Impact of External and Internal Factors on Organisation and Organisational Capabilities

Business Strategy

TABLE OF CONTENTS
INTRODUCTION 1
TASK 1 1
1.impact of external and internal factors on organisation and organisational capabilities
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2. Porter's five forces model 5
TASK 4 6
3. Evaluation of different types of strategic directions available to the organisation. 6
4.Justification and recommendation for the most appropriate growth strategy for the
organisation 8
5.Strategic management plan with strategies, objectives and tactics 9
CONCLUSION 11
REFERENCES 12

INTRODUCTION
Business strategy is the organisations plan to achieve their objective. The strategy
formulated by the organisation so that they can direct their activities towards the objectives and
goals of the organisation. Through a particular strategy organisation is able to achieve strong
competitive position, improves coordination in the organisation and leads to integration of all the
activities towards one path.
L'Oréal is the personal care company headquartered in Paris. It is the world's largest
company of cosmetics and has developed the products in the field of hair colour, skin care, sun
protection, perfumes, make-up, hair care etc.
In this report, the study is based on the internal and external factors which affect the organisation
and their capabilities. The other factors are also explained through porter's 5 model which
influence the organisation. Also in addition to this different types of strategic directions are also
explained through which company can develop the greater share in the market and can grow
their business. Strategic management plan is specified for the organisation which help them to
achieve their objectives and goals in and efficient manner.
TASK 1
1.impact of external and internal factors on organisation and organisational capabilities
L’Oréal is the leading organisation in range of cosmetics products across the world. It
produces a wide range of beauty products to meet the needs of global trends. There are several
macro factors that affects and influence the strategies of the business so it is very essential to
analyse these factors carefully.
External factors (PESTLE analysis)
Political factors- these factors state the government rules and regulations under which
the company is working. As it is operating worldwide so it need to take care of all the country's
government policies that leads to complex procedure and the production company of L'oreal is
established in Paris so the policies of the government of France influence the functioning of
company (L'Oréal PESTLE Analysis, 2019). On the other hand, different import policies of
different regions play an important role in the growing success of the industry. With the
inclusion of globalisation, these factors have showed a positive impact on the organisation.
Economic factors- Exchange rates and the different prices of the product in different
countries reflects an economic factor that the industry faces across the globe. Exchange rates
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makes the trading more difficult as convertibility of the currency is involved and influence the
profit of the company, low exchange rates reduce the profit and the strong currency rate
increases the profit.
The price of L'oreal product varies with country to country like a few places, the market
price of skincare range is very high and can make a good business from those regions that
enables the economic development of the country as the gross domestic product of that state will
get contributed indirectly. Favourable economy and the high income of the people will let to
increase the demand of the branded beauty products which will be a positive sign to the sales,
profitability and growth of the company.
Social factors- under these factors the values, technical trends and the beliefs of the
society are considered and address. The evolving lifestyle and the high standard of living of the
people leads to a high interest in the beauty and fashionable products that will positively
influence the market share and the marketing strategies of L'oreal industry. On the other side it
faces some ethical issues relating to the ingredients used in the products as people are becoming
more sensitive to luxury and quality products so some people may consider it as a chemical use
while some may not so it negatively affects the business of the industry.
Technological factors- It reflects the technological advancements and innovations that
plays a great role in enhancing and development of the business. It brings some innovation in its
product range by addressing the coming problems of the people in the society like it has
innovated the professional range shampoos and cosmetics that helps in the nourishment and
smoothing which resulted positive outcomes for L'oreal in creating a brand image (L'Oréal
PESTLE Analysis, 2019). Setting different equipment’s for operations builds complexities for the
workers and the company has to bear the training and development cost of the employees at the
workplace that incurs the high cost and reduce the profits of the company.
Legal factors- legal factors include the laws and legislations that L'oreal industry needs
to follow to maintain the success graph. Some legislations like the federal food, drug and
cosmetic act and the fair packaging labelling act so that not any controversial issues and criticism
are to be faced and due to that it can work in a favourable work environment. Different countries
have different laws and legalities so it reflects a negative sign for the industry as becomes
complex and difficult for the company to follow all the laws.
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