Impact of Business Context on L'Oréal's Acquisition of Body Shop

This report delves into the business context surrounding L'Oréal's acquisition of Body Shop, examining the impact of the macro-environment, particularly social and ethical factors. It analyzes the organizational cultures of both L'Oréal and Body Shop, highlighting their differences and potential synergies. The report discusses the factors L'Oréal considered before the acquisition, such as expansion, innovation, and costs, and identifies the components that contributed to the acquisition's failure, including cultural clashes, external factors, poor communication, and a lack of clear objectives. The analysis provides insights into the challenges and complexities of integrating businesses with differing values and strategic focuses, offering valuable lessons for business development and strategic decision-making in the cosmetic industry.

Context of Business

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY ..................................................................................................................................3
1) Impact of macro environment on current state of L’Oréal.....................................................3
2) Organisational Culture of L’Oréal and Body Shop................................................................5
3) Factors considered by L’Oréal before acquiring Body shop..................................................6
4) Components of failure............................................................................................................7
5) Reflection of the report...........................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Context of business is a method which is used in order to analyse the various factors of
environment in which a business operates. It includes the environmental scanning which focuses
on the external environment of the business and also helps in identifying the risk and success
factor which is useful in order to operate and run a business organisation. It is also important for
the business planning as it helps in analysing the strengths and weaknesses of the business
environment as its objective is to develop a strategic plan of action which is helpful for business.
It is a method which is associated with the method of sociological analysis and it include many
frameworks such as PESTLE, SWOT, competitive forces and many more. Business context
encompasses the understanding of many factors which impacts the business from various
perspective which include decision making and how they should achieve(Bell, Bryman and
Harley, 2018). This report is based on the case study of L'Oreal which is the largest cosmetic
company and a very popular brand in over 130 countries. This report is going to focus on the
impact of the external environment which company is currently facing, specifically in social and
ethical factors. Moreover, also describe the organisational culture of both the companies Body
Shop and L'Oreal and also discuss the various factors which are considered by L'Oreal before
acquiring Body Shop.
MAIN BODY
1) Impact of macro environment on current state of L’Oréal
Macro environment is the exist in the economy as whole and not in particular region or
sector(Teagarden, Von Glinow and Mellahi, 2018). Macro environment refers to the broader
condition of the market and economy as whole rather than to a specific market segment. For
studying macro environment of organisation unique tools and techniques are introduced by
marketers. These tools enables companies to analyse and understand the macro environment they
are doing business. There are several macro environment factors which affects L’Oréal which are
as follows:
1. Political factors refers to the impacts government have on industries and their businesses.
It refers to the degree of government intervenes in the economy, basically all the
influences government has on the businesses are discussed here.

2. Economical component are those determinants which shows economy's performance in
business context. Some of these factors are economic growth, inflation rates, exchange
rates, disposable income of buyers and unemployment rates of that economy. These
factors impacts the company in both direct and indirect manners as all these factors
affects the purchasing power of society. Due to impacts on purchasing power of people
demand and supply also changes which affects the business of companies.
3. Social dimension of macro analysis talks about the demographic characteristics of
population, their customs, beliefs, values and norms they follow. These factors are
important for entities to consider and study while targeting particular audience.
Organisations have to study the population trends like age distribution, income and career
aspirations of people (Nissenbaum, 2018).
4. Technological factors takes the attention towards innovation in technologies that can
influence business operation in favourable or unfavourable manner. This element refers
to the level of innovation, amount of technological change and awareness taking place in
company along with the market.
5. Legal elements talks about the health and safety, consumers rights and laws, equal
opportunities and labelling and product safety. Legal laws and regulation are discussed
here, the companies have to very careful and should have full knowledge about what is
legal and what is not in the economy they are doing business. This is essential for
organisations to be safe from any kind of legal fee and penalties and work with
compliance of law.
6. Environmental factor have came into existence and noticed recently, because of the
increasing awareness and concern of public about the world(Viriyasitavat and
Hoonsopon, 2019). This factor is important to be considered due to increasing scarcity of
raw materials, unethical business practices companies use for sustaining and rising their
earnings etc. People now prefer those brands and products which are environment
friendly which are not harmful for the world.
From all the above components which exist in macro environment of every organisation and has
huge impacts on it either favourable or unfavourable. The most influential elements which are
affecting L’Oréal before and after acquiring Body Shop are Social and Environmental (Ethical).
A brief explanation of these two dimensions and its impacts is as follows:

Social factor of macro environment is negatively impacting L’Oréal because of the
recent acquisition imposed on it of doing business with unethical practices. The company is
suffering from poor reputation in market and within minds of its customers (Koç and et. al.,2018)
. Critics are also questioning their decision of acquiring Body Shop, they are referring this move
of acquisition as image builders. Customers of L’Oréal and other public has this image in mind
that company acquired Body Shop to use its goodwill for itself and building good image in
public again after all the allegations company has on it.
Environmental element also negatively impacted the brand, L’Oréal already been
accused of unethical practices, misleading claims and airbrushing. Nestle which has 29% stakes
of L’Oréal with it, also been through negative publicity over animal testing, child labour and
other unethical promotion. These news and acquisitions about both L’Oréal and its part owner
Nestle spread misconceptions in minds of people. L’Oréal and Nestles sales were decreased
drastically, their buyers switched brands. Their market share reduced due to reduction in sales
and lost customers. The company's goodwill also got affected people start choosing other
company's product over their.
2) Organisational Culture of L’Oréal and Body Shop
Organisational culture is a system of values, beliefs, assumptions of organisation which
regulate peoples behaviour in an organisation(Rachinger and et. al., 2018). Every company
develops unique culture, which works as guidelines and boundaries for the staff and all related
parties of that organisation. It also, includes expectations, experiences and philosophy's of entity
according to which they work and perform different activities.
Organisational culture of L’Oréal
L’Oréal organisational culture is promoting corporate culture by which they enhance the
attractiveness of the group (Oldman and Tomkins, 2018). Adopting this culture helped company
to focus on the expectations and needs of their buyers and to reach to their level of required
aspirations. L’Oréal also promotes innovative ideas of employees and appreciate their initiatives
along with engaging them in decision making. The company believes in growth and development
of employees and their skills, managers plays the role of facilitator for employees.
Organisational culture of Body Shop
Body Shop has developed a very strong culture in their organisation supporting human
rights. They have strict rules and principles for care of environment which they follow and make

other follow it too. Company is against animal cruelty and therefore, they do not test their
products in developing stage on any kind of animals. Body Shop also promotes innovation and
employee growth.
Organisational culture of both the companies are different focusing on separate aims and
objectives. One is promoting corporate culture another is concentrating more on ethical practices.
But they both are bit compatible as they care about their employees, providing them growth
opportunities (James and Casidy, 2018). They encourage employees to take initiatives and
motivate them to be more creative and bringing new ideas towards company. Therefore, they can
be somehow somewhere, compatible if perform activities and take actions in accordance with
each other.
Benefits:
1. Enhance attractiveness- L’Oréal objective is to increase group attractiveness and after
some acquisitions, acquiring Body shop will benefit L’Oréal in attaining this aim.
L’Oréal can improve its image in market and its product portfolio, which will provide
benefits to both the brands.
2. Goodwill- Another benefit L’Oréal will gain from acquiring Body Shop is its goodwill
which got affected due to some allegations and comments of critics(Johannisson, 2018).
Body Shop's goodwill is adding value to company ultimately providing long term
benefits.
Challenges:
1. Creating synergies- The most influencing challenge which L’Oréal faced after acquiring
Body Shop is in creating synergy amongst the operations. L’Oréal was promoting
corporate culture and Body Shop was more concerned about the environment and care
about it more.
3) Factors considered by L’Oréal before acquiring Body shop
L’Oréal is one of the largest cosmetic company and well recognized in the world of its
kind. The company has made its place in world by serving best kind of products to several
sectors of the population around the globe. The brand has it presence in around 130 countries and
associated with almost 25 brands and several sub-brands. L’Oréal have considered some factors
before taking Body Shop's operations under its name. Those factors are as follows:

1. Expansion- The first factor which is considered by L’Oréal is expansion, the company
can grow and double its store size in just some time with acquiring Body Shop. This
acquisition can enhance presence of L’Oréal in global market that will enable
organisation in increasing its attractiveness(Pirson, Martin and Parmar, 2019). This is
their main motive to reach to more number of people and earn better profits.
2. Innovation- Both L’Oréal and Body Shop induce innovative culture which is another
factor of consideration. This same element of culture of both the enterprises will bring
synergy in organisation, more innovative ideas will flow as more expertise and skilled
staff is indulged in operations.
3. Goals- L’Oréal management will also look at the aims and objectives, of Body Shop.
This is done for analysing and understanding the requirements of company along with
knowing what company is exactly offering. If objectives of both the entities are different
from each other then it can result in negative manner.
4. Costs- This another very essential factor to consider before acquisition, the cost involved
in it and the amount of benefits company is getting is one factor which will influence the
decision of acquisition(Crane and et. al.,2019). Cost of acquiring is huge and that will
play a vital role L’Oréal will see if spending this much amount is even effective and
efficient for company.
4) Components of failure
There are several factors which lead the failure of acquisition of Body Shop by L’Oréal.
These factors are explained and evaluated below:
1. Difference in culture and primary objectives- The factor which lead the failure of this
acquisition the difference in culture of both the organisations. L’Oréal was working and
promoting corporate culture on the other hand Body Shop was more concern about the
environment. This lead to misunderstanding and conflicts in the atmosphere of company
affecting their operations and functions.
2. External factors- Next, factor which resulted in failure of this acquisition is the external
factors or in other words the macro environment of the company (Denner, Püschel and
Röglinger, 2018). The social and environmental factors are the one which had huge
impacts on the business of both the entities which resulted in companies making loss and
not gaining anything from their operations.

3. Poor communication- As known, communication is the key for success and that where
company failed. The communication system and channels were so bad between L’Oréal
and Body Shop. Employees of both the organisations were very rigid and not at all
comfortable with one another. A lot of conflicts were there amongst different teams
which affected the productivity and efficiency. This lead to failure of acquisition of
L’Oréal and Body Shop.
4. Lack in clarity of motive- As there is lack of communication and bad channels, no
employees or staff was communicating with one another. Even top level management
was also not interacting with each other. Therefore, clarity of task were not there in mind
of workers that lead to lack of clarity about the motives, aims or objectives of the
acquisition and lead to failure.
All these components drive the company towards failure of the acquisition, no objectives were
obtained and customer satisfaction was also not there.
5) Reflection of the report
From the above section of report it is reflected that L'Oreal is recently accused by the
number of unethical practices which is described in the external analysis and its unethical
practices include airbrushing advertisements, misleading claims, animal testing and price fixing.
As the macro environment is the broader market which include risk factor and company impacts
through its many components such as economical which impacts the purchasing power of people
and also influences their demand which impacts the operations of business(Nascimento and et.
al., 2019). Moreover, its social factors negatively impact the company at time of its acquisition
which defines the unethical practices as because of this company is poorly suffering from its
conditions and impact its image in front of public but after acquiring the Body Shop its image
and reputation gets increases. Moreover, in its environmental factors company is accused
because of its unethical practices which leads to misleads its claims and because of its testing
procedures its publicity got affected and because of this its sales got decreased, as a result
company lost its potential customers. Moreover, the culture which is adopted by L'Oreal in order
to focus on the expectations of buyers in order to reach the level of required aspirations. As for
this, company believes that growth and development helps in facilitating for the employees. The
culture of organisation is beneficial in order to enhance the attractiveness and goodwill of
company but apart from this company also face challenge which influence the acquisition of

company in order to create synergy in its operations which becomes matter of concern about the
environment.
CONCLUSION
From the above discussion, it is concluded that business context is important in order to
do strategic planning which is helpful for business in order to achieve success and eliminate the
various risk factors. Strategic planning is useful for business because it depicts the plans and
strategies which is useful for company in order to reduce the risk factor. In this report it is
concluded that impact of macro environmental factors which company is currently facing and
specially in its social and ethical or legal factors. Moreover, it also discuss the organisational
culture of the Body Shop and L'Oreal and also determine the compatibility of the various
benefits and challenges arise in the culture of an organisation and also the factors at the time of
acquisition of Body Shop.

REFERENCES
Books and Journals
Bell, E., Bryman, A. and Harley, B., 2018. Business research methods. Oxford university press.
Crane, A., and et. al., 2019. Business ethics: Managing corporate citizenship and sustainability
in the age of globalization. Oxford University Press.
Denner, M.S., Püschel, L.C. and Röglinger, M., 2018. How to exploit the digitalization potential
of business processes. Business & Information Systems Engineering. 60(4). pp.331-349.
James, L.T. and Casidy, R., 2018. Authentic assessment in business education: its effects on
student satisfaction and promoting behaviour. Studies in higher education. 43(3). pp.401-
415.
Johannisson, B., 2018. Limits to and prospects of entrepreneurship education in the academic
context. In A Research Agenda for Entrepreneurship Education. Edward Elgar
Publishing.
Koç, H., and et. al., 2018. Capability as a service: Method and tool support for context-aware
business services. International Journal of Information Systems in the Service Sector
(IJISSS). 10(3). pp.64-84.
Nascimento, D.L.M., and et. al., 2019. Exploring Industry 4.0 technologies to enable circular
economy practices in a manufacturing context: A business model proposal. Journal of
Manufacturing Technology Management. 30(3). pp.607-627.
Nissenbaum, H., 2018. Respecting context to protect privacy: Why meaning matters. Science
and engineering ethics. 24(3). pp.831-852.
Oldman, A. and Tomkins, C., 2018. Cost management and its interplay with business strategy
and context. Routledge.
Pirson, M., Martin, K. and Parmar, B., 2019. Public trust in business and its
determinants. Business & Society. 58(1). pp.132-166.
Rachinger, M., and et. al., 2018. Digitalization and its influence on business model
innovation. Journal of Manufacturing Technology Management.
Teagarden, M.B., Von Glinow, M.A. and Mellahi, K., 2018. Contextualizing international
business research: Enhancing rigor and relevance. Journal of World Business. 53(3).
pp.303-306.
Viriyasitavat, W. and Hoonsopon, D., 2019. Blockchain characteristics and consensus in modern
business processes. Journal of Industrial Information Integration. 13. pp.32-39.