Business Strategy Project

This project analyzes the business strategy of L'Oréal, a leading cosmetics and personal care company. It examines the company's external environment using PESTLE and Porter's Five Forces models, and its internal capabilities through SWOT and VRIO analyses. The project then evaluates different strategic directions for L'Oréal, recommending a diversification strategy into the toothpaste market. It concludes with a strategic management plan outlining strategies, objectives, and tactics for successful implementation. Desklib provides past papers and solved assignments for students.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1) PESTLE and SWOT analysis along capabilities...............................................................3
2) Competitive environment using five Porter's Model.........................................................7
TASK 2............................................................................................................................................8
1) Evaluation of different types of strategic directions for organisation................................8
2) Justification and recommendation for growth platform and strategies............................10
3) Strategic management plan with strategies, objectives and tactics..................................10
CONCLUSION..............................................................................................................................12
REFERENCES .............................................................................................................................13

INTRODUCTION
Business strategy is defined as set objectives or plans in order to achieve desired goals. It
is considered as long term enterprise planning which focus on resource issues such as raising
funds for building new factory (Alsudiri Al-Karaghouli and Eldabi, 2013). In order to survive in
competitive market, it is necessary to formulate effective strategy. The given project is based on
L'oreal which was founded in 1909 at French. It deals in cosmetics and personal care serving
products worldwide. The report covers various impacts and influence of macro environment
along with analysing capabilities of organisation and its environment. PESTLE, SWOT and
Porter five force models has been discussed. There are different types of strategic directions for
enterprise, recommendation for growth platform and strategic management plan has prepared.
TASK 1
1) PESTLE and SWOT analysis along capabilities
In order to make strategic planning, proper analysis of market need to be done by
manager of company. The deputy manager of L'oreal need to analyses both internal and external
market which helps in better decision making. The analysis of PESTLE and SWOT are as follow
PESTLE Analysis
It is tool that is used by marketers for analysing and monitoring macro
environment(external marketing environment) factors which has impact on organisation. This
identifies driving forces of change in strategic environment (Bharadwaj and et. al., 2013). The
PESTEL analysis of L'oreal are as follows:

Political- It means extent to which government influencing economy and following
regulations, policies and rules of that countries where L'oreal is operating business. It includes
political stability, foreign trade, labour law, trade restrictions, environmental law etc. The
opportunities and threats of political factors are:
 Positive- The manufacturing company of L'oreal is in Paris which has free trade policies
that helps in better importing to other countries that leads to success of organisation along
with rise in globalisation.
 Negative- If there is sudden change in policies of government regarding cosmetic and
personal care products then L’Oréal has to bear threat for their products as they have
already manufactured goods for their customers.
Economic- It is defined as performance of economy that impacts L'oreal having long
term effects. This includes interest rate, foreign exchange, inflation, economic growth, others
(Chang, 2016).
 Positive- Due to increase in GDP of customer, purchasing power rises for buying luxury
products like L’Oréal which creates opportunity to maximize profits.
 Negative- Whenever there is decrease in dollar and other currencies value then
purchasing power of customers also decline that leads threats to L'oreal.
Social- It is defined as belief, values, characteristics, attitudes and opinion of consumers.
It includes age distribution, career attitudes, population growth and health consciousness. Positive- The modern society prefers more fashion trends products for daily use. In this
case, it has opportunity to capture market by producing products as per need and demand
of customer by using latest technology.
 Negative- The ingredient used in L'oreal products consists of more chemical which is
harmful for skin. As today's customer want less chemical goods to use which is threat for
organisation.
Technological- These factors refer to innovation in technology which affect operations
of L'oreal and its markets. It includes research, development, automation and others. This factors
impact management and marketing in three ways such as: new ways for distributing and
producing goods and services. Also, new methods for communicating with specified market
(Eaton and Kilby, 2015).

 Positive- With use of latest technology, L'oreal can do more production by maintaining
high quality along with saving time and cost which leads to high profits that creates
opportunity for business.
 Negative- In case of not producing fashionable and innovative products for customers, it
can decline profits which is threat for organisation.
Environmental- Environmental factors are those which influence or determined through
surrounding environment. It includes weather, global changes, weather, climatic. These factors
are important for L’Oréal because of pollution targets, increasing scarcity of raw materials,
carbon footprints. Positive- L’Oréal can provide eco-friendly products to their customers in order to create
opportunity for increasing profits and sales.
 Negative- The excess use of chemical in production creates problems to consumer which
is threat for L'oreal. As people want high quality along with less or no chemicals products
for use.
Legal- This factors includes equal opportunities, health and safety, consumer rights,
advertising standards, product safety and product labelling (Iacob, Quartel and Jonkers, 2012). In
order to trade successfully, L'oreal need to know about right and wrong for their business. Positive- By following all legal and ethical laws related with health and safety creates
values for L'oreal products which enhance profitability and sustainability of organisation.
 Negative- In case of not following all laws according to competitors then it has to bear
threats that decline value and goodwill in market.
SWOT Analysis
It is tool used for evaluating competitive position of company through identification of
strengths, weaknesses, opportunities and threats (Jocovic and et. al., 2014). This is foundational
assessment procedure through which it can be know what organisation can and cannot do along
with potential threats and opportunities. The SWOT analysis of L’Oréal are given below:
SWOT Analysis L’Oréal Capabilities of L’Oréal
Strengths It is defined as an internal factor where
L'oreal is separate and different from
competitors. It can be in terms of
customer base, brand loyalty, unique
This capabilities helps in doing
innovation in current products
for sustainability. It has
capture market because of high

technology. L'oreal is doing constant
research and development in order to
know about their customers and needs.
Thus, because of online, it has increase
grow its market share and have strong
brand image along with loyalty of
consumers.
quality and innovation and
become leaders in cosmetic
industry. Its products are
available in more than 130
countries for convenience of
people. L'oreal is consistently
maintaining its quality along
with concerning about
environment.
Weaknesses It is defined as those areas where L'oreal
need to de improvement in order to
compete with competitors. L'oreal is
facing issue due to decentralised
organisational structures as there are
many divisions which is difficult to
control. This leads in slow production as
each and every members of divisions
give their own advice.
As L'oreal depends on third
party retailers for their selling
and accordingly to them
selling should be done. The
profits margins of L'oreal is
declining because of high
investment done in research
and development, organic
processes and others. It need
to improve this capabilities for
overcoming their weaknesses.
Opportunities It is external factors which remains
outside organisation that has potential
and capacity to gain competitive
advantage. L'oreal has opportunity to do
more innovation according to current
trends and fashion for fulfilment of
demand and need of customers. As it
has strong brand value and image in
customer so, it can produce organic and
natural cosmetics products for their
It has financial capabilities
through which it can come in
new markets. It can maintain
good relationship with other
countries for better outcomes.

customers. L'oreal has also opportunity
to do industry expansion as people
always look for newest and best product
for body.
Threats It is that factors which can cause harm
to L'oreal for running their business
successfully. The cosmetic industry is
moving quickly and people's taste and
preferences changes easily. As new
product comes into market, customer
easily switch to that products which is
threat for L'oreal. It has countless
products and profits is divided into
various segments and something occurs
to economy, L'oreal has to face huge
problems.
Innovative ideas should be
applied in business in order to
overcome from competitors.
This helps in reducing threats.
After analysing PESTEL and SWOT, it can be easily identified about market,
competitors, external, internal factors for running of business successfully. L'oreal need to
identify their capabilities which is explained with help of VRIO model given below:
VRIO Model
It is business analysis tool for evaluating resources and capabilities of company and
competitive advantage (Lawton, 2017). The resources and capabilities of L'oreal are: brand
portfolio, high quality of products, widespread distribution and organic in nature. This model is
divided into four elements which are described below:
Valuable- It means resources which creates values for L'oreal for surviving in market.
Here, all four capabilities are valuable for running business organisation.
Rare- The rare resources of L'oreal are brand portfolio and organic in nature. As other
company cannot easily copy it. It is rarity in nature having unique features.
Costly to Imitate- The brand portfolio is not easy to copy as it is costly. But quality of
products provided by L'oreal can be easily copied.

Organised to Functions- The widespread distribution used by L'oreal is organised to
functions as it is not easy possible for each and every company to follow same distribution
channels.
Resources Valuabl
e
Rare Costly to
Imitate
Organised to
Functions
Results
Brand portfolio √ √ It is valuable as
well as rare in
nature.
High Quality Of
Products
√ √ High quality of
Loreal is valuable
and costly to
imitate.
Widespread
Distribution
√ √ The widespread
distribution of
Loreal is valuable
and organised to
functions.
Organic In Nature √ √ The organic in
nature resources
is valuable and
rare in nature.
2) Competitive environment using five Porter's Model
Environmental analysis is tool which for identifying all internal and external factors
which directly affect performance of business or organisation (Li and Tan, 2013). L’Oréal need
to make strategic decision in order to achieve vision and mission through analysis of Porter's five
force model that has been discussed below:
Porter's Five Force Model

It is tool which uses five forces of industry for determining intensity of competition
among business and level of profits (McGrath, 2013). This model was developed by Michael
Porter in 1979. Porter's Five force model of L'oreal is described below:
Potential Entrants- When new entity enter into market having same products is called
new entrants. L'oreal has low threat of new entrants because there are many company such as
Proctor and Gamble, Olay, supply goods and services but does not maintain quality which
L'oreal is supplying. Thus, it has opportunity to capture market through innovation and
improvement in products.
Buyers- There are many competitors such as Avon, Proctor and Gamble that has high
bargaining power for consumer in market. L'oreal is facing bargaining power of buyers as price
charge for products is high which leads customers to switch their brand from one to another.
Substitutes- According to change in situation and time, consumer want skin care
products. L'oreal is one of them which provide ageing products to their consumers. Thus,
products of L'oreal has less substitute as no other company can beat quality provided by it.
Suppliers- It means suppliers who supply materials to industry. Here, L'oreal has low
bargaining power of suppliers because there are many suppliers from where it can purchase
products. As it can produce 45 billion units of products each years, so supplier power is low
(Statistics & Facts, 2018).
Competitive Rivalry - It is defined as competitors of identical products in existing
market place. L'oreal is facing competition in market as there are many company such as Proctor
and Gamble, Avon dealing in cosmetic products. In order to beat competition, L'oreal need to
formulate various strategies for share increment and enhance product quality.
TASK 2
1) Evaluation of different types of strategic directions for organisation
The different types of strategic directions for L'oreal is explained with help of Ansoff
Model which is given below:
Ansoff Matrix
This model is regarded as strategic planning process that provides framework and
guidelines for helping senior managers, market devise and executives for market growth
(Murthy, 2012). It was developed by Igor Ansoff which includes two approaches such as market

growth and product. There are four options of strategic direction available for L'oreal which are
given below:
Market Penetration- This is growth strategy where existing product is sold in same
market (Oestreicher-Singer and Zalmanson, 2013). In order to carry market penetration, four
objectives need to be followed such as:
 Increasing usage of existing consumers.
 Securing domain of industry growth.
 Maintaining or increasing existing product market share.
 Restructuring mature market by division of competitors which requires promotional
activities with help of pricing strategy.
L'oreal can capture more customer from their existing market and products. It also helps
in saving cost for promotional activities as products is already known to consumer. Thus, this
strategy can provide benefits to L'oreal.
Market Development- This direction provide opportunity to increase segment of market
which can be possible by following ways:
 New form of packaging products
 Various pricing strategies has made with creation of new market for attracting various
customers.
 New distribution channels as sell moving from retail to e-commerce and mail order.
 New entering into geographical market like exporting from new country.
In order to enter into such direction, L'oreal need to search target group and new market.
This can provide benefits to L'oreal if it produces unique products.
Product Development- Such strategy can be adopted by organisation if it wants to
develop new products for existing or targeted customers (Peng, 2017). It emphasis on following:
 Being the first in whole market
 Innovation in research and development
 Proper information and details about their customers
This strategy can lead L'oreal to grow profits and increase market share. Thus, it can
easily capture market because of renowned brand.
Diversification- This is growth strategy where new product is introduced in new market
(Schaltegger, Lüdeke-Freund and Hansen, 2012). L’Oréal can easily enter into new market and

products because of goodwill and brand value. This is riskier as entity is entering into that
market where it has no experience.
2) Justification and recommendation for growth platform and strategies
With the analysis of all strategies of market, it can be said that L'oreal need to adopt
diversification strategy. The justification and recommendation for growth platform and strategies
are given below:
Diversification is the strategy where company introduce new products in new markets. It
is divided into related and unrelated where related entity remains in familiar industry and market.
Unrelated means addition of new products line and market penetration.
L'oreal is renowned brand in market so it has opportunity to enter into new product that is
toothpaste for diversification of their market. Whenever famous and popular brand come with
new idea in market then it can easily capture customers. Here, L'oreal can provide variety of
toothpaste products such as for babies, salt, germs free to all category of customers for expansion
of products and target new segment. It is also recommended to L'oreal to conduct proper market
research before entering into such new products. Thus, diversification is most suitable growth
strategy for L'oreal in order to grow market share and profit in new market. As per data of 2017,
L'oreal has earned 23.89 billion US dollars brand value and has grown annually with 4.2 percent
rate between 2015 to 2018. Thus, L'oreal can easily capture market for new product as it is
targeting people of Germany where 9.44% of total toothpaste are exported having value of
US$361.7 million. It is great opportunity to come up with high value and with maintaining
quality of toothpaste for consumers.
3) Strategic management plan with strategies, objectives and tactics
Strategic Management Plan (SMP) is written documents that is applied for
communicating within enterprise and set configure resources, strengthen operations, priorities,
goals, focus energy and ensuring whether employees are working as per goals and agreement for
establishing expected outcomes (Verbeke, 2013). This plan helps L’Oréal for making effective
and efficient decisions for profits and growth. The strategies, objectives and tactics prepared by
L’Oréal are described below:
Strategies
It is very essential for organisation to make proper strategies which helps in achieving
goals and objectives. There are different points which should be considered by L'oreal are:

Market Analysis- For knowing about taste, preference, demand and need of customer, it
is essential to analyse market properly. After analysis of market, L'oreal need to make strategies
for new product and market. L'oreal has targeted people of Germany so it need to know about
types, ingredients they prefer in new products that is toothpaste. Thus, it helps in making
effective decision to organisation that can provide benefits to both customer as well as
organisation.
STP (Segmentation Targeting and Positioning)
Segmentation- L'oreal can segment market from analysis of market that can be on basis
of psycho-graphic, demographic and behavioural factors. Thus, through segmentation, scenario
can be known and decision can be made.
Targeting- After doing segmentation of market, targeting should be done. Here, L'oreal
has targeted all age group for providing their product and covers three categories such as baby
toothpaste, ingredient used and germs free toothpaste. This helps in achieving their goal and
objective of new product in new market.
Positioning- Positioning is the way of creating value and image of brand in minds of
customers. As L’Oréal is renowned brand so it does not require more advertising for creating
positioning. The tools which are used for positioning are social media, online, email and others.
This helps in creating awareness about new products and market which helps in increasing
profits and sustainability.
Objectives
Before entering into new market and product, L'oreal should make SMART objectives
for achievement of their goals. The objective set by L'oreal is given below:
“To increase sales by 20% in next three years by providing toothpaste products with
maintaining value and quality.
Tactics
There is short term plan made by L'oreal in order to achieve their set goals and
objectives. Here, L'oreal has made tactics for new product in new market which are described
below:
Cash Management- In order to manufacture new products in new market, there is
requirement of cash. L’Oréal need to make tactics for funding so that products can be launched

effectively. It can borrow money from banks and financial institutions which charge low interest
rate. This helps in making proper budget for products and market.
Packaging- L'oreal has targeted all category of customers for their product. Here, it is
introducing three category of toothpaste which includes germ free, ingredients based and babies
so according to that design should be made. Thus, for large attraction, L'oreal need to make
tactics strategies for their new products.
CONCLUSION
From above report, it can be concluded that strategies and plans are significant for
enterprise in order to make effective decision. For surviving in market, SWOT and PESTLE
need to be done that aid in knowing about strength and weaknesses of entity and plan is made
accordingly. For knowing of competitive environment, Porter five force model has been used to
identify substitute, rivalry, threat, new threats and others so that decision could be made. Here,
diversification strategy has implemented where new product is launched in new market with help
of proper analysis. In order to gain sustainability, it need to make strategic management plan
considering objectives, short term and long term goals.

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Online
Statistics & Facts. 2018. [Online]. Available through:
<https://www.statista.com/topics/1544/loreal/L'Oréal>.
https://www.slideshare.net/rikuwa/diversification-of-loreal