Impact of Internal and External Environment on Business Activities of L’Oreal

This report explores the impact of internal and external environmental factors on the business activities of L’Oreal, a French personal care company. It discusses the positive and negative impacts of the macro environment, conducts a SWOT analysis of L’Oreal, and explains how strengths and weaknesses interrelate with external macro factors. The report also highlights the importance of managing internal and external factors to maintain a strong position in the market.

REPORT ON IMPACT of
Internal and external
environment

Contents
INTRODUCTION...............................................................................................................................3
MAIN BODY.......................................................................................................................................3
P4 Identify the positive and negative impacts the macro environment has upon business operations3
P5 Conduct internal and external analysis of specific organisations..................................................5
P6 Explain how strengths and weaknesses interrelate with external macro factors...........................6
CONCLUSION....................................................................................................................................6
REFERENCES....................................................................................................................................8

INTRODUCTION
Business environment includes all the internal and external factors that affect
anorganisational functional and operational activity in direct and indirect manner (Babu,
2012). An organisation can control the impact of internal factors but the impact of external
factors are beyond the control. This report is based on L’Oreal which is a French personal
care company based on Paris. This report is going to determine the impact of internal and
external environmental factors upon business activities of L’Oreal.
MAIN BODY
P4 Identify the positive and negative impacts the macro environment has upon business
operations
Macro environment includes the external environment which does effects the
operations and activities of any organization. Any change done in external environment puts
both negative and positive impact upon the business. Macro or external environmental factors
are the factors which are not in control of any business, they work independent. Some of the
external factors include political, economical, social, technological, legal and environmental
factors. The PESTEL analysis of L’Oreal Company is as follows:
Political: The political factor states the degree towards which the government rules the
industries. The political factors include foreign trade rules, government policy, stability,
corruption, tax policy, labor law, trade policies and the like. The political state of UK is very
stable which benefits the industries or companies working into the country. The UK also has
changes their tax rates which had an impact upon the companies. Apart from this the Brexit
also put major impact upon the economy.
 Positive: As the UK government is very much stable, it benefits the L’Oreal as they
can concentrate more upon their operations and keep them stable. They do not have to
change their policies or their activities for operations with accordance to the changed
rules and policies of government.
 Negative: The UK government had changed their tax rate which resulted into increase
In the VAT, for L’Oreal’s products which it offers to the people has to get increase
resulting into increase into the cost of products. Also Brexit has resulted into the
confusion among industries as how they need to get their operations done now.

Economical: The economical factor tells about the situation and condition about the state or
country. These factors include the employment rate, fiscal policy, economic growth, interest
rates, disposable income, and the so on.
 Positive: As the UK is a very stable and wealthy country. It has the GDP of 7.5%
which considered as a positive point for the country. Apart from this the country also
have around 75% of employment rate. This things has benefited for the L’Oreal very
well as the products which is offered by the company at its price is affordable by the
people.
 Negative: Brexit has cause a big damage to companies and industries. The L’Oreal
faced a huge loss as the employees or the workers which worked with the company
now has to migrate to their original places and the exchanges of goods and services
were totally got prohibited from the state causing difficulty for companies to operate.
Social: The social factor includes the attitudes, behaviour, perspectives, taste and preferences
of people or targeted group. By knowing this the business would cater the market with the
product or service which are in demand among customers (Ji-fan Ren and et. al., 2017).
 Positive: L’Oreal analyses the market and the needs of the market, and accordingly
they order for the products. The products which are huge in demand they make it
available to their store. Through this way the store makes their sale.
 Negative: The negative impact of social factor is that if the customers would stop the
consumption of any product or products it would create a loss for the company as they
would have unsold inventory with them.
Technology: Technological factor includes the technological awareness and advancement
into an organization or a country. More the technological advancement more will be the
advancement into the region or company. L’Oreal use advance technology like information
management system into their operations in which they can store all the activities which they
under taken in their business. It has the entire data store in it and by the use of these data the
organization takes its future plans decisions.
 Positive: L’Oreal has all the information about their customers so that it can serves
differently to its loyal customers. Through this data the company can serves offers,
discounts, loyal cards, points and so on to their customers. Also through the help of
management information system the company can manage its inventories and supply
chain management.

 Negative: The negative point for the company is that they are not so technological
advanced into their operations. They don’t have the advance transport or the supply
chain which helps the company in transporting the products at time in stores.
Environmental factor: This aspect is related to change in weather and climatic factors as it
is regarded as one of the important elements. By looking awareness towards the environment,
it is essential for the company to use such products that does not harm the nature as it help in
achieving positive reputation at a global level and thus achieve a competitive advantage.
 Positive: The respective firm emphasises on using paper bags and also adopt the
strategy of reduce, reuse and recycle so as to achieve sustainable development in a
long run. Also, its packaging consists of carboard boxes with the motive of decreasing
emission of greenhouse gas.
 Negative: The environment creates scarcity of natural resources which increase the
overall cost of company.
Legal factor: This aspect relates to several elements such as discrimination laws, antitrust
laws, copyright and patent laws and many more. Various legal factors affect the business
operations and set guidelines in order to facilitate smooth operations of a business.
 Positive: Several legal factors and proper code of conduct has simplified the working
procedure of respective firm as it boosts the morale of employees as they get better
environment.
 Negative: The laws and regulations are rigid that allow the respective firm to create
barriers and thus affect the overall growth. In addition to this, it create complexities
and lead to delay in decision making of firm.
P5 Conduct internal and external analysis of specific organisations
L’Oreal is a personal care beauty brand which is known as world’s largest cosmetic
company and provide it is quality products and services worldwide. The brand is majorly
concentrating ‘on hair colour, make-up, skin care, perfume and professional hair care
products. L’Oreal is a French brand which has its registered office in Paris. For the internal
analysis of the organisation it is required to conduct SWOT analysis that assist in determining
impact of internal factors upon business activity. With the help of this analysis, L’Oreal can
do going forward with its business strategies as:
Strength:

 Geographically diversified: L’Oreal has a global presence in around 130 countries in
which they provides their quality products and services to their target customers. The
company is widespread distribution leading to the economy scale and it having a great
market share globally.
 Natural and organic product range: L’Oreal take its brand costing hit because they
blossom the decision to be completely natural and organic in nature. These kind of
business strategy assist them to leading a great customer base easily.
Weaknesses:
 Large number of branches: Being one of the renowned brands, Loreal has lot of
subdivisions as it creates large number of issues such as improper management of
employees, increase in capital expenditure and so on.
 Decline in profit margins: There are large number of competitors which enable the
firm to cut cost and thus decrease the profit margin. As a result, productivity is
reduced.
Opportunities:
 Wide reach: The concerned firm has capture large market share as it is one of the
popular brands and thus boost the sale and enhance the productivity.
 Demand of organic product: This look as a positive sign for the company as it
emphasises on providing organic products so as to gain maximum customer
satisfaction.
Threat:
 Change in business environment: Due to globalisation, the business environment in
which company carry out its operation is regarded as dynamic so the manager of
Loreal has to be updated as there are several competitors which possess a greater
threat for a firm.
P6 Explain how strengths and weaknesses interrelate with external macro factors
The inside business factors gets all the chances and challenge collected by the outer
condition and their by it doesn't get an immediate effect from worldwide components.
Propositions impacts are taken by factors which influence the acknowledgment of big
business since acknowledgment has been decide job for fruitful operational and future
advancement of the L’Oreal organization. Outer and interior condition factors connect inside

one another and an association molly work impact acquire it joined both the factor of the
association. So as to take advance or put resources into other machine and land or extension
of the business, director need high measure of monetary asset and they can possibly get it
when they award advance from budgetary elements, similar to, bank, protection, money
related asset. On the opposite side , with the difference in association will straightforwardly
impacts on the working state of the association, supervisor change strategies time when
winter season has been stet, at present time because of the CORONA, L’Oreal step their
administrations as government taken choice of lockdown, yet at the same time they are
conveying the basics. It is fundamental for the business association to keep up the level
between utilizing of the two factors as both are the sources through which association may
increase solid situation in commercial center just as they can defeat the opportunity of
vulnerability. It will likewise help in development and make new items and administrations
process. Inward and outer figure help use of assets viably uncommonly in L’Oreal they
supervisor utilize their human asset to offers best types of assistance by utilizing wellsprings
of outside components (Sena Ferreira and et. al., 2012). By receiving of inner and outer
variables chiefs can change over danger into circumstances. Political variables influence the
choice taken result rate and administrations cost by the organization. Director just take choice
after examination all the adversary enterprises rate and furthermore give successful proposal
to draw in their clients. Interrelation of interior and outside variables help executing of new
highlights and present new items and administrations and propelling occasion and keep up
coordination between all the phase of association. Quality of the organization is they have
incredible aptitudes colleague through which they can ready to finishes their assignment
inside the recommend time restrict it will give them upper hand. Hence all the consider help
giving manageability inside the market.
CONCLUSION
From the above report it has been summarised that internal and external factor of
business environment has a direct impact upon business activities of a firm. Thus, it is
required for an organisation to create appropriates strategies in order to reduce impact of such
changes. For this, it is also required for firm to conduct a proper market research to manage
operational activities in appropriate manner.

REFERENCES
Books and journals
Babu, K. V. S. N., 2012. Business intelligence: Concepts, components, techniques and
benefits. Components, Techniques and Benefits (September 22, 2012).
Ji-fan Ren, S. and et. al., 2017. Modelling quality dynamics, business value and firm
performance in a big data analytics environment. International Journal of
Production Research. 55(17). pp.5011-5026.
Savrul, M., Incekara, A. and Sener, S., 2014. The potential of e-commerce for SMEs in a
globalizing business environment. Procedia-Social and Behavioral Sciences. 150.
pp.35-45.
Sena Ferreira, P. and et. al., 2012. Framework for performance measurement and
management in a collaborative business environment. International Journal of
Productivity and Performance Management. 61(6). pp.672-690.