Impact and Influence of Macro Environment on L'Oreal

Business Strategies

INTRODUCTION
Business strategy refers to set of action which formulates guidelines for entrepreneurs by
which business objectives can be attained. It is basically a master plan by which organization
attains a competitive position within market, to carry out their activities and attract their
customers by which they can acquire organizational goals. In this report L’Oreal is considered to
understand concept of business strategy. L’Oreal is a group of French company which is
headquartered in Clichy Hauts-de-Seine. It is one of the largest cosmetics organizations. They
provide products for skin care, make-up, hair color and perfumes. This report includes impact of
macro environment and internal environment. Porter’s five forces model is applied to identify
competitive forces of market. At last, theories are applied by which they can formulate strategic
planning.
TASK 1
P1 Impact and influence of macro environment on L’Oreal.
L’Oreal is one of the world’s leading beauty and cosmetics organization. To meet
requirements of global fashion trends, they are providing different products. This organization is
based on production of skin, hair products, perfumes and pharmaceutical stuff. They provide
their services in around 130 countries. Some factors have significant impact on organization and
with passage of time these factors have direct impact on marketing strategies of organization. To
analyze impact of these factors, L’Oreal has opted to use PESTLE analysis. It will help them to
identify major factors which can aid them furnish their services more smoothly both in present
time and in future. PESTLE analysis of L’Oreal is presented below:
Political factors: The major political challenge that L’Oreal must obey rules of various
governments’ leadership styles of countries in which they are rendering their services. They are
obliged to produce safe products which do not have any kind of harmful substances contained
within. Furthermore, L’Oreal needs to adhere to advertising rules which are formulated by
Advertising Standards Authority. An example can be considered to understand this;
advertisements must not mislead that over-exaggerating function of any specific product.
Economic factors: Cosmetics industry comes at third place which comprises of around 14%
market share. When employment in this sector is taken into consideration then around one
million of people are employed which also includes massage therapists, skin care specialist,
manicurists, barbers and hairdressers. L’Oreal’s customer products are categorized to highly
sensitive economies of scope and scale. L’Oreal needs to adapt various economic problems and
environment in which they are operating. L’Oreal was affected continuously when price of dollar
and other currencies weaken. Countries with high Human Development index and high economy
are more addicted to products of L’Oreal. This will have a positive impact on growth of
organization.

Social factors: Culture of country comprises of beliefs, attitude and values of their people. An
example can be taken, with modern standard of living and level of education gets higher,
external image is also becoming important, individuals are more focusing on their appearance.
Demand of effectiveness and quality of skin care and cosmetic products is also becoming higher.
L’Oreal is recognized as foundation for social change as a “Leader of Change”. They are
recognized for inclusive, responsible and sustainable growth by which they are able to create
positive social impact and thereby dropping environmental footprint.
Technological factors: Technology has its own importance in every part of life. Technological
attributes like trust and innovation has played significant role for organization like L’Oreal.
Scientific knowledge of hair and skin which is acquired by L’Oreal for more than century has
opened great way to innovations which includes formulation of procedures, active ingredients
and evaluation of technologies. Furthermore, products can be delivered at doorstep. L’Oreal is
providing their services with use of e-commerce sites.
Legal factors: Ingredients which are used in beauty industry are risky either they can be FDA-
approved or not. The Fair Packaging and Labeling Act (FPLA) and The Federal Food, Drug and
Cosmetic Act (FD&C) are most common laws which cosmetic and beauty industry needs to
address. FD&C is responsible for monitoring ingredients which have been used in products
whereas FPLA make sure that there is no misinformation which is branded on their products. If
this happens then products will not be brought into market. L’Oreal ensures that follow legal
structure of countries in which they are operating. L’Oreal is a brand of elites of society and they
are concerned about legit stuff. If ingredients do not maintain certain code which is deemed by
FDA then they may be banned.
Environmental factors: Beauty industry is more focused to try and opt for green. L’Oreal is
opting for making packaging of their products eco-friendly which will lead to reduction in stress
on environment. Management of L’Oreal has opted for using natural ingredients which are
mostly environment friendly. L’Oreal has established and managed a program of indicators and
internal audits by which they ensured that group performance can be measured and reported with
respect to environment.
By analyzing these factors and taking into consideration these factors, L’Oreal must
formulate their strategies. They must follow all the follows of beauty and cosmetics industry so
that they can carry out their operations and services in effective manner.
TASK 2
P2 Analysis of internal environment and capabilities of L’Oreal.
L’Oreal is emerging name in the world of beauty and cosmetics. Their extensive portfolio
of makeup, hair and skin products explain reason why. They are providing luxurious as well as
inexpensive beauty options. Though organization has various strengths but there are few