Business Strategy of L'Oréal: A Comprehensive Analysis

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Business Strategy
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Contents
Introduction......................................................................................................................................2
Task 1...............................................................................................................................................4
P1Applying appropriate frameworks analyse the impact and influence of the macro
environment on a given organisation and its strategies...............................................................4
M1 Critically analyse the macro environment to determine and inform strategic management
decisions......................................................................................................................................7
P2 Analyse the internal environment and capabilities of a given organisation using appropriate
frameworks..................................................................................................................................8
M2 Critically evaluate the internal environment to assess strengths and weaknesses of an
organisation’s internal capabilities, structure and skill set........................................................10
Task 2.............................................................................................................................................11
P3 Applying Porter's Five Forces model evaluates the competitive forces of a given market
sector for an organisation...........................................................................................................11
M3 Devise appropriate strategies to improve competitive edge and market position based on
the outcomes..............................................................................................................................14
P4 Applying a range of theories, concepts and models, interpret and devise strategic planning
for a given organisation.............................................................................................................15
M4 Produce a strategic management plan that has tangible and tactical strategic priorities and
objectives...................................................................................................................................17
D1 Critique and interpret information and data applying environmental and competitive
analysis to produce a set of valid strategic directions, objectives and tactical actions..............19
Conclusion.....................................................................................................................................20
References......................................................................................................................................21
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Introduction
Current market conditions are competitive that forces businesses to have effective development
of strategic values so that the overall outcome can be accomplished. Using business strategies the
businesses can have a better accomplishment of activities. It allows making sure that long term
opportunities are being attained in a significant manner. Business activities and plans need to be
reviewed properly so that organisations can have sustainable development (Scholes, 2015).
Analysis of internal and external analysis must be taken into account by businesses so that the
range of challenges can be resolved. To have better learning about the strategic application, the
business firm like L'Oréal has been selected. In this, internal and external environment analysis
will be supported with the help of SWOT and PESTLE. Diverse strategic decisions will be
evaluated to make sure that objectives are being accomplished.
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Task 1
P1Applying appropriate frameworks analyse the impact and influence of the macro environment
on a given organisation and its strategies
It is necessary for businesses to have consideration of the frameworks that allows understanding
of the macro environment. It has been witnessed that the macro environment of the business is
all about analysing different factors so that goals and objectives can be accomplished. It also
helps in evaluating the performance of the business in a diverse manner. Application of Pestle
analysis is essential for management of L’Oréal so that key values can be evaluated in an
adequate manner. It will also enhance the work accountability by having an analysis of the
L’Oréal performance (Peng, 2017).
Figure 1: Pestle Analysis
Political: It is significant for the management of L'Oréal to have an effective understanding of
political situations. Any changes in UK political situations the business firm can face operational
transformation issues. Currently, the business firm has its operational control from Paris, so the
relation between UK and France government needs to be analysed properly. Relations at present
state are stable and benefitting the businesses to improve trade activities between two nations
(Akter, et. al., 2016). It means political stability has a great impact on organisational activities.
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Petsle
Political
Economic
Social
Technolo
gical
Legal
Environm
ent

Economical: L’Oréal needs to consider economic values properly because it also influences the
overall operations of the company. The company is operating its business from France, so parent
nation’s economic aspects need to be referring for strategic application. If global and France’s
economic conditions are facing issues of crises, then it will influence the pricing strategy of
L’Oréal Company. Changes in resource purchase are costing and prices of skin care products
must be promoted to deal with economic crises (Olson, et. al., 2018). Economic conditions in
terms of interest rates, exchange rate, need to be referred properly so that strategic decisions can
be taken into account. It allows effectively accomplishing the objectives and leading business to
better success. It also helps in taking financial decisions properly. Issues in terms of cash flow
can also be resolved by having a strategic application regarding economic conditions.
Social: The analysis of social and cultural values is essential for L’Oréal because improper
consideration of such aspects might affect product development. It may also lead the business
entity to critical issues. Business strategies must be framed according to social conditions so that
corrective measures can be taken into account (Higgins, et. al., 2015). Trends in regard to fashion
sector also need to consider so that more customers can be attracted. Valuable experience needs
to be provided among customers to meet the objectives. It is also necessary for a business firm to
introduce a new product according to social needs. If such aspects are not referred in an adequate
manner, then it will affect the overall outcome in a diverse manner.
Technological: It is a factor that influences directly on the business operations of L’Oréal so the
understanding about the changes must be referred adequately. Changes in equipment and
machines must be applied as per technological trends. It allows enhancing the work productivity
and helps in meeting the standards. If L'Oréal does not maintain such aspects, then the
competitive advantage in the market might get affected in a negative manner. It has been
witnessed that technological factors have a great impact on business activities. For example, the
company has installed new machines in its production plant, but the trends in technology have
changed after six months (Amran, et. al., 2016). In this situation to meet the industrial standards
and market value the company like L’Oréal need re-invest on the machine upgrade. It will
impact the financial condition of business in a negative manner. It indicates that management of
L’Oréal need to bring strategic decisions according to the analysis of technology
Legal: Different elements in context to tax, duties and provisional values must be referred
properly so that long term opportunities can be well maintained. If changes in financial standards
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and practices are not according to legal provisions like taxation standards, then performance
might get affected in a negative manner. Licensing and other values need to be understood
properly to ensure practice (Zhong and Li, 2018).
Environmental: Issues in terms of pollution and the environment has been enhanced that affects
the different environmental factors. It is necessary for L’Oréal to ensure that the business firm is
reviewing environmental protection standards. Waste disposal and other standards within the
production unit must be accurate according to environmental standards.
Above statement indicates that L’Oréal must evaluate the macro environmental analysis to have
framing of strategies. It will allow ensuring that strategies are being framed to meet standards in
terms of factors like social, economic, environmental, etc (Chang, 2016). Decision-making
process effectiveness can be boosted through macro environmental analysis. By having a
strategies development according to Pestle factors, the business firm can easily meet the work
standards. It also helps in creating a positive culture and lead entity to an impressive level of
success.
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M1 Critically analyse the macro environment to determine and inform strategic management
decisions.
Macro environmental aspects consideration is significant for businesses because it allows
improving the standards properly. It has been witnessed that L’Oréal need to understand diverse
factors in order to have a strategic formation. If such standards are not considered in a significant
manner, then it will affect the overall performance of the firm. According to the Buckley, et. al.
(2016), classification of essential environmental elements can be as political, economic, social,
legal, etc. Operations of L’Oréal must be framed according to the analysis of classified factors.
Strategic decisions must be taken into account as per the evaluation of the factors because it
allows accomplishing objectives. L’Oréal needs to bring changes in the operations properly on
the basis of technological trends. For example, new machines of bottling are present in the
market and the company is using the older version of the bottling process. By having an
application of technological changes in process as per trends, the bottling process effectiveness
can be advanced.
Yuliansyah, et. al. (2016), has contended that social aspects must be referred in an adequate
manner to have better operations in context to product development. For example, the social
demand in the market is regarding shampoo that can protect hair fall, but the company is
introducing shampoo for smooth hairs then the performance might get affected in a negative
manner. In this situation, the entity needs to frame a product development strategy that meets the
needs of shampoo that can protect hair fall. Wheelen et al. (2017) have argued that the macro
environmental changes force the business firm to accomplish the objectives if the strategic
formation is being taken into account in a standard format. Strategies in terms of environmental
protection also need to be framed so that operational values can be well maintained. Application
of values in terms of other environmental factors likes politics and economics is also necessary
to refer to the business firm.
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P2 Analyse the internal environment and capabilities of a given organisation using appropriate
frameworks
For a better understanding of the internal environmental factors and capabilities, the business
firm needs to focus on the application of Swot analysis. It will evaluate the strength, weakness,
opportunities and threats of L’Oréal.
Strength
 Diversified product range improve
portfolio
 The high quality of products
 Innovative products in the organic
range
 Global presence in a competitive
market.
Weakness
 The decrease in profit margin
 Divisional values are limited
Opportunities
 Introduce new products
 Innovation in product range
considering organic values
Threats
 Frequent changes in market conditions
and demand
 High competition in the market
On the basis of the internal analysis outcome, it can be said that L'Oréal is well focused towards
maintaining operational standards so that competitive edge can be gained in the market. One of
the key strength of the business firm is having a diversified product range that improves the
portfolio. It helps in attracting a wide range of customers and leads the business firm to an
impressive level of success. The organic range of products is also facilitated in gaining a
customer base those impacts directly on the sales of the company. A business firm is also
holding an impressive brand image in the global market that also benefits the entity in a diverse
manner. However, limited divisional segmentation affects the business firm (Soltanizadeh, et. al.,
2016). It has a limited target audience so the business firm needs to frame strategy that can
resolve the issue.
Profit margin is also declining that can be a critical issue for the business firm, so management
needs to understand such values properly. However, in order to have sustainable development,
the management of L’Oréal can frame strategies that can provide support to opportunities. For
example, new product development can be taken into account considering the measures of
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organic values. It will allow attracting the customers in a better way so that goals and objectives
can be accomplished. Also, the strategic format and standards need to be framed in order to have
better competition in the market. It allows accomplishing key goals and objectives and leads the
business firm to an impressive level of success (Shuen, 2018).
SWOT analysis provides information that the activities of the business entity are framed in a
strategic manner and it helps in meeting the standards in an efficient form. L'Oréal is holding
better market conditions that allow having long term development. Business expansion activities
can be promoted in a better way so that real capabilities can be taken into account. L'Oréal is
holding a better brand image in the market that also benefits the business firm. It is necessary for
a business firm to have improved focus on the strategic decisions in such a manner that the
threats can be resolved (Dahlberg, et. al., 2016). By having a strategic business expansion in the
global market, the business firm can easily improve the opportunities. New products can be
introduced in the market considering the differentiation factor. It will attract more customers and
enhance sales. Improvement in sales might bring a positive outcome in terms of profit margin.
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M2 Critically evaluates the internal environment to assess strengths and weaknesses of an
organisation’s internal capabilities, structure and skill set.
According to the Oldman and Tomkins (2018), the internal environment allows having a better
understanding of respecting to strengths and weakness. On the basis of the internal environment,
the strategies and standards regarding internal capabilities need to be framed in a significant
manner. L’Oréal is holding an impressive brand image that helps in attracting customers. It has
been noticed that the entity can build an effective customer base by meeting the needs of
customers. Mahmood, et. al. (2017), has contended that sales of the company are improving, but
the profit margin ratio is not accurate as per standards. It is because the business firm is facing
issues of cost management.
On the basis of strategic values, the cost controlling practice needs to be promoted so that
objectives can be accomplished. A wide range of quality is also beneficial for business entity
because it allows accomplishing key goals and objectives. By having adequate learning in regard
to the practice helps in meeting the standards. Lawton (2017), has argued that the company can
overcome the weakness of businesses by having an improved focus on the opportunities. Better
and unique opportunities must be framed in order to resolve issues and leads business to gain
competitive advantage. Application of standards in terms of business expansion is also
advantageous for the entity. It allows meeting the objectives and ensuring about the strategic
development. The slow division is considered a weakness of the business firm. It is because the
majority of products offered by the L’Oréal are in hair care segmentation. In order to deal with
the issue, the company can expand its opportunities by introducing new products in other body
care segments.
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Task 2
P3 Applying Porter's Five Forces model evaluates the competitive forces of a given market
sector for an organisation.
For better development of business opportunities, the business firm must have an understanding
of the competitive forces. By having an effective consideration of the competitive forces, the
strategic application needs to be framed properly. It is necessary for a business firm to have
improved focus on the five force model so that key factors can be evaluated properly. Five force
models allows to have an understanding about different factors and classification of factors can
be as rival businesses, bargaining power of buyer, bargaining of suppliers, the threat of new
entrants and threats of substitute products (McAdam, et. al,. 2017). It has been witnessed that
learning about such elements is significant because it allows having better development of
standards. It helps in attaining the long term performance and leads the business firm to
sustainable opportunities.
Figure 2: Five force
Bargaining power of buyer (High): It has been noticed that L’Oréal is having a high scale of
bargaining power of buyer because there is a number of rival businesses. If L’Oréal is not
offering products and services according to customer needs or expectations, then satisfaction
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The threat of new entrants Bargaining power of buyer
The threat of substitute Bargaining power of supplier
Competitive rival

level might get the effect. In such situations, the customers may get attracted to rival businesses
that offer better services at low prices (Lawton, 2017). Also, the success of the business is
dependent on the customer base and satisfaction so the perception and attitude of clients cannot
be ignored. It is also a reason that a business firm like L’Oréal is offering products and services
as per customer expectations. It allows attaining benefits and leading entity to an impressive
level of success.
Bargaining power of supplier (Medium): It is also necessary for a business firm to have better
consideration of supplier relation so that operational measures can be well maintained.
Bargaining power of suppliers is considered as a medium scale because few suppliers provide
unique services to the company. Also, every company expects to continue the relationship with
suppliers for the long term because it helps them in gaining a better competitive advantage. Only
a few resources suppliers have medium bargaining due to long term benefits. However, L’Oréal
is also focused on other suppliers in order to meet the outcomes. In an emergency situation the
company contacts to alternate suppliers so that outcome can be attained (Mahmood, et. al.,
2017).
The threat of substitute (Medium): L’Oréal products are not having much threat from the
substitute products because the company is offering products that do not have any substitute in
the market. For example, substitute of shampoo is not available in the market that does not
impact the business of L’Oréal. However, few other products like conditioner have a substitute
that might create an issue for business. It indicates that threat from the substitute products is
considered at the scale of the medium. Rival companies are also not offering any substitute
product in the market.
Competitive rivalry (High): It has been witnessed that the company like L’Oréal is facing high
competition in the market. It is also a reason that the business firm is having a highly competitive
rivalry so that corrective measures can be taken into account. There are many rival businesses are
present in the domestic and international market. It impacts market share and competitive
advantage in the market (Oldman and Tomkins, 2018). It is necessary for L’Oréal to introduce
unique and innovative products to have better competition with rival businesses.
The threat of new entrants (low): L’Oréal is operating in a highly competitive market and it is
not an easy task for any new company to enter the market. It is also a reason that the company is
having a low threat from the new entrants. It has been noticed that the sector demands a high
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