Swot and Pestle Analysis of L’Oréal

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Analysis via PESTLE and SWOT Analysis...........................................................................1
Competitive Environment of the company through Porter's Five Force Model....................6
TASK 2............................................................................................................................................8
Evaluation of different types of Strategic Directions Available to the organisation .............8
Justification and Recommendation of most appropriate strategy...........................................9
Strategic Management Plan....................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business Strategy refers to set of decisions made by an organisation in order to sustain a
good position in the market place. It helps the organisation in attaining their goals and objectives
(Akbar and et. al., 2016). It can be termed as a master plan prepared by an organisation in order
to gain a competitive advantage in the market against their competitors. The strategy
implemented is based on certain factors including internal, external, micro and macro factors.
These factors helps in analysing various strengths, opportunities, weaknesses and threats which
can help in strengthening the market forces. For the context of this report, L’Oréal company has
been selected in order to derive a business strategy that will help the organisation in capturing
major market share. To do that, L’Oréal's PESTLE Analysis, SWOT Analysis, Porter's Five
Force Model and Ansoff Matrix in order to mark out various factors about the company to
develop the best strategy.
TASK 1
Analysis via PESTLE and SWOT Analysis
L’Oréal S. A. is a French manufacturing cosmetic company who meets with customers
demand of products like skin care and accessories. The headquarters of company is located in
Paris. It is termed as the world's largest company who deals in variety of products like, skin care,
make-up, perfumes, sun protection and many other products. It is in the market from more than a
century, that is, company was established in 1909. The company was founded by Eugène
Schueller.
The company's experience says a lot about the time that they have given in developing a
strategy that would be able to work as a guiding light for the company. But, for the
implementation of new strategy, it is crucial for company to realise factors that are in the
industry that may affect the performance of the organisation. To meet with that PESTLE
Analysis of L’Oréal would be done (Cuomo, Mallin and Zattoni, 2016).
PESTLE Analysis
It is a framework that is used by the organisations in order to analyse and monitor the
industry in which they are working in. it helps in evaluating the macro environmental factors
which directly affects an organisation working. These factors later work as an agent in realising
the various strengths and weaknesses of the company.
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L’Oréal will implement PESTLE in order to know the position of industry in order to
evaluate a strategy for the company (DUMITRAŞCU, FELEAGĂ and FELEAGĂ, 2015). This
method will be used by company to scan the environment they are working in, so that, they can
implement their strengths and weaknesses. PESTLE Analysis of L’Oréal consist of:
(Source- What is PESTEL and how does it help your organization succeed, 2019)
Political Elements: It refers to elements imposed on the company by the government. It
can be evaluated through the government intervention in the market. There are number of
countries in which L’Oréal is operating and they need to make sure that they follow all the
procedures which are endorsed by the respective country. For example, in US company faced the
backleash because of one of their advertisement as country is very aggressive regarding their
culture and people (Gorondutse, Hilman and Nasidi, 2014).
Economic Elements: It refers to exchange rates, labour rate, employment and
unemployment rate of certain country. L’Oréal's all the major manufacturing plants are set up in
United Kingdom only and that is why they do not need to indulge in any other country policies
and the company is quite familiar with the working culture of country as they are operating here
from more than a decade. UK enjoys stable market enjoys which is helping L’Oréal in setting up
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Illustration 1: PESTLE Analysis

and working here, as, the country have stable GDP and Human Development Index, which helps
L’Oréal in building strategy that will help them in securing a good position in the market.
Social Elements: It refers to social elements that can either drive customers to the
company or can take them away (Kono, 2016). It refers to gender roles, societal norms, culture,
tradition, health and safety issues that company has to take care of either they will hamper the
growth they experienced till now. L’Oréal takes care of all the new innovation and trends in
order to attract customers. Also, while launching products in any country L’Oréal make sure that
they know about the social factors and make sure that they do not include such ingredients in
their products which may hamper the market share of company. L’Oréal is very active in their
genre.
Technological Elements:It refers to new innovation and technology bought by the
company in order to attract customers, minimise the cost, maximise the profit and capture the
major market share. L’Oréal always try to implement new and innovative technology in the
market as it will help them in getting a competitive advantage in the market. They have used it in
researching the needs off customers and tried to implement it in creating such products. United
Kingdom as well supports this as they have exempted less taxes on such companies.
Legal Factors: It refers to legal aspects of the country in which L’Oréal is working. The
company is operating in many countries and because of that it has to take care of the legal
aspects in each country. They are doing efficiently as till now L’Oréal has not fall into any legal
trap. Also, it is a brand for high and upper middle class, who are very particular about legal
aspects of any product, so, that is why, they take care of each and every legal aspect and is secure
from it.
Environmental Factors: It refers to the duties fulfilled by an organisation towards the
environment in which industry and companies are operating (Lehmann, 2016). Many global
organisations have come together can tied hands in order to support the environment. L’Oréal as
well is doing their bit to secure and support the environment. They are fulfilling all the requisites
of Britain's environment policy and are doing it efficiently. This will also help the company in
securing a good position in the market as well as it will help in gaining customer trust.
SWOT Analysis
It is a framework used to evaluate company's strengths, weaknesses, opportunities and
threats that can be used to to establish a company's strategy that will help them grow and develop
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in the market. It is developed with the help of internal and external analysis of a company. It
used so that an organisation can identify the opportunities they have and minimise the threats
with the help of strengths possessed by a company (Magnier, 2014).
L’Oréal will use SWOT Analysis to identify various strengths, weakness, opportunities
and threats in order to know what they are good at, what they need to control, what chances they
have and what are the deceiving factors present in the industry which can hamper their growth.
SWOT consists of:
(Source- HOW TO CONDUCT A SWOT ANALYSIS, 2019)
Strengths: It refers to powers possessed by the company that differentiates them from
others and help them establishing a competitive advantage in the market. L’Oréal as well have
certain strengths that differentiates them from their competitors. Some of them are, strong brand
name. L’Oréal is one of the largest cosmetic company in the world and enjoys advantages that
comes along with it. Like, the trust they receive from their customers because of it and are
labelled as one of the most innovative brand with the help of large human resource team. Also,
they have huge product mix to meet with requisites of different customer segments (Marashdeh,
2014).
Weaknesses: It refers to the forces that are stopping company to perform to their full
potential. These forces can not only work as a hindrance but also stop the growth of company.
L’Oréal one of the major weakness is sub segments. L’Oréal have so many sub sections that
become an issue for the company. The organization structure as well have loopholes which
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Illustration 2: SWOT Analysis

hinder the process as there are more number of employed then required by L’Oréal. They need to
create a channel that will erase the time taken and make it efficient.
Opportunities: It refers to chances available to the company for expansion. This section
will help them capturing more market share and more profit. The opportunities available to
L’Oréal is untapped segments. There are certain segments which are yet not explored by L’Oréal
in the market like, personal care, organic products, etc. They can come into this segment to
target more groups. As organic products has also attracted lots of customers recently, which will
be helpful for L’Oréal to attract more customers (Mayer, 2014).
Threats: It refers to difficulties that may come in the way of L’Oréal which can hinder
their growth and development. One of the major threat that is experienced by L’Oréal if from
their competitors. There are major competitors of L’Oréal in the market, like, maybelline, Mac,
Revlon, Garnier and many more who as well plays a important role in the market. Also, a major
threat for L’Oréal is products of company are not for basic people as the target for L’Oréal is
upper class people. The people below these range are more in number and thus need more focus
from the company.
McKinsey 7S Model
This framework seeks to exhibit the relationship between the 7 elements of a company to
raise its wholesome effectiveness. Such aspects are explained in context of Loreal as follows:-
Shared Value: Loreal possess a belief of raising the organisational performance by
facilitating a positive working culture and values such as transparency and integrity.
Strategy: Loreal makes use of a number of strategies within its organisational premise
such as Balanced Scoreboard (BSC) in order to facilitate effective business conduct and course
of action.
Structure: Loreal maintains a functional organisational structure whereby work is
divided among various units, functions and departments in order to attain the organisational
goals in a timely manner with the collaborative efforts of all functions.
System: Loreal has developed an effective organisational system whereby the roles and
duties of every individual is clearly stipulated and vision is made clear to them to align their
behaviour with the goal.
Staff: Loreal has a total workforce of 86000 as per the reported figures of 2018 which
are given training to enhance their skill set.
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Style: Loreal takes the input from employees in terms of their views, opions and ideas
and in return reward them with adequate incentives for good performance.
Skill: The training sessions conducted by the respective organisations assists in inflating
the existing level of skills and competencies.
The above mentioned analysis will help L’Oréal in developing a strategy that can be
implemented by entity in order to create a competitive advantage in the market.
Competitive Environment of the company through Porter's Five Force Model
It is very vital for L’Oréal to analyse various factors that will help them in realising the
competition that is present in the industry. These factors are very important to evaluate as it will
help in developing a strategy that will be efficient enough to deal with the competition in the
industry (Mishra and Mohanty, 2014). L’Oréal is working in a industry which have high number
of competitors who are waiting for a chance to grab the market share build by them. So, to
analyse all the factors Porter's Five Force Model will be implemented to identify the problems
that are present in the industry L’Oréal.
Porter's Five Force Model
This model was given by Michael Porter in year 1979. this framework is used to analyse
competition in the market through five forces. These five forces are:
(Source- Porter’s five forces- determine how attractive your market is, increase business!, 2019)
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Illustration 3: Porter Five Force Model

Threat of New Entrants: The threat of new entrants are very low in this industry as
there are lots of competition in the industry and the brands already existing are already fighting
for market share. If any new firm will try to enter into firm, then, they have to face the existing
brands, which will be ugly as these brands are well established and is working in the industry
from long period of time (Mosunova, 2014). Until and unless new firm does not bring out
something new and innovative, they would not be able to attract customers. So, for now, L’Oréal
is free from any threat from any new entrant.
Threat of Substitute: It refers to threat of a firm that they can be replaced by a
homogeneous product who can meet with the needs of customers with low price. L’Oréal
currently does not have lot of substitute products as people are very specific about the brand they
use or what type of product they choose according to their needs. as L’Oréal is well established
brand and have faith of their customers, thus, they are free from any threat from their
competitors.
Bargaining Power of Buyers: It refers to ability of customers in influence the price of
product. It can be be very important threat as if the customers have potential to bargain the price,
then, company will need to supply better quality of products at low price, whereas, if the bargain
power of buyers is low, then, company will be able to provide better quality products at high
price, thus, more profit. L’Oréal have a high bargaining threat of buyer as there are huge number
of competitors in the market for company and if L’Oréal will charge high price then, customers
will shift and company will loose their profit margin.
Bargaining Power of Suppliers: The operations of L’Oréal goes in high numbers,
breaking their own record of previous years, which is why, suppliers of L’Oréal are not able
impose a lot of threat on the company. Also, there are large number of suppliers available to the
company who are willing to provide products to the company at the minimum rate possible. So,
L’Oréal does not have any threat from their competitors.
Industry Rivalry: It refers to the competition already present in the industry. L’Oréal
have plenty of competitors in the market and they all are working from neck to neck, to capture
as much as market share possible. The competitors of L’Oréal includes Proctor and Gamble,
Garnier, Revlon and many more (Oldman and Tomkins, 2018). They all have good image in the
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market and market share capture by all of them is quite similar. Thus, there is a lot of industry
rivalry that L’Oréal needs to face.
TASK 2
Evaluation of different types of Strategic Directions Available to the organisation
There are various types of strategies that can be implemented by a company in order to
capture more market share and gain a competitive advantage in the market. It can be termed as a
framework which helps top management for the implementation of right strategy that would be
useful in growth and development. The various strategies that can be implemented will be
established with the help of Ansoff Matrix.
Ansoff Matrix
This tool was given by H. Igor Ansoff. This method helps in analysing various
corporative strategies that will an organisation keep focus in their present and potential products
and markets. It suggests to keep an eye on existing products as well as new products in existing
market as well as new market through four outcome, which are: Market Penetration: It has the lowest risk factor as it suggests that company should focus
on their existing product in current segments to grow their market share. It keeps an view
of company's existing skills and capabilities. With the help of this, Loreal can
significantly enhance its loyal base of customers in its dominant market. Market Development: In this particular strategy, new geographical or new market are
segmented by company with the help of current or existing products. It has more risk than
that of previous one. With the aid of this strategy, Loreal can enhance the share in global
market place and thereby inflate its profitability as well as sales. Product Development: It refers to introducing new products in the existing segments to
capture more market share. It is done as company is already aware of needs of the
segments and create product accordingly, thus, it will help them in capturing more market
share of the same segment (Orna, 2017). In case this strategy is applied by the company,
Loreal will be able to gain the attention of new set of people and thereby raise its
customer base in market place.
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 Diversification: It refers to introducing new products into new segments in order to grow
and develop in the market. This can be a risky strategy for Loreal owing to the equal
probability of success and failure within new markets.
Justification and Recommendation of most appropriate strategy
L’Oréal is a leading organisation and wants to expand their operations in need to capture
more market share and more profit. To so that, they need to establish a strategy from the above
mentioned one. The strategy selected by L’Oréal is:
Product Development: L’Oréal is planning to launch a product for the women in their
late 20's by launching a new anti ageing which will be able to meet with the requisites of women
in this age. They are planning to launch this cream currently in the market of United Kingdom
only and then expand their operations all over the country after the success in this market.
Strategic Management Plan
It is a document which is used to share all the necessary details regarding any specific
goal or objectives to all the stakeholders of the organisation. It focuses on goals, priorities,
resources, practices and many more (Prickett, 2014). L’Oréal will implement this plan in order to
communicate about the various resources possessed by the organisation and how they will be
used for the launch of new anti ageing cream. The cream would be first launched in the market
of United Kingdom and if it would be successful then the product will be launched in other
countries.
Strategies: There are several strategies that can be implemented by L’Oréal in order to
capture major market share for the new product which an anti ageing cream for the women in
their late 20's. The strategies that can be implemented by the company for the new product are:
Market Analysis: It refers to analysis of the market in which product is going to be
launched. L’Oréal is quite familiar with the market of United Kingdom as they are selling their
products in the same market from very long time. They already know about the strengths,
weakness, opportunities and threats that they will receive here.
STP: It refers to segmentation, targeting and positioning of product in the market to capture
more market share and more profit maximisation. The STP suggests: Segmentation: L’Oréal segment their market according to the age group of the audience.
Here, the market segment would be the women who will be in need of anti ageing cream.
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 Targeting: The target audience for L’Oréal anti ageing cream would be working women
in their late 20's who have just started showing signs of ageing.
 Positioning: The Positioning of the product would be done through various cosmetics
shops and salons.
Objectives:
 To target the market share of 20% after 3 months of launch.
 To get the revenue of £20 millions within a year.
Tactics:
Cash management: L’Oréal will be able to manage with the help of the resources
available to them in plenty. It suggests that L’Oréal will be get cash from other reserves they
have maintained from the profits acquired from the sale of other products (Vom Brocke and
Rosemann, 2014).
Packaging: It plays a very important role to attract customers. The packaging product
will be done to attract customers more towards the merchandise. Also, it will be done by Loreal
in the way that shows that it is an anti ageing cream.
CONCLUSION
From the above study, it can be concluded that micro, macro, internal and external factors
plays a major role for the establishment of a strategy for an organisation. A company needs to
see all the factors which are driving the industry in order to make a policy which will be efficient
enough to meet with the objectives of an organisation. These strategies are useful in getting a
competitive advantage in the market. Also, whenever a company wants to expand their
operations for the industry, it is essential they know about the market forces driving the industry.
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Online
PESTLE Analysis, 2019. [Online]. Available Through: <http://www.mindmapsoft.com/pestle-
analysis-mindmap/>
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