Strategic Analysis of L'Oreal: Business Strategies and Planning

This report provides a comprehensive analysis of L'Oreal's business strategies. It begins with an introduction outlining the company's focus on personal care products like skincare, makeup, and hair color. The report delves into both internal and external analyses, utilizing PESTLE and SWOT analyses to assess political, economic, social, technological, legal, environmental factors, and the company's strengths, weaknesses, opportunities, and threats. The competitive environment is evaluated using Porter's Five Forces model, assessing the threats of new entrants, buyer power, supplier power, and competitive rivalry. The report explores various strategic directions, including the Bowman Strategy Clock, to identify the most appropriate growth platform and strategies. Finally, it culminates in a strategic management plan with detailed strategies, tactics, and objectives for L'Oreal, providing a holistic view of its market position and future direction.

Business Strategies

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Internal and External Analysis for Strategic Planning...........................................................1
Analysis of competitive environment using Porter's Five Force Model................................4
An evaluation of the different types of strategic directions...................................................5
Recommendation and Justification of the most appropriate Growth Platform and Strategies.7
Strategic Management Plan with Strategies, Tactics and Objectives.....................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business strategies help to determine the future direction of company. It helps to analyze,
identify and understand the position of organization in the market. Business strategies support to
develop plans in order to achieve objective and goals for long term profit (Amran and et.al.,
2015). This report will be based on L'Oreal. It is a personal care company which produce skin
care, makeup and hair color. This study will analyze external factors of organization via pestle
and internal factor of company by swot. It will define competitive environment using Porter's
Five Force Model. This report will evaluate the different types of strategic direction. It will
justify the most appropriate growth platform and strategies. This study will produce a strategic
management plan with strategies, tactics and objectives.
TASK 1
Internal and External Analysis for Strategic Planning
Pestle Analysis of L'Oreal
Pestle analysis is used to identify the external factor such as political, economic, social,
technological, legal and environmental of organization. It helps to understand how various
factors influence the business strategies.
Political Factors: This factor include the government rules and policies that can
influence the business of L'Oreal. L'Oreal is affected by government policies of some country
such as France. For example, according to Personal Care Product Safety Act company is
required to produce and used element which not affect health of consumers. L'Oreal sells directly
on various foreign land for that organization has to follow all the legal and political requirement
which differ in each country (Asikainen, 2015). With support of government company can make
its policy better that help them to deal easily in various region.
Economic Factors: Economic factors have exchange rates, recession, GDP rates, price
of products. In different region prices of product is differ. In some region cost of specific
products is high. Such as company has to survive with recession. Due to these, customers
became some price conscious and they buy only those products which the need for survival. That
impact business of lo L'Oreal. By monitoring economic fluctuations, company can change its
strategies and plans.
Social Factors: Nowadays modern society is more interested to follow fashion trends.
With help of the latest technology customers are well aware to adopt the contemporary technical
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trends. It helps L'Oreal to expand its business worldwide. While some customers of different
region have ethical issues for instance to use of ingredients in the products. Ethical and social
trends and pressure influence the business of L'Oreal. In many beauty ads women participate
majorly, it encourages the women empowerment in society.
Technological Factors: Internet has played an important role in beauty industry.
Customers are able to find and purchase any product any time. With the help of e-commerce
sites such as amazon, flip kart L'Oreal is able to sell its product. Innovation has allowed
following contemporary trends (Beamish and Lupton, 2016). Technology has given the chance to
spread the innovation within a time. For example, by using technology L'Oreal can know need of
its customers and plan its products and services according to that.
Legal Factors: there are so many competitors in the market of lo L'Oreal. To manage its
competitors organization has to maintain its graph of success by fulfill all legal rules, regulation,
terms, conditions that differ in various regions. Customers are well known about all the legal
aspects of products. The Fair Packing and Labeling Act (FPLC) and The Federal Food, Drug and
Cosmetic Act (FD&C Act) which is related to beauty and cosmetic industry have to follow
company. FD&C law monitors the ingredients that company uses in its products and ensure
misinformation about the products. If products are not up to code FDA can banned the services
and products of company. So L'Oreal has to follow all the legal instruction to run its business
successfully.
Environmental Factors: Beauty industry is focusing on various global environmental
safety law that fulfill all global standards. For that company is making its packaging Ozone-
friendly to reduce stress on the environment. But there are some issues which growing such as
heavy plastic usage and waste materials are infecting quality of water. Some ingredients which
uses products to exfoliate the dead skin cells are being made by plastic which is terrible for
environment (Bocken and et.al., 2016). L'Oreal has to adapt good strategies to consider these
factors while making policies of company.
SWOT Analysis
SWOT analysis considers identifying external factor that impact company positively and
negatively. This analyses include strength, weakness, opportunities, threats of company.
Strengths: The major strength of L'Oreal has variety of cosmetic and beauty products.
L'Oreal provides make up, skincare and hare aisles to its customers. L'Oreal offers not only
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inexpensive, department stores for products but also provides quality of products. It is offering
high quality of products and services to its customers. Another strength of lo L'Oreal has
international access. It produces, manufacture and distributes its products globally. Nowadays
customer’s healthy hair and glowing skin. For that L'Oreal is using less chemical and moving
into organic or natural ingredients in order to make satisfy their customers (Bocken and et.al.,
2016). Company has many products for that it expends on research and development. Customers
want to use those products which are work and safe for their body. So L'Oreal work with
scientists, cosmetologist and dermatologists in order to provides its customers top of the line
products.
Weaknesses: There are so many products in care line introducing such as curly hairs,
blonds, straight hair and specific ethnicity. These segments of hair industry are affecting L'Oreal.
With that company also competing with another big companies. L'Oreal is spending more in
research and development that is heavily expensive. It is shrinking profit margins compare to its
competitors. Beauty industry is so dynamic in products and nature. L'Oreal need to change its
products fragrance, colors and other essential features in order to satisfy customers need and
demands. And keep them updated so they would not switch to another brands. With that L'Oreal
also has to analyze preference of customers to survive in competitive business environment.
Some times company has to face competition in various countries locally and internationally
both. With that company has to depend on third party sales agents those also have various
branded products.
Opportunities: L'Oreal has opportunity to produce organic based beauty products. They
have strong demand in whole over world. Because people are well aware and became more
conscious about heath. They want quality products that do not harm their skin. People are finding
products that are parables, silicon free and sulfate free. Demand of organic and natural product is
increasing in era of today (Campbell and Reyes-Picknell, 2015). So it is big opportunity for
L'Oreal to expand its business more at global level. With that company is creating new products
considering darker skin tone and curly hair against those companies who are working on niches.
L'Oreal recognizes as huge brand globally. Its luxuries beauty care products has strong brand
identity among the people worldwide. Company also work on emotional brand positioning
strategies with slogan “because you are worth it”. It makes people mind emotional and they want
to stay connected with it.
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Threats: Customers consider cosmetics as a luxurious item and it requires more price
than any other necessary items and these items are regularly purchased by customers. During the
economic crises people usually avoid to purchase high priced products. They switch to lower
piece products and services to overcome from financial crises. Change in financial environment
company has to face difficulties to make profits at global level. In beauty industry, preferences,
demands, needs change frequently. In that case company has to make change in its products
which are time consuming and costly as well according to need of customers? Changes in
products designs take more time and investment that can decrease the revenue of company.
Analysis of competitive environment using Porter's Five Force Model
Porter's Five Force Model
This model analysis the competition in market. It explains the different levels of
profitability (Das and et.al., 2015). It measures attractiveness, competition intensity and
profitability in business. It includes the threat of entity, supplier power, and threat of
substitutions, buyer power and competitive rivalry.
Threats of New Entrants: L'Oreal has medium level of threat for new entries. Because
huge capital is needed in order to establish a manufacture setup. With that cost of making and
developing products such as promotion, extensive advertisement, research and development
required to develop market presence. People trust and try only brands in case of beauty products.
There are some small companies which are focusing on marketing segments at local level. So the
threats of new entries is medium for L'Oreal.
Bargaining Power of Buyers: There is high bargaining power in beauty industry. It is
due to, high level of competition and availability of same products. There are many
manufacturers who are making similar products such as Nivea, Unilever etc. considering these
customers have high level of bargaining power. With that they can switch their brand easily. It
can reduce the purchasing (Gibson, Rosen and Stucker, 2015). To overcome it, L'Oreal is
focusing on developing quality products that suitable for skin and does not create skin problem
for buyers.
Threats of Substitutions: In market there are various varieties of products available and
customers can easily switch their interests from one to another. Such as, Vaseline, Nivea and
many more. To overcome it, L'Oreal has to work on high level of innovation in order to satisfy
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needs and desires of customers. By suing organic and natural ingredients in products,
organization can rebound its customer by switching to another one.
Rivalry among the Competitive Firms: It is high for L'Oreal. In market, there are huge
numbers of brands and varieties are available in market such as Nivea, Revlon, Ponds and many
more. There are strong competitors of L'Oreal. All are these focusing on market shares, expend
huge amount of introducing new products, innovations, research and development, modified
products (Guillotin and Mangematin, 2015). With that small and medium level of manufacture of
companies are competing t national and international level to capture market share. And outcome
is that a huge number of competitors with diversity of products are competitive rivalry for
L'Oreal.
Bargaining power of Suppliers: There are large number of suppliers in cosmetic
industry that influence the price of products. Raw material for manufacturing can obtain by
various number of suppliers. And there are many supplier ho provides same raw material to
industry. With that the cost price for changing suppliers is not higher for L'Oreal. So company
can easily switch to another supplier in case of price fluctuation. L'Oreal is huge brand. Due to
this, there is small number of suppliers who can bargain with L'Oreal. Therefore, there is less
threat of suppliers.
An evaluation of the different types of strategic directions
Strategic direction is essential focus in business. It creates structure for internal
responsibility which each department has to follow in order to achieve the goals. L'Oreal follow
the Bowman Strategy Clock. It is a marketing model that analyze the position of company
compare to competitors. This strategy help to understand how company can position its products
and service (Hair and et.al., 2015). With the help of this model, company can select a position in
order to gain competitive advantage among competitors in the market. This model better evaluate
and analyze current situation of L'Oreal. Bowman clock strategy has eight possible strategies
which is divided into four quadrants. Bowman strategy clock model has these following position.
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Low Price and Low Added Value: In this step, services and products are not
differentiated and customers interest in very low. Price of products is very law with law value of
quality. It is competitive method that L'Oreal used to compete with its suppliers.
Low Price: In this position company produce large quantity of products and their
products and services are valued. Low price products leads to low revenue margins for each
product. This position related to cheaper market leaders who concentrate on cheap and fast
production, lower cost and suing economic scale.
Hybrid: In this position, company use products differentiation and products are very
highly valued. On other side organization is focused on low price products and services.
Consumers are satisfied with products quality (Laudon and Traver, 2016). This position or model
is effective, because it products are valued and offers are well applied.
Differentiation: L'Oreal use differentiation strategy in order to deliver the best quality at
lower or average price. In this position, organization wants to offer not only product quality but
also provides reliable brands in the market that sustain customers. Buyers are sensitive to valued
products of a well-known brand, therefore they purchase that products.
Focus Differentiation: In this position, positioning strategy is used on exclusive and
luxury brands. Company offers high quality products at high prices. To gain high profit margin
they use targeted segmentation and distribution, promotion. At this position other competitors are
also on same segments so they try to keep price high.
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Illustration 1: Bowman Strategy Clock Model
Source: (Business Strategies, 2019)

Risk at Margins: company used this strategy in order to charge high prices for products
and services that is valuable for buyers. Tit is significant risk and likely to fail in long term.
Customers can switch brand and look for a better quality of products on the same price.
Monopoly Price: It is a strength for company being a monopoly in the market.
Monopoly refers that company is the only one who offering the service in its segments.
Therefore, L'Oreal does not have to fear about the competitors because customers have choice to
buy the products or not (Laudon and Traver, 2016). Buyers are dependent on the services and
products the monopolist offers. They are not able to switch the brand. Monopoly regulate
company in order to increase prices or producing faulty products or services.
Loss of Market Share: It is not attractive position for company, because they are not
able to produce valuable products and services for buyers. Therefore, price of products is high
and outcome is consumers are stay away. Organization has to opt standard prices for products to
still be in competition.
Recommendation and Justification of the most appropriate Growth Platform and Strategies.
In competitive era, growing competition Drive Company to adapt internal structure to
that support them to face competition conditions. The implementation and selection of correct
businessmen strategies is important for long term company success. Therefore, L'Oreal should
use Hybrid Strategy in order to obtain competitive advantage. Hybrid strategy aids to achieve
low and differentiation price regards to competitors. This strategy depends on the capability of
company to provide enhanced advantages to buyers with high valued products and low price.
Hybrid Strategy includes both cost leadership, differentiation and focus strategy.
Cost Leadership: This strategy is used to generate the cost advantage in competitive
market in order to provide services and products at lower prices. The aim of this strategy to
achieve market share by focusing on price sensitive or cost conscious buyers (Meyer and Peng,
2016). Effective and thriving implementation of cost leadership strategy focus on non-branding
items that can assist L'Oreal to maintain its image as lowest piece provider for a longer period.
Differentiation: under this strategy L'Oreal can produce services and products that are
valued for customers and they are willing to pay for it. In that case, competition is not based on
price but on quality. Considering this, it is hard to copy feature of products by competitors. With
help of this strategy L'Oreal can produce innovative products and services and can build a loyal
consumer base.
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Focus Strategy: By using focus strategy L'Oreal can concentrate on narrow market
places. This includes geographical region, specific consumer group or product line. In this
specific market segment company can achieve differentiation or cost advantage. The aim of this
strategy is that concentrating on specific market Segment Company can fulfill all the needs of
targeted group or people better than other competitors in a broad scope.
Hybrid strategy includes both differentiation and cost advantages. With the help of this,
L'Oreal can achieve both high productivity and quality at the same time. This strategy help to
achieve low and differentiation price regards to competitors. Cost strategy gives consumers more
value for money by offering products at lower price than others in market (Peng, 2017). It allows
company to underprice competitors who are delivering same products. Most buyers are there
who have high expectation while purchasing products. They want to pay less price for products
with highly differentiated features. For that L'Oreal can engage with activities that helps to
pursuer low cost and differentiation.
Hybrid strategy is more helpful in order to gain advantage at global level of competition.
Because differentiation allows company to charge premium price whereas cost leadership assist
company to implement the lowest price than rivals. Implementation of hybrid strategy is not
feasible but also increase the performance of single competitive strategies. Outcome of combined
strategy is multiple sources of advantage (Prajogo, 2016). With the help of hybrid strategy
L'Oreal can achieve competitive advantage by providing value to buyers that is based on both
low price and product features. Hybrid strategy have elements of both low cost and
differentiation in unique way. Due to this company enhance its profitability and productivity.
Strategic Management Plan with Strategies, Tactics and Objectives
Strategic management plan is used to focus resources and energy, set priorities, ensure
about workers and stakeholders are working together for shared goals, strengthen operations.
Strategic plan needed to achieve goals by implementing ideas and strategies in right way
(Rosenfeld, 2017). L'Oreal implement business level strategies such as hybrid strategy that
includes cost leadership and differentiation.
Objective
Objective of L'Oreal is to achieve business objectives by using hybrid strategy which
includes cost leadership and differentiation. With that strategies, company can pursue its
customer’s beneficial products with lower price.
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Broad differentiate business strategy allow L'Oreal to possess competitive advantage in
the market. L'Oreal identify different segments in market to offer variety of products to each
segment in order to fulfill demand and needs of consumers. Company achieve this by
distributing products via different channel which is based on specific needs of buyers. Different
distribution channels have the products and services such as professional products, luxury,
active, body shop etc. Company make differentiation between each channel on the basis of
desired needs of segments such as quality and cost of products. For example luxury products are
sold in retail outlets and department store (Saebi and Foss, 2015). Professional products supply
all over the world such as beauty boutiques, hair salon etc.
Cost leadership strategy focused on cutting cost at possible level to provide products and
services at lower price to customers for boosting their savings. This strategy increases capacity
utilization, market shares and drive down costs. To achieve lower cost company can work on
high capacity utilization, high productivity, effective distribution channels, effective production
process, lean production methods, and use bargaining power to analyze the lowest price for
production process.
To implement differentiation strategy in proper way L'Oreal has to make its products
more valuable in market. For that company must understand the value of its products or service.
It is a value proposition (Salavou, 2015). It solves the problem of customers and help to meet
their demands and needs and differentiate services according to that. Segmenting people on
various or unique group help L'Oreal to understand their needs in order to deliver them better
services and products. Another way to segment people in the basis of age, lifestyle, profession,
orientation assist, company to understand their specific needs.
Tactics
Tactic is tool, strategies and action which are planned to achieve a specific goal. Tactics
aids L'Oreal to capture employees, customers, shareholder feedback to know weakness,
strengths, threats and opportunities. To implement strategy successfully L'Oreal can use tactic
of customer feedback because future of company depends on customer base. Make customers
satisfied by provide them better services, with that analyze employees satisfaction to make them
work effectively (Shuen, 2018). To gain success and implement strategies properly, L'Oreal can
use tactic to measure its progress and performance. By measuring progress and performance
company can identify its loopholes and make efforts to overcome it.
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Another tactic which can L'Oreal use is that to turn long term strategies into short term in
order to implement plans and ideas properly (Tarhini, Al-Dmour and Obeidat, 2015). By making
results oriented management process annual objects can be achieved easily. Using these tactics
by L'Oreal can assist to maintain and manage its business objectives.
CONCLUSION
From the above it has been concluded that business strategies helped organization to
implement its plan in right direction. That helped to company to obtained long terms goals.
External factors supported firm to analyze political, economic, social, technological, legal and
environmental factors. That could impact company positively and negatively both, whereas
internal analysis availed organization to understand its strength, weakness, opportunities, threats.
By analyzed these factors L'Oreal improved its revenue and brand image in the market. Different
types of business strategies assisted organization to understand and analyze the position of it in
competitive market. With the help of hybrid strategy organization achieved competitive
advantage by providing products based on lower price and differentiation.
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Online
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