Impact of Macro Environment on L'Oreal and Body Shop

This report discusses the impact of macro environment on the current situations faced by L'Oreal and compares the organisational culture of L'Oreal and Body Shop. It also includes the factors considered by L'Oreal before acquiring Body Shop.

Context of Business

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
Impact of macro environment......................................................................................................3
Organisational culture at Body Shop and L'oreal........................................................................4
Factors L'oreal would have considered before acquiring Body Shop.........................................6
Factors that caused failure of Body Shop's acquisition...............................................................7
CONCLUSION................................................................................................................................8
Reflection.....................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Consumer behaviour insights can be referred as a process of gaing the information of
customer needs, preferences, behaviours and expectations. It is really important for the
organisation to gain customers insights in order to stay competitive. This report is based on the
case study of L'Oreal and Body Shop. L'Oreal has been involved in the unethical practices which
has affected the brand image of the company in a negative manner (Herrera, 2016). As company
has used unethical practices like misleading of customers, price fixing, child labour, unethical
promotions which has affected its brand image. In order to overcome this issue, L'Oreal acquired
Body Shop as it was considered as the most ethical organisation as was involved in the ethical
practices. This report discusses about the impact of macro environment on the current situations
faced by L'Oreal and comparison of organisational culture of L'Oreal and Body Shop. Also,
includes the factors considered by L'Oreal before acquiring Body Shop.
TASK
Impact of macro environment
As L'Oreal has got involved in the unethical practices like misleading claims, air
brushing advertisements, animal testing, child labour, prices fixing and unethical promotions. All
of these activities have put L'Oreal in to huge problem due to which company has lots its
reputation and brand image which has resulted in the loss of the organisation. There are various
macro environment factors which have strong impact on the current situation of L'Oreal and
some of them are mentioned below:
Economic Factors: This is one of the major factors which may have had affected the company
as company has indulged in to unethical issues that has resulted a negative impact on the
profitability of the organisation. This is has resulted in the negative image of the company among
the customer and they were not willing to purchase the products of L'Oreal in the market and
technically stay away from company's products (Van Wormer and Besthorn, 2017). Due this it
has resulted in decrease in the profitability of the company which may have resulted in the loss
of the organisation.
Social factors: This is the major factor that has affected L'Oreal in current situation, as customer
in every manner does not entertain any sort of misconduct and ethical behaviour. This have
resulted in the change of preferences or switching of customers to other brands. Beside
customers have become highly aware about the ways of operating business. So, this unethical

behaviour of L'Oreal has created disbelief and lack of trust among the society which have
negatively affected the company in current situation (Chen, Wang and Xu, 2018). Company has
not considered this factor while getting carrying out unethical practices and in return it has
resulted in negative image and lack of trust among the customers. Social factors play an
important role in success of the business besides increase in customer awareness has further
increased troubles for the company.
Ethical factors: This is also the one of the major factor which have affected L'Oreal, company
has violated various ethical codes of conducting business in an ethical manner. This has negative
affected the business of the organisation which has resulted in loss of profitability and loss of
reputation of the company due to which company has been struggling for long time. It was really
important for company take carry out the business ethically but ignoring this factors has changed
the dimensions of company and its business as well.
Legal Factors: As L'Oreal was indulged in different unethical practices and violating different
codes of business. Due to this company may have to face various legal issues from the
Government as it was also involved in violating rules like child labour, misleading of customer,
animal testing etc (Matsufuji and et.al., 2017). Due to which company may have to face legal
issues and under the continuous supervision of government. This also have affected company
relationship with government and other organisations of the country.
Organisational culture at Body Shop and L'oreal
First and foremost factor about the culture of Body Shop is their focus on concern about
sustainability of environment and nature. Body is also very concerned about ethical practices.
These characteristics of Body Shop have helped it to build a very good image and trust in its
stakeholders including customers, employees and other concerned people. Other important factor
of Body Shop's culture is their shared attitude and thinking, values of the company, human rights
and community trade.
In L'oreal important factor of their culture is their concern for their employees and
concerned people. Their approach for technological advancement (Allal-Chérif and Bidan,
2017). Team and collaborative working. L'oreal is also very concerned for its consumers and
their preferences. L'oreal has very good practices for the employees who take initiative and
succeed in it. L'oreal works as a single team despite being so big. Development of employees in

L'oreal is also considered very important and for this reason executives play a role of facilitators
and help realise their potential.
According to this it can be said that whereas culture of L'oreal is concerned with growing nad
developing its employees culture of Body Shop is concerned with following norms and values
and ethical practices (Kemna, 2017). Difference in culture are visible from this. Not just this if
seen from their type they are two different type of organisation working in same industry. In this
where Body Shop provides products to enhance natural beauty L'oreal produce and sell products
which are experimental and required to modern people.
Compatibility of these two organisations is not such that they should be working together in
collaboration as they are two different organisations working with their own different objectives.
L'oreal where is concerned with increasing customer base and productivity to increase its
profitability. Body Shop is concerned with providing qualitative products and ethical practices.
But there are some benefits of this alliance that
L'oreal would be able to use the image of Body Shop and adopting its ethical practices will also
improve its image which L'oreal losed because of getting into some wrong practices (Singh,
2018). L'oreal can also improve practices of Body Shop in terms of employee relations and team
work and get benefit from them as it has been acquired by it.
Body Shop can also get benefit from the advance technology L'oreal have with itself and its
practices to increase its customers and policies and strategies for marketing that have helped
L'oreal to become a giant in its industry these are the benefits that these two companies get from
each other. But where there are benefits challenges are natural.
Challenges in this are definitely concerned with their culture because where culture of L'oreal is
concerned with increasing profitability and productivity through its technological advancement
and highly effective employee practices main concern of Body Shop of is providing natural
products and following ethical practices. This can be a big challenge for both the companies to
work together as it becomes very difficult from human perspective to accept and work on each
others practices. Another challenge is that Body Shop is not willing to compromise its values and
practices and L'oreal being a company with profit motive can not work this much ethically.

Factors L'oreal would have considered before acquiring Body Shop
There are various factors that companies consider before acquiring other companies and
L'oreal is also no different. These factors are success of the company its reputation and brand
image, profit ratio, culture of the company, structure of the company, employees working in the
company interns of their size and quality and skills possessed by them, any special success factor
that company is having (Collischon, Löw and Törnqvist, 2018). Other than these factors there are
factors that one company is not having but other company is having like in case of when L'oreal
faced challenge in form of reduces goodwill and brand image which was that time Body Shop
was having that mad L'oreal acquire Body Shop and other factors L'oreal would have considered
before acquiring Body Shop would be,
Image and Goodwill of Body Shop- L'oreal get into many troubles and lost its reputation and
image when it was found that it is involved in animal testing, unethical promotions and few other
wrong practices like using harmful chemicals. At this time Body Shop was having an image of
being very ethical and practices for sustainability of planet and environment. This was a very big
reason that L'oreal would have acquired Body Shop.
L'oreal wanted to get into natural cosmetic industry- this can be also a big reason and
consideration that L'oreal wanted to get into natural cosmetic industry and for that there is no
other better option than Body Shop. Body Shop was not only selling natural cosmetics but had a
very good brand image and trust among customers.
Winning back trust of customers- L'oreal lost its trust when found guilty of animal testing and
unethical practices where Body Shop was had a very strong trust in its customers. This was a
very big reason and factor that L'oreal would have considered. Because when it connected itself
with Body Shop it eventually increased and build up trust in its customers.
Company culture- in Body Shop they have very good practices concerned with customers that
all its customers are very happy with its product and services (Ahmed, Manwani and Ahmed,
2018). No customer get dissatisfied with Body Shop and its employees are always willing to help
their customers to any extent that customers are very satisfied with Body Shop and its customer
practices.
Acquiring customers of Body Shop- L'oreal would have considered that it has customers of
new age and those who are interested in buying products to experiment with their look. Whereas
Body Shop was having a customer base of middle age and those who are not interested in any

kind of experiment with their look but want to enhance their natural beauty. This made L'oreal
acquire Body Shop as this would enable it to attract those customers towards itself and when it
acquires Body Shop these customers will eventually become its customers.
Factors that caused failure of Body Shop's acquisition
There are various factors that affect L'oreal acquisition and caused its failure. L'oreal did
not have adequate consideration to difference in culture and value system of both the companies.
They were having totally different motives where L'oreal having a profit motive and increasing
its customers and is a giant in its industry (Dhal, 2019). Body Shop on the other hand is a
company that operates on a relatively small level and gives preference to ethical practices than
profit earning. This is a main difference and challenge that how both companies will work
together and in addition Body Care was also not ready to compromise with its value system and
its practices and even after being acquired by L'oreal kept working on its own terms and
conditions.
Another important factor is that when Body Shop was acquired by L'oreal its image was
ruined as being acquired by a profit oriented giant corporation. That can makes Body Shop
compromise with its ethical practices and Body Shop started loosing its loyal customers (Swaen,
Janssen and Du, 2017). Additional factor that contributed to failure was undue attention of L'oreal
for Body Shop and its growth and L'oreal made very small expense for marketing of Body Shop
so it could not gain any additional customers of new and modern age and remained to middle age
regular customers and affected its profitability and lastly failed.
Their marketing strategies are also become poor after the acquisition of Body Shop than
company has before. Company try to implement many new marketing strategies in the business
environment but these strategies are not prepared by the management in the systematic way. So,
at the final result it is also a big reason behind failure. On that time management of the company
was responsible to analyse the all terms of the acquisition but management not take this task in
proper way (Tazegün and Çelebioğlu, 2016). When any company go for the acquisition in that case
company is highly need t6o follow some legal terms of the acquisition but in the L'oreal and
Body shop case this is not perfectly covered by the management of the company. There are all
businesses has their own business tricks and techniques to run their organizational activities. In
the both company's also has their own strategies but after the acquisition both are not become fail
in follow same strategies or techniques. L'oreal image goodwill was become down in the market

for their unethical attempts. In which when company acquire the Body Shop in this situation also
people not accept their products and services like they prefer before.
CONCLUSION
It can be concluded from the report that it is vital for the organisation to carry out its
business practices in an ethical manner. Also, there are various factors which can affect the
business of the organisation like social and ethical factors which needs to be considered by the
organisation in successful operations of the business. Present report also concludes that there
exits a difference in organisational cultures of L'Oreal and Body Shop which has resulted in
incapability of acquisition. Also, L'Oreal before acquiring Body Shop have considered various
factors before acquisition like improving of brand image, reputation and change in customer
perception of the business. It can also be concluded that there existed various factors which
resulted in the failure of acquisition.
Reflection
Writing a report on L'Oreal and Body Shop has been one of the best experiences of life as
I have learnt lots of things from. There are various factors which I addressed while writing this
report. This was a positive experience for me as I came to know about various things while
writing this report like I came to why should a company get involved in to the unethical
practices, and of gets involves what are consequences of it and it can be awful for the
organisation. While discussing the macro impact on the current situations faced by L'Oreal it had
face negative consequences of various external factors like ethical factors as company was not
complying on it and also has negative influence due to social factors as it changed the perception
of customers about the company. I also compare the organisational culture of Body Shop and
L'Oreal this is where I realised that how organisational culture can have impact on the business
practices of the company. Both of the companies has different organisational culture and I also
came to know that they were not compatible for each other due to which it was a challenging
task for the companies to get benefited from each other. I also came up with the experience that a
company in order to build a reputation, it can use various strategies even acquiring other
company to change the perception of customers.

REFERENCES
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