Loreal/Body Shop Acquisition: Macro Factors and Cultural Analysis

This case study analyzes the acquisition of The Body Shop by Loreal. It begins with an introduction to the cosmetic industry and the companies involved. The main body examines the influence of macro-environmental factors, particularly ethical and social aspects, on Loreal's current situation. It then explores the organizational cultures of Loreal and The Body Shop, highlighting their compatibility. The study identifies factors considered by Loreal before the acquisition and analyzes the reasons for the acquisition's failure, including cultural differences, market competition, and financial issues. A reflection report on the project is included. The conclusion summarizes the key findings and the references are also included.

LOREAL/BODYSHOP
CASE STUDY

Table of Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
MAIN BODY...................................................................................................................................1
Mention the influence of Macro environmental factors on current situation of Loreal
especially, ethical and social factors ..........................................................................................1
Organisational culture of Loreal and Body Shop to acknowledge their compatibility...............3
Different factors that would have been considered by Loreal before acquiring body Shop ......4
Which factors influence Loreal acquisition of Body Shop that leads to failure.........................5
PART 2............................................................................................................................................5
Write a reflection report on own experience about this project .................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Cosmetic industry is highly dominated by limited number of MNCs which operates in
global manner and provide appearance enhancing products to the customers. Cosmetic goods are
basically a complex mixture of artificial and natural chemical compounds. This assignment
report is going to cover about Body Shop and Loreal which are renowned cosmetic companies
operating in global manner (Ashraf And et. al., 2015). Loreal is a France based personal care
organisation, headquartered in Clichy, France. This is one of the biggest cosmetic company in
global manner and employees around 86,000 employees. Body Shop is a skin care, perfume and
cosmetics company which was earlier a subsidiary of Loreal and now a subsidiary of Nature &
co.
This assignment is going to discuss about macro environmental factors which impacts the
present situation of Loreal in a considerable manner. Also, organisational culture of Body Shop
and Loreal is discussed to identify their compatibility. Other than this, different factors are
mentioned which are considered by Loreal before acquisition of Body shop and reason for failure
of acquisition is discussed. At last, reflection about own experience of this project is discussed.
PART 1
MAIN BODY
Mention the influence of Macro environmental factors on current situation of Loreal especially,
ethical and social factors
Macro environment is defined as the remote business environment of an organisation. It
include those factors which are not internal to the company to impacts its working in a highly
manner. Loreal is a large cosmetic firm which provide beauty , skin care and hair care products
to their customers (Chun, 2016). Company is successfully working in more than 130 nations
due to which it is exposed to macro environment of different regions. Present impact of Macro
factors on Loreal can be explained with the help of PEST analysis and ethical factor which are
stated beneath:
 Political factors: Political aspects involves policies and rules of governmental authorities
of those regions in which company is operating. As manufacturing factors and production
units of Loreal are present in Paris, it is essential for the company to abide by political
scenario of France in a proper manner. In case of UK, corporate tax for business firms is
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low and government does not have any strict regulations for cosmetic firms. It will
favour business activities of Loreal in UK. Due to Brexit, there are some differences
between UK and other European nations. This can impact the working of Loreal in UK in
a negative manner (Collischon, Löw and Törnqvist, 2018).
 Economic factors: This business factor involve currency exchange rate, growth rate,
GDP, interest and inflation rate of the region in which an organisation is performing their
business activities and operations. Recession in a country also impact this factor is a
highly manner. In case of cosmetic and beauty firm like Loreal, recession posses a high
impact on its working as recession limits the purchasing power of people. Also, price of
products has major role in deciding the impact of economic factors. For example, People
in UK have high income due to which they can easily purchase the standardised products
of company. This means business operations in UK region is beneficial for company.
But, recession that takes place in 2018nhave increased inflation due to which people may
not spend high amount in buying cosmetics.
 Social factors: It involves technical trends which are highly prevailed in a society.
Modern and open minded societies like UK, France and other European nations etc. are
highly interested in fashion trends and usage of cosmetics. Due to this, people of these
region appreciate Loreal products and innovation in them. Hence, in case of UK, social
factors of region favours Loreal. But from past some time, change in demand and opinion
of people is noticed. Rather than using chemicals cosmetics to preserve their beauty,
people have started using organic and natural ingredients. This aspects has considerably
reduced the revenues and sales of company. Further change in perception and choice of
people can impact business of Loreal in more negative manner (Eskes and et. al., 2017).
 Technological factors: Technological factors has ramification in each sphere of life. In
case of business organisation like Loreal, company is needed to adopt technological
advancement and innovation so that they can serve people with unique product. Loreal is
a technologically advanced company which is more tilted towards innovation and prefers
to follow contemporary trends. If company will not be technologically updated, serving
customer as per their requirement will not be possible and it can impact the revenues of
firm in negative manner.
Ethical factor impact current situation of Loreal
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Behaviour of a business organisation is as essential as its service and economical
performance. Ethical principles of Loreal are very robust which guides them towards aspects like
courage, transparency, respect, integrity etc. These aspects helps them in Complying with
political and legal laws along with innovation, CSR etc. In case of France, Loreal became the 1st
organisation to formulate code of ethics and having a chief ethical office. But in recent time, this
company is accused by other entities for its unethical practices such as misleading claims,
airbrushing advertisements, price fixing and animal testing etc. Due to this, reputation of
company has been tarnished considerably and trust of people in the products of Loreal has
reduced (Harf and Herman, 2016). But, company has decided to counter these aspects by
considering organisational ethics in a more sincere manner. In this context, company has also
acquire Body Shop which is a renowned UK company that is highly popular for their ethical
working and concern towards environment. To regain their reputation, company has indulged in
ethical practices and in 2018, firm has received the award of most ethical organisation. This
positivity will help the firm in earning maximised profits and revenues in a considerable manner
(Wickert, Vaccaro and Cornelissen, 2017).
Organisational culture of Loreal and Body Shop to acknowledge their compatibility
Organisational culture helps in analysing the working environment of a business firm. If
culture of a place is good, then employees are able to work comfortably and all the activities of
business are performed in a proper manner. If culture at a workplace is inappropriate, employees
feel problematic and they are not able to execute their work in a proper manner.
Organisational culture of Body Shop is very strong and incorporate all values which are
against community trade, planet protection, animal testing, human rights etc. All of these aspects
are in the culture of company. Company holds different kind of business campaigns and charity
foundations. Company is performing hard to reduce their carbon footprint produced. In this
context, company also initiate energy awareness training. As per Handy's scenario, Some aspects
of company incorporate role culture as each individual of firm have specialised roles. Power
culture is also present in company and accessed by top managers to control the operability of
company (Kayser and Budinich, 2015).
In case of Loreal, this company supports multiculturalism so that all the inefficiencies can
be reconcile and organisational performance can be improved. By this mind set of employees
became broad and they are able to perform their work with utmost efficiency. This shows that
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organisation is very flexible in their approach and provided beauty care products to people as per
the requirements of people. For instance, people in European nation required tinted creams with
lifting effects whereas people in Asian country require brighting skin tone creams. In this way
company has multiple cultures. In accordance with the Handy's typology, this company has team
culture in which employees perform work in teams so that complexities can be transformed into
simplicity. Also, power culture is prevailed where power is in the hands of top managers and
superiors. This benefits the company in managing their team and organisational processes in a
beneficial manner (NURUL, 2016).
This shows that compatibility of both organisational cultures is not very high but they
have some elements which are matched with one another and denoted that aspiration and
objectives of Loreal and Body Shop are same.
Different factors that would have been considered by Loreal before acquiring body Shop
Strategic acquisition is considered as one of the best way to improve the business growth.
The main key towards growth is to utilise the resources of acquired company in optimal manner
so that high business advantage can be gained. There are different factors which could have been
considered by Loreal before acquiring Body Shop. Some of these are stated below:
 One of the main factor behind acquisition is that Loreal wants to regain their positive
reputation in marketplace. Company has been founded guilty for animal testing and child
labour, due to which people have decided to not use the products of company. As
goodwill of Body Shop is very high, this could have helped Loreal in regaining their lost
reputation (Scott and et. al., 2018).
 Another reason for acquisition is that it is a quicker, less costly and least risky method to
achieve high growth. With the help of traditional methods like increasing marketing
efforts and sales, Loreal will not be able to attain best outcomes in expected time. As
Body Shop is a renowned firm, owner of Loreal have though of earning high revenues
due to acquisition.
 Another factor for acquisition could have been reduced entry barriers. By acquiring
exisitng company like Body Shop which is already operating in almost all countries,
Loreal can overcome all the market entry barriers in an efficient manner. Also, by
acquiring Body Shop, Loreal will have less risk of adverse competition due to which they
can operate in new markets in a profitable manner.
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Which factors influence Loreal acquisition of Body Shop that leads to failure
In 2006, Loreal has acquired Body Shop to achieve high organisational vision in a proper
manner. But, this acquisition did not seems a profitable business for Loreal as its faced a big
failure. There are different reasons due to which acquisition done by Loreal has failed. Some of
these reasons are stated here. There are some incidences like Animal testing, carbon foot
printing, in which Loreal is founded guilty. This had reduced the reputation of organisation in a
specific manner. On the other hand, Body Shop is a cosmetic company which only use natural
ingredients to prepare their product (Šírová, 2015). Main core value of Body Shop is Defend
human right, activate self esteem, protect our planet, disfavour animal testing and supporting
community trade. This is the reason positive reputation of Body Shop is very high. According to
the mentioned points, this can be identified that ambitions and values of Loreal and Body Shop
are very different. This difference in organisational cultures of both the company is the main
reason due to which carried out acquisition failed in its actual practice.
Also, due to increased competition, Body Shop has struggled very much and losses its
dominant position in market. Body Shop brand is not extendable to other beauty segments like
Skin Care or make-up but this is not the scenario which is expected by the management of Loreal
at the time of acquisition. Also, on financial grounds Body Shop is on lower returns and not
able to balance the portfolio of Loreal. Due to this, expectation of Loreal from acquisition is not
fulfilled in a proper manner. Also, due to inadequate due diligence, Loreal was not able to
properly acknowledge the business and financial issues that are faced by Body Shop. These
issues have further expanded and reduced the expected profitability for Loreal. These are some
of the reasons which leads to failed acquisition of Body Shop by the Loreal cosmetics (Voigt,
Buliga and Michl, 2017).
PART 2
Write a reflection report on own experience about this project
According to my perception, working on case study of Loreal and Body Shop is very
interesting. I have gained a lot of knowledge related with cosmetic and skin care industry. At
first, I have acknowledged about the role of political, economic, technological factors in the
current situation of Loreal. Along with this, I have identified about the impact of Social and
Ethical factors on the working of Loreal. By analysing these factors in a proper manner, I am
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capable on understanding which aspects favour a company and which elements are not in favour
of Loreal. I have identified that main reason due to which Loreal has decided to acquire Body
Shop is because of its reduced ethical reputation.
By working on this report, I have learnt that Body shop has five core values which
benefits the company in gaining wide support from the customers. These values are plant
protection, no test on animals, high self esteem, defending human rights and support for
community trade. Due to these values, company is favoured by people. But I feels that intense
competition in cosmetic sector have outpaced Body Shop. As per my analysis, Loreal has
acquired Body Shop so that their good image can be formulated and they can encounter a big
hike in their sales. But, this has not happened in reality. My overall experience of this project is
very good and it has helped me in increasing my knowledge and capabilities to conduct a
research. This project have helped me in evaluating the differences between natural and
chemically based cosmetics and their impact on out skin. I am feeling very great and enthusiastic
after working on this project.
CONCLUSION
As per this given report, it has been comprehended that Loreal is a global brand which is
successfully operating as a market leader in global context. Macro factors include external
factors like social, technological, political and environmental aspect. These aspects impacts both
positively and negatively to an organisation. If ethics of a company are robust, it sustains a
positive image in marketplace. In case of organisational culture, right culture assists a company
in achieving their goals and targets in a proper manner. Main reason due to which Loreal acquire
Body Shop are high growth, positive reputation and ethical stability in market. But due to lower
returns and differences in organisational value, this acquisition fails considerably.
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REFERENCES
Books and Journals
Ashraf, I. And et. al., 2015. The Case Analysis of L’Oréal Corp. as Market Leader. International
Journal of Academic Research in Business and Social Sciences. 5(8). pp.131-148.
Chun, R., 2016. What holds ethical consumers to a cosmetics brand: The Body Shop case.
Business & Society. 55(4). pp.528-549.
Collischon, S., Löw, K. and Törnqvist, J., 2018. Beauty and the Beast: The Acquisition of The
Body Shop by L’Oréal. LBMG Corporate Brand Management and Reputation-Masters
Case Series.
Eskes, C and et. al., 2017. Alternatives for dermal toxicity testing. Springer International
Publishing.
Harf, J. and Herman, K., 2016, January. The Big Five at L'Oreal Operations Americas. In ASSE
Professional Development Conference and Exposition. American Society of Safety
Engineers.
Kayser, O. and Budinich, V., 2015. When markets fail. In Scaling up Business Solutions to
Social Problems (pp. 92-103). Palgrave Macmillan, London.
NURUL, M. P. H., 2016. The Influences of Green Marketing and Word of Mouth on Consumer
Attitudes and Intention to Repurchase Green Fast Moving Consumer Goods (FMCG)
Products in Padang, Indonesia (Doctoral dissertation, Universitas Andalas).
Scott, T. and et. al., 2018. Healthcare performance and organisational culture. CRC Press.
Šírová, V., 2015. Managing Marketing Report On L’oréal Group. CRIS-Bulletin of the Centre
for Research and Interdisciplinary Study. 2015(1). pp.31-46.
Voigt, K. I., Buliga, O. and Michl, K., 2017. Pure Beauty: The Case of The Body Shop. In
Business Model Pioneers (pp. 25-39). Springer, Cham.
Wickert, C., Vaccaro, A. and Cornelissen, J., 2017. “Buying” corporate social responsibility:
organisational identity orientation as a determinant of practice adoption. Journal of
Business Ethics. 142(3). pp.497-514.
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