Strategic Analysis of L'Oreal: PESTEL, SWOT, and Competitive Forces

This report provides a comprehensive analysis of L'Oreal's business strategy, encompassing environmental factors, internal capabilities, and competitive forces. The report begins with an introduction to the importance of strategic planning within a global cosmetics and skincare firm. It then delves into a PESTEL analysis, examining the political, economic, social, technological, environmental, and legal factors impacting L'Oreal's operations. A SWOT analysis is presented to assess the company's strengths, weaknesses, opportunities, and threats. Furthermore, the report applies Porter's Five Forces model to evaluate the competitive landscape, including rivalry among competitors, the threat of new entrants, and the bargaining power of suppliers. Finally, a strategic growth plan is proposed, outlining recommendations for enhancing L'Oreal's market position and overall business performance.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
TASK 1............................................................................................................................................1
PESTEL and SWOT analysis......................................................................................................1
SWOT ANALYSIS.....................................................................................................................3
Porter's Five Force model of L'oreal...........................................................................................4
TASK 2............................................................................................................................................7
Strategic growth plan of L'oreal..................................................................................................7
Justification and recommendation of growth platform and strategies........................................8
3. Strategic management plan.....................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Within a business, the setting up of strategies and action plans is very important for
maintaining performance of the firm. Looking at the operations and functionality of the
organisation, the management of organisation will look after the proper planning of the strategies
and other operational functions of the organisation. The current report is based on environmental
analysis and strategic growth plan that is been taken within the cosmetics and skin care firm,
L'oreal. It is a France based firm that operates on global level.
The report covers the PESTLE and SWOT analysis of organisation and evaluation of
organization's capabilities to perform its operations accordingly. Also, the competitive
assessment of the enterprise is been presented with the use of Porter's Five Force model. Other
than this, a strategic business plan is been formulated that will help in improving the growth and
development operations of the organisation. It will help in improving the facilities and execution
of business operations.
MAIN BODY
TASK 1
PESTEL and SWOT analysis
L'oreal being a well known and global brand is susceptible to be effectively influenced by
the environmental factors, regardless to internal and external for its operations. Looking at this,
The cosmetics and skin care firm will look after the proper assessment of operations and thus,
will see through the proper planning of services that will help in improving the overall
performance of the firm. The external or macro environmental factors will impact the operations
and execution of the services of the organisation (Olson and et.al., 2018). Besides this, it will
guide the management of L'oreal to develop proper and effective strategic plan, based on the
assessment of the operations and other activities that are followed within the firm. The suitable
assessment of the organisation and impacts of its external environmental factors are as follows:
Political factor: Political factors for the business are the concerning issues that directly affect
trading, exporting and other alterations in governmental policies of country. In terms of L'oreal
company, its business is greatly affected by political factors like change in trading policies and
fluctuations within country like Brexit or re-elections. This will help in proper assessment of the
business operations and gaining of the operations that will help in setting up of strategies and
thus, will help in gaining a good market share and thus supports growth of the firm. This will
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help in setting up of the strategies which will influence the setting up of action plans as per the
regulation set by government.
Economic factors: the economic factors of the organisation consists of the components that
includes the financial elements of the organisation. The setting up of inflation rates, employment
rates, GDP of the country like UK in post Brexit phase, Net income of the organisation and the
exchange rates of the currencies on global market level is been analyzed. Management of L'oreal
is required to see through the adoption of policies and action plans that will impact the sales of
organisation. This will help in proper assessment of the operations and thus, will help in proper
planning of financial operations of the organisation. This will help in making strategies that will
aid the firm to have an economic stability and reducing the chances of organisation to lose its
economic resourcing and support. Differences in exchange rates on the worldwide level is the
main economic factor that will influence and affect carrying out of the operation of LO'real in
market.
Social factors: It includes the trends and practices that exist within a society. Major part for the
society, young women will be the key consumer of products of L'oreal and hence, the form is
required to set its strategies and policies that will help in increasing the sales of the products and
services of the organisation. The assessment of the consumers or buyers trends will help in
developing a good strategy or carrying out of process to launch a new and innovative product to
retain its customers. Also, the ingredients or constituents of certain cosmetics products that may
lead to social or ethical outrage, impacting performance of organisation. The business must be
aware of these factors in order to sustain its clients and customers.
Technological factors: Technology is been imbibed within all the aspects of life and cosmetics
or skin care sector have lead to the proper assessment of proper operations and thus, will lead to
carry out the innovation on launching new products and services that will impact the sales and
operation of the products by the organisation of a firm. Technological tools like social media
marketing, digital surveying etc can be taken in consideration which will help in improvement of
services and assimilating suitable strategies that will help in proper assessment of contemporary
trends and facilitates the innovation for success of a brand. Digital and technological tools like
Social media will help in proper assessment of customer needs and developing products
accordingly.
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Environmental factors: L'oreal will look after the proper assessment of the global safety
standards and setting up of policies that will help in improving the product quality. As many
cosmetics consists of the components that may cause pollution and depletion of environment.
Thus, in such case, following of the environmental policies and measures will help the company
to carry out its CSR operations and helps the organisation to set policies and strategies that will
look after the planning of policies and strategies which will help in proper assessment of
operations and gaining suitable customer base (Akter and et.al., 2016). Pollution can also lead to
alter the ratio of sales that the organization follows within the firm. This will help the
organisation to reduce its carbon footprint.
Legal factors: Operating in the sector with high level of competition, L'oreal will look after the
proper assessment of legislation's that will help in gaining operational success. The major
customer's and employment legislation's that are been carried out by the firm. As L'oreal operates
on global level, the enterprise is required to follow certain trade regulations that are been set by
the governing bodies of the organisation. Besides this, following the laws and business
obligation is important for the L'oreal in order to maintain its brand image and setting up of
policies that will improve its growth measures.
SWOT ANALYSIS
The assessment of the internal operations is also important for the organisation that will
help in improving the overall functionality. Thus, it will help in proper planning of internal
factors of an enterprise that will help in carrying out growth measures and improvement of
services and product quality. The SWOT analysis of L'oreal is as follows:
Strength:
 Strong research and development measures: L'oreal is well known for the extensive
market research and planning of the operations that will help in improving the quality and
safety of the products or services that are been developed.
 Is a market leader and caters divers audience: the biggest advantage or strength for
the cosmetics and skin care firm, L'oreal is that it is a leading enterprise in its respective
field and is known for high quality services and products. Besides this, the global
presence helps the firm to meet the needs of a vast range of audience.
Weaknesses:
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 Lack or proper organisational structuring: The presence of multiple sub divisions and
section within the firm, the communication process becomes prolong and more complex,
that has, somewhere affected the overall market performance of L'oreal to a greater
extent. This had made the controlling process of the operation's within the firm to be
more difficult.
Opportunities:
 Launching new and innovative products: This is the major opportunity that can be
looked after by the management of business operations of L'oreal to a greater extent
(Scholes, 2015). The rise in the demands of anti aging and skin tightening creams have
created a path for the enterprise to come up with more innovative and new products.
 Expansion of business in other countries: At present the organisation is operating
within European, Asian and major countries of other continents. Along with this, the firm
can opt for expanding its operations in African and Middle east countries which has
evolved as a major consumer hub and market in recent time. This will open the doors of
increasing profitability of the organisation.
Threat
 Growth in competition: It is also a major factor that will impact the placing of
operations in cosmetics and skin care sector. Many other organisations like Avon, Proctor
and Gamble etc have been evolved as major competitors of organisation that will impact
the performance of organisation in many markets.
 Economic and political instability: It is also a crucial factor that will impact the sales
and carrying out of the operations that will lead to failing of the operational structure of
the organisation. L'oreal will look after management of operations that will impact the
overall operations of selected cosmetics and skin care enterprise.
Porter's Five Force model of L'oreal
An organisation is required to look after the proper planning of the operations in order to
have a competitive edge within market (Higgins, Omer and Phillips, 2015). The Porter's Five
force model will assist and provides suitable identification of effective factors that can impact the
performance of the firm. L'oreal is required to manage this competitive factors within the
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organisation that will impact the sales and gaining a good control over the operations that the
organisation requires to be considered. Some major competitive forces that can impact the
operation of the organisation are as follows:
 Rivalry among the competitors (High risk): L'oreal have many rival enterprises like
Procter and Gamble, Avon, Shiseido, that are required to be managed and looked after by
the management of selected cosmetic and skin care enterprise. Every organizations trying
to have a high level of market share and thus, this factor can impact the operations of the
organisation to a greater extent. In order to counter this, consistent high performance
working, launching of new and innovative products and has to work upon their product
line in order to have a better competitive advantage and thus enhance their performance.
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Illustration 1: Porter's Five Forces model
(Source: Ashrafi, 2015)

They also have to improve their marketing mediums in order to have more and more
market presence on the global scale (Pisano, 2015).
 Threat of new entrants (Low risk): As with the globalization and rise in the interest of
people in cosmetics and skin care, many new companies have emerged within the market.
This has impacted in increasing the number of competitor's. However, L'oreal is a well
known and globally established brand that has a strong brand equity that will help in
proper management and execution of its sales within the organisation. As they are the
beginners in the cosmetics and skin care segment, they are less likely to have an impact
on sales and market share of the selected firm. Hence, they possess negligible to
minimum risk for L'oreal and its market share (Amran and et.al., 2016).
 Threat of substitution (Low risk): As discussed above, L'oreal has a strong market
presence and hence, it has a very less risk from the new rival enterprises entering in
market of cosmetics and skin care. As the majority of customer's within the market have a
very high trust level on the products and services of L'oreal, their movement or diverting
towards other brands or products is very discrete (González-Rodríguez and et.al., 2018.).
Also, the smaller, beginner enterprises that are newly emerged within the market are not
in significant position to challenge the market share and brand positioning of the selected
cosmetics and skin care enterprise. Also, the substitution to products by the firm like anti
aging cream is very less in market, providing it a competitive advantage.
 Bargaining power of suppliers (Low risk): Being a major player in the respective
market, L'oreal has a very high production capacity and hence, in such case, suppliers
plays an important role in its operations (Lieder and et.al., 2017). However, suppliers
have limited opportunity as a threat factor for the organisation that will impact the
operations of the selected enterprise to a greater extent. This will improve the overall
performance of the organisation and relation with supplier's as they posses very less
amount of threat for the organisation. As the purchasing cost is been set by the
organisation, they management is able to make out the part of cost or revenue that can be
shared with its suppliers. This will improve supplier's trust level and hence, will guide the
firm to improve their market presence (Leonidou and et.al., 2015).
 Bargaining power of Customer's (High risk): This is an important element that is
required to be looked after by the organisation in order to sustain their market share.
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Many entrants and rival enterprises like Proctor and Gamble, Avon and Shiseido etc that
are providing the cosmetics and skin care products to the customer's on a cheaper rate as
compared to L'oreal. As the customers are having many options to choose from and there
is a significant price difference, the management of organisation is susceptible to see a
movement in its market share and customer base (Zhu and Chertow, 2017). This may
lead L'oreal to have a decrease in its customer base and possess a major challenge for
market share of company.
All these factors impact the overall operations of the organisation that will lead the
organisation and thus will lead to rise in carrying out the operations in most effective manner. It
will support the organisation to set proper strategies and carrying out of the operations that will
help in meeting the operational capability of the organisation. It also helps in effective decision
making.
TASK 2
Strategic growth plan of L'oreal
Different strategic direction's
In order to have a better idea about the strategic growth plan and the directions or options
been available to the firm, Bowman's strategy clock is been selected which is as follows:
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 Low price and Low value added: It is not a competitive position and can't be
differentiated by the firm (Rosemann and vom Brocke, 2015). The customer gains a very
low value, regardless to low price frame. It is a way to remain competitive in market in
case of low sales within the organisation.
 Low price: It includes the strategy of cost minimization to have a successful operation. It
has low profit margin but high volume of output that can lead to generation of high end
profits. The low pricing may also lead to have high price wars.
 Hybrid: It is a combination of low pricing as well as high product differentiation
measure. It includes the measures like selling of high quality of products on reasonable
pricing. It helps in the proper positioning of organisation within a market.
 Differentiation: It is a process of highly perceived added value by the means of branding
which help in meeting the customer needs and demands (Sanaei and Sobhani, 2018).
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Illustration 2: Bowman's Strategic Clock
(Source: Bowman’s Strategy Clock, 2019)

 Focused differentiation: This is the strategy to place the product within the market
where it has a high perceived values. It involves the suitable segmentation, marketing and
distribution of products or services by the firm.
 Risky high margins: It is termed as meant to fail strategy that impacts the perceived
value. The buyers will look after the products and service quality on a high price but later
on will lead to getting the similar product on low price tag, impacting sales of the
organisation.
 Monopoly pricing: this is the strategy that includes an enterprise, that single handily
sells a product and faces no competition. This is the strategy that includes the lack of
proper alternatives and setting up of prices (Cortimiglia, Ghezzi and Frank, 2016).
 Loss of market share: It is a strategic positioning of middle range pricing for low value
product that will help in winning over many customers but then moves the buyers
towards a better option.
This measures will help an enterprise to carry out business operations on a competitive
level without hampering the sales and productivity of the organisation.
Justification and recommendation of growth platform and strategies
On the basis of the above operations that are been analyzed above, suitable strategic
positioning measures such as focused differentiation can be undertaken within the selected firm,
L'oreal that will impact the sales and policies of the organisation on a higher level (Hapsari,
Stoffers and Gunawan, 2017). The reason behind choosing the focused differentiation measure
by the organisation is the proper segmentation of its target customer base, promoting the goods
and services accordingly and distribution measures that will impact the sales and setting up of
market share within the market. Products like anti aging reams and sunscreens can be segmented
for the customers of middle age (Above 40) and Adults (21-35), respectively. Hence, for the
following of these approach, it is been recommended that suitable measures are required to be
adopted for successful establishment of organisation in market. Besides this, it is also
recommended that suitable assessment of market share and placing of strategic growth practices
like online marketing, reaching maximum number of buyers easily and providing them high
quality service (Kossyva, Sarri and Georgolpoulos, 2015).
3. Strategic management plan
Suitable strategic plan for suitable management of operation's are:
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Objective: To improve the market positioning of L'oreal using Focused differentiation strategy.
Strategies: Various strategies can be applied within the selected cosmetics and skin care sector.
It includes the following of different strategies and policies and thus, will look after the proper
implementation of the policies and procedures that will help in setting up of organisation in a
market. Some strategies are:
 Segmentation of the customer base using anti aging cream can be followed for
identifying customers.
 Social media, content based and customer oriented marketing process can be carried out
that will impact the sales and revenue generation of the organisation.
 As the firm will be successful in convincing the target audience, it will help in proper
assessment of online trends and customer demands that will impact.
 Premium allocation and establishing of the dedicated stores or outlets are been set that
will impact the sales of the organisation that will impact the sales of the organisation to a
greater level (Leischnig, Wölfl and Ivens, 2016).
Tactics:
 Marketing measures can be taken within the organization with the planning of the
operations and thus, will help in proper assessment of business operations of the firm.
 Branding approach can be adopted that will improve the sales of the organisation to
greater level.
 Market share can be improved by enhancing the promotional process and hence will help
in proper evaluation of the customer's or buyers needs.
Based on the PESTEL, SWOT and porter's five force model that will help in improving
the strategic-management of the operations which are been carried out by the firm. This will lead
to rise in carrying out the growth and development measures of the enterprise.
CONCLUSION
This will help in proper management of the strategies and assessment of the
environmental factors that will help in proper assessment of the operations. The internal and
external environmental factors will lead the organisation to have a sustainable growth and thus,
will lead the organisation to have a significant rise in the growth rate and development measure
of the organisation. This will lead the firm to improve the firm to carry out the strategic planning
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of the firm that will help in proper assessment of the operations that will lead to rise in
productivity and revenue generation within the firm.
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