Business Strategy Report

This report analyzes L'Oreal's business strategy, utilizing PESTLE and SWOT analysis to assess its capabilities and competitive environment. It examines Porter's Five Forces Model and evaluates different strategic directions, recommending diversification as the most appropriate growth platform. The report concludes with a strategic management plan for L'Oreal, outlining its vision, mission, values, objectives, goals, strategies, and tactics.

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1. PESTLE and SWOT analysis for organisation for assessing its capabilities.....................1
2. Porter's Five Forces Model for examining competitive environment...............................4
TASK 2 ...........................................................................................................................................5
3. Evaluation of different types of strategic directions available to an organization............5
4. Strategic management plan for L'oreal by including strategies, objectives and tactics.....6
CONCLUSION................................................................................................................................7
REFERENCES ...............................................................................................................................8
.......................................................................................................................................................9

INTRODUCTION
Business strategies refer to directions or frame that entrepreneurs or manager undertake
so that they can further achieve their overall goals and objectives. In certain business concerns,
managers and entrepreneurs are required to follow a certain code of conduct which will further
help them in enhancing their strategic capabilities so that business strategies can sustain for a
quite longer period of time (Brewster, 2017). Business strategies further provide support to
business entities for enhancing their productivity in competitive market. In present scenario this
report has been prepare on L'oreal which is a French personal care company with its
headquarters in Clichy and registered office in Paris as well. This report focusses on PESTLE
and SWOT analysis of the organisation so that organisation's capabilities can further be
evaluated. Various strategies and strategic decisions have further been discusses here. In addition
to this justification and recommendations regarding growth platforms have been stated. Lastly,
this report includes a strategic management plan which is useful for business.
TASK 1
1. PESTLE and SWOT analysis foir organisation for assessing its capabilities.
Strategic planning refers to activities or guidelines which are used by managers of a
business entity so that they can further undertake various activities such as setting or determining
priorities, strengthening their area of operations along with ensuring that employees as well as
stakeholders are performing towards achievement of a common goal. It is basically a trained and
developed effort which is helpful in producing fundamental and key decisions that will further
direct and guide as to what an organisation is along with laying focus on its upcoming future
perspectives. In present context, L’Oréal is a leading brand that provides skin care and haircare
products to its customers. The main reason behind L’Oréal being an effective name in
competitive market is their extensive portfolio of hair care and skin care products. Still there is a
quite higher competition as customers today are quite conscious about what products they use for
their skin and hair (Cavusgil and et. al., 2014). Hence for sustaining in local market it is quite
important that managers of Loreal frame strategies that are effective for them. Also they need to
carefully assess internal and external market situations which has been stated in form of PESTLE
and SWOT analysis as under:
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SWOT analysis
Strengths Weaknesses
L’Oréal is a market leader in haircare and
skincare products due to their extensive
portfolio and best quality products. It is a quite
large scale brand and provide job to around
60000 employees all over the world. One
more important factor is that they provide
diversified goods and services to their
customers.
One major drawback or weakness of this brand
is that it has decentralized organisational
structure hence due to their subdivisions it is
quite impossible that operations get controlled
by a single individual. Also they have started
facing a quite tough competition from other
leading brands.
Opportunities Threats
In context of L’Oréal there are a number of
benefits such as they can tap advantage from
growing market (Chang, 2016). Also they own
a quite developed market share as they have a
number of patents registered under their name.
One major opportunity which can be
considered by managers of Loreal is adopting
and manufacturing herbal and skin friendly
beauty products which will further lead to
growth and expansion.
Threat for L’Oréal is continuously rising as
there is a quite tough competition from other
brands within cosmetic sector. Also individuals
may skip buying products of Loreal feeling that
they are not as per their needs.
PESTLE analysis
L’Oréal is a major leading brand in haircare as well as skincare sector. It manufactures a
variety of products that further help in meeting needs of current market trends along with global
fashion trends as well. L’Oréal has its smaller units in around 130 nations. As per external
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analysis there are a number of factors that affect its growth and performance which has further
been stated as under:
Political Factors: Factors that are affected by or related to policies of government or
political background of a country are referred to as political factors (Chen and Jermias, 2014).
As L’Oréal is a French business entity so it can be noted that government policies or political
situation of France will be affecting the company by greater amounts. In present scenario as
globalisation has been undertaken in Loreal hence it can be seen that it will have a quite positive
impact on working of Loreal. After globalisation the company has become more aware and is
manufacturing products as per health standards set by government. This will further raise
profitability of Loreal along with enhancing its customer base as well.
Economic factors: Factors that are based on economic elements of a country are referred
to as economic factors. Various economic elements include exchange rates, monetary policies,
tax rates etc. In context of Loreal various factors and elements such as financial stability, GDP,
price of products etc. affect its economic growth. Prices of L’Oréal products keep on changing
from region to region due to difference in tax rates, import export duties etc (Goffee and Scase,
2015). GDP is an important factor that affects growth of brands such as L’Oréal . Hence it can
be said that people will be buying products only if there is some unique feature in them which
will further have a quite positive impact on business.
Social factors: Factors that affect society as a whole are referred to as social factors. In
present context it can be seen that modernise society and luxury class people are more interested
in buying products of L’Oréal Functioning of a business generally gets affected by beliefs,
values and thoughts of individuals that reside in a society. People in a society are usually first to
identify if there are any new innovations in technology. Also they wait for L’Oréal to bring
innovations in its products along with maintaining quality of products. This is usually done by
using a minimal amount of chemical content in hair and skin care products.
Technological factors: Factors that get affected due to new advancements in technology
are referred to as technological factors. Technology plays a quite significant role in day to day
functioning of L’Oréal . Managers of Loreal always keep an innovative approach while
manufacturing products and services along with following both past as well as future trends.
Hence it can be noticed that innovation is the key to success behind operations of L’Oréal All
these have enhanced productivity of L’Oréal along with maximising its revenue as well.
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Legal factors: As per legal factors it has been assessed that there a number of rivals of
L’Oréal in present scenario which makes it quite difficult for them to maintain a stable market
growth. In context of L’Oréal for achieving a competitive edge managers will have to carefully
examine all legal requirements and then fulfill them (Jeston, 2014). By doing so they will be able
to achieve better and stable growth position.
Environmental factors: Factors that affect environment due to business operations are
referred to as environmental factors. As per Loreal it has been examined that they should follow
global and environment safety laws that have been set by global standards. L’Oréal in present
context is one of major leading brands in haircare and skincare brands hence it is quite essential
that these factors are considered well before determining policies of the company. Also
environmental laws should always be considered while framing laws and policies.
2. Porter's Five Forces Model for examining competitive environment.
Business concerns dealing in cosmetic as well as skin care industries have a quite wide
and well developed range of products and services that are used by a number of customers.
Hence in present context of L’Oréal managers use Porter's five force model so as to achieve a
strategic and competitive edge in market against its rival firms. This will help managers in
analysing competitive environment. It includes 5 forces which are mentioned below:
Bargaining power of Buyers: In context of Loreal it is assessed that buyers generally
have a quite high bargaining power as there are a number of seller with alternate brands in
competitive market. Hence it can also be said that Loreal is in no position of influencing prices
of their products (bargaining power of buyers. 2019). Also it creates a force on business
operations of L’Oréal for reducing their prices else there are high chances that buyers may
switch to other low priced brands.
Bargaining power of Suppliers: In context of Loreal they have a huge number of
suppliers. Also there are numerous manufacturers available. Presence of substitutes of inputs as
well as cost of input both are assumed to be quite low. Hence it can be said that bargaining
power of suppliers in context of L’Oréal is quite low whereas bargaining power of L’oréal will
be quite high when there are a large number of buyers and few suppliers are quite dominant. If
bargaining power of an organisation is high then it becomes easy for them to settle deals with
suppliers as per their terms and conditions
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Competitive rivalry: In competitive rivalry, company focusses or stresses on achieving
competitive advantages. Competitive rivalry amongst firms is quite high in today's scenario.
Hence consumers tend to switch brands quite easily. Also it is examined that barriers for entering
into the market are quite low (Jocovic and et. al., 2014). As the competition for L'oreal is very
high in market, so for this they can provide some attractive offers and discount on their products.
This will help to gain the attention of the customers towards their skin products.
Threat of new entrants: Business concerns in skincare and haircare section are quite
competitive which further influences and attracts customers so as to retain their market share.
This further leads to a price drop in profitability of currently existing business entities. In context
of Loreal there are a number of barriers such as cost of implementing set up is high , rules of
government are quite strict. In context of new entrants it has been found out that there are a
number of new firms entering competitive markets and are providing goods and services at quite
cheaper prices. Hence it can be said that threat of new entrants is ever present in competitive
market due to which Loreal will have to effectively choose its strategies for maintaining its
customer base.
Threat of new substitutes: There are basically two substitutes of L’Oréal which are
mainly home remedies and home made products or herbal products. These products are far more
cheaper and beneficial with no side effects. Home remedies are generally preferred by rural
people as they cannot afford luxury or expensive products. Also switching cost and buyer
tendency is quite lower. Hence the threat of substitutes is quite higher as people today have
become more aware and refer using skin friendly products.
TASK 2
3. Evaluation of different types of strategic directions available to an organization
A strategic direction refers to various key forces that move a business towards its desired
goals and objectives. Strategic direction in a business can only be established when various
elements such as vision, strategies, tactics, mission work in absolute harmony with each other
(Klettner, Clarke and Boersma, 2014). For activity generation, any effective business leader uses
all these elements which further maintains a positive working environment in Loreal. Strategic
decisions are most crucial factors in a business concern. A clear and complete vision helps
workforce for understanding organisational aims and objectives which are to be achieved. In
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context of L’Oréal, it is noticed that they go through a number of challenging and critical
situations. Specific strategies, such as identifying product strengths, adjusting pricing, or
acquiring another business, have historically been used to get a small enterprise off the ground.
Various types of strategic decisions in context of L’Oréall have been stated as under:
Market penetration: Market penetration refers to a process that is responsible for
enhancing current market share of an existing product or service. This can be possible only by
adopting or applying marketing tools such as advertising, promotion, discount offers etc. Market
share of L’Oréal can be enhanced by adopting effective business strategies which further help in
expanding market share. In 2014, Loreal opened up a number of new stores all over the world.
On the other hand it is also examined that decrease in value of products helps a business in
enhancing its sale. If managers of Loreal undertake market penetration strategy then they will be
able to enhance their customer base and as well as market share. One major disadvantage in
applying this strategy cannot be used in case of luxury products as they involve higher costs in
development process.
Market development: Market development refers to a strategic decision where company
is meant to target new markets or new areas so as to promote growth. In this aspect marketing
teams play a quite important role in building brand image of business concerns at a global level.
For this companies may even use global strategies and policies which further enhances
development process for new products (Laudon and Traver, 2016). The company tries to sell
more of the same products to different people, which is very unsafe for the L'oreal company
because every product need time to set in the new market. It required lots of investment and
promotion.
Product development: Product development refers to an innovative process where a
business concerns develop or manufacture new products and services. In this context product
development can only be considered when strengths of a firm are related to its specific customers
rather than specific products. In context of Loreal it has been examined that new product
development is a quite time taking and risky process yet its benefits may be quite higher.
Advantages of adopting this strategy is that it will enhance market share of Loreal. Despite this
there is a drawback that it is a risky process as not every custoem r have prefer or trust newly
launched products.
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Diversification: Diversification is a quite hazardous strategy in context of L’Oréal as
there is a quite lesser scope for achieving economies of scale as different customers have
different needs according to which they are sold products. Hence managers will have to spend a
lot of funds for promoting their goods and enhancing customer base as well. Advantages of
using diversification will be enhancement in customer base and profitability and productivity
growth of Loreal. Also diversification in products will help in providing a competitive edge to
business firms against their rival firms.
A justification and recommendation of the most appropriate growth platform and
strategies: From the above based model i.e. Ansoff growth vector matrix it can be said that
diversification will be more useful for Loreal as it will be able to enhance its area of operations
along with building its entire customer base. A major recommendation in this context for Loreal
is that they should produce more diversified and herbal products. Also they should use skin
friendly supplements in their products so that customers do not face any diseases or allergies.
This will be quite helpful in building brand image of a firm.
4. Strategic management plan for L'oreal by including strategies, objectives and tactics.
A strategic management plan refers to a plan or document that is used by entrepreneurs
and managers for communicating their organisational goals and objectives within business
premises. Strategic management plan is a quite crucial document which leads an organisation
towards profitability and success . Strategic management plan of Loreal is such that it will help
in achieving their desired goals and objectives within the specified time frame.
Aim: Aim of Loreal is to expand their business operations at a global level (Peng, 2017).
Organizational structure: Managers of Loreal follow a divisional and decentralised
organisational structure. In this company there are no in house manufacturing units hence
employees for manufacturing or production are to be employed from diverse backgrounds.
Vision: Vision of L’Oréal is “To establish a sustainable business growth and market
share as well.”
Mission statement: Mission of L’Oréal is to offer or provide excellent quality products to
their customers which are quite innovative(Scholes, 2015).
Values: L'oreal believes to have integrity, respect, courage and transparency by being
ethical and recognized by all employees.
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Objectives: Managers of Loreal prefer using SMART tool for setting up their objectives.
Current objective of Loreal is to enhance its sales ratio by 20% in 4 months also leading to an
increase in its overall customer base as well as profitability.
Goals: Basic goals of L’Oréal is to win trust and confidence of its customers. Providing
access to products that enhance well-being. Also they focus towards mobilizing its innovative
strength so as to preserve the beauty of the planet and supporting local communities. Long term
goals of Loreal are entering competitive market by gaining collaboration with local
manufacturers (Spender, 2014).
Strategies and tactics: In this aspect, Loreal will consider market penetration strategy
which will lead to enhancement in profitability as well as market share. In this managers and
leaders need to promote their existing goods and services by undertaking various marketing
tools such as good advertisements, promotional activities etc.
CONCLUSION
From the above mentioned report it has been concluded that managers and entrepreneurs
need to focus on ways as to how business strategies can be undertaken further leading to their
long term sustainability. This report basically focusses on competing skills of a business as to
achieve its goals and objectives within a specified time frame. Also it is mentioned that a
business concern should have a self directed goal and should always be focussed towards it.
Also, it helps in managing the costs and also influence sales and revenues. Company should
understand strategies used by its competitors and evaluate these with its own strategies. This will
enable to know the reason for ineffectiveness.
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REFERENCES
Books and Journals
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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.
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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).
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Wheelen, T. L. and et. al., 2017. Strategic management and business policy. Pearson.
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bargaining power of buyers. 2019 [Online]. Available through
<https://writepass.com/journal/2017/09/bp-porter-five-forces-analysis-essay/>/.
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