BABS Foundation Context of Business: L'Oreal and Body Shop Acquisition

This essay provides a comprehensive analysis of L'Oreal's acquisition of The Body Shop, examining the various factors that influenced the deal. The introduction sets the stage by defining the context of business and highlighting the importance of assessing different factors impacting business operations. The main body delves into the impact of the macro environment on L'Oreal, utilizing PESTEL analysis to evaluate political, economic, social, technological, legal, and environmental factors. It also explores the organizational cultures of both Body Shop and L'Oreal, identifying role, person, power, and task cultures and their compatibility. The essay discusses factors L'Oreal considered before the acquisition, such as cost, market image, financial position, and human capital. Furthermore, it analyzes factors contributing to the acquisition's failure. The conclusion summarizes the key findings and implications of the acquisition. The references section provides a list of sources used for the analysis.

Context of Business

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
1. Discussion of the impact of macro environment has on the current situation faced by
L'Oreal.........................................................................................................................................1
2. Organisational culture at Body Shop and L'Oreal...................................................................3
3. Discussion about the factors that L'Oreal would have considered before deciding to acquire
Body Shop...................................................................................................................................4
4. Factors having effect on the L'Oreal's acquisition of Body Shop resulting in failure of
project..........................................................................................................................................5
CONCLUSION................................................................................................................................6
REFERNECES................................................................................................................................8

INTRODUCTION
Context of business refers to the assessment of different factors which have huge impact
on the operations of business organisation. In order to operate all the business activities smoothly
it is essential for the organisation to gone through from all the factors which might lead negative
impact on the business operations. This following assignment is based on L'Oreal which is one
of the well recognised cosmetic industries that operates its activities across the world. Currently,
this company is planning to acquire to Body Shop which is also operating its business activities
under same industry. This file will cover several topics includes influence of macro environment,
organisational culture of both companies, different factors which requires to be considered while
opposing other business etc. Additionally, different factors which are occurring due to the failure
of acquisition and reflection will also consider in this report.
MAIN BODY
1. Discussion of the impact of macro environment has on the current situation faced by L'Oreal
Macro environment refers to the external forces of business organisation which have
great impact on the organisational performance (Chun, 2016). Consideration of these factors in
decision making is essential so as to operate all the business activities smoothly. It is also
necessary for the manager of L'Oreal to evaluate external environment so that they can acquire
Body Shop effectively without any crisis. In this regard, they can use PESTEL analysis which is
describing beneath:
Political: These factors related to government institutions are considered as part of it.
These factors include stability of governmental parties, trade restriction, tax policies and many
others. At the time of acquiring Body Shop L'Oreal has faced a lot of challenges related to
taxation policies of government. As spending amount of L'Oreal for acquisition was 652 million
pounds so company have to pay higher amount of tax on the same due to which the overall cost
of the acquisition will remain at higher level.
Economic: These factors includes inflation rate, interest rate, exchange rate, deflation, trade
policies etc. as these are directly related to the economy of nation. L'Oreal is a French personal
care company as current main focus of them on acquiring Body Shop which is established in
UK due to which company have to face the issue of paying the amount in local currency which
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create big problem for L'Oreal. Also, different economic conditions of both nations also seen as a
major issue for L'Oreal (Febriyanti, 2014).
Social: The factors which are arising due to changes in belief and attitude of people are
included in this like ethical consideration, lifestyle attitudes, culture, age distribution and many
more. Body Shop have lower brand value within the market because of it is practicing its
products on animals. Due to this, L'Oreal also have to face some social issues which lead
negative impact on their image and decrease overall productivity and sustainability of their
business. Moreover, Body Shop is carrying its activities in an unethical manner due to some
ethical issues also faced by the manager of L'Oreal in conducting all their business activities
effectively.
Technological: The advancement or innovation in technology is main example of these
factors which required to be considered by business entities to carry out all their operations in a
systematic manner. While opt the business of Body Shop, L'Oreal needs to consider all the latest
technologies or techniques in their activities so as to meet the current trends of market and to
provide higher satisfaction to the customers’. It leads the direct positive impact on the brand
image of L'Oreal which results higher profitability and sustainability in marketplace.
Legal: All these factors related to government rules and regulations are included here
like labour law, copyright, patent and acquisition act. In order to acquire the business of Body
Shop successfully it is essential to consider all the laws and regulations of government of both
nations so as to create an effective brand image in marketplace and to attain higher success
within the limited period of time.
Environmental: In this, those factors are included which are occurring due to the
environmental conditions like climate, weather, environmental policies, CSR etc. As in the
present world, Body shop is not having effective brand image due to its practising on animals
which create difficulties for L'Oreal as it create huge legal interferences in organisation activities
as it is harming environment (Coste-Maniere and et. al., 2019).
From the preceding discussion, it has been evaluated that current situations of the Body
Shop has lead huge impact on the performance of L'Oreal. Due to which, it become more
essential for the manager of L'Oreal to ascertain that all the unethical practices of Body Shop
remain stopped.
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2. Organisational culture at Body Shop and L'Oreal
Organisational culture refers to system which is based on the beliefs, assumptions and
values that are following by the management and subordinates within the organisation. In order
to effectively achieve the organisational goals and objectives it is requires having goods culture
at the workplace. There are four types of cultures which can be espoused by different
organisations on the basis of their needs and structure. L'Oreal and Body Shop are also
considering separate cultures to carry out their operations in an ethical manner. All these culture
are defining below:
Role culture: In this type of culture power is coming from the role of each individual
which allows each personal to accomplish their work in an effective manner and with great
efficiency. As due to this, each employee within the organisation like Body Shop and L'Oreal is
well introduced with their role which forces them to accomplish their assigned work within the
given period of time (Gough, Hall and Seymour-Smith, 2014).
Person culture: Under this kind of culture, all the individuals are giving their major
focus on their personal objectives by neglecting the organisational aims as they only seeks to
attain the growth for themselves only. In this, each person considered that they are superior and
talented. This culture can be adopted by the manager of L'Oreal and Body Shop when they feel
that each employee within their organisation is having an expertise and higher skills so as to
perform in a well manner.
Power culture: In this type of culture, power is handed on some certain person as in an
organisation this power is having by manager which enables them to make proper control and
monitor on employees activities. Herein, employees are not included in the decision making
process which can lead negative impact on them as well. This culture is most suitable for L'Oreal
and Body when they want to accomplish a specific task within a limited period of time.
Task culture: In this, different tasks are assigned to the employees as per their skills,
qualities and capabilities. This will enables the organisation to perform its difficult jobs in easy
way as it depends on the abilities of employees to perform its job. This culture can be used by the
management of L'Oreal and Body Shop in order to identify better solutions for their problems
which are facing by them.
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From the above defined cultures, task culture will be followed by L'Oreal as with the help
of this they will be able to get assurance of the effectiveness of accomplishment of each task and
also can find best solution for all the issues of their operational activities. Other, Role culture will
be espoused by Body Shop as this will enables them to meet their desired outcomes on time by
getting the efforts of each individual effectively (Ferrão, 2015).
The culture which are following by L'Oreal and Body Shop are compatible with each
other as because both of these will help them in getting the higher support of employee in
accomplishing all the give assigned with great efficiency. By adopting these cultures these both
companies are trying to attain its long time goals so as to enhance the sustainability of their
organisation in marketplace. The high range of compatibility is developing several opportunities
for L'Oreal which is defining below:
Highly motivated staff members: If the organisation will follow these both cultures like
task culture and role culture then they will be able to get higher motivation of employees in
achieving the organisational goals. As because it provides right to employees to perform their job
as per their capabilities and skills so that they does not have to feel overburden on themselves.
As task culture allows the employees to get work as per their capabilities and talent whereas role
culture enables all the members within the organisation to perform their job as per their role so as
to maintain their interest and motivation in achieving the organisational goals and objectives.
Future growth: With the help of them L'Oreal will be able to grow faster. As higher
compatibility in the both role and task culture helps the organisation in increasing engagement
level of employees which direct lead impact on the growth of the business in marketplace. If the
L'Oreal will acquire the Body Shop then they will be able to increase chances of their growth in
market as because both of these organisation having almost similar culture (Guezguez and
Lafforgue, 2018).
3. Discussion about the factors that L'Oreal would have considered before deciding to acquire
Body Shop
Before acquiring another business organisation it is necessary to have loon on assessing
various factors so as to make effective decisions related to this acquisition. As L'Oreal have to
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pay 652 billion pounds to acquire the business of Body Shop so it is very crucial for them to
consider various factors. Some of them are describing below:
Cost of acquisition: This is the most important which needs to be undertake before acquire a
business as because it is related to expand the funds. As in case if the acquisition amount is very
higher than it might happen that company have to expand its monetary resources as well other if
this amount is very lower than in this case the might happen that it creates difficulties for
organisation to resale it to any other entity. Due to this, it is very essential for L'Oreal to gone
through from this factor very carefully in terms to get higher success and growth (Sarason and
Hanley, 2015).
 Market image of the company: It is another most important factor which needs to be
considered by a business organisation. It defines that before acquiring any other entity
evaluation of brand image of them is essential so as to operate all the organisational
activities in an effective manner. In order to sustain their success it is necessary for
management of L'Oreal to have looked on assessing the brand image of Body Shop so as
to ascertain the success and growth in market.
 Financial position of Body Shop: If a company wants to acquire any other organisation
then the focus on assessing the financial position is also mandatory in order to make
appropriate decision. In case, if there is huge availability of debt then it might create issue
for that company who is acquiring that organisation. It is also same applied to
management of L'Oreal that they must give their emphasis on evaluating the financial
position of Body Shop and after that they should formulate decision to acquire it or not.
 Human capital: The consideration of human capital is also vital as because human
resources are considered as a biggest way to get higher success and growth in the
business. For that organisation who is acquiring the business of other entity is essential to
assess those employees who are working in that firm is highly skilled and experienced or
not. L'Oreal manager also must give their focus on those employees of Body Shop having
some personified skills and capabilities or not so as to perform their job role in a
significant manner.
4. Factors having effect on the L'Oreal's acquisition of Body Shop resulting in failure of project
It is not necessary to acquire another business organisation is also profitable but in some
cases it also might prove as a failure. A range of components’ are available which may lead
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negative impact on acquisition like missed value for investment, poor communication, lack of
clarity, external factors and many others. As L'Oreal is giving their focus on acquiring Body
Shop with the aim to earn higher profit, market share and to make strong customer base but in
some cases it sometimes can give results reversely (Factors resulted in failure of acquisition of
Body Shop, 2019). The factors which are main reasons of failing of acquisition are as follow:
 High competition: The higher level competition for Body Shop is available in the
marketplace from Estee Lauder, Revlon and many others which create biggest issue for
L'Oreal to acquire this company. As because higher level of competition might affect the
profitability and sustainability of Body Shop in a negative manner. Due to which, L'Oreal
management have to think to acquire this organisation as this also might lead them in
lower position in marketplace (Voigt and et.al., 2017).
 Unstoppable popularity of online shopping: In the present world, online presence of
each business has take a huge place due to which people do not prefer to visit physical
outlets to purchase the products. As the products of Body Shop are not available on
online sites which create issue for L'Oreal to achieve higher profits, sales and
sustainability as well. The main motive of L'Oreal behind acquiring the business of Body
Shop is to enhance its market share and profitability bur due to this they are not able to
meet their plans successfully. It has been seen as biggest failure of company as it has
affected sales, revenue and market share of L'Oreal.
 High cost of running a large number of shops: The cost of executing the activities of
Body Shop is higher and L'Oreal cannot bear this much amount to carry out all their
activities appropriately. Due to this Management of L'Oreal realised that motive of
acquisition behind acquiring Body Shop will not be able to accomplish as it requires
more investment to conduct all the functions in a significant way.
Hence, it can be stated that various factors are available which can become reason of failure of
acquisition. All these factors lead direct impact on the profitability, market image and sales of
the business. Moreover, the manager also has to face the issue of higher cost for running the
business activities effectively (Ricci, 2014).
.
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CONCLUSION
From the above file, it can be concluded that in order to acquire any other business entity
it is essential to undertake all the important factors of them so as to operate all the operations
smoothly without facing any kind of issues. Factors which need to be analysed are cost of
acquisition, brand value, human capital and many others. As these all are playing an important
role in taking the organisation at leading position in the marketplace.
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REFERNECES
Books and Journals:
Chun, R., 2016. What holds ethical consumers to a cosmetics brand: The Body Shop
case. Business & Society. 55(4). pp.528-549.
Febriyanti, N., 2014. THE INFLUENCE OF BRAND EQUITY TOWARD CUSTOMER BUYING
DECISION ON COSMETIC PRODUCT IN JAKARTA (Doctoral dissertation, President
University).
Coste-Maniere, and et.al., 2019. Circular economy: A necessary (r) evolution. In Circular
Economy in Textiles and Apparel (pp. 123-148). Woodhead Publishing
Gough, B., Hall, M. and Seymour-Smith, S., 2014. Straight guys do wear make-up:
Contemporary masculinities and investment in appearance. In Debating Modern
Masculinities: Change, Continuity, Crisis? (pp. 106-124). Palgrave Pivot, London.
Ferrão, L. M. G., 2015. A case study on the launch of Revitalift Laser X3 by L’Oréal Paris
Portugal (Doctoral dissertation).
Guezguez, H. and Lafforgue, H., 2018. Ivan Coste-Maniere1, Karine Croizet2, Eleonora Sette3,
Alexandre Fanien3. Circular Economy in Textiles and Apparel: Processing,
Manufacturing, and Design, p.123.
Sarason, Y. and Hanley, G., 2015. 10. Social ventures: exploring entrepreneurial exit strategies
with a structuration lens. Research Handbook of Entrepreneurial Exit. pp.214-226.
Ricci, F., 2014. L'Oreal acquisition policy: The Body Shop case study (Doctoral dissertation).
Voigt, K. I. and et.al., 2017. Business Model Pioneers. Management for Professionals.
Vasudevan, H., 2015. L'OrealBaby Girl PerfumeMarketing Strategy. International Journal of
Information, Business and Management. 7(1). p.193.
Online
Factors resulted in failure of acquisition of Body Shop. 2019. [Online]. Available through:
<https://www.bbc.com/news/business-38905530>
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