Impact of Macro Environment on L’Oréal

This article discusses the impact of macro environment on the current situation faced by L’Oréal, the difference in organisational culture between The Body Shop and L’Oréal, factors considered before acquiring The Body Shop, and factors affecting L’Oréal's acquisition of The Body Shop.

CONTEXT OF
BUSINESS

Table of Contents
PART 1............................................................................................................................................1
Discussion of impact of macro environment on current situation faced by L’Oréal.............1
Difference between organisational culture of The Body Shop and L’Oréal..........................3
Discussion of factors L’Oréal would have considered before acquiring Body Shop.............5
Factors affecting L’Oréal acquisition of Body Shop..............................................................6
PART 2............................................................................................................................................7
Personal Reflection.................................................................................................................7
REFERENCES................................................................................................................................9

PART 1
Discussion of impact of macro environment on current situation faced by L’Oréal
Context of business is an effective area of study and practice which undertakes
appropriate and effective insight into several practices which are adopted and performed by an
organisation in relation to achieving its business objectives (Leminen and et. al., 2019).
Moreover, this aspect is highly crucial to be understood and assessed, in order to evaluate the
strategies and operations which firms are willing to implement in relation to enhancing the
competence as well as sustainability within the marketplace. L’Oréal is one of the most
recognised and preferred cosmetic organisations globally. Due to inappropriate market image,
the firm acquired The Body Shop, which is yet another effective company in this sector. In this
context, below is the external analysis of the organisation.
Macro environment of a business consists of different external factors surrounding a
business which have prominent impacts on the company and its strategies. Moreover, assessment
of the same is important which would assist a firm in formulating strategies which are suitable as
per the conditions prevailing within the environment. In terms of L’Oréal, there are certain
external factors influencing its current condition. Some of these pointers are explained below:
 Political:
These factors is related to the political scenario of a country, which directly impacts the
current condition of of a company. It undertakes factors like political stability and soundness
within the nation that influences the strategies developed by an organisation. For instance, within
the UK, there has been high political instability due to the likelihood of Brexit which has
impacted each and every multinational organisation negatively (Kwilinski and et. al., 2019). This
is because there has been frequent changes in supply chain regulations and operating laws, which
have prominently disrupted the functioning of L’Oréal within the country.
 Economical:
These factors are associated with the economic performance of a market, which could
either positively or negatively influence the companies operating within the marketplaces. Due to
global inflation, several markets on which the firm is operating are under performing, due to
costlier supply chains and lesser demands. One prominent market of L’Oréal in this context is
the United Kingdom, where due to decrease in value of Pounds and inflation, the supply chain of
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this company has become very costlier. Moreover, due to selling up of The Body Shop, the
organisation is further experiencing negative impacts upon performing their financial and
business functions effectively (Sheng and Lan, 2019).
 Social:
These undertake several social trends which are related to customer preferences that has
an impact on offerings of the company. Currently, people within the UK and globally wants
beauty and cosmetic products that are inclusive of natural ingredients and does not have any side
effects on the skin. However, L’Oréal has a preceded reputation of providing products that are
very much ineffective and have been accused of wrongful advertisements in the last decade.
Hence, this factor could be viewed as an opportunity for the firm to improvise its processes and
offerings which are in accordance with the current market trends prevalent within the
marketplace.
 Technological:
All the technological advancements are considered within these factors which have a
direct influence over the processes adopted by the firm. Several technologies within the cosmetic
industries such as Artificial Intelligence, which helps in both product creation as well as testing
(6 New Trends in Cosmetic Technology, 2019). Hence, this has a negative impact on the current
situation of the firm as it does not follow the technological trends within its processes. However,
this could also be an opportunity for the firm to acquire in order to appropriately improvise the
production system of its cosmetics and include viable and effective methods for testing, which
might enhance its public image..
 Ethical:
Each and every organisation is required to adopt ethical frameworks to function as per the
expectations of government, customers and society. Hence, this influences the functioning of the
company on ethical grounds. L’Oréal is one of those organisations whose actions are not
considered ethical. Some of the prominent examples as per the case study is related to animal
testing and misleading marketing. Moreover, its acquisition of The Body Shop was also hailed as
unethical due to the motive of the firm to just clarify its image. Therefore, this has a negative
impact on the firm's current situation as there is still a wide scope of improvement which the
company has yet not accomplished, due to in-adherence within its practices associated with
animal and environmental protection. In fact, several organisations such as PETA, still
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speculates about these practices happening inside the firm (L’Oréal is included on PETA’s “do
test” list. What does that mean?, 2019).
Hence, from the above analysis, it could be said that macro environment analysis helps in
determining external factors that have an influence on the current situation of companies.
Difference between organisational culture of The Body Shop and L’Oréal
It is highly essential that organisation cultures of companies are identified and compared,
in order to witness their compatibility while working together. Moreover, the factors arising after
such a comparison determines as to whether the working together of these companies could be a
success or a failure. In relation to L’Oréal and The Body Shop, their cultures must be evaluated
which would allow to analyse the likely benefits or challenges faced by these companies
throughout their term of working together. Therefore, below is an analysis of their organisational
cultures:
 The Body Shop:
One of the most prominent aspects associated with The Body Shop is that it abides by the
Corporate Social Responsibilities that must be an integral part of the organisational culture. This
aspect within the company is very much constant since its inception, which makes the firm one
of the prime examples in terms of effective organisational culture. Furthermore, the practices
promoted within the company are associated with environmental and animal protection (The
Body Shop embeds CSR in corporate culture, 2019). As for people, the firm adopts practices that
ensures the personal and professional growth of employees, along with promoting their
engagement towards the firm and its engagement. This is performed due to adopting strategies
for their inclusion within the strategies of the firm. In addition to this, Democratic Leadership is
adopted within the organisation, where there is an effective consideration of opinions of
employees and inclusion of their creative inputs within the firm, which enhances the scope of its
improvement in the company's processes. Furthermore, there are certain schemes which are
implemented within The Body Shop that effectively provides opportunities that helps in their
personal and professional growth.
 L’Oréal:
The organisational culture of L’Oréal has always been quite different from The Body
Shop as the firm's culture is focused more on its practices rather than its people. Innovation is
highly valued within the company where the employees are motivated towards achieving more
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creative results through ensuring continuous improvement in the processes adopted by the
organisation (Nascimento and et., al., 2019). In addition to this, the leadership within the firm is
more inclined towards changes within its operations and services which provides benefit to the
company. However, the company does not pay enough attention when it comes to the personal
development of employees, as this aspect is dependant upon the achievement of organisational
objectives. Furthermore, a rather mechanical approach is adopted by the firm to attain its goals,
rather than much focus on the Corporate Social Responsibility.
Benefits or Challenges
Hence, the above analysis reflects that the nature and working of both the companies are
highly inappropriate. In addition to this, the cultures are very much contrast when it comes to
handle people and processes within the organisations. However, one similarity in both the
cultures which had been beneficial towards the acquisitions is related to focus on creativity. Both
the cultures are highly focused upon having innovation within the organisation and its practices.
Hence, both the culture appropriately and effectively include and promote creativity which has
been beneficial for the products the firms made throughout their acquisition (Xheneti, Karki and
Madden, 2019).
However, there are several challenges related to their contrasting cultures as well. One of
these challenges which the firms faced was related to their working environment. This is because
employees at L’Oréal are accustomed to work as per the instructions provided by the higher
management, as well as are very much adaptable to change due to the leadership adopted by the
company. However, workforce of The Body Shop have been habitual in relation to working
within an environment that is associated with provision of opportunities to these employees.
Moreover, another challenge which the firms faced had been in terms of leadership. This is
because contrasting approaches are adopted within the companies to lead the workforce. Hence,
while L’Oréal is focuses upon continuous change and improvement for attaining objectives, The
Body Shop is consistent towards development and inclusion of employees to derive strategies for
the same. Hence, there has been very limited compatibility within these cultures that resulted in
such an ineffective performances for years.
Thus, organisational cultures of different companies are required to be assessed so that
challenges and benefits are evaluated at times of mergers or acquisitions. Furthermore, it allows
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organisations in analysing as to whether it could merge or acquire different companies to
collectively work together.
Discussion of factors L’Oréal would have considered before acquiring Body Shop
Before acquisition, there are several factors which organisations are required to consider,
in relation to ensuring future sustainability, as well as effective growth throughout the years.
Furthermore, these factors also helps in determining strategies which could be implemented in
case of gaining success towards appropriate and effective growth (Viriyasitavat and Hoonsopon,
2019).
L’Oréal acquired The Body Shop last decade, which did not end up in an effective
manner. Hence, it is important to analyse the factors that should have been considered by the
organisation before acquiring The Body Shop. Some of these aspects are reflected as under:
 Culture:
One of the primal factors that should have been considered by L’Oréal before acquisition
of The Body Shop is the differences in culture. As mentioned above, both the companies operate
at a wider scale and yet are poles apart when it comes to handling individuals and practices
within the organisation. This analysis was needed prior to the acquisition as L’Oréal was
dependant upon practices related to animal testing of their products and producing products that
are ineffective where environmental protection are concerned. On the other hand, the reputation
held by The Body Shop contrasted that of the firm, which should have been considered by
L’Oréal as it was not willing to mould its practices, rather than add practices of the latter in order
to ensure betterment in its operations. Furthermore, it should have been a very prominent
consideration of the firm if it was willing to acquire The Body Shop, as it would have ensured
that whether the acquisition would be successful or not (Vitari and Raguseo, 2019).
 Objectives:
Another factor that must have been considered by the organisation is associated with the
objectives of the company for which the acquisition had been made. This is because it is very
much essential that objectives of both the organisations align with one another so that a
collective culture and structure could be formulated. For instance, there are several speculations
that objective of L’Oréal in relation to its acquisition of The Body Shop has been to clarify its
image within the market, using the ethical practices adopted by the latter effectively. Moreover,
there have been several verbal confirmations of how L’Oréal is willing to amalgamate the
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business practices of both the companies in order to create sustainability within the marketplace.
On the other hand, The Body Shop wanted to expand and strengthen its business practices by
amalgamating with this company. Hence, such contrasting objectives must have been considered
by L’Oréal before acquiring The Body Shop, as this caused certain challenges and
underperformance of both the companies in question (Tura and et. al., 2019).
 Competition:
This factor is related to the competition within the environment of L’Oréal and The Body
Shop at the time of acquisition. Hence, in this context, both the companies were required to be
innovative in their product development, rather than just merging their operations with one
another. Had this factor been considered by the organisation, it would have had a positive impact
on both the companies which would enhance their performances within the marketplace.
However, the merger led to further decline of the innovative practices happened within both the
companies, which led to a massive downfall in coming years due to dynamic market.
Factors affecting L’Oréal acquisition of Body Shop
It is wide known that acquisition of The Body Shop by L’Oréal had been a failed affair,
considering inappropriate market presence, poor quality performance and several constraints to
both the companies which have been disadvantageous towards the acquisition.
Hence, some of the factors that affected the acquisition has been stated below:
 Overlapping Functioning:
A prominent factor that affected the acquisition of these two companies was the
overlapping of cultures and practices. Loyalty of customers amongst the customers of The Body
Shop was deeply associated with the values which the firm followed. However, after the
acquisition, the firm's core principles were overlapped by L’Oréal which was a strong factor
towards its underperformance. Moreover, this also led to reduction in the originality of the firm
and its products due to loss of authority within its business practices. The impact of this was loss
of customers, diversion of loyalty, as well as weaker sales and profitability (Ryan and Daly,
2019).
 Market Competition:
Another factor which affected the acquisition was related to increasing competition
within the cosmetic industry. There are several brands which have been acquiring higher status
in the market due to their practices and products, such as Lush, Neal's Yard and Dr. Hauschka
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(Why Is L'Oreal Trying To Sell Off Natural Beauty Brand The Body Shop?, 2019). However,
despite of being a beauty giant, L’Oréal did not contribute towards enhancing competence within
The Body Shop to enhance its competitive image in the market. This is evident from the fact that
larger investments were performed by The Body Shop to strengthen its store network, rather than
digitalising its operations, which was demand of the industry. Hence, in this relation, the firms
failed to improvise their business practices which led to ineffectiveness within the acquisitions.
 Inappropriate Brand Positioning:
As per this factor, there were minimal activities that were associated with positioning The
Body Shop by L’Oréal. The latter did not appropriately handle the operations of the former,
which led to weaker product portfolio and image in the market. Moreover, customer interests
also started fading away, giving little scope for the firms to thrive within the market. Hence, it is
one of the most evident factors which led to failure of acquisition of The Body Shop by L’Oréal
(Van Ho, 2019).
PART 2
Personal Reflection
Reflection is an activity which helps individuals in relation to evaluate their past
experiences in a way which allows them to develop and improve their activities in a way that
enhances their competence in future careers. As per this report above, I was required to perform
appropriate market research in terms of identifying the details about the acquisitions, along with
information about the current practices of the firms and associated benefits or losses the
companies are facing (Baker, Dant and Weaven, 2019).
Several positive aspects which I experienced while performing this assignment was the
collection of information. This is because both the companies, L’Oréal and The Body Shop are
prominent organisations with effective market shares and hence, there is an ample amount of
information within their acquisitions. In addition to this, the firm has recently sold The Body
Shop and hence, new information have been provided through several trusted and effective
internet websites. Another effective experience was related to ensuring the flow within the
report. This is because my written communication skills are quite sound, as per the feedbacks
acquired by me through my assessors and peers. Hence, I worked quite effectively towards
ensuring that there is an appropriate flow within the information being written by me.
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However, there were some negative aspects too within the report. For instance, while I
was effective in collecting information, I failed to appropriately segregate the same, which cost
me a lot of time and efforts. Furthermore, though the information gathered by me was from
effective sites, however, authenticity of the information was inappropriately determined by me
while I started my work. However, through feedbacks from my peers, I later realised how
effective information is acquired and segregated.
Hence, to improvise within my weaker aspects, I would be undergoing training and
attending workshops, which would be allowing me in gaining effective competence in relation to
gathering and using effective information.
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REFERENCES
Books and Journals
Baker, B.L., Dant, R.P. and Weaven, S.K., 2019. An empirical examination of the dark side of
relationship marketing within a business-to-business context. In Handbook of Research
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Kwilinski, A., and et. al., 2019. Formation of the entrepreneurship model of e-business in the
context of the introduction of information and communication technologies. Journal of
Entrepreneurship Education, 22, pp.1-7.
Leminen, S., and et. al., 2019. Industrial internet of things business models in the machine-to-
machine context. Industrial Marketing Management.
Nascimento and et., al., 2019. Exploring Industry 4.0 technologies to enable circular economy
practices in a manufacturing context: A business model proposal. Journal of
Manufacturing Technology Management, 30(3), pp.607-627.
Ryan, J.C. and Daly, T.M., 2019. Barriers to innovation and knowledge generation: The
challenges of conducting business and social research in an emerging country
context. Journal of Innovation & Knowledge, 4(1), pp.47-54.
Sheng, J. and Lan, H., 2019. Business failure and mass media: An analysis of media exposure in
the context of delisting event. Journal of Business Research, 97, pp.316-323.
Tura, N., and et. al., 2019. Unlocking circular business: a framework of barriers and
drivers. Journal of cleaner production, 212, pp.90-98.
Van Ho, T., 2019. General Comment No. 24 (2017) on State Obligations Under the International
Covenant on Economic, Social and Cultural Rights in the Context of Business Activities
(CESCR). International Legal Materials, 58(4), pp.872-889.
Viriyasitavat, W. and Hoonsopon, D., 2019. Blockchain characteristics and consensus in modern
business processes. Journal of Industrial Information Integration, 13, pp.32-39.
Vitari, C. and Raguseo, E., 2019. Big data analytics business value and firm performance:
Linking with environmental context. International Journal of Production Research, pp.1-
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Xheneti, M., Karki, S.T. and Madden, A., 2019. Negotiating business and family demands within
a patriarchal society–the case of women entrepreneurs in the Nepalese
context. Entrepreneurship & Regional Development, 31(3-4), pp.259-278.
Online
6 New Trends in Cosmetic Technology. 2019. [Online] Available Through:
<https://www.cosmeticsandtoiletries.com/networking/eventcoverage/6-New-Trends-in-
Cosmetic-Technology--480082253.html>
L’Oréal is included on PETA’s “do test” list. What does that mean?. 2019. [Online] Available
Through: <https://www.peta.org/about-peta/faq/is-loreal-cruelty-free/>
The Body Shop embeds CSR in corporate culture. 2019. [Online] Available Through:
<https://www.thestar.com.my/business/business-news/2007/12/15/the-body-shop-
embeds-csr-in-corporate-culture>
Why Is L'Oreal Trying To Sell Off Natural Beauty Brand The Body Shop?. 2019. [Online]
Available Through: <https://www.forbes.com/sites/greatspeculations/2017/02/23/why-
is-loreal-trying-to-sell-off-natural-beauty-brand-the-body-shop/#f55e4581523e>
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