PESTLE and SWOT Analysis of L'Oreal

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
PESTLE and SWOT analysis of organisation and analysis of their capabilities........................1
Analysis of the competitive environment of the organisation using Porter’s Five Forces Model
.....................................................................................................................................................5
TASK2.............................................................................................................................................7
Different types of strategic directions available to the organisation..........................................7
Justification and recommendation of the most appropriate growth platform and strategies......8
Strategic management plan with strategies, objectives and tactics.............................................9
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business strategy is defined as set of decisions which assist the entrepreneurs in
achieving specific business objectives. It is the master plan by the management of the
organisation to secure a competitive position in the market. It is a summary of the planes which
is followed by the organisation to meet business objectives. To understand business strategy
L'Oreal company is taken which is French personal care organisation founded in the year 1909. It
was founded by Eugene Schueller by establishing headquarters is in Clichy, France and
employees approx 90000 employees (Eini and Parisay, 2016). This report consists of impact of
internal and external factors through PESTLE, SWOT and Porter's five force model. Apart from
this models, theories and concepts to assist with the understanding and interpretation of strategic
directions available to the organisation is mentioned.
TASK 1
PESTLE and SWOT analysis of organisation and analysis of their capabilities
For creating a strategic plan, effective analysis of market is required to be performed
through the firm manager. The deputy manager of L'oreal required to analyze the internal as well
as external market that assists them to make effective decisions. The PESTLE and SWOT
analysis are mentioned below:
PESTLE Analysis
This is considered as a tool which is utilise by marketers to monitor and analyse external
environments factors that have impact on firm. It also find out the changing driving forces into
strategic surroundings. PESTLE analysis of L'oreal are explained below:
Political factors:
It refers to the extent where government influence economy as well as obey rules and
regulations of country where L'oreal is running their business. This consider foreign trade,
political stability and so on (Figueira-de-Lemos and Hadjikhani, 2014). Therefore, the
opportunities and threats of political factors are as follows:
Opportunities: L'oreal is a manufacturing company in Paris which have free trade
policies that assists in improved importing to another countries which leads to success of
company and also growth in globalisation.
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Threats: In case if there is sudden change into government policies in respects of
personal care as well as cosmetic products at that time L'oreal have to face threats for its
products as they has already produced products for its consumers.
Economic factor:
This is considered as a performance of economy which impacts L'oreal having long
period of time. It involves inflation, economic growth and so on (Franco, 2012).
Opportunities: As GDP increases then purchasing power of consumers rise in order to
buy products such as L'oreal that forms an opportunities to enhance profitability.
Threats: If there is decrease in dollar or another currencies value then consumers buying
power also decline that leads towards threats to L'oreal.
Social factors:
This factor is considered as a values, attitudes, opinions and so on. Now a days society
mainly concetrate upon trends as well as changing preferences. In social trends firm has to utilise
such components which do not hurt the emotions of society. Earlier L'oreal faces issue which
hurt public emotions by utilising few irrelevant ingredients. For example: it has to do change in
its product as per the changing customers education level so they have modify products in order
to satisfy the base of clients.
Opportunities: Modern society like fashion trends products for regular use. At this case,
it is an opportunities for L'oreal to capture market through manufacturing products according to
the demand as well as requirements of consumer.
Threats: Ingredients that is utilise by L'oreal consists more chemical that is not good for
all types of skin. As clients mostly prefer less chemical contain products to use this is a threat for
firm.
Technological factor:
This factor considered as a technological innovation that impacts operations of L'oreal as
well as their market (Madondo, 2015). This consists automation, research and development and
so on. It also effects marketing and management such as new ways for manufacturing and
distributing products or services etc.
Opportunities: By using latest technology, L'oreal can manufacture more products
through maintaining standard quality, saving cost and time that leads to higher profitability
which forms an opportunities for firm.
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Threats: If L'oreal will not manufacture innovative for consumers so, it profit decrease
that is a threat for the company.
Environmental factor:
It includes climate, whether and so on which directly effects industries. Beauty industry
where L'oreal concentrate towards the concepts of Go green by providing eco friendly packaging
which do not laid more stress on environment. But few another problems like use of plastic in
skin care segment and cosmetic effects its businesses (Midorikawa and Niitsuma, 2018).
Opportunities: L'oreal facilitate and produce eco friendly product for their users, this
enhances the clients loyalty towards company. For acquiring opportunities firm has to modify
their strategies through adapting advance technology.
Threats: more usage of chemical in manufacturing will develop issues to customers that
is a threats for L'oreal. As consumer prefers good quality with less chemical containing products
for use.
Legal factor:
This factor includes consumer rights, health and safety and etc. changing rules and
regulation s effects proceedings of business in case of improvement policy which provides a
safety direction for the regulation of cosmetics. For trading successful, L'oreal required to know
all laws and regulations which are effective for its business.
Opportunities: by obeying overall ethical as well as legal regulations which is related to
health and safety that make values for the products of L'oreal that increases their sustainability
and profitability.
Threats: In case if the company is not following all regulations in compare to
competitors then they have to face threats that reduces their goodwill as well as value into
marketplace (Mintz, 2014).
SWOT Analysis
SWOT analysis is considered as a tool which is used by company to create strategies in
order to identify its strengths, weaknesses, opportunities and threats. It organises as per the
external and internal work as well as scenario of company.
Strengths:
It is refers as an internal factor. There are various strength of L'oreal
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 it have a huge product chain which offer by them like hair care and dye, make up, skin
care products etc. this assists them in product line completion as well as satisfy the base
of customers.
 This spent more funds upon research and innovation in order to offer effective products.
 Its other strength is that it focus on cosmetic fields with dermatological in order to
provide overall products chain. Therefore, their strength works because of their abilities
to beat its rivals in effective manner (Montella and Tonelli, 2018). Strong brand image brings targeted sales for the company.
Weakness:
 Company deals with too many sub divisions which makes it difficult to control business
operations.
 Organisation is facing huge competition in may of its products and suffering loss.
 High investment on research and development makes company to work on low profit
margins. Law brand awareness effects sales of the company and reduces profits.
Opportunities:
 Products that are introduced by L'oreal have high market potential and sales keeps on
going.
 Every year a new product is introduced by the organisation and becomes an opportunity
of well product mix.
 Providing small focus on male segment products will take business at new height's and
opens doors to grab new opportunities and markets. Demand for organic cosmetics are increasing and garbing this opportunity will help
organisation to attract large number of consumers (Russell, 2018).
Threats:
 Industry in which L'oreal is dealing is highly dynamic as there is a constant change in
taste and preference of the consumers and turned as threat for business failure.
 L'oreal has divided into various sub groups this makes availability of financial resources
a huge problem for all organisation.
 The overall economic crisis is affecting business of organisation dealing in costly
products and L'oreal is also affected by this.
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Analysis of the competitive environment of the organisation using Porter’s Five Forces Model
The Porter's five force model was first described by Michael Porter in his classic 1979.
The model describes that how to analyse a competitive environment in which product or
company works. It also helps to analyse the strength and weakness of a company (Porter’s Five
Forces Model, 2019). Porter's Model can be applied to any section of economy so that
profitability can be known. There are five forces in this Model which play an important role in
shaping every market as well as industry in the world. L'OREAL is also using the Porter's five
force Model for competing in the market.
(Source: Porter’s Five Forces Model, 2019)
The five forces of Porter's Model which is used by L'OREAL Company -
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Illustration 1: Porter’s Five Forces Model, 2019

 Competition in the Industry -
The importance of these force depends upon the number of competitors in the industry.
Larger the number of competitors in the market with larger the products and services they offer,
lesser will be the power of company. L'OREAL uses this force by offering large varieties of
beauty products and other cosmetics and serving its customers good quality. This strategy helps
the Company to earn more profit. Thus the chance of competing increases with increase in sales
and profit (Saito, Iimura and Aoyama, 2015).
 Potential of New Entrants into An Industry -
The importance of these force depends upon the entry of new entrants into the market.
Larger the number of new entries in the market,more the Company's position gets weakened.
L'OREAL too applied this force and came into the market and weakened the position of other
competitive company. It is not easy to compete a Company which has the potential to be in the
market.
 Potential Developments Of Substitutes -
Nowadays, everyone is concerned with their skin because of age, L'OREAL being a
potential leader in its anti ageing products, is giving better results and thus there is less chance of
substitutes to take its place. Thus it brings less chance of threats to the market.
 Bargaining Power Of Suppliers -
The Suppliers are rapidly increasing in the market. As the manufacturing of products in
L'OREAL is increasing every year because of its production capacity, there is less chance for any
other supplier to threat and bargain with the Company.
 Bargaining Power Of Customers -
There are so many companies in the market and consumer also uses different product of
different company. Because of using other brands, consumer can switch to other company. This
can be a big loss to the Company. There is higher bargaining power of customers so L'OREAL
should deal with such threats to maintain in the market (Schebesch, Pribac and Blaga, 2016).
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TASK2
Different types of strategic directions available to the organisation
Strategic directions provides a course of action that leads to the achievement of goals of
an organisation's strategy. Various directions available with L'Oreal is explained with the help of
Ansoff Matrix.
(Source: Ansoff Matrix, 2019)
Ansoff Matrix is essential for strategic marketing planning where it is applied to look at
the opportunities to grow revenue for business through developing new product and services.
Igor presented a matrix in the year 1965 that focused on the firm's present and potential products
and markets. There are four options of strategic that are available in this strategy with L'Oreal
that are as follows:
 Market Penetration
Market penetration is based on increasing market share of existing products in the
existing market (Ansoff Matrix, 2019). By adopting this strategy an organization can make
additional changes in the existing product by taking the customers choice, taste and preferences
into consideration to satisfy and attract as many as customers as possible. Loreal adopts this
strategy to gain market share of its existing products in the existing market by applying various
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Illustration 2: Ansoff Matrix, 2019

strategies like decreasing prices to attract customers, joining hands with the competitors,
increasing promotional activities of the existing products.
 Product Development
Product development is said to occur when the organization offers new product in the
existing market. After doing proper research, an organization offers new products to its
customers. In this strategy there is some risk associated with the introduction of new product.
Loreal adopts this strategy to attract its existing customers by using different quality
development, addition of new feature, acquiring and merging resources of the competitor and
improvement in technology to provide innovative and attractive products to the existing market.
 Market Development
Market development is also said as market extension. The organizations make strategies
to enter into a new market with the existing product. Through this strategy new customers are
identified and attracted towards the existing product. Loreal adopts various strategies, such as,
entering into a foreign market, providing products to unknown market, target and select the new
segment of customers towards the existing product (Solberg Hjorth and Brem, 2016).
 Diversification
Diversification is adopted when an organization wants to enter in a new market with the
new product at a same time. There is huge risk involved in this strategy. This strategy is often
used when an organization is suffering huge losses, they are not able to capture the required
market share of the existing market, when the technology they are using becomes obsolete and
new technology is available. Loreal uses the diversification strategy to enter into new market
with the new product in order to capture more market share and to make innovative products as
per the markets demand.
Justification and recommendation of the most appropriate growth platform and strategies
All the strategies that are discussed in the Ansoff Matrix it can be evaluated that all the
strategies possess its merits and demerits. Most appropriate strategy that is most beneficial for
L'Oreal is Market development. As entering in a totally different market with existing product
brings new consumer segment for the organisation. Expansion of business through this strategy
can be done at national level or at international level.
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L'Oreal is considered as one of the well recognised and highly renowned brand that is
already existing in number of countries. Market development is an opportunity for L'Oreal to
expand its business in the market which is easy to grab and are less competitive. When a famous
and well known brand is introduced in new market then it becomes easy to target consumer
group and also to attract as they are well known with the organisation and their products offered.
L'Oreal is dealing in variety of products that will give it competitive advantage to offer large
range of products. Introducing business in new market is quite risky so it is advisable to conduct
a market research for the company and then only decision is taken. When existing range of
products are introduced in the market this will reduce cost of introducing a new product. L'Oreal
is one of the fast growing brand name with approx $ 23.89 billion as brand value. L'Oreal is
large business organisation that is operating in more then 130 countries. So, it will be beneficial
and easy for it to operate in one more nation as it keeps on doing that. It is a great opportunity for
enhancing consumer base and sales and making product renowned in more and more countries.
Strategic management plan with strategies, objectives and tactics
Strategic Management Plan is a document used to communicate within the organisation
regarding goals, priorities, focus energy, availability of resources, strengthen operations,
employees and other stakeholders to achieve common objectives (Tang and Samih, 2018). It is a
critical step towards success of the organisation as general but clear goal setting is achieved by
this. This strategic plan will help L'Oreal to set its priorities and achieve its objectives. For this
strategies, objectives and tactics are defined as follows:
Strategies: Having a pre defined strategy helps in achieving set objectives in a efficient
manner. L'Oreal should use Market Analysis Strategy as it is going to expand in the new
market. It will helps to identify taste, preference of the existing consumers in the target market.
Together with this level of competition that is already existing in the new market place is
analysed and effective decisions are taken.
STP(Segmentation, Targeting and Positioning): Segmentation involves finding out
what kind of consumers with different needs exist in the new business market which is targeted
to expand by L'Oreal. Targeting is the process of identifying the most attractive segment from
the segments that are analysed and one with highest profitability is selected. Positioning is the
final stage and business oriented brings competitive advantage to organisation and generates a
image in consumers mind.
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Objectives: L'Oreal is entering into a new business market with existing product object
for this expansion must be pre decided to make strategies and plan to achieve these objectives.
To have largest market share in the cosmetic industry is the long term goal of this company.
Together with this capturing a large consumer base in the new market is short term object for the
year.
Tactics: It is a conceptual action that is taken by L'Oreal to achieve goal. Tactics that are
used by the organisation to be successful in the new market are as-
Distribution- Target and long term object of the organisation is capture large market
share and having a strong network in distribution channel will make product available
throughout the country. This will help control market and hold consumer for long period.
Diversification- Consumers of all age group is targeted and it is required to introduce
variety of products to attract all age group. As large variety will give consumers a wide range of
choice and attract all of them to try the product.
CONCLUSION
From the above project report it has been concluded that each business requires strategies
and plans to achieve its objective. To analyse market and impact of various factors PESTLE
analysis is conducted and to come across with strengths and weaknesses of internal business
organisation SWOT analysis is done. Business environment I highly competitive and to know it
Porter five force model is used. Various strategic directions are available and one is selected on
the basis of its benefits. A strategic plan is implemented to achieve business objective and
expand business in the new market.
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<https://research-methodology.net/amazon-ansoff-matrix-2/>
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