Strategic Business Plan: L'oreal's Growth and Development Strategies

This report provides a comprehensive business strategy analysis of L'oreal, a leading company in the cosmetics industry. It begins with an introduction to business strategy and its importance, followed by a detailed analysis of L'oreal's internal and external environments. The report includes PESTLE...Read More

BUSINESS STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................2
TASK 1............................................................................................................................................3
PESTLE and SWOT analysis for organization's capabilities.................................................3
Porter's Five Forces Model for analysis of competitive environment....................................6
TASK 2............................................................................................................................................7
Evaluation of different types of strategic directions available to an organization.................7
Justification and recommendation of most appropriate growth platform and strategies........9
Strategic management plan for L'oreal by including strategies, objectives and tactics.......10
CONCLUSION .............................................................................................................................11
REFERENCES .............................................................................................................................11
.....................................................................................................................................................12

INTRODUCTION
Business strategy refers to the course of action or set of decisions which assist the
entrepreneurs in achieving specific business goals and set of objectives. In some organisation,
managers need to consider how business strategies can be sustained through strategic capabilities
(Brewster, 2017) . This is all about how a company will compete in its marketplace. This is the
continuous process and conducted in each segments in order to accomplish purposes. The present
report is about L'oreal, which is the world's largest French personal cosmetics care company
founded in 30 July, 1909 by Eugene Schueller. This report emphasizes on PESTLE and SWOT
of the organisation and an analysis of the organisation’s capabilities, along with the evaluation of
different types of strategic directions has been discussed in the report. In addition with this,
justification and recommendation of the most appropriate growth platform and strategies is
outlined below in the report. At last this report produce a strategic management plan with
strategies.
TASK 1
PESTLE and SWOT analysis for organization's capabilities
Strategic planning is describe as management act which is used to focus energy, set
precedence, and resources to ensure that employees and other stakeholders are working to attain
the goals and objectives and adjust the organization's way in result to a ever-changing
environment. Strategic planning produces important decisions and actions that configure and
guide about the organisation and, what it does, what are its services, by focusing on upcoming
future. L’oreal is the leading name in the cosmetic and beauty world (Cavusgil and et. al., 2014) .
Their extensive portfolio of hair, skin, and make-up products is the reason why this brand is the
only one, offering so many inexpensive as well as luxurious beauty options. However,
competition is rising because customers are very conscious about their face products, so when it
comes to choosing products for their skin and hair they are awake while buying that. Hence, it
becomes imperative for L'oreal to make plan of action in order to gain its position in the
marketplace. Thereby, before any major decision-making, it should analyse the factors, both
external and internal that could affect it. This may be achieve by conducting PESTLE and
SWOT, which are elaborated below :

SWOT analysis
Strength Weaknesses
L'oreal is a leader in the growing cosmetics
industry despite the competition in the market.
This also offers the best to their customers.
This has approx 60,000 employees around the
world. Apart from the cosmetics items, this
company is also active in dermatological and
pharmaceutical fields. In present time, L'oreal
is having 23 brands operations globally in
more than 130 countries. Also this have a
wide-ranging distribution channel. The L'oreal
products are of highest possible quality.
This company has decentralized organizational
structure and due to their subdivisions, they
also has the difficulty in the control of their
organisation. Along with this, the tuff
competition from other leading cosmetics
company established their brands (Chang,
2016) .
Opportunities Threats
L'oreal can tap the growing market that ranges
from the affluent, the ageing and also the
masses of the developed countries. Along with
this, greater market share because of the
numerous patents is registered by the company
L'oreal.
The threat of L'oreal is the growing
competition within cosmetics industry. Along
with this L’Oreal may be producing the best
products in their sector, and for many people
products of L'oreal are not necessary, so they
can omit by buying the L'oreal products.
PESTLE analysis
L’oreal is the one who is leading in the industry of Beauty and cosmetics all over the
world. The company is producing several varieties of beauty products in order to meet the need
of fashion trends globally. It is making various varieties of products to meet up the needs of the
current global fashion trends. The factors that's affect the L'oreal profitability are as follows -
 Political Factor – The factors which are related with the government rules and policies
in which L'oreal is working. As the manufacturing company of L'oreal is in Paris so
generally the rules and policies of France government affect the company's profitability

very much. With the accomplishment of globalization, political factors have impacted the
business industry like L’Oreal. This is being affected by various norms of UK
government and to comply with these, it is producing products that are safe to use and
does not contain any harmful or hazardous substance. When inflation rate got high in
France it affected the sales of L'oreal products. The rates of these products was increased
and as a result sales of these products was decreased. This builds the reputation of
company in front of customers and stakeholders. Political factors are analysed before
entering into new countries so that there will be less governmental conflicts.
 Economic Factors – These factors include that exchange rate of state in which L'oreal is
executing their business operations. For the organisation like L'oreal, finance plays an
important role in the upbringing of their business. Apart from the finance, prices also
plays important role in the business, as the products prices change in different parts. The
main factor contributing the business of the luxury products brand is the GDP of the state.
Mostly people are buying the L'oreal products, So by this the sale of the company can be
increased and this change will positively affect the entire business (Chen and Jermias,
2014) .
 Social Factors - The adults and young generation people are crazy about trendy fashion
in the products of L’Oreal. The perceptions of people living in a society influence the
activities of an entity. The society who is aware about the latest technology and eagerly
waiting to adopt the new changes then they definitely wait for the new innovation of
L'oreal. Along with this, it has started to use components which are not prohibited.
L'oreal has maintained the quality of skin care products by sustaining an adequate
chemicals of the products for skin. All these social and ethical physical phenomenon
plays large role in the business of L’Oreal. L'oreal introduced an ageing cream for middle
aged women by analysing the demand of this kind of product among women. This makes
the company competitive in market and in this way it can also capture new customers and
hence overall sales will be increased.
 Technological Factors – These factors are ever-changing in every field of life. The
technological concept like innovation is playing a vital role in the business of L'oreal.
The L’Oreal brand is producing the trendy fashion products, because this is very much
familiar with the innovation. The technology gives it possible to spread the innovation

within seconds and the fashion lovers are ready to buy the trendy products (Goffee and
Scase, 2015) . Therefore, L'oreal is the key to its success and have proved to have created
positive results which has increased its revenue and sales. L'oreal makes outer body of its
products attractive and keep changing them within interval of 6 months. This attracts
customers and hence sales is increased. New technology in hair products like shampoos,
serums, hair dyes etc. is used in L'oreal products. For e.g. L'oreal introduces casting
crème hair colour with no ammonia in it.
 Legal Factors - There are many rivals of L'oreal in the marketplace, so it is difficult for
L'oreal to maintain the graphical record of success in order to achieve business goals. For
L'oreal, this is necessary to fulfil all the legal formalities in which they are executing their
business, as because now the world has now become a global village and people have
become alert about the legal aspects of the products of L'oreal. This factor is very crucial
for the products of L’Oreal. The main function of legal department in L'oreal is to draw
and negotiate all kinds of contracts. It is responsible for legal security of operations.
Legal department is proactive and functions properly to avoid any legal dispute in the
company.
 Environmental Factors : The factors of environmental are concerned with the
environment and it's safety. L'oreal has been one of the leading international brands
which always interpret the external and internal factors that affect the entire company. In
the similar way, the environmental factors have the power to affect the performance of
their operations. Therefore, the good strategy is to consider these factors while
determining the company policies (Jeston, 2014) . Also, the future policies of the
company could be made as per the trends. The company L'oreal should focus on rules of
global before producing the cosmetic products. According to environmental protection
act, 1990 people of UK should ensure not to harm environment in any ways when doing
business so L'oreal takes care of not harming the environment and function smoothly.
Porter's Five Forces Model for analysis of competitive environment
The companies which are dealing in cosmetic and skin care industries have the range of
products which are being used by many customers. So in the similar sense, L'oreal is one of the
top brand cosmetic and skin card industry which uses Porter's five force model to attain strategic
edge in the marketplace by analysing the competitive environment of UK.

 Bargaining Power of Buyers – The accessibility and exploding competition of L'oreal
has given the buyers high bargaining power. So, this is difficult for L'oreal to maintain
long-term profitability. Due to this factor company has to reduce their products prices
else the customers will switch to other brands. For example - Some of the buyers of
L'oreal are RishonB and Robert tanner are the senior buyer at L'oreal (Buyer – Loreal,
2019) . Along with this, Clarisse Ariza and Olga Birosova are also buyers of the L'oreal.
(bargaining power of buyers, 2019).
 Bargaining power of suppliers – L'oreal has large numbers of suppliers. For example -
There are 1,647 L'oreal supplier suppliers, mainly located in Asia. The Alibaba.com
offers 1,771 L'oreal supplier products (L’Oreal Supplier. 1999-2019) . There are many
manufacturing products which are required by L'oreal. The presence substitutes of the
inputs and the impact of input on cost is low. Hence, the bargaining power of suppliers in
L'oreal is low. On the other hand. Bargaining power of L'oreal is high when there are
many buyers and few dominant suppliers, and also they has high valued product. Here,
the bargaining power of organisation is high, so it is very easy for them to settle the deal
with supplier on their terms and conditions, which can lead to increase in profitability of
L'oreal.
 Competitive Rivalry – The company focus on competitive advantages. The degree of
competition amongst the rivals of L'oreal in the industry is high (Jocovic and et. al.,
2014). The conditions due to which high rivalry causes is high number of competing
firms, consumer switches the brand easily, also the barriers entering into the market is
low and the most important cause is that the rivals of L'oreal selling the similar products
and rendering the same service as compared to L'oreal. As the competition for L'oreal is
very high in market, so for this they can provide some attractive offers and discount on
their products. This will help to gain the attention of the customers towards their skin
products. For example – Some of the rivals or competitors of L'oreal are MAC,
Maybelline, Lancome, Revlon, Coty etc. (L’Oreal Competitors, 2019). Revlon is a public
company that deals with personal products and it has 74800 fewer employees than
L'oreal. In addition to this Coty is the biggest rival of L'oreal.
 Threat of new entrants – The industry of cosmetic and skin care companies are
competitive and attract large numbers of customers to retain market share. This leads to

the profitability of the existing companies. There are a lot of obstacles for the new
entrants of L'oreal. As the cost of implementing new setup is very high in this sector, and
rules or restrictions of government are very tough, so this all make it very handy for a
new entrance to come and deal in this sector. The new company in cosmetic industry are
Unilever $21.3 billio and Procter & Gamble Co. (Klettner, Clarke and Boersma, 2014) .
 Threat of substitutes – The Two substitutes of L'oreal, home remedies and skin products
made with home ingredients like oil and herbs maintain and protect the skin of peoples.
The home remedies products are generally used in rural areas as these peoples cannot
afford high rate products. The switching cost and the buyer tendency towards substitutes
are low.
TASK 2
Evaluation of different types of strategic directions available to an organization
A strategic direction consider the key units that move the business of L'oreal towards
their objectives. The vision, mission, tactics, plan of action and core values all bring the
constitution of a strategic direction. An effective business leader refers to the elements to
generate activity and positive rational state in an organization. A strategic direction is the most
crucial unit of a business. The clear vision of an organisation allows each worker to know the
aim and objectives of their company. Tactics and plan of action allows each worker to
understand the part they plays in contributing to the achievement of the vision and objectives.
The company L'oreal faces unique challenges (Laudon and Traver, 2016) . Specific strategies,
like identifying the strength of product, adjusting the pricing strategy, or acquiring another
business, have been used in the past to get a small enterprise off the object. There are various
types of strategic directions available to L'oreal which are as follows:
 Market penetration: - The state of increasing the market share of an existing product, or
upgrading a new product, through strategies such as advertising and lower prices. It is
strategies used by L'oreal to promote their existing products in the marketplace, which
can increase market share of the L'oreal. In 2014, the company had opened large numbers
of stores in all over the world. Thus, this can be seen that L'oreal is utilising its
distribution channels to satisfy their customers as they move across the channels, which
could further strengthen its competitive advantage (Lawton, 2017) . On the other hand,

decreasing the value of products can helpful for the company to increase it's sale. For
example - if L'oreal decreases the price of their products then the sale of their products
automatically increases and then there could be a chance in increasing the market share of
the company.
 Market development – In this strategic direction, company targets new markets. The
team of marketing development is responsible for a range of products and for brand
image at international level. They formulate the global strategies, improve development
processes for new products and set up the deployment of the strategy in all over the world
where the people are existing (Peng, 2017) . The company tries to sell more of the same
products to different people, which is very unsafe for the L'oreal company because every
product need time to set in the new market. It required lots of investment and promotion.
 Product expansion: - In this strategic direction, company sells different products to
similar peoples, so for this company should expand the production of their products by
producing different variables or they can renew their existing products. This strategy is
all about introducing new product in the existing market. In this case L'oreal come with
the new product which is different from the existing products. This is developing new
and complementary products from its existing product lines in existing markets through
innovation. This might be due to winter that the selection of beauty products is increasing
to satisfy the need and requirements of customers, For example- the beauty manager
suggests that companies may create 2-3 shadows of darker choices for their make-up
products. So there is chances of low demand of product because company already have
their products in the market. L'oreal need to attract more customer and for this they need
to spend on promotion.
 Diversification - This strategy of business is hazardous, there is often little scope for
using existing expertness or for achieving economies scale, because company sell
different products to different customers. In this strategy, company required lot of money
for the promotion to build up the customers. The companies like L'oreal can exist in such
market as compared to small companies.
Justification and recommendation of most appropriate growth platform and strategies.
Growth platforms are special enterprise selected by a business organization to increase
their revenue and growth of earning. It work on two stages - Strategic and tactical. The Strategic

growth platforms usually take longer period for 3-6 years which includes long-term initiatives
and later is for a shorter period, it involves short term initiatives. On the other hand, tactical
growth platforms are used to achieve targets of current year an take less time for implementation
as they are for shorter period, these both strategies and their results are based on the current
budget year in every business. Apart from this, growth strategy are used by enterprises to make
management plans for attaining goals for the growth of in fields of manufacturing, marketing,
finance etc. These are required in ever-changing economy to minimize risks and contingencies
and maximize growths. It is beneficial for long term development. L'oreal should study or
examine the power of each strategies on daily basis and should check the outcomes which are
achieved, and then the outcomes should be compared with standard in order to know the variance
and take correct steps to trim down the gap and make changes in strategies and plans to achieve
the business goals and set of objectives (Spender, 2014) . To attain the business goals and
objectives, they can use one of the strategy from the above, which is market penetration. This
strategy is used to achieve the objectives – Firstly this increase the market share of actual
products of L'oreal, secondly this can be achieved by a combination of competitive pricing
strategies, sales promotion, advertising, and perhaps more resources dedicated to personal
selling. This strategy will be for long term as the vision is to gain sustainable growth and become
a global leader in cosmetics products. For growing business for L’Oréal, market penetration can
be the best approach that they can adopt. As this approach will help them in increasing their
profitability and market share. According to this approach, they have to promote their existing
products using good advertisements, and promotional activities in existing market, which can
help them in increasing their sales. This can be more effective for them, L'oreal is one of the
biggest personal care company, and they are providing their services and products in around all
the countries of world. Therefore, promoting existing products in existing market can be
beneficial for them. Now L'Oreal are coming up with small and tinny packages by offering
wide of prices for packages .Focusing on emerging economics, adapting as per consumer need
and preferences in order to attain customer's attention towards it. Its mainly strategy is to drive
revenues through smaller size packages in favour to act as a catalyst to meets its revenue targets
and growth at international marketplace. In order to make a product more successful in the
market, the L’oréal company need to set an effective platform that are generally initiatives
selected with the aim to sustain for a long period of time. In case of a new business which is

expecting a high growth industry, so it is able to maintain a high growth rates for a longer period
of time (Scholes, 2015) . There is a huge possibility for forming a new growth platform which is
arises when forces of changes like converging technologies as well as social pressure in order to
create certain job opportunity and profitability chances in attaining proper market base at
international level.
Strategic management plan for L'oreal by including strategies, objectives and tactics.
A Strategic Management Plan is a document used to communicate within the
organization to ensure that employees and other stakeholders are working together to achieve
business goals and establish agreement for intended outcomes (Wheelen and et. al., 2017) .
Strategic management plan is crucial for the success of a company. It is combined set of values,
vision, direction and goals for future growth. It starts with managing developments, there
implements and monitor the strategy. A management plan of L'oreal will help it achieve its
desired goals which is as follows:
Aim: To increase market share and attract customers towards their products.
Organizational structure: L'oreal is a decentralized company that exercise its control over its
divisional units. It does not have in house manufacturing units and employs personnels from
diverse background.
Vision: To establish sustainable business growth.
Mission statement: Beauty is a language in the life of peoples and L'oreal has set the mission of
offering all women and men of the world, the best products of cosmetics innovation in terms of
quality and safety to ensure beautify skin products globally.
Values: L'oreal believes to have integrity, respect, courage and transparency by being ethical and
recognized by all employees.
Problems: L'oreal will focus on problems with high price and Advancement of technology.
Goals: The cosmetics company goal is to win the trust and confidence of a billion new
customers. Long-term goals of L'oreal is to enter growing market by collaborating with local
manufacturers and short-term goals will be to focus reducing the prices in order to attract more
customers (Veit and et. al., 2014) .
Strategies and tactics: L'oreal will use market penetration strategy, as this approach will help
them in increasing their profitability and market share. According to this approach, they have to
promote their existing products using good advertisements, and promotional activities in existing

market, which can help them in increasing their sales. Along with this, they can organise some
promotional events in open environment, which have some entertainment activities and rewards
for winners and participants. This will help L'oreal in achieving their goals and objectives of
increasing market share and attracting customers towards their products.
CONCLUSION
From the above report, it has been concluded that, managers need to consider how
business strategies can be sustained through strategic capabilities. This report is all about how an
organisation will compete in the market to attain their business goals. In this report, it has
concluded that a company must be directed to achieve their set of objectives as such direction
can be for both long and short term. It is important to align such strategic plans with core
activities of business. Along with this, the business strategy can be better explained by
conducting SWOT and PESTEL to know about the market position and internal capabilities and
Porter's Five Forces Model to understand competitive environment. Further, strategic direction
provides set of actions that needs to be incorporate to achieve goals in a systematic and effective
manner. Also, it helps in managing the costs and influence sales and revenues. Company should
understand strategies used by its competitors and evaluate these with its own strategies. This will
enable to know the reason for ineffectiveness. At last a management plan is necessary to
communicate within the organization to ensure that employees and other stakeholders are
working towards common goals.
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