which people will be informed regarding those activities which can impact environment adversely. By this, company will sustain a firm position worldwide along with enhanced revenues. Stakeholder analysis:It is an important framework for identifying stakeholders and analysing their requirements and needs in a proper manner. This tool will helps in identifying all key stakeholders and their vested interest about the company. It will helps in developing a strategic view of institutional and human landscape and the relation in different stakeholders. Different steps of this analysis are discussed below: In this step main stakeholders of Loreal are identified so that all important stakeholders can be included properly. Main stakeholders of Loreal are executive staff, consultants, employees, customers, shareholders, investors etc. In this step, stakeholders of organisation are prioritised and major stakeholders are given highest priority. In this step, communication with stakeholders is carried out so that their trust can be win. Interrelation in PESTLE and Stakeholder analysis Due to high quality of products, company has successfully maintained a stable customer base in UK. Company also provides products associated with pharmaceutical and dermatological field due to which large number of people are familiar with products and loyal to the brand. As firm is investing high in research and innovation, new products are offered to the customers but due to this profit margins of company have reduced considerably. To attain more revenues and profitability, Loreal can expand its product line by targeting people from all age groups. But economic instability in different countries can reduce the sales of company. Also, high quality products offered by other company in less price will adversely impact the sales. VRIO analysis VRIO stands for value, rareness, imitability, organisation. If employees will be familiar with the available resources, then they can get to know about their capabilities in a more desired way.VRIO is defined as a strategic tool used by firm to identify their internal capabilities and 3
resources. It will benefits Loreal in identifying their available resources so that targets can be attend desirably(Hoejmose, Brammer and Millington, 2013). In context with Loreal, analysis is carried out below: (Source:Applying VRIO Framework to Loreal, 2018) To analyse organisational capabilities, manager in company can use VRIO analysis. It is an analytical technique which will benefits the company in evaluating its financial, material and human resources so that competitive advantage against rival companies can be achieved desirably.This analysis is complementary to PESTLE analysis. It will assists the company in understanding their inside situation in a clear and precise manner. By this required improvement can be made so that company can earn high revenues and gain advantages over rival companies. 4 Illustration1: VRIO of TESLA
If some resource will not add value to the company, then company can switch those resources with other materials. If some resources will be rare company can initiate strategies to optimally use them. In case if resources are valuable and rare but not costly then they will help company to gain competitive advantage. In this regard, Loreal will be able to acknowledge its organisational capabilities properly. b) Prepare an analysis of the competitive environment of company by using porter's five force model Porters five forces model: There are two different types of environment under which every company has to work i.e., external and internal environment. Internal can be controlled by the company as it consist of strengths and weakness only(Meskendahl, 2010). But on other other hand it is hard for any organisation to control external environment as it is made up of market factors which changes according to needs and demands of the market. It is important for any company to analyse and monitor the external environment as it is directly linked with the performance of companies in a positive or negative way. To analyse it, L'oreal can use porters five forces model which is explained below with the functional strategies company can use to tackle the circumstances, Threat of new entry:It refers to chances of new competitors to enter in to market. Due to increase in number of key players it becomes hard for any company to enter. Moreover, scale of economies are high for new entrants and chances of getting success is low. So it can be said that threat of new entry is low in cosmetic industry. But L'oreal have to regularly assess the new competitors and its strategy and then modify it accordingly. Threat of substitute:It means, different way of doing the same thing. There is no particular substitute for cosmetic industry but home remedies could be one of it. Nowadays customers are more concerned about their skin due to which they are coming back to the home remedies. To cope up with that, L'Oreal have to bring any new product in the market which has ingredients like saffron or kumkumadi tailam etc so that they can attract those customers. Bargaining power of supplier:If the number of suppliers are higher then their bargaining power will be lower and vice versa. In the cosmetics industry, there is low differentiation in the inputs or raw materials due to which they have low powerof 5
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supplier. But still switching cost is high due to which company does not prefer to change their suppliers more regularly. To tackle this, L'oreal have to regularly assess the cost of the raw materials and quality of it and then make the decision accordingly(Montgomery, 2011). Bargaining power of customer:In this factor, if there is high number of customers then bargaining power of customers is high and vice versa.Due to increase in competitors list and price sensitivity, customers changes their brand more regularly resulting in loss for many companies. To tackle this situations, L'oreal have to opt change their price and set it according to the competitors so that more customers would be attracted. Competitive rivalry:It refers to number of competitors in the market. UK cosmetic market has large numbers of key players like MAC, Elemis, YSL beauty, clarins etc. So it can be said that competitive rivalry is high in cosmetic industry. To manage the competitions, L'Oreal have to opt various marketing activities like social media, sales promotions etc so that their brand awareness would be increased to a certain level which ends at increasing customer and market share in the market. According to the porter's analysis, it is identified that company should try to lower down their prices or make their product differentiate as compareto other so that potential customers would be attracted from it. The threat of substitute is medium in cosmetics industry. Supplier have low bargaining power but customer due to their varying demand have high power. Company is required to make competitive strategies so that advantage against rivals can be achieved. TASK 2 a) To include evaluation of various kinds of strategic directions available to the organisation To devise different kind of strategies so that desired objectives can be achieved, manager in Loreal can use Ansoff Matrix. It is a strategic planning tool that will offers a framework so that marketing manager of company can devise different kinds of strategies to sustain future growth. There are four quadrants associated with this matrix which are mentioned below: Market Penetration:In this strategy, a firm enhances its presence by using its existing products within existing market. Market development benefits a firm in increasing their market shares. To achieve this, company can either enhances their sales within existing 6
customers or by targeting new customers. For this purpose, Loreal can invest more in advertising and promotions. To achieve high sales, company can decrease its price, increase its promotions or acquire some rival company. Diversification:In this strategy, Loreal can increase its market shares by introducing new offerings in new marketplace. This is a risky strategy as it involves both product and market development. If Loreal will adopt diversification then manager in company is required to analyse market in an appropriate manner so that the requirements of people can be understood properly and in respect with that new product can be developed. Market Development:In this strategy, a company tries to expand its business into new markets and segments with the help of its existing products and services. For this, manager in Loreal can target different customer segments according to their preference or introduce the company to a new foreign market. By this sales and revenues of company will expand considerably(Newton and et. al., 2015). Product development:In this kind of strategy, a firm develops a new product or service so that customer base within existing market can be enhanced. By increasing product line of company, high profitability can be achieved desirably. To develop a new product, manager in company can invest high in market research so that needs of customers can be acknowledged desirably. Other than that joint venture with other companies that are capable to help Loreal in successfully launching a new product is also an effective option. b) Justification and recommendations to most appropriate growth platforms & strategies In case of Loreal, company is going to use Diversification strategy in which company will introduce new products. This new product will be offered in existing as well as new market so that high sales can be achieved. Diversification is a risky procedure but taking high risk will also benefits the company in achieving high returns. But this strategy will benefits Loreal in reducing all risks which are associated with business portfolio. Some of the justifications related to the benefits of using diversification strategy are mentioned below: With the introduction of new product, product line of company will enhance due to which customers will have more variety to choose. This will increases the organisational sales due to which high revenues can be generated(Peng, 2017). 7
As more products will be developed, company will require more markets to offer their products. Distribution of products into new market will increases their popularity. Due to this overall turnover of the firm will increases considerably. Recommendations:It is recommended to the marketing manager in Loreal that before developing a new product, marketing team is required to analyse the choice and preferences of people in a desired manner. This will helps them to understand which kind of product development will benefits the firm in achieving their desired targets. It is also recommended to the company that rather than targeting all sections, if consideration will be given to the people of a specific age group then product will become more successful. Also, it is recommended that company can introduce their new product in Kid segment as it is a popular brand and customer loyalty is high. There are chances that new product will achieve high success. c) Strategic management plan including strategies, objectives and tactics Strategic management plan It refers to the plan in which the aims, objectives, strategies etc. are provided which are predetermined by the management of Loreal. Through this plan, organisation can achieve the success in the business market as the elements for expanding the product portfolio are already determined by the management. These elements are discussed below: Summary: Loreal is expanding their product portfolio for enhancing the satisfaction level and experience of customers. The firm desires to increase their market share and position by expanding the product line. Aim: The aim of the Loreal is to increase the market share of its products and firm by increasing the products in their product portfolio. Objective:The objectives of the Loreal is to enhance their market share in the beauty and cosmetics industry of UK. This can be achieved by increasing the range of their products to ensure that the customers get what they want to purchase from the company based on their needs (Schrader, Freimann and Seuring, 2012). Organisational structure:The organisational structure of the Loreal is Hierarchical which means that the firm has operates of several level. The lower level employees report to middle level, middle level employees report to upper level management and the upper level management reports to the CEO and Board of Directors. 8
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Vision:The vision of Loreal is to get the recognition and appreciation from the customers from the products provided by the firm. Mission:The mission of Loreal is to provide highest quality and performance standards beauty products to the consumers for their enriched experience and satisfaction. The firm has decided to expand the product portfolio of their brand for attracting more customers. Values:The values of Loreal are given below: A culture shared by all employees at every level Using high quality based raw materials and packagingA production unit which targets the excellence Costs:Loreal has estimated an amount of 1,00,000 pounds for expanding their product portfolio in the UK. Time: The time period for successfully expanding the product portfolio is 2 years which is estimated based on market analysis. Scope: The scope of product expansion is wide as the firm is expanding the portfolio so that the products of the Loreal can reach to remote areas of UK for getting the accessibility to customers in these areas. Quality: Loreal is focused on the quality of the products provided to the customers. The firm is using the quality based raw materials in manufacturing their products. Also the company is using the TQM and Lean manufacturing for eliminating the waste in production department. Problems:Loreal is facing tough competition from the competitors such asMaybelline, MAC, Dior etc. The products of Loreal are comparatively higher than the competitors due to the quality of raw materials and manufactured products. The problems faced by the firm is due to the prices of products provided by the competitors(Spender, 2014). Strategies: The firm is using the diversification strategy for this expansion through which Loreal can provide the unique features based new products to their existing and new customers so that the market share along with the profit of the firm can improve in the UK cosmetics industry. Measure the progress:The management of the Loreal needs to evaluate the performance of the employees so that they can be provided with additional training for obtaining the improved results. 9
Modify the long term strategies into short term tactics:The management of Loreal should needs to change their strategies and policies accordingly to the situations for eliminating the involved risks. Through this, the firm can obtain sustainability in the UK market after expanding the product portfolio. Marketing strategies: The company has decided to use the social media and their website for attracting the customers towards the newly introduced products. Also the firm has decided to offer the discounts and rewards to the existing employees when they purchase the new products. CONCLUSION From above mentioned report, it can be concluded that internal and external analysis will benefitsthecompanyinacknowledgingmarketingconditionsinanappropriatemanner. Techniques like Porter's five force will benefits the company in analysing the competitive environment in which company is operating. There are different kinds of strategies which can be used by company to enhance its sales and revenues. With the help of an effective strategic management plan, a firm can achieve its objectives and goals by efficient means. 10
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