L’Oréal/Body Shop Case Study

This case study analyzes the acquisition of Body Shop by L’Oréal. It discusses the impact of macro environment on L’Oréal, the organizational culture of both companies, factors considered before acquisition, and factors leading to failure. The study provides insights into the cosmetic industry and the challenges faced by companies in maintaining their brand image and values.

L’Oréal/Body Shop Case Study
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Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Impact of macro environment................................................................................................3
TASK 2............................................................................................................................................4
Organisation culture of L’Oréal and body Shop....................................................................4
TASK 3............................................................................................................................................6
Factors considered by L’Oréal before acquiring Body Shop.................................................6
TASK 4............................................................................................................................................7
Factors affecting L’Oréal acquisition of Body shop resulting into failure.............................7
TASK 5............................................................................................................................................8
Reflection...............................................................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
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INTRODUCTION
Cosmetic industry has huge scope in the market as there is continuous increasing demand of
same. It is important for all the brands dealing in this sector to fulfil all their corporate social
responsibilities as only than their survival in the industry is possible (Chun, 2016). L’Oréal and
Body Shop both are big players of this sector and are widely spread all over the world. The
following report will discuss the impact of external surrounding on their business also with the
culture that is followed in the firm. Thereafter the influencing causes behind the acquisition of
Body Shop by L’Oréal will be highlighted along with causes that leads to its failure too. Lastly, a
reflection on own experience of writing report will be given.
TASK 1
Impact of macro environment
L’Oréal is a huge cosmetic brand which has great influence of the external environment like
the change in political, social, economical and ethical factors. While operating business in the
market it has to ensure that it fulfils the criteria of all these elements. The impact of these on the
current working of L’Oréal are as follows:
Political factors – The selected brand is operating at global level and therefore is highly
influenced by the various laws and regulations that are imposed by the different governments. It
makes it difficult for L’Oréal to operate as to adopt the different working style in distinct
countries demand much effective work force. It has to fulfil all the criteria of FDA i.e. Food and
Drug Administration which influences the availability of brand products in the market. Getting
the process, labelling, documentation approved by this authority is a time consuming process
making it difficult to maintain the regular supply.
Economic factors – These are the factors having an immense impact on the total business of
L’Oréal. The recession element has a major significance for L’Oréal or cosmetic business as
whole. It is required that he total gross domestic product is good in a country as it is essential for
having a good business for premium products like that of L’Oréal. It is earning good revenues in
areas where buying capacity of customers is high. L’Oréal followed the price fixing practice
which developed negative image about brand among the product users (Ditlev-Simonsen, 2017).
Social factors – All the promotion and advertisements of the L’Oréal brand are carried out
by the celebrities. This creates a huge issue in the target customers of this brand as it makes it
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difficult for ordinary customer to relate with the product. Also now people are aware about their
rights and does deep research before taking their buying decision. L’Oréal had done many
misleading promotions in their past which has huge influence on its present operations also as
people have trust issues.
Ethical issues – L’Oréal was involved in many of the practices which are not fair on the
ethical grounds. For instance, it was doing child labour which are against the CSR and hence it
has affected much on the brand reputation. It also practiced the testing of its products on animals
which is against the ethics. It ruined the face of L’Oréal brand and its total revenue decreased to
a significant amount. It has created a great pressure on the marketing team of L’Oréal to first
redevelop the goodwill and also to manage it sales to maximum
Technological factors – It consist of modifications that are associated with the change.
Every day a new application is launched which has the capacity to produce better than before. It
has benefited L’Oréal to produce such products which lasts for longer and high popularity can be
gained. Accordingly, in this way technological factors have assisted the referred to brand in
getting out of the different problems in which it was involved in (Postmus, 2017).
Environmental factors – These are those factors that are associated with the natural
surroundings. It creates pressure on the business operation to operate in a way that it does not
affect the environment. L’Oréal has made excessive use of natural ingredients which has resulted
into concern by those customers who are positive about their green surroundings.
TASK 2
Organisation culture of L’Oréal and body Shop
Organisation culture is the combination of values, norms, views and how human resource
work in at professional work. It has great influence on the final outcomes of business. The
corporate culture of both Body Shop and L’Oréal is discussed below in detail:
Organization culture at Body Shop
Body shop is a known brand operating at international level and delivering the quality
cosmetic products. It values to the human rights and has adopted fare trade practice. This way the
employees are satisfied with the general practices of the company and hence it is continuously
developing. It further adds more satisfaction to the customers as they are well treated by the
motivated employees which reflects that human resource is friendly with the clients. It motivates
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the work force to maintain the overall standards and keep close monitoring on same. Culture
aspects of this organisations are against the concept of animal testing and do not indulge in
activities which are not ethical like promoting child labour. Apart from this green theme is
followed in all over the body shop store reflecting that it is influenced by the nature which
further gives a positive aroma to the costumers (Lindström, 2018). Every employee in the store
wears a common uniform and assist the customer in choosing products for themselves which is a
positive professional culture followed in the firm. They also have their own charity foundations
which supports the concept of saving the planet from unethical business practices.
Organization culture at L’Oréal
A developing culture of business is followed by L’Oréal. It is operating at global level
and is capable of giving close rivalry o other brands in the same field. Their vison is to make the
customer feel that they belong to the brand and for same friendly connections are developed by
the marketing team. Employees are motivated to give their opinion in the business practices and
are encouraged by applying their ideas if approved by all. It creates a positive work culture
where the work force gets the recognition. Delegation of authority is done easily if someone has
a good idea which creates a challenging working atmosphere which is productive and coming up
with something new every day. Profit maximisation is their primary goal which has led to some
unethical code of conduct in business like testing on animals, creating attractive advertisements
which are sometimes misleading too.
After analysing the corporate culture of both body shop and L’Oréal it is found that they
are poles apart and their visions do not match with one another. It is due to the fact that body
shop gives equal weightage to profit ad society and do not harm the environment for the sake of
raising more revenues. Business practices are distinct and are planned because of the variation in
the values, beliefs, norms (Lassila, 2018).
Challenges arising out of compatibility of culture
1. Grievance among the customer – Loyal clients of Body Shop felt bad when their
preferred brand which was known for its ethical behaviour was purchased by one whose
image is already ruined because of unethical practices.
2. Position of business become week – When there is difference in the image of two
brands in the market and they collaborate, one which has effective goodwill face the
challenge of getting affected by the other brand spoiled name. in case of L’Oréal and
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body shop there where many allegations against the business practices of L’Oréal which
affected the revenues of Body shop too as then customer consider them as one.
3. Loss of core values – When compatibility of culture among two companies having
different grounds of operations issues related to the core values arise. It is because no
company wants to give up on them and hence the conflicts arise. Even if there is prior
agreement made still values are hard to discontinue (Ashraf and et.al., 2015.).
4. Tough choices to make – As discussed in the above case there is huge difference in the
way both body shop a L’Oréal continues its business. if it is tried to establish
compatibility among them both the brands have to make hard choices. In case of the
selected brands one focus on mass selling and other supports sales which are also
justified on social and environment grounds. Both the situations cannot be achieved if
mission of no organisation is ignored.
TASK 3
Factors considered by L’Oréal before acquiring Body Shop
Whenever a new business strategy is planned it is for the benefit of the company. complete
market analysis is done well in advance so that the desired results are achieved. L’Oréal acquired
body shop and there were range of factors that were considered before taking this particular
decision. Some of the most common are discussed below:
Got access to the supply chain – When acquisition of already established brand is done in
business it further adds more capacities to the organisation and same is the case with L’Oréal.
Though it already had a good supply chain management but working together with Body shop
will add more value to its supply chain and it will raise to a great extent. After purchasing body
shop, it can get access to more suppliers which will increase the availability of L’Oréal products
in the market without making much arrangements for its establishments.
Access to outlets – Body shop has its outlets in different parts of the world and location for
each is selected on premium basis which has maximum footfall of the target buyers. When
L’Oréal acquire this brand it can display its own product also at the outlets of body shop. This
way it can also capture the market of another brand also and in long run a new customer base can
be formed. Body shop has very good brand image in the market and people who trust it will also
develop their faith in L’Oréal considering it to be a part of the same brand.
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International expansion – Though L’Oréal is globally operating but acquiring but
acquiring an established brand like Body shop will add another level to the business. It is spread
widely and doing business together will have led to the expansion of business at global level. If it
is done alone than more human resource and effective strategic planning is required which
further add more cost to business. As L’Oréal was already suffering in business because of its
negative image it was risky and difficult for this company to expand without assistance of
another brand.
Use the goodwill – In the present competitive world products are sold with the goodwill.
Organisations having a good image in the market need not to invest much on advertisements and
promotions. This way much cost is saved which can be further utilise in adding more quality and
standards to the product. Body shop has created its name in the cosmetic industry and do not
need much campaigning. It could be a major factor behind L’Oréal to acquire body shop as it can
make use of its goodwill and can increase its sales in the market (Lindström, 2018).
TASK 4
Factors affecting L’Oréal acquisition of Body shop resulting into failure
There were many reasons behind why the purchase of body shop by L’Oréal was failed.
Some of the most common reasons were as follows:
Body shop lost its popularity – L’Oréal was criticised for most of its unethical practices
like use of unhealthy ingredients, animal testing etc. when it purchased body shop business of
both the products were done together. It greatly affected the goodwill of body shop which was
known to be ethically conscious. The loyal customers of this brand start doubting the business
deal as why Body shop joined hands with the firm which is already having a negative image and
is indulge in many practice which are against the social welfare.
Total sales of Body shop reduced – After the acquisition both L’Oréal and body shop were
considered one. Brand image of L’Oréal was bad among the customers and when it was found
with body shop the image of same was also at stake. It was believed that now this brand is also
deviating from its prime quality of being ethical and focusing on profit maximisation. It
ultimately resulted into loss of many potential buyers of body shop which brought he sales graph
low.
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Large share competitor grab share – Multinational companies took the advantages of
issues that were faced by body shop after the acquisition. As people were doubting that body
shop has lost its grounds and also its products are expensive it created an opportunity for the
other business. Unilever for instance started capturing more market which further raised issues
for the purchase made between two brands. (Ashraf and et.l., 2015.)
Implementation and change factors – L’Oréal was involved in may practices which were
not possible to be stopped over a night. Animal testing, use of different inappropriate ingredients
are some of them. Due to this both brands body shop and L’Oréal started losing their market
which made the question a wrong choice.
TASK 5
Reflection
In order to complete my report, I went into details of the business acquisition that took place
in between two most significant brand of cosmetic industry i.e. Body shop an d L’Oréal. It was
an interesting experience as I analysed the details of the operations of these two brands which
added much to my knowledge of how as a customer evaluates the products before taking the
buying decision. I was very happy to know that now people are more aware for the environment
and not just focus on their own priorities. As it was an important commercial case, data regarding
same was easily available and I did not found any difficulty in resolving the different quarries
related to the case study. This unit also enhanced my understanding of how important customer
is to the market as all the planning and strategies are formulated keeping them in mind and if it is
not appreciated by the ultimate user than all the labour goes in vain. My overall research skills
are developed as in order to deliver most appropriate solution I went through different articles
that were present on net regarding the case study.
CONCLUSION
From the above report this has been summarized that the culture of different organisation is
distinct from one another. It is influenced by the core values of the entrepreneur and reflects
throughout the life span of business. Both L’Oréal and body shop deals in eth same industry but
are very much different from one another as they have spate priorities and accordingly have
different brand image in the market.
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REFERENCES
Books and Journals
Chun, R., 2016. What holds ethical consumers to a cosmetics brand: The Body Shop case.
Business & Society. 55(4). pp.528-549.
Ashraf, I. And et. al., 2015. The Case Analysis of L’Oréal Corp. as Market Leader. International
Journal of Academic Research in Business and Social Sciences. 5(8). pp.131-148.
Ditlev-Simonsen, C.D., 2017. Beyond sponsorship-exploring the impact of cooperation between
corporations and NGOs. International Journal of Corporate Social Responsibility. 2(1).
p.6.
Postmus, J.K., 2017. Influence of Corporate Green Reputation on Sustainable Consumer Buying
Behaviour. Wageningen UR: Wageningen, Holland, pp.1-41.
Lindström, J., 2018. TOMS Shoes: Positive and Negative Effects in Developing Countries.
Lassila, E., 2018. Social Media Marketing of Natural Cosmetic Companies in the UK and in
Finland: Four case companies.
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