L'Oreal Body Shop Case Study

This case study explores the acquisition of Body Shop by L'Oreal, analyzing the impact of macro environment, organizational culture, considerations before acquisition, and factors for failure. It discusses the importance of core values, ethical practices, and target audience in the success or failure of an acquisition.

L'Oreal Body Shop Case
study

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................4
Impact of macro environment on L'Oreal...................................................................................4
Organizational culture at body shop and loreal..........................................................................5
Consideration by L'Oreal before acquisition of body shop.........................................................7
Factors for failure of acquisition of body shop by L'oreal..........................................................8
Reflection....................................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
L'Oreal is one of the largest personal care company from France. It deals in cosmetic
products and made its place in hair colour, sun protection, skin care, hair care, perfume and
make-up. The company comprises 27 global brands and 5 key expertise under it. It has its
excellence of expansion over 130 countries. Likewise, body shop is also a cosmetic company
dealing in environment friendly and natural products. It has its 2500 store outlets at 60 countries.
It was leading cosmetic brand due to its core values.
In year 2006 L'oreal acquired body shop to get the benefits of its market and its brand image.
Impact of macro environment on L'Oreal.
L'Oreal, is one of the leading cosmetic brand dealing in skin and hair care products.
There are many factors which have direct impact on the company. These factors are directly
influencing the marketing strategy and sales of the company. Some factors which have direct
impact on the company are discussed as below.
 Political Factors :- L'Oreal gets positive impact of political factors. It includes the rules
and policies in which company operates. As the manufacturing of L'oreal is at Paris so all
the policies of France will be applicable to the company (Santos, Au-Yong-Oliveira, and
Branco, 2018). It also includes the import policies of the country. The company enjoys
benefits on the side of political factors because of liberal import and export policies at
France.Loreal is the manufacturing company from Paris so all the political policies of
France are applicable on the company. With the increase in globalization political factors
play a favourable role for the company. Political unstability in the trading country has
badly affected the working of body shop in many countries.
 Economic factors :- The recession is the main element in upbringing the L'oreal as the
best cosmetic brand. Apart from it exchange rates, GDP is the main factors contributing
to the business of L'Oreal. States having high Human Development Index And with
wealthy economy will be having more demand of branded products like L'Oreal. The
people of such region will be more prone to the products like L'oreal and hence there will
be more sale. Thus, these factors has positive impact on the international brand like
L'oreal.Recession is also an important element for development of cosmetic brand

Loreal.Pricing of product is also differentiated depending on the region. The rate of
currency exchange has a great influence on the revenue generation of body shop.
 Social factors :- It includes the trends of society which are impacting the buying
behaviour of the people and hence has an impact on sales of the loreal. Modern society is
more interested in branded fashion and loreal. The people who have interest in the latest
technology and regular innovations will always welcome innovations by the loreal. As
loreal is one of the most innovative brand so it is favourable on part of L'oreal. The use
of natural ingredients has shown a great favourable feedback for body shop.
 Ethical factors :- These factors have also considered as the social factors as it has direct
impact on the society as a whole. These ethical issues are use of ingredients in the
manufacturing of products. Some states consider as unethical to use such products. The
unethical issues for the company accused was airbrushing advertisements, animal testing
and price fixing (Al-Shahmani, 2018). These issues have badly affected the working of
L'oreal. Body shop has been very much benefited because of ethical concern as they use
natural ingredients in their products.
 Technological factors :- For the company L'oreal technology and innovation has played
a great role. It has helped the company to modify its product from time to time and fight
the dynamic market competition. Thus, technology has always positive impact on the
company like L'oreal. Thus, regular innovations is necessary for the company.Loreal is
very much prone to innovation and it always follows contemporary trends.The online
sales of body shop products is favourable for the company.
 Legal factors :- The company has to consider the legal aspects for the region in which it
is working. The L'oreal is elite brand and has to deal people of elite class. So, working
with the legal parameters of the company is necessary to stand in this competitive market.
Loreal is working as global brand so it has to follow the legal parameters of all over the
world.Body shop has less legal parameters because of usage of natural products.
 Environmental factors :- The environmental factors includes all international
environmental laws for global safety. That L'oreal has to follow for success in this
competitive market. The L'oreal has always played a vital role in protecting environment
internally and externally. This is helpful in maintaining brand image for L'oreal.

Thus, It is clear from above analysis that these are the most important factors for
analysing the external factors for the company. L'oreal must consider this factors for the success
of the organization. These strategies must be considered before framing any policies for the
company.
Organizational culture at body shop and loreal
Every company has its unique personality which is responsible for its brand image in the
market. The unique personality is called organizational culture. They are responsible for success
of any organization. organizational culture also includes the core values, beliefs and assumptions
which states how the organization will believe. For the same below are organizational culture of
body shop and L'oreal.
Before the acquisition Body shop has recognized name in the natural cosmetic brand. It
has 2400 stores within 61 countries with 120 products (Chun, 2017). The body shop has strong
value and concepts for organizational success. organizational culture as there was of shared
meaning held by members of the organization differentiates from other organizations.
Organizational interaction is the key for culture. The company's values are responsible for
building overall organizational culture. Such key that body shop follows to get competitive
advantages are defend human rights, Activate self-esteem community fair trade, against animal
testing and protection of environment. Here staff policy states work, family, care. Staff is
receptive rather than sales oriented.
The organizational culture of L'Oreal before acquisition focused on organizational value
and culture and ethical principles. The core values of L'oreal are as follows passion for
adventure, enrichment through diversity, leading innovation and valuation of individual talent.
The important elements for the company is innovation, creativity and entrepreneurship. The
company can survive for long term in the competitive market which is always active for the
changes arriving in the market. The company focuses only on one business beauty. It believes
that beauty can bring self-confidence and openness to a person. The passion for company's
business is linked to culture and humanity. They create products understanding others and their
needs. The secondary motive of the company is innovation. The company believe the continuous
change in customers preference and expectations so company continuously work on innovation

and research (Wickert,Vaccaro,and Cornelissen, 2017). This will be helpful In attaining the
company's objective efficiently and thus will be helpful in fulfilling customer needs.
The ethical principle of company includes integrity, courage, respect and transparency.
Hence, the organizational culture Of both the organization was not compatible after the
acquisition. As the culture and values of both the companies were different and was totally
opposite to each other. Body shop relays on human rights and use of natural ingredients whereas
Loreal uses some ingredients which are against public policies of some states. So the
organisational culture of Body shop and Loreal was not compatible.
Consideration by L'Oreal before acquisition of body shop
Acquisition is the process by which a company most or all of another company's share to
gain control over the another company. The company acquire the another company because of
several reasons that are diversification, expansion of market share, cost reductions, etc.
The body shop emerged as one of the most emerging organic cosmetic brand amongst the
customers. It was also ethically strong brand in cosmetic sector. In year 2006, There was
announcement for acquisition of body shop by the loreal. There are certain considerations that a
L'oreal has to analyse before the acquisition of body shop. As the L'oreal was accused of the use
of unethical practices in the business. The L'oreal loose the trust of its customers because of
price fixing, use of animal testing (Korompis, 2015). So, in year 2006 Loreal decided to acquire
body shop as the most organic and eco- friendly cosmetic brand. The aim of acquisition was to
cope up with the drawbacks with the selling of Eco-friendly cosmetic brands. The major
considerations that company has kept while acquiring includes the following.
 Acquisition of its core value :- The L'oreal has analysed that body shop is leading brand
due to its core value so, L'oreal choose the body shop to get the benefits of its core value
which includes use of natural products. Another value that make company's brand image
was against the animal testing and price fixing. These was the major factors that company
has kept in consideration before planning the acquistion for the companies.
 Retaining the public trust :- Every business work for customers and customers is the only
one for whom company works. The main aim of acquisition was to cover the public trust
that L'oreal has been loosing due to use of unethical trade practises. So L'oreal has

acquired body shop with a view to retain the public interest in the company again and
build a brand image as body shop.
 Garbing the potential market :- The next objective of the company for the acquisition was
to garbing the market that has been enjoyed by the body shop. The market segmentation
of body shop was such that nature friendly users was with body shop. That segment has
top be grabbed by the L'oreal for its future long term benefits.
 Adding to the brand values :-The addition of the renowned organic brand with the L'oreal
will surely add to the brand value of the company. The L'oreal ha initially analysed the
benefits of addition in the brand values of the concern.
 To know the marketing methods :-The another analysis would be to know the benefits the
other company enjoying in the market. The company here came to know the marketing
strategies that body shop is carrying to fight in such competitive market.
 Expansion of target market :-The acquisition will surely help in the expansion of target
market that body shop was previously enjoying. The target segment of body shop was
people using organic products so that segment is also to be acquired by the L'oreal.
Factors for failure of acquisition of body shop by L'oreal
The acquisition of body shop by L'Oreal was an great change in the cosmetic retail sector
of the economy. As body shop was previously indulged in selling of environment friendly
products while L'oreal was reverse of it. It was indulged in the unethical trade practices which
was totally against public interest and was opposed by public. So here L'oreal decided to acquire
body shop to get benefits of its core value and culture. But in year 2017 company again get
separated and acquired by another Brazilian company Natura cosmetics. Here the case depicts
that loreal had only acquired for the sake of benefits to get access to the stores and supply chain
of the company. The main factors behind the failure of acquisitions are firstly L'oreal aims to
acquire the market which they were loosing due to ethical issues. They acquired the market by
this way. The next was use of pricing fixing by L'oreal (Worek,De Massis,Wright,and Veider,
2018). Here company can not combine with each other and due to lack of proper coordination
between the company acquisition fails. Thirdly the company had enjoyed the benefits from the
brand image that company was enjoying from its core values. Here body shop also uses the
natural ingredients whereas L'oreal was opposite to it. So, company was lacking in these

parameters and had to cope up with these parameters. The company failed due to lack of proper
planning before acquisition. The company should have to take care of the various considerations
before acquisition.
The main reasons for body shop acquisition by L'oreal
 No proper coordination of resources :-There was not proper coordination between the
resources and vision of both the companies. Both the companies was just opposite to each
other in the terms of values, culture, vision, methods, beliefs and assumptions. The
companies were also lacking the proper coordination of policies and ethics. This was the
major factor for the failure of acquisition of companies.
 Lack of organizational culture :-The next reason is lack of organizational culture in
L'oreal. The organizational culture was having many drawbacks (Dörner, 2019). This
drawback was not able to cope up with the help of body shop culture. So, the acquisition
was not the success.
 Lack of proper target audience :-The target audience of both the companies was different.
L'oreal target audience were of elite class but body shop targeted people who are organic
users and health conscious. So, this merger was not successful to target the particular
target segment.
 Lack of values :-The values that L'oreal was using was unethical and was never accepted
the public. The unethical values was responsible for low response of customers to the
company and hence the acquisition failed.
Thus, the overall conclusion for the failure was due to lack of proper understanding of
coordination between the resources of both the companies. The proper planning of the resources
may be helpful in case of acquisition so this is to be considered at that time.
Reflection
While writing the report about the acquisition of L'oreal and body shop two most
emerging cosmetic brands, I have noticed the following things. Firstly I have learned that
company have to work only on ethical grounds to get success. A company with unethical trade
behaviour will never be accepted by the public and always be avoided by the public which will
be the reason for company unwanted loss. Next I have noticed that company have to take some
major steps to cover up its losses and to make long term stability in the market.As I had learned

in my classroom of organizational behaviour that companies has to follow the ethics that are laid
down at the time of planning stage. These are the most important factors which I have learned
for organizational success. Loreal decided to acquire body shop to cover its looses and grab its
market share. I think that decision was too quick as this does not analyse the overall market
trends and other factors, thus each decision should be very keen. But lastly I have noticed that
proper planning before the acquisition is also necessary for the successfully attaining the
objectives for the company. The classroom teaching about organisational success taught me to
make proper planning before making implementation. I has also been taught in the classroom
about the factors affecting the working of business. Which company should analyse and examine
its effects. Here L'oreal has not analysed the overall factors affecting the acquisitions. These
factors play a very significant role in the success of any company. Firm has to make
considerations of various factors which may have positive or negative impact of the company.
These factors may be micro and macro. The macro factor are social and ethical while macro
includes internal rules and policies of the organization. Thus, from the above report I came to
know about how the business works in dynamic environments and factors affecting their
working. I have concluded that working ethically will be most important factor for the
organizational success.
CONCLUSION
It is concluded from the above report that unethical behaviour of organization will hinder
the interest of target audience in the company's product. The company has to consider the
important points before acquiring other company. A proper analyse of factor has to be done for
getting the organizational success.

REFERENCES
Books and journals
Santos, R., Au-Yong-Oliveira, M. and Branco, F., 2018, September. L'Oréal and its innovative
differentiated positioning process in the beauty industry. InEuropean Conference on
Innovation and Entrepreneurship(pp. 717-XII). Academic Conferences International
Limited.
Al-Shahmani, H., 2018. The impact of the emerging trends on the makeup market in Europe.
Chun, R., 2017. Organizational virtue and performance: An empirical study of customers and
employees.Journal of Business Ethics,146(4).pp.869-881.
Wickert, C., Vaccaro, A. and Cornelissen, J., 2017. “Buying” corporate social responsibility:
organisational identity orientation as a determinant of practice adoption.Journal of
Business Ethics,142(3). pp.497-514.
Korompis, F. I., 2015. The Effect of Store Environment and Brand Image on Consumer Buying
Decision at The Body Shop Manado.Jurnal Berkala Ilmiah Efisiensi.15(4).
Worek, M., De Massis, A., Wright, M. and Veider, V., 2018. Acquisitions, disclosed goals and
firm characteristics: A content analysis of family and nonfamily firms.Journal of Family
Business Strategy.9(4). pp.250-267.
Dörner, N., 2019. L´ Oreal SA-consumer goods(Doctoral dissertation).

Weber, A., 2018.The adoption of a SME dual market strategy and its influence on
organisational culture: The case of employee motivation(Doctoral
dissertation.University of Gloucestershire).