Assignment on Business Strategy : L'Oréal

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................4
P1 Applying appropriate frameworks analyse impact and influence of macro environment on
a given organisation and its strategies.........................................................................................4
TASK 2 ...........................................................................................................................................7
P2 Analyse internal environment and capabilities of a given organisation using appropriate
framework...................................................................................................................................7
TASK 3............................................................................................................................................9
P3 Applying porter's five force model evaluate competitive forces to given market sector for
an organisation............................................................................................................................9
TASK 4..........................................................................................................................................10
P4 Applying a range of theories, concepts and models, interpret and devise strategic planning
for given organisation...............................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business strategy is an strategic management tool used for formulation and
implementation to achieve major goals and objectives. In strategic plan can be succeed when it
leads towards growth, positioned for competitors and by strong financial performance in respect
of specified organisation. Business strategy is chain of activities for taking set of decisions that
enables to an organisation in achieving specific objectives. It is kind of master plan that used by
management to competitive advantage and secure actions with satisfying consumer demand. This
report is based on L'Oréal which is an French personal care company. It is world’s largest
cosmetic based company. This report is based on impact and influence of micro environment on
organisation. It also elaborates internal environment and capabilities with competitors’ analysis
with help of porter five force model. Further it explains various strategies and methods that helps
in taking strategic decisions in context of firm.
TASK 1
P1 Applying appropriate frameworks analyse impact and influence of macro environment on a
given organisation and its strategies.
Macro environment is a condition that exist as a whole economy rather than for particular
region. It affects business slowly but impacts in deep so to resist from these factors with help of
PESTEL analysis an organisation can reduce its effect at maximum level (Bharadwaj, and et.al.,
2013). External and internal analysis plays crucial role in making appropriate strategy by giving
important insights. This report is based on L’Oréal which is an international brand of cosmetics
and to make strong strategy need of evaluation of various factors that are as follows:
PESTEL analysis of L'Oréal:
Pestle is a micro environment tool which helps in accessing environment and its different
factors that influence its proceedings. organisation deals in cosmetics in which it specialised in
hair and skin care products.
Political factors:
In political factors consist of different rules and regulations according to countries where
L'Oréal operates at that time. As it presents in 130 countries on five continents. Its manufacturing
is in Paris so policies of France affects it so much (Blackburn, Hart and Wainwright, 2013). It
deals in different regions which play crucial role in its success so according to them they have to

modified in their policies. In political challenge that faced by it is different government
leadership styles while operate in different nations. In past if faces decline due to dermatology
branch due to new legislation in drugs. European union majorly focus on use of some specific
drugs for cosmetic industry such as Phthalates. These regulations oblige to them to produce safe
products for consumers that not impacts harm effects. It has to follow advertising standards in
which ads should not be misleading and ex aggregated.
Positive:
Political factor work as a strength when L'Oréal according to different nations adopt
various strategies and policies. Such as in firm manufacturing unit established in Paris so for
smooth functioning it follows rules and regulations in return government also corporate to
L'Oréal by giving reductions. Opportunities for an organisation impacts in positive manner on
organisational strategies when government helps in functioning.
Negative:
L'Oréal operates in many nations so to accord with different rules and regulations adopt
changes according to situation sometimes create dissatisfaction in employees and incurs huge
cost (Chang, 2016). Threats impacts negative on organisational strategies for that they have to
cut cost in other important matters.
All these factors have both positive and negative impacts that majorly impacts on works and
proceedings of an organisation in better manner.
Social factors:
In social factors consist of technical trends of society, in today world modern society
majorly focus on trends and changing preference. In social trends organisation have to use such
ingredients that are not hurt emotions of particular society (Goffee and Scase, 2015.). L'Oréal in
past days’ faces problem that hurts emotions of people by using some ingredients. For example,
it has to modify in their products according to changing education level of consumers so they
have to smart products to satisfy consumer base.
Positive:
Social factor helps in giving best products according to consumer choice and preferences
and it enhances loyalty of consumers towards organisation. For example, while it launches a
shampoo in India it found that in that region people prefers sachet size shampoos so it modify
their products and in both form it available in market.

Negative:
Social changes create hurdles before both organisation and employees in modification in
their products according to consumer demands frequently. When taste and preferences of
consumer changes according to it organisation have to modify in their strategies to give desirable
outputs to the consumers so that they can fully satisfy. Assessing the needs and wants of
consumers is very important to reach at large consumer base and build loyal consumers for
organisation.
Technological factors:
changes in technology affects product that available in market in both quality and
functionality. Today modern society demands constantly changing and according to its products,
features should be updated and according to it technology up gradation is very obligatory
(Jeston, 2014.). In case of L'Oréal it has broad research and development team that determine
barriers in entry, influences of outsourcing decisions. From last few years it undergone with
transformation in digital by investing approximately 15.7 pc in global media. Company launched
a no. of digital initiatives in enhancement in sales and brand loyalty.
Positive:
By adopting new and advance technology for better satisfaction of consumers L'Oréal
adopts modern technology time to time and become third largest cosmetic company in world.
Negative:
when an organisation adopts different technologies it incurs huge cost and lot of
investment should be required for research and development. When consumer demands more
techno oriented products and organisation also give more favourable products in that conditions
organisation have to change in strategies so that they can give proper message to their
employees.
Economic factors:
In economic factors consist of conditions that affect strategies and policies of
organisation. In case of L'Oréal while operate in different countries they have to face adverse
economic conditions of each and every country. Recession in Paris affect its business
proceedings and prices of products also play an important role such as in some area price of
cosmetics are high so when they deal in that region it effects on its business (Laudon and

Traver, 2016). In past it faces problem of continued weaknesses of dollar and other currencies
also.
Positive:
It is a multinational brand name which follows rules and regulations in that case they
easily operate in adverse situation. So in case of recession UK government give reduction in
interest rates because it also helps in countries development. So recession affect strategies of
L'Oréal in that case they not planned about new launching and discounts.
Negative:
Economic factors resist profitability of L'Oréal and decrease their goodwill when it is
unable to handle impacts of that effect. So in that case they have to change in their strategies to
give pleasant experiences to customers.
Legal factors:
Changes in laws and regulations affect business proceedings in case of policy
developments in European union that gives safety directions for cosmetics standards. Seventh
amendment in cosmetics that approved by European parliament that ban on animal testing to
make products better.
Positive:
Changes in legislation influence to L'Oréal also modified in their internal plans and
policies so that they can pace with consumer taste and preferences (Lawton, 2017.). In that case
consumer become loyal towards organisation. To pace with changes organisation, have to change
in its strategies such as labour laws, ingredients should be according to consumer preferences.
Negative:
Different rules and regulations when apply in an organisation so handling all laws
simultaneously is very hazardous aspect for L'Oréal and it incurs cost also. When operate in
different countries organisation have to follow different rules and regulations and when L'Oréal
adopts in well manner It give positive results. For that organisation have to modify in their
strategies.
Environmental factors:
In environment main factors are weather, climate that directly affects to industries.
Further growing awareness towards e co friendly products and in education level of consumers
affect their business (McGrath, 2013). Beauty industry in which L'Oréal , focuses on concept of

Go green by giving packaging e co friendly that laid less stress on environment. But some other
issues such as plastic usage in cosmetic and skin care segment affect their business.
Positive:
When it produce and provide e co friendly products for consumers, it increase loyalty of
consumers towards organisation. For grab opportunities organisation have to change in their
strategies by adopting new and advance technology.
Negative:
Build eco friendly products and service for that firm have to give training to their
employees. For that they have to majorly invest on training and development. When in
environment and consumer become aware about environment then L'Oréal have to change in
strategies to adopt different plans and policies to cope up with adverse situations.
TASK 2
P2 Analyse internal environment and capabilities of a given organisation using appropriate
framework.
SWOT analysis is used for internal analysis in which strength and weaknesses of
particular organisation should be evaluated so that important insights should be gained from that.
Internal analysis helps in making appropriate strategies according to organisation needs and
demand.
SWOT analysis of L'Oréal :
Strength:
There are many strengths of L'Oréal in which it has a large chain of products that offer
by it such as make up and its accessories, hair care and dye, skin care products. That helps in
completion of its product line and satisfy consumer base. It spends lot of funds on research and
innovation in assurance that it offers best products (Rugman and Verbeke, 2017). Their another
main strength is that it concentrates in field of cosmetics with dermatological to give whole chain
of products. Hence its strength works as its capabilities to beat its competitors in better way.
Weaknesses:
Main problems that face by firm is decentralization of organisational structure, many
subdivisions that are exist in organisation so it is very difficult to distribute roles and
responsibilities. Another weaknesses is profitability, margin of company in their products is very

low because high end cost of their advertisements marketing as well (Schaltegger, Lüdeke-
Freund and Hansen, 2012). Lack in Coordination and control of various activities affect their
business portfolio. Hence, it by adopting right kind of structure and strategy they can adopt right
kind of situation in L'Oréal.
Opportunities:
L'Oréal main concept is to frame products that are for all age women and growing
demand of cosmetic products enhance market share of it. Growing demand enhance chances in
specialization in hair styling and colour, skin care cosmetics with perfumes. It is well known
brand name so when it launch a new product it easily popular in market and it is organic
shampoo. Opportunities in market from growing market ranges that are affluent branding. It has
great market share by no. of patents associated with it. Hence it has lot of capabilities that it can
use for expansion in market share.
Threats:
Threat before it is growing competition in field of cosmetics and changing needs and
preferences of consumers that are also hazardous for it to compete in market. Other threat is
economic downturns which is faced by it when they deal in different countries that hurts their
profitability level (Scholes, 2015). In most cases it faces problem of economic crunch while deal
in market so it faces economic downturn. Hence their threats also work as their capabilities by
bring changes and modification in their product according to consumer needs and demand. It has
several capabilities that give opens door of advances so that they can easily adopt any new
product into market.
Main capabilities before L'Oréal is it has large chain of products so it can fully satisfy their
consumer base in different manner. It is a global brand name so if it has any threats or
weaknesses so it possesses strength to convert into opportunities. Such as it has huge chain of
research and development team that give important insights to grab large no. of opportunities.
TASK 3
P3 Applying porter's five force model evaluate competitive forces to given market sector for an
organisation.
Competitors analysis is an important attribute in organisational growth and development
by evaluating their future strategies, L'Oréal can adopt changes and beat their competitors. It can

be better evaluate by Porter five force model that focus on each and every aspect of different
competitors. In its competitors includes MAC, maybelline, dior, chanel and urban decay etc.
which influence business proceedings.
In five force model following aspects are included that are as follows:
Threat of new entrants:
Cosmetic and skin care industry is very much competitive that attracts large no. of new
entrants for capture large market share. In case of it faces fierce rivalry from different
competitors (Shuen, 2018). It has low threat of new entrant due to huge cost while enter into
market. Developing new products requires lot of research and development and manufacturing
process. So few firms can access for such a large investment. In case of L'Oréal it has huge
competitors in which Avon, Revlon, clinique and other small stores also available that gives
threat for it, by occupying large market share that reduce overall profitability.
Threat of substitute:
There are two kinds of substitute in front of consumers of L'Oréal in which home
remedies and various skin care products that made at home with help of natural ingredients such
as herbs and natural oil. These factors mostly used in rural areas. In case of L'Oréal some of
women think about that above mentioned options are old fashioned and also ineffective. So there
switching cost and propensity towards substitute are low.
Competitive rivalry:
In cosmetic industry competition level is high because large no. of rivals exists in which
MAC, maybelline, Dior and Lancome etc. the features and their products are closely resemble to
each other so that they beat to each other. Hence competitive rivalry is high in context of
L'Oréal .
Supplier power:
This factor give evaluation about power of suppliers by making changes in prices. In case
of cosmetic industry they have low supplier power that influence prices by using techniques in
which market manipulate by hoarding and restrain supply (Spender, 2014.). There is switching
cost and integration in forward direction also exist. In case of L'Oréal it has low substitution
power by input and its cost is also low. It creates a strong relationship with its suppliers in world
wide on basis of trust and mutual understanding with higher standards.
Buyer power:

Bargaining power of customers related with ability to influence price of industry by
switching products frequently. It determines manipulating power of consumer to influence price
by shift in demand. In case of L'Oréal they have high bargaining power of their consumers.
Cosmetic industry has high bargaining power due to high competition in market and large no. of
cosmetics available in market. These products have high substitutes so that consumers can easily
switch to another product which is available at low price.
TASK 4
P4 Applying a range of theories, concepts and models, interpret and devise strategic planning for
given organisation.
There are different concepts, models and theories that helps in making strong strategic
planning with help of different strategies and planning methods in which porter's generic model,
Bowman's model and Ans-off matrix that give important insights before planning and
implementing strategies in context of L'Oréal (Verbeke, 2013.).
To build strong strategy need to evaluate with help of Porter generic model in which main
attention should be paid on cost leadership, Differentiation and focus factors so that important
insights should be gain.
Porter' generic model:
Competitions are getting higher day by day and the pricing strategies are dependent on the
demand and supply of the product, so a company focuses on three factors of Porter's Generic to
achieve a new level in the market, that is cost leadership, differentiation and focus. These factors
define the unique strategies of a company and focus on the future growth which is as follows :-
 Cost leadership:- Customers are the king of the market and a firm always focuses on the
lower down its prices to attract more and more customers towards it (Wang and Verma,
2012). It plays with the prices by lowering down its quality and sometime depends on its
brand value in the market. L'oreal have to focus on the brand creation and quality is a
great impact on its product. So, a company can cost cutting while manufacturing its
product as efficiency in operation, competitive pricing strategy, finding the raw material
on low cost and the best is to find out the innovation in the manufacturing process. These
processes work in lowering down its prices without any effect in the quality of its
product.

 Differentiation :- Uniqueness of the product always be the first most vital part of a
company so to differentiate and finding an attraction in the market is the aim of a
company. Beating the competition in a proper manner and increase the sale, is the
objective which a company works on. When it talks about L'oreal then it focuses on
brand creation, uniqueness in providing service, finding the specific geographical market
and the most important is the capacity to manufacture speciality product. These strategies
find a place in the mind of a customer and placed to form a brand in the market. Such as
Lakme has less diversified market share in comparison to L'Oréal it has large product
line.
 Focus :- Segmentation plays a vital role in every company, market segmentation,
customer segmentation, segment of cost on the basis of customers, etc. These focuses
help a company to form the unique strategies for the different segments and work
according to them. L'oreal have to focus select an appropriate segment and design its
strategy to serve them well as to earn more profit (Wheelen and et.al ., 2017). Cost focus,
to earn the advantage of low cost for the selected segment can be a part of its strategy,
which plays a vital role in earning the profit more. Its segment market is specially women
of all age and it also made products for men.
L'Oréal can select differentiation method because it is most powerful source of expand
their market share in best manner. To differ in market organisation aimed to launch new organic
shampoo because today people suffer from hair problems.
Strategic management plan.
Summary:
Main focus of L'Oréal is to expand its market share by expanding its product line to
satisfy consumer needs and wants.
Costs:
While launching a new product it takes almost 1,00,000 pond to accomplish results.
Time :
To complete that project, it takes almost 2 years.
Scope :
It has broad scope before organisation to expand its market share with complete their
product line in better manner.

Quality:
While implement a new product organisation have to concern about quality for that they
have to use advance tools and techniques to give better results.
Aim:
L'oreal have aim is to increase their market share by 10% in upcoming four months.
STP:
Their segment market is women's who suffer from problem of hair fall and target people
who are very much health conscious and prefers eco friendly products and position rich and
middle class people.
Objectives:
There objectives are to expand their market share by providing better solution of their
consumers.
Tactics:
To achieve desirable goals and objectives L'Oréal have to adopt some tactics that are as
follows:
Set priorities:
Negative:first and foremost aim is satisfying consumers’ needs and wants in better way
and expand their market share.
Focus on energy and resources:
organisation have to find out source from where they get best and cost effective resources
to build organic products.
Strategies:
For successful completion of project they have to build products that differ from their
competitors and better satisfy consumers want. Before implementing an strategy into an market
place organisation have to deeply research about each and every aspect and accordingly
implement into market. In case of L'oreal to gain competitive advantage use differentiation
strategy by evaluating the competitors strategy and in case of L'Oreal they are large multinational
company and lot of amount to invest for research so that they can grab attention of large
consumers. For grab attention they firstly improve quality of products and by offering at less
prices for sometime and after that when they like their products attributes that attach by company
in their product and after that they offer it on less prices.

CONCLUSION
From the above report it has been concluded that business strategy is an important
attribute in organisational development and enhancement to fulfil specific goals. Before planning
a new strategy organisation have to focus on different aspects in which internal and external
factors by different methods in which PESTEL, porter, SWOT analysis are main attributes that
contributes in collection of different ideas and concepts. By analysing competitive strength an
organisation can easily evaluate possible opportunities and threats that can encounter by it in
near future.

REFERENCES
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Wheelen, T. L. and et.al., 2017. Strategic management and business policy. Pearson.

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