Business Strategy Report

This report analyzes the business strategy of L'Oréal, a leading cosmetics and beauty company. It examines the company's internal and external environment using PESTLE and SWOT analysis, as well as Porter's Five Forces Model. The report also evaluates different strategic directions available to L'Oréal and recommends a product development strategy for growth. It concludes with a strategic management plan outlining objectives, strategies, and tactics for implementing the recommended strategy.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
PESTLE and SWOT of the organisation and an analysis of the organisation’s capabilities......3
Analysis of the competitive environment of the organisation using Porter’s Five Forces
Model..........................................................................................................................................9
TASK 2..........................................................................................................................................11
Evaluation of the different types of strategic directions available to the organisation.............11
Justification and recommendation of the most appropriate growth platform and strategies.. . .12
Strategic management plan with strategies, objectives and tactics...........................................12
CONCLUSION..............................................................................................................................13
REFRENCES.................................................................................................................................15
.......................................................................................................................................................16

INTRODUCTION
Business strategy is the set of decisions which help an entrepreneurs in accomplishing
predetermined business objectives. In other words it can be said that, business strategy is the
master plan that is use by management for taking competitive position in the market area,
carrying out operational activities, attract customers as well as accomplish desired objectives of
business (Bharadwaj and et. al, 2013). Simply it is long term business planning which cover
period about 3 to 4 years. This assignment is based on L’Oréal which is from personal care
industry founded in 1909 and is serving at worldwide level. Respective organisation is one of the
world's leading provider of large range of skin care and accessories. This report is going to
conduct internal and external analysis of company along with its capabilities. Also it analysing
competitive environment with the help of porter's five force model. Apart from this, it include
evaluation of various types of strategic directions available for organisation as well as strategic
management plan will be designed in this report.

TASK 1
PESTLE and SWOT of the organisation and an analysis of the organisation’s capabilities.
PESTEL analysis is the tool utilise by the marketers for external or macro environment
factors analysis because it have wide impact on the working of organisation (Wang and Verma,
2012). Moreover, PESTEL is the mnemonic which denotes P for political, E for economic, S for
Social, T for technology, L for legal and E for environment. Importance of each and every factor
is different to different type of industries. L'Oreal is leading organisation in cosmetic and beauty
industry in the entire globe (Acquaah, 2013). It is serving variety of products with the motive of
providing customer satisfaction and fulfilling their needs and wants. Respective organisation is
mainly dealing in hair and skin related products as well as having some range of perfumes and
pharmaceutical stuff. PESTEL analysis is used for identifying impact of macro environmental
factors on L'Oreal are as follows :-
P- Political factors: This factor involve rules as well as policies given by the government
in which organisations like L'Oreal is working. As manufacturing activities of same firm is
conducted in the Paris thus, government policies of France gives wide impact. Along with this,
various import policies of particular location play crucial role in the success of same
organisation. Apart from this, political factor have both negative as well as positive impact on
L'Oreal which are as follows :- Positive – With the assistance of political factors, L'Oreal can do business in different
countries in effectual manner. Thus, it result in generating more and more revenue as well
as increase customer base also.
 Negative – There are various rules, regulations and laws made by the government which
sometimes gives negative impact on the operational as well as functional activity of
L'Oreal (Woodard and et.al , 2013). Thus, in this situation respective organisation have
to take care of their offerings, that it will not include any harmful substances.

(Source: PESTEL ANALYSIS, 2018)
E- Economic Factors: There are several factors included in it such as inflation rate,
economic growth, exchange rate, interest rate and so on. Recession is one of the major element
which assist in growth of the cosmetic companies such as L'Oreal. Apart from all this, price of
the product play important role in economic factor because it varies from one region to another
(Veit and et.al., 2014). Although, GDP of a particular state is one of the major factor which
contribute in business of luxury products like L'Oreal. Positive – Developed state which have high human development index and good
economy will be good for brand like L'Oreal. If people have money they want better
living standards which result in purchasing more and more products of respective
organisation. That will be positive for association because it help in increasing sales. Negative - L'Oreal always looking for skilled employees therefore it is hard for them to
provide employment opportunities to each individual. Thus, the employment
opportunities for economic development can be a restricted factor for L'Oreal.
S- Social factors: This factor includes various factors such as population growth, age
distribution, career attributes, culture and so on. When any change in social factor take place,
Illustration 1: PESTEL analysis

then it will directly change demand of customers and then L'Oreal have to design products
according to that.
 Positive- Alteration is social factor is sometimes positive for company because for
fulfilling new demand of customers L’Oréal have to introducing new and innovative
product. That will assist in attracting customers and increasing profitability for business. Negative- Along with the positive factor, modification in social factor also have negative
impact. Because sometimes organisation is not able to grab changes accordance to
customers needs and demand frequently which result in loosing customer base. As well
as other competitors will take place of L'Oreal in market area.
T- Technological factors: This factor involves several aspects such as research &
development activities, improvement as well as innovation in technology etc. Technological
factors are important because with these L'Oreal will be able to increase quality of their products
and do production in better manner. Positive- L’Oréal have various personnels who have years of experience as well as
knowledge about skin and hair that assist company in accepting innovation in proper
manner (Burgos-Campero and Vargas-Hernández,2013). Although, with the assistance
of advance technology they can also make variety of offerings which provides an
opportunity to company in market in terms of gaining high competitive advantage. Negative- If respective company didn't adopt technology in proper way then they will
face one of the major challenge by not satisfying their customers. Use of obsolete
technology in manufacturing products can result in declining quality of products which
negatively impacts on profit ratios of company.
E- Environmental factors: There are various factors included in environmental factors
such as change in climate, weather, ecological factors and so on. L'Oreal have to kept in mind
all these environmental factors so they can do production according to it in effective manner.
 Positive- L'Oreal work for so many eco-friendly projects that help them in sustaining in
the market with such new initiatives. Through these kind of working practices,
organisation can expand their business in so many countries easily with the help of
government support.

 Negative- If L’Oréal will use natural ingredients, which are depleting, then will have to
face the pressure of society. Some one of their offerings are made by using depleting
ingredients and it is harming their image in society.
L- Legal factors: There are various laws and legislation given by government of several
countries such as consumer law, discrimination law, employment law, health and safety law etc.
It is important for company to kept these legislations in mind so they can perform their
operational and functional activities in legal manner (Whitelock,2012). Positive – Legal factors are opportunities for L’Oréal because they work in legal manner
by following all the laws and legislation given by government. This will result in easy
business expansion within other nations. Negative – If Company will not follow laws and regulations in proper manner then it may
be harmful for overall production process or organisation may have to pay some amount
of fine.
SWOT Analysis – It is the framework which is utilise for evaluating organisation's
position as well as for developing strategic plan. Here, SWOT stands for strength, weakness,
opportunity and threats (Trimi and Berbegal-Mirabent,2012). Explanation of SWOT analysis in
relation of L'Oreal will be discussed below for identifying capabilities that will assist in
conducting business operations and functions in proper way.
SWOT analysis L’Oréal Capabilities
Strength  One of the major strength is
quality of products and
services offering by L'Oreal
because it result in making
customers more loyal.
 L'Oreal is offering its
products in approx. 130
countries, thus it have
widespread distribution
which leads to economies
of scale as well as sharing
 Mention strength is
capabilities for L'Oreal
because this will help
them in attracting and
satisfying large number
of customers in proper
manner (Sako,2012).
Moreover, by its good
quality of product,
L'Oreal is able to do
business at global level.

fixed expenses such as
warehouse, factories and so
on. This will result in
controlling production cost.
 Respective organisation is
dealing in wide range of
products related to mature
skins.
 L'Oreal do continuous
research & development
because when it comes to
beauty and cosmetics
products, then directly
manufacturing sometimes
result in producing harmful
products. It is important to
involve cosmetology,
dermatology, sun
protection, skin and hair
care as well several other
science factors into it.
L’Oréal is capable of
influencing expensive
beauty product segment
as they are know for
better quality of
offerings.
Weakness  L’Oréal is the cosmetic and
skin care company which is
not well know in United
State market area.
 It invests huge amount in
promotional as well as
advertisement activity
which result in increasing
cost of offerings.
 One of the major
capabilities is research
& development team
which help L'Oreal in
overcome these
weakness as well as
also in expanding
business within United
States.

 Amount invested in R&D is
higher, organic processes
and massive expenses
related to distribution result
in low profit margin for
L'Oreal compare to their
competitors.
Opportunities  One of the major
opportunity for L'Oreal is to
expand its business in
United States.
 As demand for organic
products is increasing day
by day thus, L'Oreal can
also deal in it.
 By maintaining good
relation with United
State, L'Oreal can
increase its financial
capabilities.
Threats  Offering of L'Oreal is
expensive which may not
be affordable for everyone
(Laudon and Traver,2016).
 One of the major threat is
large number of
competitors such as
Lancôme, Maybelline,
NYX cosmetics and
Garnier.
 Customers of respective
organisation are shifting
towards Olay and Ponds
because they are offering
products at economic price.
 Range of L’Oréal
offering is rare but
other organisation can
copy it which can be
taken as threat for
capabilities of same
association.

Analysis of the competitive environment of the organisation using Porter’s Five Forces Model.
Porter's five force model is an analysis tool which use five industry forces for
determining the intensity of competition within industry and its profitability level. In other
words, respective model is utilise by companies for evaluating as well as analysing competition
within marketplace (Ansoff and et.al , 2019). Implementation of respective model will helps
manager of L'Oreal in developing suitable strategies and plans in effectual manner. Moreover,
through this company will be able to generate more revenue and increase its customer base. In
porter's five force model respective company will evaluate industry's environment with the help
of five factors i.e., threat of new entry, threat of substitutes, bargaining power of customers and
suppliers and competitive rivalry. These factors are defined as follows :-
(Source: Porter's five force,2018)
Threat of new entry – This factor is related to entry of new organisation in the same
industry. When a particular industry have less entry barriers and more profit then their will be
Illustration 2: Porter's Five Force Model

several person who can start their business and enter into market (Morgan, 2012). If an industry
have low investment, no rules and regulations of entry then it become easy for everyone to enter
into that particular market area. Threat of new entrance is moderate for L'Oreal because there is
requirement of huge investment for entering into beauty and skin care industry as well as
respective organisation is well known in same industry.
Threat of substitutes - This is related to the availability of substitute products and
services within market area. This may happen only when buyer will get products and services of
best quality in less price. Threat of substitute product is high for L'Oreal because there are
several organisations like Unilever, P&G, Nivea and so on which are offering same products.
Bargaining power of customers – This refers to the condition when customers have
power of demanding best quality of products and services with minimum price. In this situation
production of organisation get affected, if they produce products with low price it will affect
loyalty of customer's. Whereas, if organisation will offer products with low price then it will
affect their profit maximisation. In relation with L'Oreal bargaining power of customers or
buyers is high because large number of substitutes are available in the market area (Essay on
Marketing Report for L'Oreal, 2016). Customer of respective organisation can switch to another
brand such as Unilever, P&G, Nivea etc., if L’Oréal offer products at high price.
Bargaining power of suppliers – This factor is related to the situation when suppliers sell
their offerings at high price with low quality. Bargaining power of suppliers will affect profit of
the company because if it is high then organisation have to pay more amount for purchasing raw
material. There are several situations when suppliers have more power like there will be less
seller of specific goods and services, availability of few substitutes of material, supplier is
holding scarce resources etc. (Dey and Sircar,2012). In relation to L'Oreal, bargaining power of
supplier is low within respective industry.
Competitive rivalry - It is related to the high level of competition within market area in
which company is doing business. In competitive rivalry factor organisation generally identify
strength and weakness of its competitors available in marketplace. As well design strategy is
such manner so they will gain advantages within market area. For L'Oreal competitive rivalry is
high because there are several association that are offering skin as well as beauty products at low
price like Nivea, Ponds, Olay and so on.

Hence, manager of L'Oreal have to consider all these factors while designing any strategy
and doing planning so that, they can make appropriate and effective plans as well as strategies.
TASK 2
Evaluation of the different types of strategic directions available to the organisation.
Ansoff Matrix is the strategic tool as well as technique that is utilise by the organisation
for designing future growth as well as enhancement of business. Respective strategy is useful for
senior manager, executives, marketers as well as other members also form appropriate strategy
as per its requirement. (Thomas, Smith and Diez,2013).
Market penetration:- it refers to strategy in which penetration of market is done in such
manner leads to more income with existing product and services in existing market . L’Oréal will
develop specific strategies and plan which help them in gaining more profit in existing market
with existing products. For this they use attractive promotional and advertising technique which
attract more and more customers. Promotional and advertising techniques which can be use by
respective company are social and print media, digital media, poster and many more.
Product development:- This is related to brining new product in the market area which can be
existing or new. To survive in marketplace innovation and creativity is necessary for every
company or brand. As per this strategy product development is related to dealing in diverse
products for identify some innovative and unique inventions. For this company mainly focus on
time profit model in which company launch new product within a specific time period and
launch in market before any competitor will launch same product.
Market development:- This refers to strategy in which there is existing product and new market
place. Here main aim is to cover more and more customers of different group. L’Oréal can adopt
various components model to expand market with same product ranges. In this, respective
company get gain more profitability ratio because they can sell same product or exit product
range at high or more price.
Diversification:- It refers to those matrix in which market as well as product or services both are
new. Product diversification assist company is attracting customers and capturing market area. If
L’Oréal do diversification in market and product, then company's profit get boosted in
marketplace (Russo and Minto, 2012) . For this company needs to adopt attractive promotional
and advertising channel such as social media, digital media, posters and banners and many more.

Along with this they can tie up with some famous faces so that customers get attracted in huge
amount.
After analysing and evaluating all matrix of Ansoff model, manger of L’Oréal can adopt
product development strategy. In this, it will develop and launch new range of product and
services in existing market.
Justification and recommendation of the most appropriate growth platform and strategies
Ansoff Matrix is using by L'Oreal for the purpose of evaluating that which step is more
suitable for company in enlarging their business within marketplace. Thus, by evaluating as well
as analysing each and every steps of respective method manager or management department of
L’Oréal made decision to use product development technique because it is more suitable and
effective for them. This strategy is implemented by the organisation for market growth and profit
generation. Moreover, for L'Oreal it has been recommended that they have to expand their
business in the current market area by manufacturing and producing unique as well as innovative
goods. This will assist in attracting large number of customers and also in enhancing
profitability ratio of company. Such as they can manufacture or produce organic or eco-friendly
products because it is in demand now a days as well as will help more in attracting customers.
Apart from this, there are some advantages of implementing product development strategy these
are as follows:-
 L'Oreal can improve their performance within market area by developing new product.
 It will help respective company in improving their reputation through quality in market.
Strategic management plan with strategies, objectives and tactics.
Strategic management plan is the document which is use for the communication purpose
within organisation. It helps to set goals, configure resources and set priorities for the
organisation in order to attaining desirable success. With thee assistance of this L'Oreal is able to
design strategies and plans in an appropriate manner.
Objectives – SMART objective which is developed by L'Oreal is as follows :-
“To introduce organic hair removal cream in UK within four months in order to
maximise market share 10% more. ”
Strategies and tactics that is designed by the same organisation are as follows:-
Strategies – This is framed by the organisation for conducting work and other functional
activities in proper manner so that company can accomplish its predetermined goals and

objectives in successful manner (Hockerts,2015). Below mention is the STP analysis conducted
by L'Oreal for making strategies :- Segmentation – It is done on the basis of demographic, behavioural and psycho-grahpic
factors. L'Oreal is conduction segmentation on the basis of age, feedbacks, income and so
on. Targeting – After doing segmentation next step will be conducted by L'Oreal is to
targeting customers. Respective organisation is targeting people of all age group and their
products is divided into three segments such as baby, youngsters and old age people. By
such practices same company will be able to attract customer’s of all age group which
assist in achieving goals and objectives in better manner. Positioning – With the help of positioning L'Oreal is able to create its brand image in the
mind of customers (Kellermanns and et.al , 2014). For positioning purpose same
organisation is using different tools such as online marketing, social media and so on.
L'Oreal can use digital and social media tool which assist them in attracting customers
more because now a days people are using these media more as well as they are addicted
towards it. L'Oreal position in the market by introducing their new product and services
through brand ambassador. L'Oreal position in the market by introducing their new
product and services through brand ambassador. They will market this product by
communicating potential buyers that this offer is of high quality but it will be available at
affordable rate.
Tactics – L'Oreal design short term plans for achieving predetermined goals and
objectives in better manner. Moreover, it is the responsibility of company's manager to develop
tactics for introducing new products within existing market area which are as follows :-
 Fund is necessary for launching new products and it is the responsibility of L'Oreal
manager to arrange. For this they can borrow money from several sources such as bank
loan, investors, financial institutional and many more.
CONCLUSION
From the above discussion it has been concluded that, business strategy play important
role in smooth running of business. Thus, for manager of L'Oreal, it is important to design
appropriate business strategy for gaining competitive advantages and enhancing market share.
PESTEL and SWOT analysis help in identifying macro as well as micro environmental factor

along with their impact on company. Moreover, by these analysis respective firm will able to
known its strength, weakness, opportunities and threat and impact of external factors on firm's
strategy. Apart from this, for determining competitive environment, association can conduct
Porter's five force model analysis.

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