L'Oréal's Acquisition of Body Shop: Social and Ethical Impacts

This essay examines the acquisition of The Body Shop by L'Oréal, exploring the impact of social and ethical factors, organizational culture, and the strategic considerations that influenced the deal. It analyzes the contrasting organizational cultures of L'Oréal and The Body Shop, highlighting the challenges and benefits each faced. The essay delves into the factors that L'Oréal considered before acquiring The Body Shop, such as market position, growth opportunities, and technological synergies. However, it also explores the factors that contributed to the acquisition's ultimate failure, including market dynamics, changing consumer preferences, and L'Oréal's pre-existing brand image. The analysis underscores the importance of ethical practices and consumer perception in the cosmetics industry, and the critical role of thorough research in mergers and acquisitions.

ESSAY

TABLE OF CONTENTS
MAIN BODY...................................................................................................................................3
Impact of social and ethical factors over current situation faced by L’Oréal........................3
Organizational culture of the Body Shop and L’Oréal and challenges or benefits faced by
them........................................................................................................................................4
Factors considered by L’Oréal before acquiring Body Shop.................................................5
Factors which impacted the acquisition of Body Shop resulting in failure............................6
Reflection on experience of writing the report.......................................................................7
REFERENCES................................................................................................................................9

MAIN BODY
Impact of social and ethical factors over current situation faced by L’Oréal
L’Oréal is one of the largest companies in the world in the field of cosmetic and is a
brand which provide its services in more than 130 countries. But then also the company is not
gaining the position which they deserve (The Body Shop: What went wrong? 2017). This is
majorly because of the reason that the company is accused of using many unethical proactice3s
within the operations and working of the company. this impact the goodwill of the company to a
great extent. This is majorly because of the fact that due to modernization and upgradation of the
society it is very necessary for the company to have great impact over the social and ethical
factors of macro environment.
The macro environment refers to as the environment which is external to the company
and which are out of the control of the company. There are many external factors impacts the
company such as technology, legal, environment, social and many others. The study of the
business environment is very necessary because of the reason that the business exist in the
environment which is very dynamic and ever changing. Many new changes and differences come
in the actual practices being used by the company and what is currently going on in the market
(Grizane and Jurgelane, 2017). Thus, it is very necessary for the company to analyse those
changes and make the relevant changes within the company.
In this modern world the consumers are more advanced and more concern towards the
development of the society and protecting and safeguarding the environment. This is majorly
because of the reason that with the increase in globalization the trend of societal development
and ethical business practices has increased. The ethical business practices are the ones which
are correct morally and does not harm the society. For L’Oréal also, it is very necessary to have
the use of ethical practices and which do not harm the society. This is majorly because of the
reason that if the company do not follow this then the consumers will not like the products of the
company and this will result in the loss for the company.
There is a huge impact of social and ethical practices over the business of L’Oréal. Like
for instance the company use the tactic of airbrushing advertisement. Under this type of
advertising the company use the existing photos and then make changes in that photo only and
advertise it in the market (Epstein and Yuthas, 2017). This is an unethical practice because the
photo is already being used and this will have a negative impact over the business of L’Oréal.

Another practice which is not in favour of the ethics and the society is child labour. This
is a not an ethical practice because of the reason that this is a crime to employ a child at work.
and this will harm the ethics as well as the behaviour of the society (Nicholls and Daggers,
2016). The members of the society will not like the products of the company as the company is
using false practices and employing child at work. another practice of L’Oréal which it is
accused of is animal testing. Under this the company takes experiments and other testing over the
animal to study variable affecting their behaviour or knowing the biological system.
Organizational culture of the Body Shop and L’Oréal and challenges or benefits faced by
them
Organizational culture plays a major role in the working of the company. The
organizational culture is defined as the beliefs and assumption which the company follows which
governs the behaviour of the employees working in the company. it is very necessary for the
company to have effective culture within the company. this is majorly because of the reason that
if the culture will not be comfortable then the employees will not work in an effective manner. In
contrast to this if the culture of company is good then the employees will also like to work in the
company for the goals accomplishment of the company (Jones, Borgman and Ulusoy, 2015).
The organizational culture of L’Oréal is not that good. This is mainly pertaining to the
fact that the company is having a really bad image within the market. This is because of the
accusation that the company uses unethical practices. The unethical practices are the ones which
are not good or beneficial for anyone except the company. this is the major reason behind the bad
culture prevailing in the company. as the company is defamed in the market the employees of the
company also did not like to work in such company. and because of this reason the goodwill of
the company has depleted and the employees are not much efficiently working.
On the other hand, Body Shop is the emerging cosmetic brand which has values attached
to the company in support of the human rights and environmental protection. These practices
within the company spreads a good and coordinating organizational culture for the company.
This is majorly because of the reason that if the company is having good worth in the market will
motivate the employees to work in more effective and efficient manner and this will increase the
productivity of the company (De Houwer, 2017).
The acquisition was compatible for L’Oréal because they wanted to improve their market
position and reputation and because of acquiring Body Shop is beneficial. This is majorly

because of the fact that Body Shop is having good position in the market and this will add to the
market position of L’Oréal as well.
L’Oréal was much benefitted by the acquisition of the Body Shop because the company
was having nice market position and goodwill in the market. Also, the company was having a
good access to the supply chain and L’Oréal can now also use the supply chain of Body Shop.
But on the other hand, the Body Shop is not much benefitted by this acquisition. This is because
of the reason that the L’Oréal was already defamed and accused of the use of unethical practices
within the company. So, there was not any benefit for the Body Shop.
Factors considered by L’Oréal before acquiring Body Shop
The acquisition is defined as the acquiring of some other company into the one company.
this is a technique in which the ownership of one country is transferred to some another country.
Like in present case the L’Oréal has acquired the Body Shop. The acquisition is very beneficial
for the company as without much efforts another company comes under the supervision of
another company. There are many different reasons behind the process of acquisition. The major
reasons which L’Oréal must have considered before acquiring the Body Shop are discussed in
the following points connected below-
The major reason behind this acquisition is the defensive position of Body Shop. This is
majorly because of the reason that the body shop is already having a good position within the
market. And because of this the L’Oréal has planned to acquire body shop (Saville-Troike and
Barto, 2016).
Another reason considered by L’Oréal before acquisition is to have growth. This is
because of the major reason that the company is accused of using unethical practices and because
of this the company is not having much growth within the market. Thus, this acquisition will
help the company in getting some growth opportunities.
One more reason for this acquisition is that the company will have access to the newer
technologies being used by the body shop. As both the companies are of the same industry and
dealing in same products and services. Thus, the technologies which are being used by body
shop can also be used by L’Oréal now (Herrera, 2016).
Another factor considered by L’Oréal before acquiring body shop is that the company is
having a good supply chain and logistics system. And if L’Oréal will acquire body shop then this
will give right to L’Oréal also to use the supply chain of the body shop.

Another reason for L’Oréal in acquisition of body shop is the financial synergy which the
company can enjoy because of the acquisition. This is majorly because of the reason that both
the companies have similar product range and services. Thus, this acquisition will have the
company in enjoying the financial synergy that is the investment will be low as the both
companies will be having same resources and same technologies to be used (Perfetti, 2017).
One more factor which L’Oréal must have considered before acquiring body shop is to
eliminate the competition. This is majorly because of the reason that acquisition takes place in
same industry and because of this acquisition the competition is removed.
Another factor is the increase in the consumer base. This is majorly because of the reason
that earlier both the companies were performing differently and now after the acquisition both
the companies works together as a single entity. And because of this reason the consumers of
both the companies are grouped together and due to this the consumers base for the combined
company increases.
Factors which impacted the acquisition of Body Shop resulting in failure
The acquisition was done by loreal of the body shop without much of the research. Thus,
the acquisition was not much successful. This was because of many of the reasons. Some of the
reasons are as follows-
The major reason for the failure of the acquisition of the body shop by loreal is that in the
competitive market there are many companies which are dealing in the cosmetic brands which
are made of the natural ingredients and with no animal testing. And because of this major reason
the loreal decided to sell off the body shop portion to the Natura Cosmetics which is a Brazilian
company.
Another major reason is that there is more craze and trend of the online shopping. Many
of the similar products and are available in online stores and that to with many different types of
offers and discounts. Thus, this attracts more of the consumers and they prefer shopping online
and not by going to the shop and then purchase the product or the services (Basuil and Datta,
2019).
One more factor which impacted the failure of the acquisition is that the cost of running
the store is very high and the related income is very low. Thus, this was a failure as the shops
were many but the sale of the product was not much and the cost of maintaining the shops was
more then what was earned.

Another reason for the failure of the acquisition was that market is very dynamic and ever
changing and there are any changes in the preferences and the taste of the consumers. This is also
a major reason for the failure of the acquisition of loreal and body shop (Franzén, 2016). The
major reason underlying this fact is that the company was not able to deal with the fast-changing
needs and preferences of the consumers and because of this the consumers lost interest in the
products and services of the company.
One more reason for the failure of the acquisition is that loreal was already having a bad
image of the company as it was accused of the use of unethical practices such as animal testing,
child labour, price fixing and many others. Thus, because of these practices the image of Body
shop which was good before the acquisition. But after the acquisition the image of the loreal
instead of improving also let down the image of the body shop as well. Thus, because of this
reason that acquisition failed of loreal and body shop.
Reflection on experience of writing the report
The experience of writing the report was an amazing experience. This is mainly because
of the reason that with help of this report writing I learnt the different dynamics of the market
and how it can be dealt with using different theories and tactics to improve the business. With the
help of this report I learnt that acquisition means to acquire some business which is similar in the
business who is acquiring (Korsholm, Jensen and Nielsen-Kudsk, 2018). Like in the present case
loreal has acquired body shop. Both these companies are dealing in the cosmetic field and thus
one company has acquired the other. With this report I also learnt the art of making the report.
This is because of the reason that earlier I was not efficient in making the report but till the
completion of this report I learned the art of writing the report.
With this writing I learnt the art of researching as well. This is majorly because of the
reason that when I started this report I was not having much of the knowledge but as I continued
with the research I learnt that every little information is available on the internet. And because of
this I mastered the art of researching. But this was also a bit confusing. This is majorly because
of the reason that all the different websites have same or similar information. But I was very
confused in the fact that which information to be selected for the report. This is majorly because
of the reason that only some variation is there in the information of various different links and is
very confusing to cater to the requirement of the report.

Also, the report was very interesting part because I also gathered the knowledge of the
writing skills. This is because of the reason that the report writing is very good skill which I
learnt because of this report on the acquisition of loreal and body shop. Also, I learnt that there
are many different reasons for the company to acquire the other business (Bolli and Renold,
2017). These are like increase in market base along with increase in the consumer base, financial
and technological synergies, reduction in cost, increasing capabilities, reducing the competition
and many other reasons which are beneficial for the company to acquire the other company.

REFERENCES
Books and Journals
Basuil, D.A. and Datta, D.K., 2019. Effects of Firm-specific and Country-specific Advantages on
Relative Acquisition Size in Service Sector Cross-Border Acquisitions: An Empirical
Examination. Journal of International Management. 25(1). pp.66-80.
Bolli, T. and Renold, U., 2017, April. Comparative advantages of school and workplace
environment in skill acquisition: Empirical evidence from a survey among professional
tertiary education and training students in Switzerland. In Evidence-Based HRM: A
Global Forum for Empirical Scholarship (Vol. 5, No. 1, pp. 6-29). Emerald Publishing
Limited.
De Houwer, A., 2017. Bilingual language acquisition. The handbook of child language, pp.219-
250.
Epstein, M.J. and Yuthas, K., 2017. Measuring and improving social impacts: A guide for
nonprofits, companies and impact investors. Routledge.
Franzén, E., 2016. Perceptions of advantages in language learning: What is Beneficial for
Acquisition–Motivation or Bilingualism?.
Grizane, T. and Jurgelane, I., 2017. Social media impact on business evaluation. Procedia
Computer Science. 104. pp.190-196.
Herrera, M.E.B., 2016. Innovation for impact: Business innovation for inclusive growth. Journal
of Business Research. 69(5). pp.1725-1730.
Jones, N., Borgman, R. and Ulusoy, E., 2015. Impact of social media on small
businesses. Journal of Small Business and Enterprise Development. 22(4). pp.611-632.
Korsholm, K., Jensen, J.M. and Nielsen-Kudsk, J.E., 2018. Cardiac Computed Tomography for
Left Atrial Appendage Occlusion: Acquisition, Analysis, Advantages, and
Limitations. Interventional cardiology clinics. 7(2). pp.229-242.
Nicholls, A. and Daggers, J., 2016. The landscape of social impact investment research: Trends
and opportunities.
Perfetti, C.A., 2017. The representation problem in reading acquisition. In Reading
acquisition (pp. 145-174). Routledge.
Saville-Troike, M. and Barto, K., 2016. Introducing second language acquisition. Cambridge
University Press.
Online
The Body Shop: What went wrong? 2017. [Online]. Available through: <
https://www.bbc.com/news/business-38905530>