Strategic Analysis of L'Oreal: PESTLE, SWOT, and Planning

This report provides a comprehensive analysis of L'Oreal's business strategy. It begins with an introduction to business strategies and their importance, followed by a detailed examination of L'Oreal's capabilities through PESTLE and SWOT analyses, assessing its strengths, weaknesses, opportunities, and threats in the political, economic, social, technological, legal, and environmental contexts. The report then applies Porter's Five Forces model to evaluate the competitive environment, focusing on the bargaining power of buyers and suppliers, competitive rivalry, and the threats of new entrants and substitutes. The report then evaluates different strategic directions, and concludes with a strategic management plan for L'Oreal, including specific strategies, objectives, and tactics to gain a competitive edge in the market. The report also provides justification and recommendations regarding growth platforms. The report is a valuable resource for understanding L'Oreal's strategic approach.

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1. PESTLE and SWOT analysis for organisation for assessing its capabilities.....................1
2. Porter's Five Forces Model for examining competitive environment...............................4
TASK 2 ...........................................................................................................................................5
3. Evaluation of different types of strategic directions available to an organization............5
4. Strategic management plan for L'oreal by including strategies, objectives and tactics.....6
CONCLUSION................................................................................................................................7
REFERENCES ...............................................................................................................................8
.......................................................................................................................................................9

INTRODUCTION
Business strategies is a name given to directions or guidelines that an entrepreneur or
manager considers so as to achieve various key benefits along with achievement of their overall
goals and objectives within a specified time frame. In a number of business concerns, managers
and entrepreneurs have to adopt or practice a certain code of conduct so that it can help them in
enhancing their overall strategic capabilities and also frame business strategies that can sustain
for a quite longer time period. (Brewster, 2017). Business strategies are also known provide
support and help to business entities. This further leads to enhancement of their productivity and
profitability in current competitive market. In the present context, this report has been framed
on L'oreal which is a French personal care and wellness business entity. It has been
headquartered in Clichy and also has its registered office in Paris as well. This report focusses on
PESTLE and SWOT analysis of an organisation so as to determine organisation's capabilities
and further evaluating them as well. Various strategies and strategic decisions have further been
discussed in this report. In addition to this justification and recommendations regarding growth
platforms have also been mentioned in an appropriate manner. Lastly, this report includes a
strategic management plan which helps a business in gaining a competitive edge.
TASK 1
1. PESTLE and SWOT analysis for organisation for assessing its capabilities.
Strategic planning is a name given to activities or guidelines which are considered or
undertaken by managers or leaders of a business concern so as to gain competitive advantage.
They further need to consider various key processes such as setting objectives, strengthening or
enhancing their area of operations. They also deliver a common goal or objectives to their
employees and stakeholders and ensure that they are working towards it (Cavusgil and et. al.,
2014). In present context, L’Oréal is a leading brand that provides skin care and hair care
products to its customers. Hence for sustaining in local market it is quite important that managers
of Loreal frame strategies that are effective for them. For effectively analysing markets managers
and leaders of Loreal have decided about examining internal and external market situations
which have further been mentioned as under in the form of SWOT and PESTLE:
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SWOT analysis
Strengths Weaknesses
Loreal in present scenario happens to be a
world leader in market for hair care and skin
based products. This is due to their diversified
and specialised portfolio and excellent quality
goods and services. Loreal operates on a large
scale and employs around 60000 employees
from all parts of the world.
Loreal basically operates on a decentralised
organisation structure which becomes a
weakness for their brand as it is not always
possible that a single person can handle all
operational and non operational activities. Also
a major factor is that they have specifically set
sub divisions for each and every business unit.
Opportunities Threats
In context of L’Oréal there are a number of
benefits such as they can tap advantage from
growing market (Chang, 2016). Also they own
a quite developed market share as they have a
number of patents registered under their name.
One major opportunity which can be
considered by managers of Loreal is adopting
and manufacturing herbal and skin friendly
beauty products which will further lead to
growth and expansion.
In context of Loreal it has been observed that
threat for its brand has been constantly rising
due to high level of competition between other
cosmetic brands. Also with the launch of new
and innovative products hampers the brad
image of Loreal as people feel that products are
not as per their requirements.
PESTLE analysis
Loreal is currently a major hair care brand in international market. It is a house to a
number of skin care and hair care products which help in meeting needs ad requirements of its
customers and also provides a stable market share to the company (Chang, 2016). Loreal has
well established units in 130 nations that are smaller in size. A number of factors have to
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considered by businessmen whenever they wish to conduct external analysis of their brand which
has been mentioned as under:
Political Factors: Factors that are related to a political environment of a country are
known as political factors. In relation to Loreal it has been examined that it is a French business
concern hence laws and government policies of French will have to be considered by managers
and leaders as it will be most affecting business concerns. Loreal has recently globalised its
business operations which has provided a quite high amount of benefits to Loreal (Chen and
Jermias, 2014). After globalising its business operations managers have started following health
and safety standards which enhances its overall profitability by great extents. This also helps in
raising customer base of Loreal as well.
Economic factors: Factors that are used to analyse economic situations in a country are
referred to economic factors. Examples of various economic factors are exchange rates,
monetary policies, GDP, price of products as well. All these factors are expected to have a huge
impact on economic situation of a country. In context of Loreal it has been observed that
products of its products keep modifying or changing from time to time based on various
economic changes. Also GDP of a country happens to be an important factor which hampers or
affects growth and development of Loreal. Hence it can be said that people will be buying
products only if there is some unique feature in them which will further have a quite positive
impact on business.
Social factors: Factors that are based on elements of society or affect society in general
are known as social factors. In present of Loreal it has been observed that modern and luxury
class people are quite liking the products delivered by Loreal and are ready to pay any amount of
price for it. In context of social factors it has been observed that business can only function
effectively if entrepreneurs consider various social elements such as beliefs, culture, thoughts
and values of individuals. People or consumers are generally the first to identify innovations and
changes
Technological factors: Factors that are based on new and innovative advancements in
technology are known as technological factors. This happens to be most important tool for every
business and has a significant impact on day to day functioning of Loreal (Goffee and Scase,
2015). Hence to get benefit from this managers of L’Oreal always keep an innovative approach
in their attitude while manufacturing products and services. Also they consider a mix of both
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present and future trends so as to gain an advantage. Innovatoin happens to be the most stable
driving force for Loreal and its image.
Legal factors: In context of legal factors it has been examined that there are a number of
competitors of Loreal in market. Hence it is quite difficult that they can maintain a stable market
position. In context of Loreal, it has been analysed that managers will have to be effective and
innovative snd carefully examine legal requirements so that they cn gain market share
enhancement and a stable market growth as well.
Environmental factors: Factors that are based on various environmental elements are
known as environmental factors (Jeston, 2014), In context of Loreal it has been examined that
they will have to adopt all environmental laws and standards that have been set up by regulatory
authorities. Loreal happens to be major hair care ad skin care brand in today’s scenario hence it
is essential that managers considered environmental laws and policies before framing policies for
their organisation.
2. Porter's Five Forces Model for examining competitive environment.
Cosmetic and hair care sector has most number of customers along with a wised range of
diversified products and services as well. These products are consumed or used by people based
on their requirments and spending power. Hence managers of Loreal have decided about using
Porter’s five force model so as to gain a strategic edge against its rival firms. Five major
elements of this model have further been explained as under:
Bargaining power of Buyers: In present context, it has been assessed that bargaining
power of buyers is generally quite due to a number of sellers who provide a number of
a;lternative brands in competitive market. Also it will be correct to say that Loreal does not own
the power that it can attract or influence prices of their products (bargaining power of buyers.
2019). If in any case Loreal increases its prices then buyers may easily switch their brand
choices.
Bargaining power of Suppliers: Loreal in present scenario owns a number of suppliers.
In same ratio it even employs a high number of manufactures as well. Presence of substitutes of
inputs as well as cost of input both are assumed to be quite low. Hence as there are no high cost
of inputs bargaining power of suppliers will also be quite less and bargaining power of L’Oreal
will be quite higher as there are a large number of buyers present and only few suppliers to fulfil
that requirement.
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Competitive rivalry: In context of competitive rivalry, company’s main focus or stress is
on gaining a stable competitive advantages. Competitive rivalry happens to be quite high
amongst in present day situation. This further helps customers in switching or changing brands
quite easily. Also there are no much restrictions on entry of new firms into the market. In context
of Loreal it has been observed that their competition is quite high and hence to sustain in market
it is necessary that they provide attractive offers and influencing deals to their customers. This
way customers will be more impressed with their products and services.
Threat of new entrants: Business concerns dealing in skincare as well as hair care
segment are very competitive with other (Jocovic and et. al., 2014). This further helps in
influencing and attracting customers so that they can retain their present or current market
share. This creates a price drop in current profitability of existent business entities. In present
context of Loreal it has been examined that there are a number of barriers which hamper its
overall growth and profitability. On the other hand in context of new entrants it has been
examined that new firms do not have to face any such strict regulations which makes their entry
easy. Also their prices of goods and services are quite lower as compared to established brands.
Hence entry of a new entrant( firm) is basically a threat for existing firms so managers of Loreal
will have to choose effective strategies that do not hamper its customer base.
Threat of new substitutes: In present context Loreal faces threat only from two
substitutes that are home remedies and herbal products. These products are quite cheaper as
compared to Loreal and also do not have any side effects due to their medicinal quotient. It has
been observed that rural people mostly prefer herbal and home remedy based products as their
spending power is less and they do not trust cosmetic products so much. Hence it can be said that
threat of substitutes is quite higher for Loreal.
.
TASK 2
3. Evaluation of different types of strategic directions available to an organization.
A strategic direction is an essential tool which provides a number of key forces as well as
directions that help a business concern in timely achieving their goals and objectives (Klettner,
Clarke and Boersma, 2014). Strategic decisions or choices in a business can only exist when
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various elements such as mission, vision, goals and objectives aim towards a similar collaborated
and coordinated goal. Every business leader uses all these elements so as to maintain a healthy
and positive working environment in their organisation. It is quite important that Loreal follows
a mission and vision as it will be easier and helpful in achieving organisational goals and
objectives. Managers of Loreal have to face a number of critical and complex situations. Various
key strategic decisions in context of Loreal have been stated as under:
Market penetration: Market penetration is a name given to a process which helps in
enhancing or improving market share in respect of an existing product or service (Laudon and
Traver, 2016). This will only be possible only in case effective marketing tools are adopted such
as advertising, promotional tools, discount offers etc. In context of Loreal it has been determined
that its market share will be improved if they adopt effective tools and strategies. On the other
hand it is also examined that decrease in value of products helps a business in enhancing its sale.
If managers of Loreal undertake market penetration strategy then they will be able to enhance
their customer base and as well as market share.
Market development: Market development is another important strategy wherein owners
and managers of a business concern target new developed markets which help in promoting
growth and profitability. Marketing teams of a company play a quite important role in
developing goodwill and brand image of a firm. Many a times companies may even consider
globally present policies and strategies which help in developing new products. In context of
Loreal, it has been examined that they try to sell similar products and services to each and every
customer which is quite unsafe as every product requires a certain amount of tiem and efforts.,
Product development: Product development is an on-going and continuous process
which employs a number of goods and services which help in manufacturing and development of
goods and services (Lawton, 2017). Product development is only useful for Loreal when its
strengths are quite relative to their specific customers in place of their relative products. By
adopting such strategies Loreal will be able to enhance its overall market share. Other than these
benefits there are certain drawbacks that not every customer prefers newly launched products
and services.
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Diversification: Diversification is an essential business strategy but can even be quite
challenging or hazardous at times. In context of LoreaL, it is internationally developed brand but
may face a number of difficulties in bringing about diversification in their goods and services as
demands and needs of each customer will be quite different from other. Hence to achieve an
advantage managers will also have to employ a quite huge sum of funds which will help in
enhancing customer base as well as promotion of goods and services.
A justification and recommendation of the most appropriate growth platform and
strategies: In the above analysis Ansoff matrix model has been considered which states that
product diversification will be an optimum tool in context of Loreal as it will help in improving
their customer base and market share (Peng, 2017). This will also lend a stable market position to
Loreal in competitive market. In present context, it has been recommended that Loreal should
also manufacture more diversified and herbal beauty products which have various medicinal
benefits. Also they should provide free doctor consultation for various skin allergies and skin
diseases. This will be quite evffective and build customer base of Loreal.
4. Strategic management plan for L'oreal by including strategies, objectives and tactics.
A strategic management plan is an essential document which is used by managers and
leaders so that they can effectively communicate their organisational goals and objectives
to their subordinates. This plan further helps in enhancing efficiency and profitability of a
business concern. Strategic management plan is such that it helps managers and leaders in
achieving their goals and objectives within a specified time frame.
Aim: Aim of Loreal is to expand their business operations at a global level.
Organizational structure: Managers of Loreal follow a divisional organisation structure
in their organisation where roles and functions of each individual are decentralised. Also the
company does not own any in house manufacturing units thereby employing workforce from all
backgrounds (Scholes, 2015).
Vision: Vision of Loreal to develop a sustainable and trustworthy customer base as well
as market share for itself.
Mission statement: Mission of L’Oréal is to offer or provide excellent quality products to
their customers which are quite innovative.
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Values: Loreal is an international brand and follows a set of values such as integrity,
respect, courage as well as transparency. For this mangers adopt ethical code of conduct in their
organisation.
Objectives: Managers of Loreal have decided about adopting SMART for setting up
their organisational objectives. Presently the objective of Loreal is to enhance or increase its
overall sales ratio by 15% in approximately 3 months (Spender, 2014).
Goals: Main aim or goal of Loreal in present scenario is to win trust and vote of its
customers which will help in establishing its goodwill in market. Also managers of Loreal have
decided about using environment friendly techniques that do not hamper natural resources. Also
they have decided about indulging in CSR activities and helping local communities in preserving
nature as well (Wheelen and et. al., 2017).
Strategies and tactics: Strategies and their development is important for any business to
excel and achieve a competitive edge hence in this context managers of LOREAL have decided
about adopting market penetration strategy which will further help in growth and development of
its overall business leading to enhanced profitability and market share.
CONCLUSION
From the above mentioned report it has been concluded that business strategy and its
development in alignment with organisational goals and objectives is quite important as
without a planned business strategy no organisation can function in an effective manner.
These report further discusses various elements that govern a business strategy such as
strategic management plan of a company along with various strategic directions that are
available with companies while they indulge into formation of business strategies. This
report also mentions market analysis with the help of statutory tools such as SWOT and
PESTLE. Lastly Porter’s five forces model has also been discussed in this report.
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REFERENCES
Books and Journals
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Chang, J. F., 2016.Business process management systems: strategy and implementation.
Auerbach Publications.
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Chen, Y. and Jermias, J., 2014. Business strategy, executive compensation and firm
performance.Accounting & Finance. 54(1). pp.113-134.
Goffee, R. and Scase, R., 2015. The Real World of the Small Business Owner (Routledge
Revivals). Routledge.
Jeston, J., 2014. Business process management. Routledge.
Jocovic, M. and et. al., 2014. Modern business strategy Customer Relationship Management in
the area of civil engineering. Applied Mechanics & Materials. (678).
Klettner, A., Clarke, T. and Boersma, M., 2014. The governance of corporate sustainability:
Empirical insights into the development, leadership and implementation of responsible
business strategy. Journal of Business Ethics. 122(1). pp.145-165.
Laudon, K. C. and Traver, C. G., 2016.E-commerce: business, technology, society.
Lawton, T. C., 2017. Cleared for take-off: structure and strategy in the low fare airline business.
Routledge.
Peng, M. W., 2017. Cultures, institutions, and strategic choices: Toward an institutional
perspective on business strategy.The Blackwell handbook of cross‐cultural management,
pp.52-66.
Scholes, M. S., 2015. Taxes and business strategy. Prentice Hall.
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Oxford University Press.
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