Business Strategy and Innovation Analysis

This assignment delves into various business growth strategies, including PESTLE analysis, SWOT analysis, and Ansoff's growth vector matrix. It provides a detailed breakdown of these concepts, along with real-world examples and case studies from industries such as the leather industry and sharing bike services. The assignment also touches on innovation management, product-market configurations, and portfolio diversification strategies.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Presenting an internal and external analysis of L'Oreal.........................................................1
Presenting Porter five force model for L'Oreal......................................................................6
TASK 2............................................................................................................................................7
Presenting different types of strategic directions for L'Oreal.................................................7
Justification and recommendation of appropriate growth platform.....................................10
Strategic management plan for L'Oreal................................................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business strategy is the action or set of decisions which helps the managers in order to
achieve the business objectives. The report main aim is to understand the concept of business
strategy and it is also based upon the case scenario of L'Oreal which is one of the leading firm
and provide a range of skin care and accessories. Report present internal and external analysis by
using SWOT and PESTLE in order to determine the company's capabilities. Further, it also
describes the competitive environment of a firm by using Porter's five force model and it alos
evaluate different types of strategic directions by using Ansoff growth vector matrix and
recommended the best growth platform and strategies for L'Oreal. Moreover, study produce a
strategic management plan with strategies, objectives and tactics.
TASK 1
Presenting an internal and external analysis of L'Oreal
In order to determine company's external macro factor, PESTLE analysis is used which is
a framework, that is used to analyse and monitor external factors that impact upon the
organization's performance.
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Illustration 1: PESTLE Analysis
(Source: PESTLE Analysis, 2019)

Political factor: It includes the rules and policies of the government in which the quoted
firm is working and in UK, the product safety is quite essential. Thus, it is quite necessary for an
organization to keep adhering all the laws which is prescribed by government. As the
manufacturing company of L'Oreal is in Paris, therefore, the government policies of France
affect the company. Beside this, there are several import policies which further plays an
important role in the success of L'Oreal (PESTLE analysis of L'Oreal, 2019). Thus, it shows that
the political factor also have a positive impact upon the business of a quoted firm.
Economical Factor: The factor includes the exchange rates in which the company is
actually working and among all, the recession is that element that cause upbringing of cosmetic
organization such as L'Oreal (Rupiarsieh and Santosa, 2019). Beside this, the prices of the
quoted firm also varies in different regions such as in few regions the prices of the product are
high and even it is also considered that beauty and cosmetic industry are immune to economic
downturn. Thus, in developed countries, who have high Human Development Index are more
prone to use branded products such as L'Oreal and this helps to increase the chances of sales as
well.
Social Factor: In modern states, people are more interested in fashion trends and they
prefer to use branded products as well. Even it is also analysed that the society who have the
knowledge of latest technology then they are also welcome the innovation made by L'Oreal.
While on the other side, there are some ethical issues which also affect the purchasing power of
the customers. Overall, these social and ethical factors plays a prominent role in the business of
quoted firm.
Technological factor: This factors creates positive impact upon the business and L'Oreal
is also very much prone to innovation and keep meet out the demands of the customers as well.
Even the technology also provide a chance to the quoted firm to follow for a success and provide
the best possible innovative products to their customers and force people to purchase trendy
products (Wiksuana and et.al., 2019).
Legal factor: It is quite necessary for L'Oreal to keep follow all the legal laws which is
prescribe by the government and for cosmetic industry, the quoted firm has to follow The federal
food, Drug and Cosmetic Act (FD&C act) and the Fair packaging and Labelling Act (FPLA).
Because if the product have proper ingredient then it does not affect the skin of the customers
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and as a result, it will help to sustain the brand image as well. As L'Oreal is one of the leading
firm, therefore it is quite necessary for the firm to adhering all legal laws.
Environmental factor: As L'Oreal is one of the internation company who promote
sustainable innovation in the product formulation so that it will does not affect the environment
in negative way. Apart from this, the company should also take some initiatives regarding
environmental and sustainability.
Stakeholder mapping analysis:
Primary stakeholder: these are the person in L'Oreal who are mostly affected by
positively and negatively by an action of an organization. These are the employees, management
and enitre system of the business.
Secondary stakeholders: these are the person who affected indirectly by the action of an
organisation and this are suppliers of the quoted firm.
Tertiary stakeholders: these are the person who affected the least such that they are the
customers.
Conclusion: From the above, it has been concluded that macro factor affect the business
in negative way such that it also affect the smooth functioning of the business. In the same way
bys using PESTLE analysis, it has been concluded that external factor do affect the business in
negative way and by suing stakeholder matrix tool, the business smooth functioning is also
realised.
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To determine the company's internal capabilities, SWOT framework is used that helps to
identify company's strength, weaknesses and opportunities, threats and these are as mentioned
below:
Strength: L'Oreal offer a variety of beauty and cosmetic products and also have a brand
image in market at global level (Lestarini and et.al., 2018). The quality of its company's product
are high and it also have strong research and development through which the firm easily
determine the needs of their customers and produces the same. Further it also invests a lot of
amount to produce organic products for their uses as they want less chemical ingredients
products. Currently the company also operates in more than 110 countries and this shows its
global presence at all over world.
Weaknesses: As the quoted firm invest a high amount in the research and development
but it leads to shrink the profit margin of the business. But on the other side, to stay competitive
in the market, it is quite necessary for the firm to research in order to determine the exact needs
of their customers. Apart from this, for L'Oreal multiple acquisition is another weaknesses and
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Illustration 2: SWOT Analysis
(Source: SWOT Analysis, 2018)

the company is also dependent on the suppliers that somehow affect the profit of the company.
Even the quoted firm also offer a variety of products and therefore it also require a number of
subdivisions to handle everything and relying on so many customers in order to manage those it
creates issues such as slowness.
Opportunities: The firm have the opportunity to enter into new market such as personal
care sector and even by offering organic products at global level will also creates another
opportunities for the business (Sulastri and et.al., 2016). Moreover, L'Oreal also creates new
product for niche costumers and as it should focus on everyone rather than one specific
demographic. This will further creates another opportunity for L'Oreal to leave a positive
impression upon the customers and can ecven change their mind as well.
Threats: The biggest threat which the company faces from their rival because there are
so many companies who offer the same products with low rates, thus it always affect the
business in negative way. Apart from this, the cosmetic industry also moves quickly and it
become more difficult for L'Oreal to keep analysing the demand of their customers and produces
the same again. As a result, the company may sometimes faces loss even (Mitreva and
Krivokapić, 2017). Due to sudden fluctuation in economy of the country, it also leads to create
negative impact upon the company, hence, it affect the profitability of the company and its brand
image as well.
Research based view method: this is a managerial framework that used to determine the
strategic resources in order to deliver the comparative advantage of a firm. This are as mention
below:
Resource: All the assets, information and knowledge which are used by the firm that
further helps to improve the efficiency and the effectiveness of the company's overall situation.
L'Oreal have best products and knowledge that helps to keep gaining iots high competitive
advantages.
Capabilities: L'Oreal offer a variety of beauty and cosmetic products and also have a
brand image in market at global levelThe quality of its company's product are high and it also
have strong research and development through which the firm easily determine the needs of their
customers and produces the same.
Competitive advantage: To gain high competitive advantage, the quoted firm also uses
best competitive pricing strategy.
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Conclusion: From the above it has been concluded that L'Oreal have high brand image in the
market and it also offer the best products with reasonable rates. It has been concluded by using
SWOT analysis that the company also faces though competition from the rivals as well.
Presenting Porter five force model for L'Oreal
Porter five force model in used to determine the competitive advantages of L'Oreal and it
is as follows:
Threat of substitute (low): Quoted firm faces less substitution in the anti- aging
products. Such that L'Oreal did not disturb by any potential substitute in the market. Even on the
other side, if there is high threat of substitution then it has to continuously invest into research
and development so that it came with new innovative products in order to meet out the demand
of their customers (Ramdani and et.al., 2018). Currently, the firm, also have lot of competitors
but L'Oreal also provide the best quality of products with reasonable rates, then this shows that
the threat of substitute is low. Moreover, as the threat is low then it clearly shows that the
business can also grow its unit at new country because the products of L'Oreal are unique and no
other cmpany have such products to gain high competition.
Bargaining power of Buyers (High): As the company provide the best quality of
products to their customers and offer variety of products to their customers, further it also
operates its unit at different countries. On the other side, the company also faces high
competition from its rival firm and there may increased chances that the customers may also shift
from other brand. Therefore, L'Oreal faces the threat of lack of customer and at this situation, it
must be deal with the threat as early as possible in order to maintain the market share of a
company. Apart from this, as the buyers have a strong bargaining power then the firm usually
have to drive the price down so that L'Oreal will make profit for the firm (Ting and Xiaoyan,
2017). Moreover, company provide the best quality of products to their customers and offer
variety of products to their customers that is why it has a high buying power as compared to
others.
Bargaining power of Suppliers (Low): Currently, L'Oreal also has a huge capacity such
that its production is also exceed around more than 40 billions units per day and even the
suppliers further have the little opportunities to deal with L'Oreal. Being a brand image in
market, the quoted firm also have quantity of suppliers, thus the suppliers does not have the
ability to bargain with cited firm and thus, it does not faces too many threats from the suppliers.
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As a result, it shows that the bargaining power of Suppliers is low and on the other side, if the
suppliers have strong bargaining power then they will extract higher price from it and as a result
it creates negative impact upon the business and the company's overall financial performance
also got affected. Beside this, L'Oreal also has a huge capacity such that its production and
because of variety of products and deal at wide range of country the company have low
bargaining power of suppliers.
Threat of new Entrants (low): For L'Oreal, the threat of new entrant is quite low
because in this modern world, there are already strong competitors who have their own market
share and if a new company is entered into the existing market, then it has to invest a lot of in the
market (Hajar, 2015). As a result, there is no surety of the business profit and success. On the
other side if L'Oreal faces high threat of new entrant then, quoted firm will be willing to earn
profit in order to reduce the threat from nee ones. Moreover, as the quoted firm have low threat
of new entrant because it required high amount if investment when a new business wants to enter
into new market, that is why L'Oreal have low threat of new entrant.
Rivalry among competitive firms (high): In this competitive world, the company also
faces high competition from its rival firm and in UK, there are so many companies who are
dealing in beauty and cosmetics. As quoted firm also have high competition therefore, it needs to
focus on non-stop quality enhancement for each and every production so that to sustain its
market share (Anna, Cahyadi and Yakin, 2018). Further, it should also be enhance their
marketing channels through highest technology and innovation in order to raise its market share
and its global presence as well. The company have high power of competition, further, it needs
to focus on non-stop quality enhancement so that to sustain its market share.
Conclusion: From the above it has been concluded that the by using Porter five force model that
the company have high competitive advantage in the market but on the other side, it also have
low threat of new entrant, bargaining power of suppliers and high buying power of a customer.
TASK 2
Presenting different types of strategic directions for L'Oreal
In order to determine the strategic direction, Ansoff growth vector matrix is used which
helps to determine the correct growth strategy should be opted by the firm and this is as
mentioned below:
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Market Penetration: This strategy is considered one of less risky because the firm has to
produce the product in their existing market only. Thus, it will be more easy for L'Oreal to use
this strategy as it helps in maintaining market share that further result into growth and also helps
to increase the market share if its rivals may reach the capacity limits. In the context of L'Oreal,
the firm has to decrease the price and increase in promotion and distribution support so that it
will help in acquisition of rival in the same market (Gurcaylilar-Yenidogan and Aksoy, 2018).
This strategy is one of the most commonly used method by many companies in order to grow its
current business and reach at further level of success.
Product Development: Under this, the company has to produce new products in their
existing market in order to achieve the growth and this strategy also involves the extending the
products range and make it available for the company's existing market. As the quoted firm also
have strong research and development strategy, which helps to develop the strategy that further
leads to attract wide range of customers towards them. Apart from this, in order to produce new
product into market, the firm has to analyse the needs of their customers and then produce the
same in market. But on the other side, when a business produces new product then it carries
more risk other than attempting to increase the market share (Business, 2016).
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Illustration 3: Ansoff's growth vector matrix
(Source: Ansoff's growth vector matrix, 2018)

Market development: This means that the business wants to expand the business at new
market and it is considered the best strategy when the business wants to reach at global level.
Moreover, the strategy is successful when the company have unique product technology and also
have unique selling proposition. Further, it also benefited from the economies of scale only ifit
increases output. In the context of L'Oreal, the business already have the brand image and in
order to enter into new market, the business may use this strategy because this is successful when
the buyers in the market are as such profitable.
Diversification: This is considered one of the most risky strategy because in this
strategy, the new products are introduce in new market (Dawes, 2018). For a company, it will be
more difficult when a business introduce new offerings in new markets. Basically, this strategy
is used when a firm continuously faces loss from last many years. At that time, only
diversification strategy is beneficial because it includes the potential to gain a foothold in an
industry and also helps to reduce the overall business risk as well.
Porter generic strategy: This strategy is used in order to determine the strategies which
is taken by the firm. This are as mention below:
Cost leadership : This strategy is follows by the L'Oreal in which the company provides
the product with lower price as compared to other rivals. Further this strategy also shows the
effectiveness of the products.
Differentiation strategy: in this strategy, the company also have the highly skilled and
creative product development team that helps to corporate reputation for quality and innovation.
This product also helps to make differ the products from others.
Focus strategy: This concentrates on a narrow segments and within the segment it
attempts to achieve the cost advantages and differentiation. Such that the company needs to be
focus on their products only.
Conclusion: From the above it has been concluded that by using cost leadership strategy
in which the firm should uses competitive pricing strategy in order to lead the business at further
level of success. Apart from this, by using Ansoff growth vector matrix, report conclude the
strategic direction and among all the strategy, the quoted firm uses Market penetration in order to
raise its current market share.
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Justification and recommendation of appropriate growth platform
From the above, strategies L'Oreal use Market penetration as a market growth strategy
because it helps to expand the business at current market only. Further, the strategy also helpful
for only growing market and as it focus on the maintaining the market share which will results in
growth and thus it will help to increase the opportunities as well. Apart from this, it is also
realised that the market penetration helps in market share growth, further it also helps to improve
the customer loyalty and customer value as well. Thus, among all, choosing market penetration
as a market growth will also helps to grow its current market by using variety of option such as,
as the firm have a brand image in market, thus by introducing organic cosmetic product for their
customers will be beneficial for the business in order to raise the profit and sales (Verhoeven and
Johnson, 2017).
Apart from this, as L'Oreal also offer variety of products to their customers and even it
has a global presence, therefore, opting market penetration as a marketing growth strategy will
be more beneficial for the business. It is so because this strategy is only deal with current
products and current products. Thus, by using this strategy the company also analyse the needs
of their customers and produces the same into working area.
Beside, this, it is also recommended to L'Oreal that it may also use product development
strategy in which the company may also innovate a new product such as Organic products. As
the strategy also states that by introducing new product into current existing market will help to
attract wide range of customers towards them (Chereau and Meschi, 2018). Moreover, the quoted
firm can also improve the quality of their offered products and by taking or analysing the needs
of their customers, can also implement those strategies into the working area. As in this modern
world, it has been analysed that customers are quite curious about their health and skin and that
is why they demand to produce the organic products which contain fewer chemicals and more
natural ingredients so that it will not affect their skin in negative way (Fozer and et.al., 2017).
That is why company may also opt Product development strategy in which it offers organic
products to their customers in order to meet out their demands.
Strategic management plan for L'Oreal
Strategic management plan is that plan that is used to communicate all the goals, set
priorities and strengthen operations in order to ensure all the employees to work to achieve the
defined goals for the company. It is a strategic planning and management system that is actually
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used in a business to align all the activities to the company's vision and strategy and also helps to
improve the internal and external communication so that the objectives are attained. This further
includes following things which are as mentioned below:
Executive summary: The present strategic plan is based upon L'Oreal which offered a
variety of cosmetics products to their customers. The current plan is mainly focus on some
specific aim and objectives which are actually set by the firm in order to increase sales and
profit.
Aim: L'Oreal main aim is to increase the profit up to 20% in coming 2 years.
Objectives:
 to increase the profit so that it will help to sustain its brand image in market
 To developing new strategy so that it will lead to maximize the profit as well.
Measures: In order to achieve the financial objectives, the quoted firm also develop new
strategies so that it will help to sustain its brand image in market. Apart from this, it also keep
analyses the needs and wants of the customers so that it can easily attain the aim and objectives
of the business in more appropriate way. Further, the strategy of L'Oreal is as follows:
 The quoted firm will provide the best value, choice and service in order to gain high
competitive advantages and maintain the reputation in existing market (Rupiarsieh and
Santosa, 2019).
 It also expands the territories of its shop in order to reach large group of mass.
 Further, cited firm also listen to their customers and after analysing the needs, it
immediately implements those into working place.
Segmentation Targeting Positioning
L'Oreal basically provide the
women of upper middle class
and provide the cosmetics
products as well.
The quoted firm also target the
women whose age is above 27
and also target the large group
of developed countries as well.
Apart from this, the quoted
firm also target the young age
group girls because they are
more concern about their skin.
L'oreal also offers high end
brand in beauty and cosmetic
products such that it also have
a brand image in market with
its global presence as well.
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Risk involved: Investment is the major risk involved during this, because when a plan is
implemented, then the chances of high profitability of risk are involved and to increases the
number of stores, L'Oreal also needed a lot of investment which may be consider risky for the
plan (Wiksuana and et.al., 2019).
Action to be taken: In order to achieve the goal of a company, the quoted firm also used
best promotional method i.e. modern promotional tools and also by opting a new technology into
the working area will also helpful to reach the objectives in defined manner.
CONCLUSION
By summing up above report, it has been concluded that by adopting proper business
strategy, L'Oreal will also maximizes its profit margin and can sustain its brand image in market.
Therefore, report analyses the internal and external factors that affect the business environment
by using SWOT and PESTLE analysis. Beside this, present study also concluded that by using
Porter five force analysis, L'Oreal can easily improve its competitive edge and the market
position which is based upon the outcomes. Apart from this, by using Ansoff growth vector
matrix, report conclude the strategic direction and among all the strategy, the quoted firm uses
Market penetration in order to raise its current market share and further by using strategic
marketing plan, study concluded all the risk involved, measures, Segmentation, targeting and
positioning and then chooses different way in order to enter into new market, so that it will lead
to raise the market share with its global reach.
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