Contemporary Strategic Management in Global Context

This study focuses on the application of strategic management in the global context, specifically analyzing the global business environment and strategies for businesses pursuing global markets. The study uses L'Oreal as a case study to demonstrate the importance and application of analysis tools such as Porter's five forces, PESTLE analysis, and SWOT analysis. It also discusses the significance of ethics, sustainability, CSR issues, and stakeholders in shaping strategic management approach. The study concludes by highlighting the contemporary theories and approaches for maintaining effective strategic management response to global business conditions.

Contemporary Strategic Management in Global Context
INTRODUCTION
Strategic management can be defined as continuous and
on going planning, monitoring and analysis of all those factors
that helps an organization to meets its pre determined goals
(Lasserre, 2017). This study is based on L’Oreal who is a French
personal care company and provides several consumers goods
and other beauty care products. It serves worldwide and has
approximate 86,000 employees. This study is going to show
importance and application of some analysis tools such as
Porter’s five forces, PESTLE analysis and SWOT analysis that
helps the company in analysing all internal as well as external
factors. By analysing all these factors, it takes competitive
advantages and enters in the global market in an effective
manner.
Evaluation of global business environment and strategies for businesses pursuing
global markets
Global environment is a combination of all activities and internal, external
factors of local as well as international businesses. In other words, it refers to the
uncontrollable international and local interactions that affect and influence the way if
operating business of an organization. L’Oreal group is the largest beauty and
cosmetic company of the world and has largest amount of shares and sales. It has
almost 23 global brands having a local gross revenue of approximate $17.5 billion and
$19.5 billion in 2010.
It is stated that this company is facing both tariff and non tariff issues that creates
several problems in its path of doing and operating business activities in global
markets (Karadag, 2015). In the context of strategies related to global market it uses
and make an effective use of Porter’s five forces analysis tool for identifying its
position and intensity of competition in the market
5 forces of competitors are described as follows:
5 Forces Intensity Description
Threats of new entrants High There are several exiting strong competitors and
players in this industry. There is a requirement of
less investment for entering in this industry. So,
there is a high threat of this force.
Bargaining power of
suppliers’
Low In the context of bargaining power of suppliers it
is stated that there are several suppliers in this
beauty industry so there is a low intensity of this
power for L’Oreal.
Bargaining power of
customers
High Customers have many choices as there are
several companies in this industry. When they
get similar features of products in other brand at
affordable prices then they have more power to
bargain. It can decrease the profit margin of
L’Oreal. So it is the big threat for the company.
Substitutes products Low Moderate markets already exists with strong
company like Olay, Avon. So, it is obvious that
there is a lack threat of this force.
Competition among
existing players
High There are several brands and cosmetic business
in the market that also operates in the global
market. Some competitors of L’Oreal are:
Unilever, Revlon, Proctor and gamble. There is s
high intensity of competition but the
international strategy of L’Oreal makes it able to
be the business leader (Plos and et.al., 2015).
So, it can be said that by analyzing all these forces, L’Oreal can make changes I its
strategies and take competitive advantages in the global market.
In addition, it is also stated that uses segmentation, targeting and
positioning strategy as a global market strategy such as:
Consumer demographic plays an important role in creating products as it
makes sure to the company that they are providing the right products to
the target market. Its targeting and segmentation strategies depend upon
different types of people. For example, Its dark and lovely brand is made
and sold specially for African consumers. It is positioned as an ethical
beauty care and cosmetics company that respects differences in
aspirations, desires and cultures. It also has approximate 34 consumer’s
goods brands (Dreher, Puco and Goget, 2019).

Application of strategic analysis framework and strategy for operating in a global market
There are several strategies are being used by L’Oreal for being in the competition and
for operating in the global market in an effective manner. There are several internal factors
that can affect its operations and its effectiveness so it analyses all these internal factors such
as:
Strengths:
 The main strength which makes it able to operate in different countries is its ability
to research and development about different market. Its heavily invest in research
and development which makes it able to makes its products differ and innovative
than competitors.
It has a strong financial position and stability and it also provides goods to different cultures
of people as per their needs (Ashraf and et.al., 2015).
Weaknesses:
 It has strong financial stability but has lower profit margin due to heavy and strong
competition in existing players.
 It has decentralized organizational structure that is also the main weakness and it
becomes difficult to control over different units.
In addition, it also uses marketing mix strategy that helps it out in
making aware to its customers about its products and pricing strategy
for entering into the new market.
Products: It has several brand and products categories such as
skin care, hair color, make up, sun protection crème and perfumes.
Luxury products, active cosmetics and personal care products and
some type and categories of its all products.
Prices: In the context of pricing policy it is stated that it
mainly focuses and adopts premium pricing policy and provides
almost products at affordable prices.
Place: It has research centers in 6 places such as Japan, US,
France, China etc. It provides its products through online stores and
of line as well.
Promotion: It has an attractive and influencing advertising
slogan that mainly focuses and denote to consumers involvement.
So. These both strategies are the main strategies uses as global
market strategy.
Opportunities:
 The main focus of this company is on lucrative segmentation and demands of
these type of products are increasing that is the biggest opportunity for this
company.
 This company has also registered around 400 brands that helps it in attracting
wider range of customers and increase its sales.
Threats:
 In the beauty industry there is a possibility of monopoly that can restrict it to enter
and merger into large brands.
 It is already stated that there is a high competition among existing players that is
the biggest threat for L’Oreal and it can decrease its sales and revenue.
From the above analysis it can be said that there is a requirement for L’Oreal to make
changes in its products and other strategies for removing and decreasing its
weaknesses and increasing its strengths.
Significance of ethics, sustainability, CSR issues and stakeholders in
shaping strategic management approach
Corporate social responsibility, ethics and sustainability plays an
important as it shows the way of operating of business of an organization.
It also shows an ethical and social consideration of human rights of an
organization which helps it out in solving corporate social responsibility
and ethical issues. The mission of L’Oreal is to reach one billion more
consumers in the coming years and challenge related to this mission is to
reduce waste and produce more with less impact
For reducing impacts of sustainable challenges and problems,
L’Oreal offering desirable and organic products and it also working in 3
main areas. First is it is more investing in sustainable innovation in order
to make sure that all of its products has social and environmental benefits.
Second is it empowers consumers for giving them choices and providing
detailed information’s which they require. The last but not the least is the
influence and power of its brands to make sustainability not just the right
choice, but the desirable choice (Rastogi and Trivedi, 2016).
So, it can be said that this company can solve all sustainable
and CSR related issues by providing desirable choices of products. It also
implementing TQM and lean manufacturing approaches for waste
management and improving the quality of its products.
Contemporary theories and approaches for maintaining effective strategic management response to
global business conditions
Except, SWOT and Porter’s 5 forces analysis model, L’Oreal makes and effective use of
PESTLE analysis model. This model helps this company in analysing all external factors by which it
can take competitive advantages and can effectively operates its business in the new market.
Political: It includes all rules and political stability of countries and the market in which L’Oreal
operates. Consumers in this industry are becoming more conscious of political affiliations and values of
brands. Environmental law, tax law from which L’Oreal is getting affected in promoting its products
(Nguyen, 2015).
Economic: It includes interest rates, exchange rates and inflation rates. It is also stated that this
company and its cost of capital has been affected by interest rates. Exchange rates also affected this
company in importing goods from other countries.
Social: Consumers in this industry prefer organic and safe beauty products and It is closely involved in
the life of the communities where they are located and it also includes the cultural aspects and include
health consciousness and emphasis on safety. Trends in social factors affect the demand for a
company’s products and how it operates in global market.
Technological: There are several brands and companies that are making an effective use of technology
and providing innovative products. It can create several problems for L’Oreal. On the other hand,
L’Oreal mainly focuses on research and development and provides innovative products to potential
customers. So, it can be said that this factors is an opportunity for the company.
CONCLUSION
From the above data it has been summarized that strategic
management played an important role for operating in the global market.
This study has shown applications of PESTLE analysis that helped
businesses in operating in the new market by analyzing and measuring
effectiveness of external factors. Porter’s 5 forces analysis tool also
played a vital role in analyzing all those factors that helped an
organization in taking competitive advantages by making changes in
strategies. Further, it has also discussed SWOT analysis that supported an
organization to analyze all internal factors like strengths, weaknesses,
opportunities and threats by which it attract wider range of customers