Impact of Macro Environment on L’Oréal

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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