Analysis of L'Oreal's Acquisition of Body Shop: Report and Evaluation

This report provides a comprehensive analysis of L'Oreal's acquisition of Body Shop. It begins by examining the impact of the macro environment on L'Oreal, including political, economic, social, technological, and ethical factors. The report then delves into the organizational cultures of both L'Oreal and Body Shop, assessing their compatibility and the challenges that may arise from their integration. Part 1 of the report also outlines the factors that L'Oreal considered before acquiring Body Shop, such as financial implications and market analysis. The report concludes with a reflection on the acquisition process and provides an overview of factors that affected the acquisition. The report also explores the factors that influenced the acquisition's success and provides a summary of the key findings and conclusions.

Individual Report

Table of Contents
INTRODUCTION...........................................................................................................................4
Part 1................................................................................................................................................4
Impact of Macro environment on the current situation faced by the L'Oreal.............................4
Organisational culture of Body Shop and L'Oreal and compatibility of the culture...................6
Factors which have been considered by the L'Oreal before deciding to acquire Body shop......7
Factors that had effected the L'Oreal acquisition of Body Shop.................................................8
Part 2................................................................................................................................................9
Reflection Report........................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES................................................................................................................................1
.........................................................................................................................................................1

INTRODUCTION
Organisation has to focus upon various factors which can influence the operations and the
activities which are to be performed by them. For this various internal and external factors are
analysed which can have both positive and negative impact on the businesses. Organisational
culture need to be managed by the leaders effectively as with this they can keep their employees
motivated. Also it help the management to identify the compatibility level of the organisation
with that of the changes which are to be made in the organisation. For expanding the business
and to meet up with various faced by the businesses, they need to consider the options of
acquisition and mergers with which they can get over such issues and problems. For this report
the case study of L'Oreal is taken into consideration, which is a cosmetic giant who acquired
Body Shop to meet up with the issue of loss of reputation etc. This report includes various
factors that affected such acquisition, impact of the organisational culture and the factors that
need to be consider before planning for acquisition.
Part 1
Impact of Macro environment on the current situation faced by the L'Oreal
For the organisations it is crucial to analyse the impact on various macro factors which
can affect the business operations. With the help of such analysis appropriate strategies and
planning can be done by the management in order to reduce its impact. For analysing the macro
environment for L'Oreal PEST analysis need to be done along with that the impact on social and
ethical factors are also taken into consideration.
 Political Factors: The imposition of various rules and regulations has impact on the
operation of the L'Oreal. Various regulations on the medicines has been changed by the
European Union which leads to reduction in the dermatology products. Along with this
various policies are implemented for the advertising of the products of the company so
that they cannot mislead the customers. All these factors affects the functioning of the
company. But L'Oreal has identified alternatives for animal testing which has been
approved by the OECD. This has positive impact on the company (Demir, Alıcı and
Chi Keung Lau, 2017).
 Economic Factors: The company has been performing in a dynamic environment in
which they have to adapt the changes which are taking place such as the changes in the

income of the consumers, the economic stability has impact on their sales. They have
opportunity to expand their business in developing countries like India and China but
due to trade war between China and USA has reduced the consumption level. Also the
global slowdown has impact on the demand of their products as due to this the
consumers are left with lesser disposable income (Davies and Neilson, eds., 2018).
 Social Factors: The culture in which the organisation is operating has impact on the
functioning as the demand of the products depends upon the values, beliefs and taste
and preference of the consumers. The consumers are becoming more conscious of their
appearance which leads to increase in demand of the products of L'Oreal as they
provides a wide variety of cosmetics. The products of L'Oreal satisfies the need of the
customers by providing the goods as per their needs such as they offers products which
reduces the need of visiting to the Spa. But due to growing environmental
consciousness they have to determine the alternative to the animal testing which
enhanced their image.
 Technological Factors: This factor is associated with the innovation in the products
and the processes for which the company need to invest a lot of funds in research and
development which can help in introducing the innovation. The companies need to
acquire activities and create alliances with other beauty tech start-ups which helps them
to renew their portfolio and to innovate their strategy. With the help of this factor they
have introduced new category of cosmetics such as cosmeceuticals and dermo cosmetic
which helps in resolving the issue of anti-ageing etc. This has a positive impact of the
L'Oreal as with this they can easily attract a lot of people (Elsmore, 2017).
 Ethical Factors: Ethical performances of the organisation helps them to improve their
image and thus improves the financial performance. L'Oreal is considered to be one of
the most ethical company as they strive to be a responsible company. This is because
they consider the ethics in their strategy and in their daily practices. The ethical culture
of the company and its integrity facilitate better assessment of the substantial part of the
organisation. Due to ethical practices of the L'Oreal they have been picked as one of the
best company by their ethical and their sustainable practices. With the help of these
ethical practices the impact of various ethical issues in the past can be easily managed
and compensated.

Organisational culture of Body Shop and L'Oreal and compatibility of the culture
Organisational culture refers to the values, beliefs, assumptions of the employees
working in the organisation. Also it includes the way in which the work is being done by the
people which is unique as it vary from organisation to organisation (Filippou and Taylor, 2017).
Organisational culture at L'Oreal: The culture of L'Oreal is made up of various values
and specific ways of doing the work. Such culture is communicated to the employees working
and to the one who joins them. They allow their employees to actively participate in their
activities within the group. By developing familiarity and sharing the vision, the employees can
be attracted and retained by them for a longer period of time. Human resource of the company
ensures that the daily experiences of the employees are improved consistently. The culture is
very attractive as they consider the interest of the consumers, anticipate their expectations. Also
the role executives act as facilitators who focusses on the growth of the employees and analyse
their potential on the basis of which they provides them various trainings.
Organisational culture at Body Shop: The culture at the Body Shop is that they have a
shared vision and values which motivates their employees to be consistent towards their
objectives and goals. They follow the colour theme in their stores which represents their image
and the nature of the products that they offers. The employees of the Body Shop are friendly and
have understanding among each other which improves their customer services. Their employees
have dress code which give them professional appearance and motivates them to act in the same
way. Also they consider the community trade, protects the human rights and support no animal
testing. With the help of community trade the suppliers are made to build better and safe future
as they are developed by way of various opportunities. Further they make their employees to
identify various ways to reduce the impact of their operations on the society(Kimenyi and
Wieland, 2019).
The culture of the organisation are compatible with the need, expectation and
requirement of the employees to a greater extend. But at some point of time it may contradict
with the values and beliefs. Also it may get affected in case the changes are to be implemented in
the organisation. Various benefits of such compatibility are :
 When the culture is adaptable the chances of the conflicts reduces among the employees
and even with the management, as shared vision develops better understanding among
the people in the organisation.

 Strong culture contributes to the success of the organisation effectively as it leads to
better and quick decision making which reduces the possibility of delays. While it also
promotes active participation in the organisation which leads to various suggestions and
opinions from the employees. With the help of such opinions the problems can be
resolved by them easily (Laforet, 2016).
Along with some benefits various challenges are also faced by the companies due to
organisational culture are given below:
 The challenges which is faced by them related to the culture is due to diversity in the
organisation. The L'Oreal and the Body Shop both have a large number of people
working in the organisation which belongs to diverse culture. Due to this the employees
has to faces issues of understanding.
 The another challenges which is faced by them is related to the differences in the values,
beliefs and perception of the employees. When organisations are merged their employees
has to adjust them selves with the new culture. This may leads to resistance which
adversely impact the overall performances of the organisations.
Factors which have been considered by the L'Oreal before deciding to acquire Body shop
L'Oreal decided to acquire the Body Shop as they were facing various issues which were
related with the misleading claims of the customers, airbrushing advertisements etc. Whereas the
operations of the Body Shop were effective and famous as they consider the human rights and
the environmental care. Due to this they made a bid to acquire the Body Shop as with the help of
this they can compensate their loss of reputation (Le Meunier-FitzHugh and Douglas, 2016).
Various factors which they must have decided before acquiring the Body Shop includes:
 Look at the rational behind the acquisition: Before identifying and deciding for the
acquisition the L'Oreal identified various rational which helps them to resolve various
issues faced by them. They analysed that the Body Shop fit to their strategy and can
easily resolves their issues. Also the funds could also be easily procured for the same as
they can convince their investors by providing the established mission and vision and
with the help of this option they could easily improve their performance.
 Impact on Financials: Before acquiring the Body Shop, the L'Oreal had considered the
impact on their financial. It can be in context of what amount they will be required for
taking over the company and to what extend their revenue will be increased by taking

over the company. On the basis of such identification they analyse various sources from
where they can procure funds. Along with this they identified the projected growth for
the company with the help of which they determined the benefits to them (Meissner and
McKenzie, 2019).
 Manage Expectations well: While acquiring any business, the acquiring company has
various expectations which can be in terms of timely completion of the procedure of
acquiring, benefits of such acquisition to the companies. L'Oreal before acquiring the
Body Shop expected that with the help of this they can improve their business operations
which they could do. They identified various factors which they expected from such
acquisition includes improvement of their poor performance, use of goodwill of Body
Shop to limit their loss of reputation.
 Consider the pros and cons of new market: It is important for the companies to
identify various pros and cons of such strategy which they are planning to implement.
The same is done by the L'Oreal as they determined various complexities, issues related
to the communication, regulations, intellectual property rights etc. On the basis of which
they identified various strategies with the help of which they can overcome such issues
and can make the acquisition effective.
 Have a proper integration plan: Before acquiring any company it is important for the
organisation to develop a integration plan with the help of which they can efficiently
manage their resources and the capabilities. The L'Oreal prepared a plan which included
various short-term, mid-term and long-term objectives which they could achieve by
acquiring the Body Shop (Scott and Marshall,2018).
Factors that had effected the L'Oreal acquisition of Body Shop
The L'Oreal acquired Body Shop with the aim of resolving various issues faced by them
but due to mismanagement of the strategies and various other issues the acquisition could not be
successful. The various factors that affected the acquisition are:
Poor performance: The performance of the products were not satisfactory due to which
their sales declined and thus resulting the loss of revenue of the company. Due to inefficient
strategies the Body Shop could not perform better which leads to reduction in the returns on the
capital and relatively lesser margins on profits. With such under performance they could not
performed which makes the L'Oreal to decide to sell off their business. Their sales slumped

down by 38% which leads to reduction in the profitability (L'Oreal Potential Body Shop Sale,
2017).
Losses customers loyalty: The brand image of the Body Shop is high as the customers
have high perceived value from the products but due to lack of performance standards and
reduction of the prices downwards by the L'Oreal affected the customers loyalty. Also the brand
is not extended by the companies which losses the interest of the customers as they did not added
any new products to it such as a range of make-up, skin care products etc.
Strategical issues: The main reason which leads to the failure of the business is lack of
proper strategies. Such as the products of Body Shop are natural which is why the customers
expected more products under the same brand but the L'Oreal and the Body Shop failed to do so.
The companies underperformed consistently which is due to inappropriate strategies formulation
and their implementation. It affected their operations and financial performances which reduced
their profitability. This leads to sales off by the L'Oreal of the Body Shop (Chapman and
Pambudi, 2018).
Competition: The competition affected their operation the most as they did not focussed
upon various advertising and promotional strategies which are crucial to make the customers
aware. The rival brand uses more of online medium but they did not took them into consideration
this affected their operations. The focus of L'Oreal was on the stores but not on the online
shopping which is most preferred by the customers. This put them in the situation of not being
capable of meeting with the competition with the competitors.
Due to all such factors the organisation has to sale off the Body Shop because this
affected their operations and reduced their profitability. Retailing is becoming a challenge for the
companies because of the emergence of the online platform. But the L'Oreal could not meet up
with this requirement which leads to failure of their acquisition.
Part 2
Reflection Report
While conducting this report I realised that it is important for the companies to consider
various factors such as macro and micro factors. This helps the organisation to understand
various the current situations prevailing in the market and has impact on their operations. With
the help of PEST analysis, I identified the impact and current situation of L'Oreal which have

both positive and negative impact. Further while preparing this report, I analysed the importance
of the organisation culture and the way it can influence the operation of both the companies
L'Oreal and the Body Shop. The organisational culture has various benefits and challenges for
the organisation which they has to be considered by organisation while analysing the culture.
I identified various factors which are determined by the L'Oreal before acquiring the
Body Shop which make me understand various implications of various factors that leads to
acquisition. With the help of these factors I could analyse the requirement of the acquisition and
the ways in which the such requirements can be fulfilled such as the requirement of the funds
and the sources from where such funds can be gather by the company. I also identified that the
L'Oreal also analysed various rational which are required for this acquisition such as funds,
analysis of the growth factors and the path which they have to follow to achieve the growth etc.
Later on, while preparing the reports I realised that the acquisition was not successful.
For this various factors which causes failure was identified. Once I determined all the factors, I
analysed that it is important for the organisation to walk hand in hand with the situation
prevailing in the environment such as they did not took the moves of the competitors seriously
and this leads to poor performances of both the organisation. Also I found that they did not
focussed on the strategies that is they neither formulated the strategy as per the requirements nor
implemented the existing strategies well. The companies did not focussed on the advertising and
promotional activities which is why they could not attract the customers effectively which leads
to loss of their profitability and market share.
This report developed analysis skills in me which will help me in understanding various
aspects in future and will help me in understanding such issues of acquisition in future.
CONCLUSION
It is concluded from the above report that it is important for the organisation to
understand the influence of various macro factors so that their impact can be managed. Further
they have to understand the organisational culture and its impact on the operations so that the
management can make them compatible with the challenges and its benefit. Along with this
various factors which are to be decided by the company are discussed such as sources of funds,
growth trajectory etc. While the factors which affected their acquisition are also analysed such as
strategic issues, level of competition and various other such factors.

REFERENCES
Books and Journals
Chapman, A.J. and Pambudi, N.A., 2018. Strategic and user-driven transition scenarios: Toward
a low carbon society, encompassing the issues of sustainability and societal equity in
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Davies, H.T., Tavakoli, M., Malek, M. and Neilson, A. eds., 2018. Managing Quality: Strategic
issues in health care management. Routledge.
Demir, E., Alıcı, Z.A. and Chi Keung Lau, M., 2017. Macro explanatory factors of Turkish
tourism companies’ stock returns. Asia Pacific Journal of Tourism Research. 22(4).
pp.370-380.
Elsmore, P., 2017. Organisational Culture: Organisational Change?: Organisational Change?.
Routledge.
Filippou, I. and Taylor, M.P., 2017. Common macro factors and currency premia. Journal of
Financial and Quantitative Analysis. 52(4). pp.1731-1763.
Kimenyi, M.S. and Wieland, R.C., 2019. Strategic issues in microfinance. Routledge.
Laforet, S., 2016. Effects of organisational culture on organisational innovation performance in
family firms. Journal of Small Business and Enterprise Development. 23(2). pp.379-
407.
Le Meunier-FitzHugh, K. and Douglas, T., 2016. Achieving a Strategic Sales Focus:
Contemporary Issues and Future Challenges. Oxford University Press.
Meissner, K.L. and McKenzie, L., 2019. The paradox of human rights conditionality in EU
trade policy: when strategic interests drive policy outcomes. Journal of European
Public Policy. 26(9). pp.1273-1291.
Scott, T., Mannion, R., Davies, H. and Marshall, M., 2018. Healthcare performance and
organisational culture. CRC Press.
Online
L'Oreal Potential Body Shop Sale, 2017. [online] Available
through:<https://www.cosmeticsdesign-europe.com/Article/2017/03/08/L-Oreal-s-
potential-Body-Shop-sale-a-look-behind-the-headlines>
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