Importance of Macro and Micro Environmental Analysis in Acquiring Body Shop by L'Oreal

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This study highlights the importance of analyzing macro and micro environmental factors before acquiring Body Shop by L'Oreal. It discusses the impacts of these factors on L'Oreal's current situation, organizational culture at L'Oreal and Body Shop, factors to consider before acquisition, and the failure of the acquisition. The study emphasizes the significance of ethics and the need to satisfy customer demands in the beauty industry.

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LOREAL Body Shop
Case Study

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Table of Contents
INTRODUCTION...........................................................................................................................1
Impacts of macro environment on the current situation of L'Oreal.......................................1
Organizational culture at L'Oreal and body shop along with advantages and challenges......2
Factors need to be considered before deciding to acquire Body shop...................................3
Factors that affect L'Oreal acquisition of body shop that resulting it the failure...................4
Reflection of the study and experience..................................................................................5
Conclusion.......................................................................................................................................6
REFERENCES................................................................................................................................7
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INTRODUCTION
This study is going to show the importance of analysing micro and macro environmental
factors before entering in new market. Before making any type of business related decision, a
manager requires to analyse all those factors like political, social, technological which impacts
on its operations in a critic manner (Zhou and et.al., 2017). This study is based on L'Oreal who
wants to acquire Body shop for several reasons. It will also show the importance of ethics and
organizational culture.
Part 1
Impacts of macro environment on the current situation of L'Oreal
L'Oreal is one of the largest cosmetic companies in the world it is popular as it sells its
products and services in over 130 countries with having approximate 25 brands and sub-brands.
Ion the context of current situation, it can be said that this has been accused by people due to
unethical practices such as child labour, non-organic products, animal testing, airbrushing
advertisement etc. These factors and behaviours created several problems for the company.
There are some factors that are impacting on its current situation in both positive and in a
negative manner such as:
Social factors: In the positive section it can say that modern era of people love to show
off as they want to show and share their beauty to with the world. It is the great opportunity for
L'Oreal. Due to time limitation and busy schedule they do not go to salon for spa and other
things as they want some products who can help them in doing spa at home and L'Oreal is
providing these products (Rubin and Froehlich, 2017). On the other hand, it is also stated that
people are becoming more aware towards environment they prefer to buy products from those
companies who are sustainable and perform codes of ethics. Due to this pressure from aware
people, government has also banned the testing of products on animal. L'Oreal is the one who
tests its products on animals which can decrease its brand image and sales as well. So, it can be
said that this awareness and governmental policy having negative impacts on its situation and
performance (Akhtar, Siddiqi, Ashraf and Latif, 2016).
Ethical factors: L'Oreal is recognized as 1 of the 2018 world's most ethical companies.
Ethics means the behaviour and the way of operating business in the market. Before 2018. this
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company was accused because of its unethical behaviour. This company also was fined because
of price fixing of about $67 (Unethical behaviour of L'Oreal, 2011). Due to child labour and
price fixing and also support political party by giving bribe to them with the main aim of taking
competitive advantages shows its unethical behaviour. This unethical behaviour have negative
impacts on its operations and performance. On the other hand, it can also be said that now it has
committed to follow codes of ethics and invest more in sustainability for taking trust of
customers (Lunt, Staves and Weyman, 2019).
Organizational culture at L'Oreal and body shop along with advantages and challenges
It is stated that L'Oreal has accused and fined for its unethical behaviour which decreased
its brand image and reputation in the mind of its potential customers and in the whole market.
Due to this reason it wanted to acquire most famous company body shop which is mainly;y
known for its ethical behaviour. There are several reasons which show that why should this
company needs to acquire Body shop such as: providing different products to different target
market specially to socially and ethical consumers, meet the needs of the society towards green
and organic products and for entering in the international and other markets in an easy manner.
Corporate culture: In the context of its corporate culture it can be said that it shares its values
with all stakeholders that are directly and indirectly involved with It (Binder, Mair Stummer and
Kessler, 2016). There are several features of its corporate culture which makes it able to attain
its brand image same as like before and increase trust among customers. It also promotes and
respect diversity at its workplace. Innovation, passion, responsibilities and quest for
intelligence are some features of L'Oreal culture. Some more characteristics and feelings of
customers and employees regarding culture are:
Passionate: Some people said about L'Oreal culture that the key of the success of
L'Oreal is its main characteristic of having passion to achieve something. It strongly believes in
its products and employees in order to make people believe in its products as well (Shafer,
2015).
People oriented: Other main characteristic of it is more people and relationship oriented
rather task oriented. It increases trust among employees which helps it out in accomplishing its
goals and objectives (Organizational culture of L'Oreal, 2015).
There are some disadvantages and limitations of this organizational structure. The main
disadvantage is its communication strategy is poor which creates several problems and it was
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also accused because of child labour. It shows that its policies are not strict which can lead
several problems and lawsuit against it.
On the other hand, in the context of culture of Body shop it can say that it also focus on
corporate culture and the culture who invest in building an environment where people have
opportunity to ask anything for doing the right thing only. There are several features of this
organizational structure such as:
Communication: According to its culture, manager and employer mainly focus on
listening to its employees with an open mind and also shares goals with its staff for which they
are working. The main aim of its effective communication is to make people and employees feel
free and fresh for motivating towards performing more productively.
Democratic leadership: It is said by people in feedbacks that the main feature of its
company is its leader is democratic. It makes them feel respected and valued, and they are more
likely to live with the company for the long run.
In the context of, limitation it is also stated that the management strategy and style
mainly focus on completion of tasks rather relationship. The main aim of this company is to
make more money and due to this aim, it is facing the problem of labour turnover (Carayannis,
Sindakis and Walter, 2015).
Factors need to be considered before deciding to acquire Body shop
L'Oreal buys body shop at approximate for £652m and it said that the brand of Body
shop will retain and the company would continue to be based in and run independently of the
UK. There are several factors which needs to be considered by L'Oreal before making decision
of acquiring body shop. Some factors that can impacts on its operations in both manner are
described as follows:
Political: This is the most important factor as by acquiring Body shop it will require to
products in all those countries and region where potential customers of Body shop live. To
analyse political stability and instability of those regions can have impacts on its operation and
acquisition decision. Governmental policy of France is so strict that push pressure on this
company to make changes in strategies. So, it can be said that, L'Oreal needs to consider and
analyse this factor.
Economic: This factor includes exchange rate of the company in which L'Oreal wants to
work and operate its business by acquisition of body shop. Economic crisis, exchange rate of
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currencies, transportation cost and taxes are some factors involved in economic factors which
can affect this company and its decision of acquiring of body shop. Economic crisis of the
country and brand can influence buying power of customers which can decrease as well as
increase sales of the company.
Social: It includes the needs and demands of customers of the company whom L'Oreal
wants to acquire. It is stated that customers of Body shop wants to ethical and sustainable
products at affordable prices. After acquiring body shop, it will be important for L'Oreal to
satisfy needs of its as well as existing body shop's customers. For making sustainable products it
will require investing more in technology and other strategies. It can increase its operational cost
(Perera, 2017).
Technological: The main key of the success of body shop is investment in technology,
research and development. After acquisition of body shop, L'Oreal will also require to continue
it and invest in technologies and providing all facilities to customers. By investing only it can
retain its customers, otherwise it may face several problems like decreased brand image,
decrease sales etc.
Legal: It is stated that Body shop comply with legal standard which are stipulated by UK
and European laws. So, it is important for L'Oreal to focus on this factor and analyse its impacts
on its operations and strategies to prevent itself from any lawsuit.
Environmental: It is the most important factor which needs to be considered by L'Oreal
as people are becoming more conscious about their health and aware about environment. They
prefer to purchase products from those companies who focus on sustainability and ethics as
well. Body shop focus on ethics and sustainability and it is the reason that its customers have
trust on its products and are loyal (Nandonde, 2019).
From the above, it can be said that a deep analysis of all these factors can make L'Oreal
able to take decision of acquiring body shop.
Factors that affect L'Oreal acquisition of body shop that resulting it the failure
There are several factors and actions which shows that the acquisition of body shop by
L'Oreal went wrong. L'Oreal had stated in one article that he stopped animal testing of their
products but some articles claim on its statement that all these practices regarding animal testing
still the same (Factors affect L'Oreal to acquisition of Body shop, 2019). It went against the
most core value of body shop and also create problems in the path of taking competitive
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advantages. Due to this unethical behaviour and social factors created problems for both L'Oreal
and body shop. Customers switch for other organic and personal care products for ethical
reasons. Although, the main reason of providing acquisition was to allow and give opportunity
to L'Oreal to learn from the body shop about CSR but there is no much evidence for L'Oreal
regarding behaviour change. Now Body shop trying to make believe in its customers that it is
still on its core values and is not letting acquisition or L'Oreal to hamper its image of caring
towards environment and the society. It is not focusing on developing strategies for making
believe its existing and new customers about its products and services. Some factors are
described below which results failure:
Technological: Financial stability is most important for L'Oreal for accomplishing and
making itself successful after acquisition of body shop. But due to lack of finance, it did not
invest in R&D (Aithal, 2017).
Environment: L'Oreal has been accused of not following ethics. By acquiring body
shop it can gain its reputation but still it did not learn importance of ethics and codes of ethics of
body shop.
Legal: According to the UK law, there is a requirement for this company and shop to
conform requirements for minimum wage, fair marketing, compensation and equal opportunities
to all employees. It did not follow all these rules.
Social: Not investing in marketing and strategies it failed to satisfy customers and which
decrease its sales so, it can say that it will require effective marketing function.
PART 2
Reflection of the study and experience
From the above data I can say that there is an increasing importance of analysing and
using macro and micro environment analysis tools. In the context of organizational culture of
body shop I can say that It has made an environment where, all levels of employees can share
their views, personal stories and experience as well. It is the main strength which help in
accomplishing goals. I can also say that unethical practices is the main reason which can
decrease brand image and reputation of an organization in the market and in the mind of people
as well. Nowadays people are becoming more aware about their health and environmental as
they want to use organic and those products that are being made naturally and with in ethical
manner. For taking competitive advantages performing all functions ethically is important. It
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can also be said that the feelings of open-minded and flexibility of adapting situations is one of
the main feature of an organizational culture. It makes its employees able to work in an effective
manner and increase their learning skills as well.
In addition, in the context of importance of leadership style it has been known that
Leader of Body shop give opportunity to employees to take active participate in the process of
decision-making which is beneficial for both employees and the company. In the spirit of
continuous improvement, L'Oreal and any type of organization can recognized and known for
ethical behaviour if it works closely with institutes and major associations. I can also say that
different environmental factors including political stability, instability, economic crisis,
exchange rates, environmental factors like sustainability, technological factors and legal factors
all needed to be considered by the company if it wants to enter in new market and also want to
acquire other brand as well.
Conclusion
From the above study it has been summarized that macro as well as micro environmental
factors played a vital role for accomplishing goals. Before entering the new market and
acquiring other brand, company needs to analyse all those factors that impacts on its operations
and decision making process. A deep and effective analyse made an organization able to
accomplish all its goals, increase its sales, increase loyalty and trust among employees and
customers. It has also shown the importance of ethical behaviour and consequences of unethical
behaviour for the company.
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REFERENCES
Books & Journals
Aithal, P.S., 2017. ABCD Analysis as Research Methodology in Company Case
Studies. International Journal of Management, Technology, and Social Sciences
(IJMTS). 2(2). pp.40-54.
Binder, P., Mair, M., Stummer, K. and Kessler, A., 2016. Organizational innovativeness and its
results: a qualitative analysis of SME hotels in Vienna. Journal of Hospitality &
Tourism Research. 40(3). pp.339-363.
Carayannis, E.G., Sindakis, S. and Walter, C., 2015. Business model innovation as lever of
organizational sustainability. The Journal of Technology Transfer. 40(1). pp.85-104.
Nandonde, F.A., 2019. A PESTLE analysis of international retailing in the East African
Community. Global Business and Organizational Excellence, 38(4), pp.54-61.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
Rubin, R. and Froehlich, T.J., 2017. Ethical aspects of library and information science. In
Encyclopedia of library and information sciences (pp. 1468-1482). CRC Press.
Shafer, W.E., 2015. Ethical climate, social responsibility, and earnings management. Journal of
Business Ethics. 126(1). pp.43-60.
Zhou, X. and et.al., 2017. Examining the influence of online retailers’ micro-blogs on
consumers’ purchase intention. Internet Research. 27(4). pp.819-838.
Akhtar, N., Siddiqi, U.I., Ashraf, A. and Latif, M., 2016. Impact of a Brand Equity on
Consumer Purchase Decision in L'Oreal Skincare Products. International Review of
Management and Business Research, 5(3), p.808.
Lunt, J., Staves, M. and Weyman, A., 2019. Ensuring safe behaviour on a global scale:
L’Oréal’s approach. Policy and Practice in Health and Safety. 17(1). pp.32-53.
Unethical behaviour of L'Oreal. 2011. [Online]. Available Through:
<https://www.cbc.ca/news/business/l-oreal-p-g-fined-for-cosmetics-price-fixing-1.994125>.
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Organizational culture of L'Oreal. 2015. [Online]. Available Through:
<https://www.loreal.ca/oldcareers/who-we-are/what-our-people-say-about-our-culture>.
Factors affect L'Oreal to acquisition of Body shop. 2019. [Online]. Available Through:
<https://www.slideshare.net/DishaBedi1/the-body-shop-strategy-after-acquisition-by-loral>.
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