Strategic Management and Market Analysis

The assignment is a comprehensive study on strategic management and market analysis focusing on L'Oreal as a case study. It includes an analysis of the company's internal organizational structure, store view, generic strategy, and porter's five forces in the context of the cosmetic and skin care industry. The study also explores various sources including academic papers, research articles, and online resources to provide a thorough understanding of strategic management and market dynamics.

Illustration 1: Loreal's Strore View
L'Oreal Strategy Report

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Analyse the impact and influence of the macro environment on the L'Oreal organization.........3
Evaluating the internal environment and capabilities of the L'Oreal...........................................5
TASK 2............................................................................................................................................7
Evaluating the competitive forces of the L'Oreal in the market via Porter's five forces.............7
Diverse strategic planning if the L'Oreal through the application of range of theories, concepts
and models...................................................................................................................................9
Recommendations to improve the strategic planning within the L'Oreal cosmetic based
company.....................................................................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Strategic planning is the organization's process of defining its strategy, or direction and
making the decisions on allocating the resources. An organization strategy is the sum of actions
which company intended to take in order to achieve the long-term goals. This report will be
based on the strategies of the L'Oreal and this enterprise deals with the variety skin care and
beauty products. The study will help in understanding the macro and micro environmental
factors that influence the overall companies position as well as profitability. Along with this, the
document will also helps in investigating various strategies that which reveals the capabilities of
the L'Oreal.
Moreover, this report will also helps in understanding about the competitive firms which
impacts on the sales and popularity of the L'Oreal brand. Range of theories and models are
applied within the study in order to identify the effective and efficient strategies within the firm
which helps company to enhance the customer satisfaction as well as increased profitability of
the firm.
TASK 1
Analyse the impact and influence of the macro environment on the L'Oreal organization.
Business strategies can be termed as the long term plan of action which are mainly
designed to achieve a particular goal or set of objectives (Ansoff And et.al., 2018). In the field of
management, Strategic management consists of the formulation and implementation of the major
goals and initiatives which is mainly taken by the top management staff of the L'Oreal. This
company operates the business with a mission to help the people in realising the aspirations and
enhancing the individual looks to the fullest which develops the personality and confidence
among them. This company offers the wide range of cosmetics and beauty products to women
as well as men which helps them to beautify their physical appearance and this allows the
customers to gain self-confidence and open up to others. So business strategy is one of the
important aspect which allows them to sustain and grow in this highly competitive market. These
strategies also allow the company to innovate and invent new products which will meet the
demands of the user. Thus making the strategies within the firm is very important as it helps in
bringing something new which is may be responsible for the companies maximised sales and
increased profitability (Connelly And et.al., 2019). Also Strategic management generally
provides a consistent framework for managing each phase of the strategic planning life cycle.

Macro environmental factors are the major external and uncontrollable factors that
influence an organization's decision making and it also impacts on the overall performance and
strategies of the L'Oreal. As the business is mainly affected by the different factors which
collectively form the business environment can be termed as the business environment (BE). It
generally consists of macro (External Factors) and micro (Internal Factors) business environment
which influence the overall company's strategy and performance. So there are some analytical
framework which helps in analysing the factors which influence the business.
The PESTEL analysis of L'Oreal will cover all the macro environment factors that
influence the company's main strategies which consists of production of variety of products
according to the customer demand. PESTEL analysis is a strategic management tool which
allows the leaders in a L'Oreal to make the better decisions. L'Oreal generally operates in a
dynamic environment which which can be easily influenced by the increasing environmental
activities among the consumers, government, regulatory framework along with the social trends
and legal system within the region.
Political
These factors are often related to the local or national interventions of the government
which impact on the economic environment of the L'Oreal (Epstein, 2018). As this company
operates the business within the large number of countries which consists of different
governmental rules which lead to the huge impact on the main objectives of the business. In the
cosmetic company, there are various products been used that are related to the personal care. So
an Act is introduces which is called as FDA that ensures the safety of the product which is
mainly designed for Skin-to-Skin contact. So there is a huge political concern as the government
of the UK has banned the 500 cosmetic ingredients out of total 1328. Therefore lack of resource
availability because of the government intervention may leads to the political concern which
influence the quality of the beauty products. Thus, it impacts on the strategic decisions-making
of the managers within the L'Oreal.
Economical
It is one of the important concern, unlike the beauty industries which are quite resistant to
the economic recession. In 2008, rapid changing technology has made the people more price
conscious and thus they decided to buy only the products which fulfils their survival needs
(Grover, Chiang, Liang and Zhang, 2018). However, in 2015, The UK's beauty industry

generated over $56 blillion dollars, with hair care leading the way. L'Oreal industry have
provided the employment to the large number of people including hairdresser, barbers,
manicurists, skin care specialist, massage and therapist etc. thus this company has contributed
economic development of the society.
Social
These factors are concerned with the brand loyalty as well as perception, life style and
change in the attitude of the people. So this factor influence the strategic decision making of the
managers and leaders within L'Oreal. Customer trends rapidly changes according to their tastes
so if L'Oreal will not provide the updated product to the customer then this company may lose
the loyal customers. So social factor influences the strategies of the company.
Technological
According to modernised world, the industries are improving the efficiency of the goods
and services by employing latest technology. In this huge competitive market, it is very
important for the L'Oreal company to improve the technology within the firm as it may influence
the efficiency and productivity of the L'Oreal products.
Environmental
Due to the presence of the social media and use of internet, people are becoming more
conscious about the environment, so L'Oreal need to consider the eco friendly components
within the Beauty care products. As the quality of the cosmetics is mainly approved by the FDA.
Legal
There are various legal considerations as the Federal Food, Drug and Cosmetic Act
(FD&C Act ) leads to the fair packaging and labelling of the goods provides by the organization
for the final consumptions to the society (Lunt, Staves and Weyman, 2018). Also FD&C
monitors the ingredients based on their use while the FD&C ensures there's misinformation
branded on the products.
Evaluating the internal environment and capabilities of the L'Oreal.
Internal environment and capabilities of the L'Oreal is mainly composed of the
elements within the organization which consists of the employees, management and specially
corporate culture which defines employee behaviour. Internal environmental consists of various
conditions such as ethics, work culture, employees behaviour, policies and procedure within the
external business environment. These factors may impact upon the strategic decisions of the

L'oreal company. SWOT analysis helps in understanding the strengths, weaknesses
opportunities and threats of the L'Oreal Brand:
Strengths
L'Oreal Company provides the variety of beauty and cosmetic products. There are
various strengths of the company as the company has developed its strong brand image which
serves the quality based products to the customers (Pati, and et.al., 2018). However, the products
offered by the L'Oreal are expensive to some extent as this organization have moved into the
luxury brand, which offers high quality products. Although, L'oreal have expanded the business
in almost 120 countries of the world and along with this, the company offers a natural line of
products which consists of natural ingredients. This organization has also developed a strong
brand image. So these are the strengths of the L'Oreal.
Weakness
This company relay on the specific suppliers for the raw material, so it can be one of the
weakness of the L'Oreal. It seems that, people are developing their business on daily basis which
leads to the increased competition among market. As various company offers the new hair care
line debuting and every day which are affecting the sales of the L'Oreal Products. In addition to
this, profit margins are shrinking daily according to the growing competition in the market
(Rydehell, Isaksson and Löfsten, 2019). Since L'Oreal offers many products, so thus the
company requires a number of sub division via development of task based department so L'Oreal
have slow division process which affects the performance and strategies making power of the
managers.
Opportunities
L'Oreal is generally considered as worlds top most cosmetic brands among the world. So
the organization have to create new products to the consumers. This is where the L'Oreal need to
put more emphasis on. Also, there is a wider opportunity for the growth and expansion to the
L'Oreal industries as the organization posses the higher popularity across the world which will be
more likely to be enhance the customer base.
Threats
As the Cosmetics industry moves quickly and L'Oreal is one of them which has acquired
the higher popularity among the customers (Santos, Au-Yong-Oliveira and Branco, 2018) . In
this highly competitive world, various different organizations are making huge efforts to

understand the customer demand and provide them products accordingly so this is a big threat to
lose the loyal customers. As the L'oreal has countless products where the profits are divided into
different segments so tricky cash flow of the company acquired from different segments is one of
the threat to the L'Oreal.
Illustration 2: L'Oreal's internal organizational structure
TASK 2
Evaluating the competitive forces of the L'Oreal in the market via Porter's five forces
In order to strengthen the business performance, strategies can use Porter;s five forces
model to analyze the competitiveness faced by the L'Oreal. This analysis will help the company
in understanding and providing the solution to address such huge level of competition in the
market. The porter's Five forces that determine the personal and household products of the
L'Oreal industry in the market are described below:

Threats to new entrants (Low)
L'Oreal company is considered to be low as compared to the participation of the potential
entrants into this moderate industry. As The market has a presence of very strong companies like
Avon, Olay, Gamble and Nivea along with the L'Oreal brand. So since these companies are
already exists in this competitive market, so it has a low chances of the threats from the new
potential entrants (Tonelli and Cristoni, 2018). So it seems like L'Oreal cannot be disturbed by
any substitute in the market. Therefore it brings less threat to the company.
Threats to Substitutes (Low)
Aging is one of the main reason which influence the people around the world to use skin
care products. So L'Oreal seem like does not disturbed by any potential substitute in the market.
Although, there is a less substitution in the anti aging product in the market so it brings less
threat to the market. However, various common products such as shampoo and deodorant etc.
may have a great substitute in the market which brings a huge threat to the company (Strategic
management in L'oreal, 2018).
Supplier's power (Low)
Illustration 3: orter's five forces in L'Oreal
(Source: Porter's five forces, 2018)

L'Oreal has a huge capacity that their production is exceeding 45 billion units every year
so the company has a huge approach to the large number of suppliers in the world. Also suppliers
has few or they does not have the ability to bargain to L'Oreal brand. So there ar e also the less
chances of threats from its suppliers.
Buyer's power (High)
As the cosmetic and skin care industry have the numerous powerful competitors in the
world such as Avon, Gamble, Nivea etc (Yen and Liang, 2018). So it may influence the strategic
decisions of the company as the other companies may cause higher bargaining power of
customer. So there is a huge possibility that customer may attract towards the different similar
brands which offers the similar type of products. Therefore, L'Oreal may face the threat to the
lack of customers.
Competitive Rivalry (High)
Various companies are the strong competition of the L'Oreal such as Nivea which
provides the similar products for example, fairness cream, shampoo, alcohol free shave,
deodorants, body sprays and other cosmetics just like L'Oreal. Along with this, there are more
strong rivalries into the market such as Avon, Shiseido which has pushed the L'Oreal into the
more elevated amount of rivalry into the current business which offers cosmetics and skin care
products. However, This factor within the Porters five force help the L'Oreal to enhance the
quality for every production line in order to sustain the company in this industry (Kaul, 2019) .
Along with this, Rivalry analysis help the company in enhancing the market channels along with
application of High technology tools which allows the managers to reach large customers within
the global market.
Diverse strategic planning if the L'Oreal through the application of range of theories, concepts
and models
Generic porter's model help the company in managing the cost effectiveness as well as
focus towards the four basic strategies which help in strengthening the strategies overall
performance of the L'Oreal. So such strategies are described below:

Cost Leadership
This strategy allows the manager of the company to minimise the cost of the product
within the firm. In order to pursue cost leader strategy, L'Oreal can be helpful in managing the
economies of scale, supply chain management options, diversifications of suppliers and
preferential access to raw material and other factors.
Differentiation
L'oreal can also be able to pursue the differentiation strategy based on the personal skin
care and cosmetic products. Also this strategy allows the company to seek the unique in the
personal and household products by providing the value proposition which is largely cherished
by the customers (Rohrbeck and Kum, 2018). Also, L'Orel can select one or more attributes in
terms of products and services which will helps in offering the vale to the consumer. This
strategy will basically help the L'Oreal in developing the unique and different products to the
people which helps in eliminating the space which is already overpopulated by the competitors.
Focus
This generic strategy of Focus mostly rests on the choices of competitive scope within the
L'Oreal industries (Wadhawan and Seth, 2018). It can be categorised into two types that is Cost
focus and differentiation focus. Moreover cost focus helps in choosing a specific segment in
Illustration 4: L'Oreal's Generic strategy
(Source: Generic strategy, 2017)

which the prices can be lowered while differentiation focus allows the managers to target the
specific consumer market in order to influence the strategic decisions of the L'Oreal.
Recommendations to improve the strategic planning within the L'Oreal cosmetic based company
As the above analysis help in understanding the strategic management planning for the
L'Oreal. Therefore all the above mentioned analysis helps in identifying the threats and
opportunities of the company which enhance the overall business performance. Instead of this,
the company have to focus towards various strategic management areas ion order to strengthen
the financial performance of the company. And such suggestions are as follows:
 Manager of the L'Oreal should focus towards the strong commitment for the technology
development within the company.
 L'Oreal should also focused towards the Global reach of the market by developing the
company in the international martket.
 In addition, L'Oreal need should also introduce the Saloons and partnership with the
sport's team in order to promote the male cosmetic segment of the company.
 Also company should focus towards the restructure of the L'Oreal brand which helps
them in employee retention.
CONCLUSION
From the above study, it can be concluded that strategic management is one of the key to
success of the L'Oreal. As the effective strategy planning has resulted in the higher sales and
profitability of the firm. Also, this report has created a clear understanding about the Internal and
external business environment factors that influences the overall business performance. Along
with this this document has also explored various PESTEL factors individually that helped the
readers in understanding the influence of the external environment factors on the strategic
planning and decesion making of the L'Oreal.
Moreover, SWOT analysis of the L'Oreal company has been performed in order to
understand the strengths , weakness, opportunities and threats which influence the growth and
sustainable development of the firm. In addition, it has also created a clear understanding about
competitive forces of the L'Oreal company with the help of the Porter's five forces that help in
understanding the substitute, supplier' power as well as rivalry among the L'Oreal company.
Along with this, this report has also explored the Generic Porter's which helped in focusing

towards four generic strategies within the business. Such as lower cost, differentiated product,
process etc.
REFERENCES
Books and Journals
Ansoff, H.I. And et.al., 2018. Implanting strategic management. Springer.
Connelly, B.L. And et.al., 2019. Something in Common: Competitive Dissimilarity and
Performance of Rivals with Common Shareholders. Academy of Management
Journal. 62(1). pp.1-21.
Epstein, M.J., 2018. Making sustainability work: Best practices in managing and measuring
corporate social, environmental and economic impacts. Routledge.
Grover, V., Chiang, R.H., Liang, T.P. and Zhang, D., 2018. Creating strategic business value
from big data analytics: A research framework. Journal of Management Information
Systems. 35(2). pp.388-423.
Lunt, J., Staves, M. and Weyman, A., 2018. Ensuring safe behaviour on a global scale:
L’Oréal’s approach. Policy and Practice in Health and Safety. pp.1-22.
Pati RK, and et.al., 2018 Business model design–performance relationship under external and
internal contingencies: Evidence from SMEs in an emerging economy. Long Range
Planning.
Rydehell, H., Isaksson, A. and Löfsten, H., 2019. Effects of internal and external resource
dimensions on the business performance of new technology-based firms. International
Journal of Innovation Management. 23(01). p.1950001.
Santos, R., Au-Yong-Oliveira, M. and Branco, F., 2018, September. L'Oréal and its innovative
differentiated positioning process in the beauty industry. In European Conference on
Innovation and Entrepreneurship (pp. 717-XII). Academic Conferences International
Limited.
Tonelli, M. and Cristoni, N., 2018. Strategic Management and the Circular Economy.
Routledge.
Yen, S.Y. and Liang, Y.C., 2018. An Exploration of Patent Analysis and R&D of the Organic
Silicon Industry. NTUT Journal of Intellectual Property Law and Management. 7(1).
pp.62-86.

Kaul, D., 2019. Segmenting and Targeting in Indian Market. ANVESHAK-International Journal
of Management. 8(1). pp.121-125.
Rohrbeck, R. and Kum, M.E., 2018. Corporate foresight and its impact on firm performance: A
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Wadhawan, N. and Seth, A., 2018. Understanding Consumer Buying Behavior: A Study with
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