External Environment and Cultural Impact on L'Oreal's Body Shop

This report provides a comprehensive analysis of L'Oreal and its Body Shop subsidiary, focusing on the impact of the macro-environment, including political, economic, social, technological, environmental, and legal factors. It examines the influence of Brexit, social values, technological advancements, and ethical considerations on the business. The report also delves into organizational culture, comparing different models and assessing their compatibility with L'Oreal's operations, particularly in light of the Body Shop acquisition. It highlights the importance of ethical practices and the challenges L'Oreal faces in aligning with Body Shop's values. The report further explores factors to be considered before the alliance, including vision, mission, and store identity. It also examines the reasons behind the failure of the alliance and provides a reflection on the current situation of Body Shop under L'Oreal, offering insights into the complex interplay of external forces, cultural dynamics, and strategic decisions within the cosmetic industry.

Context of Business

Table of Contents
INTRODUCTION...........................................................................................................................3
Task..................................................................................................................................................3
Impact of Macro Environment for Current situation of L'Oreal Body Shop...............................3
Culture and its Impact on the Performance of L'Oreal Body Shop.............................................5
Considerable Factors Before Opening Body Shop......................................................................6
Reasons that cause Failure to L'Oreal in Body Shop...................................................................7
Reflection.....................................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Business is a practice that is used by the individual or group of people to making their
living better and making money by selling of providing services. It also can be considered as the
activity that help the organization or particular person to make profit from the particular activity.
L'Oreal is one of the oldest cosmetic organization which was established in year 1909 by Eugene
Shhueller. Headquarter of the company is in Clichy, France (Chun, 2016). The operational area
of L'Oreal is World wide. This report is providing the impact of the external environmental
factor on the current situation faced by company in current situation. The organizational culture
of L'Oreal will be analysed to evaluate how it is compatible with the challenges and profit
earning practices. The factors that are considered by the organization before launching body shop
are explained in report. Various factor will be analysed in the report that leads the decision of
organization to acquire the body shop as failure. A brief analysis will be provided in the report in
contexy of current Body shop of L'Oreal.
Task
Impact of Macro Environment for Current situation of L'Oreal Body Shop
The are different factors that are present outside the organization have major impact on
the performance of the organization. These factors are not in control of organization. These
factors are classified in six different parts which are political Factors, economic factors, social
factors, technological factors, environmental factor and Legal Factors. The organizations that are
working in the cosmetic industry mostly got affected by the social, cultural and ethical issues
because it is more related to their business.
Political Factors-
The political factor are associated to the political concepts. The decisions that are taken
by organization are can affect the performance of the company in their business. For current
example Brexit is one of the most current issue in UK (Voigt, Buliga and Michl, 2017). Just
because of these condition people in UK who are in corporate world are in uncertain condition.
This is difficult for them to make current investment in the market place. They are confuse about
the economy. This political decision of government can affect the business of the L'Oreal's Body
Shop alliance as both the companies will find it difficulty to develop their CSR polices for
ethical practices and could blame each other which resulted in breaking of alliance. There are

some other policies changes like taxation policy reform can affect the business revenue of
organization.
Economical-
Brexit has huge impact on the economy of the United Kingdom. The market of UK is
uncertain and unstable due to the changes and fluctuations in the investments of people in local
market. This changes in the market place can create difficulties in the business process of the
L'Oreal. There are other current changes in the international economy can also affect the
business of L'Oreal business in the market place. This issue has also brought financial loss to the
company which can affect Body Shop and even L'Oreal wanted to use good will of Body Shop
mitigate the damage of financial loss. As L'Oreal purchased Body for purpose to improve its
reputation in market place with positive image of Body shop. It is really difficult for organization
to meet the profit goals with complication of financial merger with Body Shop.
Social Factors-
The social factors are associated with the people and their behavior. People are associated
with some personal values which are related to their religion or community. These factor can
affect them in different manner. The emotional connect with their sentiments can influence their
decision. For the cosmetic industry, influence of these factors is crucial because these personal
values can affect their decision making process. It can be both negative or positive. Open
personality can positively affect the decision of the people (Sarason and Hanley, 2015). Other
thing is the personal views about the process of shopping and selection of product. some of the
people are more comfortable with the online shopping. The culture is also a major factor in the
business of the L'Oreal because it has greater impact on the personality and thinking process of
the people. Some of culture can affect decisions of individual. This is how cultural and social
factors can influence the performance of the L'Oreal business through Body Shop. The issues
like child labor, negative promotion and use of animal in the testing of beauty product has
harmed the image of company in the global market. This is some main issues that lead the
L'Oreal to the failure. The issues related to human rights also affected the image of L'Oreal store
in the market. As company has been involved in unethical practices which has turned customers
away from L'Oreal is facing a bad publicity so, in order to overcome the loss it has decided to
make alliance with Body Shop. People has become aware of CSR practices and demand
company to adopt these practices, but L'Oreal has failed to do so which resulted in the loss of

company. In order to overcome this factor L'Oreal had alliance with Body Shop but even could
meet the expectations of society. There will be huge role of this alliance to improve the mind set
of people. It can help the L'Oreal to improve its reputation in market place.
Technological Factors-
Impact of technology is huge for business world. Technological factors can affects the
businesses of the organization on wide scale. Technological changes are changing continuously.
This is important for organization to stay update of current factor to run the business efficiently.
Internet is technology that can affect the business of the L'Oreal's business through using the
positive image of Body Shop (Karlsson and Mattsson Brochs, 2019). People are preferring the
online shopping instead of physical and this thing can affect the business of L'Oreal Body shop.
The these process is more effective then the body shop. People normally compare online
shopping process with the physical process. The differences between the online shopping and
physical shopping mostly affect the performance body shop of L'Oreal.
Environmental Factors-
These factors are associated with sustainability and other things that are related to the
environment. The beauty products are made of the resources are mostly of chemicals which are
not good for skin. This things can cause damage to skin, this is a reason that's why people are
avoiding the beauty products. These the major factor that can affect the business of L'Oreal Body
Shop. The issues related to the sustainability can affect the performance of L'Oreal. This is
negative for both L'Oreal and Body Shop. By the procedure of Alliance L'Oreal can adopt the
standards of Body Shop to avoid the negative promotion that is currently faced by company in
market place.
Legal Factor-
The legal factor are associated with the decisions of legal authorities. The decisions made
by legal authorities are applied in the constitution of the country in form of act and legislation.
These law are made to limited the action of organization and their presence in the market place.
For example there are some restrictions are faced by the cosmetic industry which are connected
to the use of chemicals in their products. Legal factors are most crucial for both organization. For
alliance they need to full fill all the requirement which are mentioned or considered in law. The
body shop and L'Oreal can face some legal issues in the acquisition process.

Ethical factors: This is one of major factors that L'Oreal was facing in the market and company
was violating various ethical standards of business which resulted in the loss of a business. Also,
company has made alliance with Body Shop in order to mitigate the consequences of violating
the ethical standards. But even it did not prove to be successful for business so this alliance was
just a chance for a company to secure its stand and even company failed to learn for Body Shop
to mend its ethical practices. So this could not prove fruitful for the company's reputation.
This is how external factors can affect the business of L'Orel in the physical body shop.
The impact of culture and communities is huge on these body shops.
Culture and its Impact on the Performance of L'Oreal and Body Shop
There are different type of culture is possible in the business organization. The type of
culture selected by organization is depended on size and power distribution in the organization.
According to Handy's model there are four types of cultural are mainly followed in the
organization which are categorized on the basis of to standards which are level of power and
level of cooperation (Šírová, 2015). Power distribution and cooperation are most important in the
organization. On the basis of these parameters powers are classified in for types which are power
culture, role culture, person culture and task culture.
Power culture- This is a strong culture which is followed in the organization. This type of
culture is present in the organization which are startups and newly established organization. In
the culture power is on the end of power or leader of the company. The cooperation level is high
in this culture with low power distribution.
Role culture
In this culture the level of cooperation is low and power distribution is also low. This
culture is used in the organization that are focused on the skills and profession of the person. Due
the power distribution is low and level of cooperation is also low in organization, it leads to the
low level employee satisfaction in organization.
Person culture-
This culture is followed by the organizations which works on the professional knowledge
of person. In this culture cooperation level is low and power distribution is high and it is
depended on the expertise level of the person. This culture is good for organization who's level
of success is depended on the professional level of individual.
Task Culture-

Task Culture is the organization culture that consists of high level of power distribution
and high level of cooperation (SARI, 2016). For the multilevel organization which have matrix
or vertical hierarchy structure. The employees are highly satisfied and motivated in this culture.
Ethical Culture- Body Shop was involved in the ethical practices which has proven to be
successful for its business but on the other hand L'Oreal has failed to adopt this culture in its
organization due to which company failed to carry out ethical practices. In order to overcome the
issue L'Oreal have entered into the alliance with Body Shop to adopt ethical culture within the
organization but even this did not work for L'Oreal.
As per the case study Body L'Oreal has owned the Body Shop they can use Ethical
culture with power culture to maintain its performance in market place. There are different
benefits of this culture in organization. This will improve the control of operation of L'Oreal with
better and ethical practices of Body Shop.. The employees will be remain motivated and loyal to
organization. These things will help the organization to perform there business successfully. This
culture is most compatible for the operations of the L'Oreal with acquisition of Body shop.
Benefits
1. quick response to employees and consumers.
2. High employee retention.
3. This culture will boost the performance of employees.
4. By using supply chain L'Oreal can improve its performance.
Problems
1. Power is allotted to only one person.
2. There is too much pressure on the employees and leader related to the performance.
3. The decision making process will not that much effective.
Considerable Factors Before Allying Body Shop
There are different factors that are need to be considered by the organization before
Allying with Body Shop. These factors are related to the vision, mission, location, create identity
of store, position, competitors and brand awareness.
Vision and Mission- Before considering any other factor company its is important for them to
consider the vision and mission of the organization which is associated with the Vision and
Mission of Body Shop. By considering these factors they will be able to evaluate and decide

their future action that can help them prepare better and effective strategy and business policy.
This will help them to generate effective output.
Location- This is one of the most important factor which is need to be considered by the
organization before Allying with Body Shop. The impact of location is high on performance of
organization in particular region where they are trying to improve their brand Image. In different
ways, location of store can influence their business. The accessibility of the consumer is
depended on location of store.
Create Identity- The identity of the store or brand is most important. Better identity and higher
brand value can help the organization to create better revenue form market.. Before allying with
Body Shop they need to create better identity of L'Oreal to reflect is much b=etter with better
image of Body Shop.
Position- The position of the organization is a crucial element in the performance of the
organization. There are different positioning strategies are used by the organization to lead the
market place in the consumer numbers and revenue. By creating better positioning they will be
able to create better brand value. L'Oreal also can use positioning of Body Shop to improve their
performance.
Competitors- This is one of the common factor that organization should consider before
entering a new market. Performance of competitor, their pricing policy and their location is
important to consider. By including this factor they will be able to gain competitive edge in
target market. All they need to do is to utilize the brand value of Body Shop to get better result
with ,arket performance.
Brand Image: This is one of the main factor that L'Oreal has made alliance with Body Shop, as
company was suffering from the loss of reputation due to unethical practices which has affected
its brand reputation. On the other hand Body Shop had good brand reputation related to ethical
practices so acquiring Body Shop could act as shield for L'Oreal to protect its brand image.
Reasons that cause Failure of Alliance of L'Oreal With Body Shop
There are different reasons that lead L'Oreal to failure in alliance with Body Shop. Some
of common reasons are location and diversity of the store in the global market (Lehanneur,
2019). There are some allegations are faced by different organization related to the use of
animals in the testing of beauty products, involvement of child labor and misleading
advertisements are some main reason that affect the performance of the organization in the

global market. These are some crucial points that cause the damage to the brand value of L'Oreal
in the international market. This is main reason of their failure. Their objective was to improve
the image of company by using the positive image of Body Shop but the culture and ethical mind
set of people and previous brand image of L'Oreal had affected this alliance and its performance
in market.
Reflection
According tome there are different factors are associated with the performance of the
L'Oreal with the Body Shop. Normally organization face negative promotions. They are also
prepared for this type of actions. These activities are performed by different figures which are
associated with the market place. In my opinion the reason of failure in Body shop is their
ignorance in the allegations and false information. This is how many cultural and ethical reasons
lead the organization to the failure in the market place.
CONCLUSION
This report is concluding various reasons that lead the organization to the failure in their
business with acquisition of Body Shop. The external factor has been analyzed in the report that
can affect the business of L'Oreal. Various factors that are associated with performance of Body
Shop and L'Oreal has been studied to find out the reasons that make this business as failure.

REFERENCES
Books and Journal
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konsumtion med exemplet The Body Shop.
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KENYAMANAN LAYANAN TERHADAP LOYALITAS PELANGGAN THE BODY SHOP
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Voigt, K.I., Buliga, O. and Michl, K., 2017. Pure Beauty: The Case of The Body Shop.
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