Business Strategy Report

This report analyzes L'Oréal's business strategy, using PESTLE, SWOT, Porter's Five Forces, and Ansoff Matrix to evaluate its macro environment, competitive landscape, and growth strategies. It also includes a strategic management plan outlining L'Oréal's vision, mission, values, objectives, goals, and tactics for achieving sustainable growth. Desklib provides past papers and solved assignments for students.

BUSINESS STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1) Analyse the impact and influence of the macro environment on a given organisation and its
strategies......................................................................................................................................3
2) Analysis of the competitive environment of the organisation using Porter’s Five Forces
Model..........................................................................................................................................7
TASK 2............................................................................................................................................8
4) Justification and recommendation of the most appropriate growth platform and strategies. .9
5) Strategic management plan with strategies, objectives and tactics........................................9
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Regulation of business has been grown from decades with bringing new and innovative
changes to maintain its existence for the longer period of time. In addition to this, role of clear
and complete strategic formulation has been regulated, with vision & mission of continuing firms
business for longer period of time (Jocovic and et. al., 2014). For effective strategic formulation,
it is necessary for every firm to set their vision & mission along with strategic targets & goals to
accomplish. This report will be conduct on L’Oréal, which is the leading French personal care
headquartered in Clichy and its registered office is in Paris, France. They are specialized to sell
hair colour, skin care, sun protection, make up perfume, hair care and men skincare.
Apart from this, report will be carry on discussion of SWOT and PESTLE of the business
entity along with analysis of organisation capabilities. Also, report will put emphasizes on
analysing internal capabilities through doing complete analysis of porter's five force model and
different strategic management plan with defined strategies, objectives and tactics.
TASK 1
1) Analyse the impact and influence of the macro environment on a given organisation and its
strategies
Macro environment is a structured condition that exists in an economy as a whole, rather
than being of particular region or sector. In general, macro environment actually involves trends
in gross domestic product, inflation, employment, monetary & fiscal; policy (Jeston, 2014). In
context with business environment of France, there are various impacts & influences that macro
factors such as political, economical, legal, technology etc., has put on its own business entities.
“L’Oréal” which is a leading provider of skin care products and accessories to their respective
customer's, impact of political and economical factors are quiet high and influences is relatively
bad. In the current scenario, competition in skin care products has been raised due to increased
competition and somewhere, influence of France business reforms & regulation.
L'Oréal is an industry that was established in France and is currently best in its domain.
This leading skin care entities have its units in 130 different countries, which great brand image
& continuous increase in its profits. With the passage of time, these factors are directly
impacting strategies on higher level. The detailed discussion on macro factors are as follows:

Political: This factors includes rules and policies of France governance, in which entities
like L'Oréal is currently working (Scase, 2015). As a part of manufacturing organisation, French
business has been impacts by weak political regulations such as interference of politics into
business nature, continuous changing of French government along with conflicts & stand against
of authorities. This has led business entities in the France to structure business strategies on
frequent basis. In context with L'Oréal, this has impact its business operation to change their
marketing strategies with change of new government and being influenced to raise higher
business growth. In present time, situation is very much controlled and also impacts of political
factors are on positive side. But, if this continuous changing of government will happen, impact
on L'Oréal will carry on and this may also lead to negative role of their negative strategies.
Economical: This factors includes exchange rates and monetary policies of the country,
in which business entities are working. The recession element is considered as mainstream part
in the upbringing of cosmetic business like L'Oréal. Continuous fluctuation of Euro currency and
slow down of investments has led cosmetic business firms to raise more funds into its business
regulation and led this leading cosmetics firm to rise the pricing of their cosmetics product in
different regions of France (Goffee, 2016). For instance, in few regions, the price of skin
products is high and in response to its business strategies, impact will be moderate. Moreover,
GDP of the country is the major factor on business entities like L'Oréal. In France, human
development index is high and growth of an economy is now onwards started rising. The
expected impact of this factor will be positive, but still strategies could effect due to inflation
rate. Economical factor can influences operation of their firm to initiate more strategies to
enhance business productivity.
Social: The social factor would encompass various technical trends in the society. In the
present time, modern society are more interested in fashion trends, which will be huge business
opportunities for L'Oréal to capture this fashion trends. For this, they can go for product idea
with following current trends through sense of technology and its aspects (Jermias, 2014). This
fashion changes has led L'Oréal to rise price of their product, because of lack of wide resources
is a major issue. In response, this will impact business strategies of this leading cosmetic trader
to either pay huge money to get resources or it could impact on customer purchasing parity.
Technological: Technology role has its own change in every sphere of life. For the
companies like L'Oréal, the technological attribution like innovation, creativity & trust have

played the significant role. Cosmetic brand like L'Oréal is very much inclined to innovation and
involvement of creativity along with following human trends. The technology has given its
possible efforts to spread the innovation and fashion is as to purchase the trendy products.
Therefore, for the luxury products brands like L'Oréal, innovation is and will be key feature to
follow for product's success (Chen, 2015). This factor will impact business strategies of L'Oréal
to make changes as per trends. This would be costly deal.
Environmental: The environmental factors deals with different global environment laws
related to safety measures, which are actually abided by global standards. People are now more
diverted towards pollution free and enhancing sustainability practices in what they are buying or
purchasing. In response to this, more international brands are playing their role in showing part
of their support to pollution free. Out of which, L'Oréal is one common brand to take initiative to
enhance sustainability practices in their cosmetic manufacturing. This will positively impact their
brand image & customer acquisition along with little impact over their strategies, which will
involves incurring of funds.
Legal: There are many competitors of L'Oréal. The business world has now become a
global village and customer's have become more vigilant about critical & legal aspects of the
products (Chang, 2016). L'Oréal is the brand belongs to upper middle class or the upper crust of
every society and also they are concerned about all kind of legit stuff. This factor is important
when it states to brands like L'Oréal. The chances that, legality factor will impact this leading
cosmetic to either change their product line or take initiative to develop more products to
maintain legal image of business. This factors will led cosmetic firm to compensate their
strategies towards profitability of the business. Here, degree of impact is moderate.
SWOT analysis of the L'Oréal:
Strength Weaknesses
The major strength of L'Oréal is its strong
research & development strategies. Leading
cosmetic brand have more advancement in
cellular engineering and micro fluids which
has enables their product expectancy in future.
Quality & safety regulation is the positive
side of L'Oréal to retain their customer on
Growing saturation is top level weakness of
this leading skin care brand. Products such as
straight hair, curly hair, blondes and also
specific ethnicities are gained major attention
of customer that skin care products. Along with
this, shrink of profit margin has been resulted
from heavy investment made in research &

longer basis along with development strategies
to idea and concepts focused on creating
landmark in skin care and cosmetic segments.
development. Slow division and continuous
changing of trends has led tougher
competition for L'Oréal.
Opportunities Threat
Industry expansion is a major opportunity for
L'Oréal (Cavusgil, and et. al., 2014). In
response, company may easily move into
newer space in beauty industry like personal
care sector. Product development is major
option, to develop market and raise high
profits. Niche consumer must be focus to get.
Taking quick changes in product and
customer acquisition will be major threat for
L'Oréal. Also, this cosmetic firm has countless
products and also their profit generation is
divided into three different segments. This
division of cash flow will be danger for
L'Oréal.
Sources: Pestle analysis, 2018
Analysis of an organisation capabilities: L'Oréal has strong command over business
regulation and also they can module market as per their market needs or trends (Brewster, 2017).
Also, they real capabilities to survive in market in high, because of their customer who are loyal
Illustration 1: Pestle analysis

of its brand. Because of their strong command over political and technological situations, L'Oréal
is in strong position to expand their product line through new product development or they could
expand their business strategies such as targeting niche market, distribution channels to expand
product ease to customer and supply chain management (Lawton, 2017).
2) Analysis of the competitive environment of the organisation using Porter’s Five Forces Model
In context with L'Oréal, porter's five force model will be used to determine competitive
intensity, attractiveness of an industry and also in terms of profitability. The complete analysis of
various forces on this leading cosmetics are as follows:
Bargaining Power of Buyers: Bargaining power of buyers are low especially for female,
because, this customer segments is loyal towards using cosmetics, irrespective of what is the
price factor or any discount being offered on it. In cosmetics industry, there are large numbers of
customers and no buyers tends to have bargaining leverage. Hence, limited bargaining leverage
will helps L'Oréal.
Bargaining power of suppliers: This power is low, because there are large substitute of
an inputs, hence supplier have less bargaining leverage over producers (Peng, 2017). This is due
to competition among substitutes. In response, greater competition positively affects L'Oréal. It
is easier to switch suppliers, as a result low suppliers switching costs would affect L'Oréal.
Threats of Substitutes: There are various leading and strong brands such as Chanel, Mac,
Lancome, Estee Lauder etc., actual risk associated with substitute of brands is high. In order to
deal this, L'Oréal should introduce innovative & unique products at every point of time, which
will strengthen the brand position and reputation in French marketplace.
Threat of new entrants: The amount of money required to initiate cosmetic products,
which will meet the high profile people needs within France is high. Apart from this, pricing,
marketing and quality of the products initiated by new entrants can be threat for L'Oréal. This
tends to bring overall risk of entry of new companies in cosmetic sector which is significantly
dangerous for L'Oréal (Scholes, 2015).
Competitive Rivalry: The extent of competition prevailing with cosmetic industry is high.
The rivals present within this sector are Espa, Mac, Elemis, Maybelline. etc. The presence of
business enterprises within this industry tends to reduce the overall growth and profitability of
companies such as L'Oréal. Thus, L'Oréal should put concentration over quality and pricing of
their cosmetic products.

Sources: Porter's five forces model, 2017
TASK 2
3) Evaluation of the different types of strategic directions
Strategic direction refers to course of collective action taken by business entities to get
valuable suggestion over what accurate strategy will company use to raise growth and market
shares. These kind of strategies are taken into consideration by analysing vision, mission, goals,
strategic objectives etc., of the business entity (Spender, 2014). In context with L'Oréal, ansoff
matrix will prefer by strategic managers with four options of market penetration, product
development, diversify and market development. Out of the four, strategic manager needs to find
out best two with main agenda to suggest suitable for business development of L'Oréal. The
explanation of ansoff matrix is as follows:
Market penetration: It focuses on increasing sales of existing products to existing
market. In this strategy, firm uses its products in old market, in simple words, firm is aims to
increase its market share with this strategy (Veit and et. al., 2014). This will be suitable option
for L'Oréal, by diminishing prices to attract existing or new customers and increasing promotion
Illustration 2: Porter's five forces model

& distribution channels. Acquiring competitor can be suitable options, but it is risky, because of
higher fund outflow.
Product development: This strategy focuses on introducing new products to an existing
market. In this, firm develops new product through innovation & market trends practices to cater
to an existing market. Actually, it involves huge extensive research and identifying development
& expansion of product range (Wheelen and et. al., 2017). This strategy can be best option for
L'Oréal, because, managers have strong understanding of their current market situation and have
potential to provide solution to meet needs of an existing market. This strategy can be done
through investing in R&D, raise strategic partnership with other firms in form of distribution
channels, supply chain and better customer services.
Market development: This strategy focuses on entering new market using existing goods.
In this, firm enters new market with their old products. In this context, expanding into new zone
means expanding into new geographies, customer segments, regions etc. This strategy will be
successful, if firm own its proprietary technology, techniques & tools to enhance development of
market (Boersma, 2014). In case, this strategy would proved suitable, in response, this will be
accomplish through catering into different buyers segment, starts putting focus on entering into
domestic market or buy pure resources. The risk is moderate, but control measures are required.
Diversification: This strategy majorly focuses on entering new market with new
products. In this, business firms enters to new market with an innovative products. This strategy
has been considered as high risked strategy with threat of brand image loss. There are very few
chances that L'Oréal will adopt this strategy, because introducing new zone through new product
can diminish existing product purchase scope with options to competitor's products.

Sources: ansoff Matrix, 2018
4) Justification and recommendation of the most appropriate growth platform and strategies
After the complete discussion over different strategic phases of ansoff matrix, it has to be
justify that market penetration & product development will be suitable for L'Oréal to get zone for
increased growth and as part of market development strategies (Clarke, 2017). Also, it has to be
recommended that, innovation and role of diversity should be adopt to make these strategies
fulfilled towards set strategic objectives of L'Oréal. Manager of this leading cosmetic must focus
to understand and realize customer taste & preferences towards choices of cosmetic's, hair care
etc., for female especially. As a deputy strategic manager, this has to be revealed that business
environment is quite suitable in France, to initiate new product development of L'Oréal cosmetic
products such as Skin care, hair care, beauty and make-up etc. This can be done through clear
utilization of different resources along with strategic planning to use advance technology, skilled
manpower, chemicals to be involved in manufacturing of products.
5) Strategic management plan with strategies, objectives and tactics
Strategic management plan is the collective tool, which is used for communicating firm's
vision, mission, value, strategic goals and strategies of business organisation, employee's and its
key stakeholders (Klettner, 2016). This structured plan is a key to success and growth of every
Illustration 3: ansoff Matrix

organisation. With the help of this plan, various planned objectives & goals are associated to
business strategic formulation. In context with L'Oréal, clear & complete preparation of strategic
management plan for leading cosmetic's business entities are as follows:
Aim: To increase business growth & strategic business in the existing market. Also, focus
towards exact customer knowledge for future product development.
Organisation structure: L'Oréal actually follows matrix organisation structure, in which
different sub-division are divided on the basis of different product categories such as skin care,
hair care etc. This structure is specialized towards bringing effective work culture along with
controlling business activities in a productive manner.
Vision: The vision of L'Oréal is to become “Customer's priority”
Mission: The mission of this leading cosmetics giant is to expand their business growth
to different region or countries with agenda of higher profitability and maximum market share.
Values: L'Oréal has various values such as effective and protected sustainability, when
working in manufacturing process, manpower empowerment, understanding workforce and fair
business practices etc. (Traver, 2016).
Objectives: The strategic objectives of L'Oréal is to raise their market share by estimated
1.9 percent in their entire different product lines. This is decided through critical analysis of chart
given, which shows sales from year 2011 to 2017.

Goals: L'Oréal has divided their strategic goals in two different types: Short term and
long term goals. In addition, they have defined long term goal of being market leader, but they
used to set short term goals of every 4 months, where major goals is to improve product quality,
maximum customer acquisition, enhancing market shares, making organisation structure more
relevant and directed towards long term goals.
Strategies and tactics: L'Oréal must use market penetration and product development to
accomplish their set strategic objective of increasing product sales by 1.9 percent in comparison
to 2011-2017. Through market penetration, they will use penetration pricing, focuses on making
improvements in existing products and development of logistics & distribution channels much
convenient to ensure ease of product reach (Laudon, 2016). Along with penetration, cosmetic
firm will use new product development to empower their customer with new & innovative skin
care products. They will practices this strategy taking customer knowledge and taste &
preferences.

CONCLUSION
From the above report, it has been concluded that business strategies are important to
business entities in raising its suitability & growth. It has led to business excellence and stepping
stone towards establishing business sustainability and increased productivity. Pestle analysis has
simply led to understanding of various external factors to necessary measures to overcome any
challenges associated with business suitability and growth. Swot analysis has reveals the
uniqueness of business firm, which they actually shows through their product's uniqueness and
relevancy in services. Apart from this, setting pre-stage vision & mission has been proved
necessary to structure or implement strategies to obtain business growth. Lastly, strategic
management plan has resulted to set strategic targets & goals to enhance major productivity and
profitability of the business.

REFERENCES
Books & Journals
Brewster, C., 2017. The integration of human resource management and corporate strategy.
In Policy and practice in European human resource management (pp. 22-35).
Routledge.
Cavusgil, S. T. and et. al., 2014. International business. Pearson Australia.
Chang, J. F., 2016. Business process management systems: strategy and implementation.
Auerbach Publications.
Chen, Y. and Jermias, J., 2014. Business strategy, executive compensation and firm
performance. Accounting & Finance. 54(1). pp.113-134.
Goffee, R. and Scase, R., 2015. The Real World of the Small Business Owner (Routledge
Revivals). Routledge.
Jeston, J., 2014. Business process management. Routledge.
Jocovic, M. and et. al., 2014. Modern business strategy Customer Relationship Management in
the area of civil engineering. Applied Mechanics & Materials, (678).
Klettner, A., Clarke, T. and Boersma, M., 2014. The governance of corporate sustainability:
Empirical insights into the development, leadership and implementation of responsible
business strategy. Journal of Business Ethics. 122(1). pp.145-165.
Laudon, K. C. and Traver, C. G., 2016. E-commerce: business, technology, society.
Lawton, T. C., 2017. Cleared for take-off: structure and strategy in the low fare airline business.
Routledge.
Peng, M. W., 2017. Cultures, institutions, and strategic choices: Toward an institutional
perspective on business strategy. The Blackwell handbook of cross‐cultural
management, pp.52-66.
Scholes, M. S., 2015. Taxes and business strategy. Prentice Hall.
Spender, J. C., 2014. Business strategy: Managing uncertainty, opportunity, and enterprise.
Oxford University Press.
Veit, D. and et. al., 2014. Business models. Business & Information Systems Engineering. 6(1).
pp.45-53.
Wheelen, T. L. and et. al., 2017. Strategic management and business policy. Pearson.
Online:
Strategies of L'oreal. 2018. [Online]. Available Through:
<https://www.forbes.com/sites/jannamandell/2018/03/16/loreal-says-in-your-face-to-
competition-with-strategic-ai-and-ar-acquisition-modiface/#185ac80c1f38>.