BABS Foundation: L'Oreal/Body Shop Case Study, Sept 2019 Intake

This case study examines the L'Oreal and Body Shop acquisition, focusing on the impact of macro-environmental factors using PESTEL analysis, organizational culture, and the factors to consider before and challenges of the acquisition. The study investigates political, economic, social, technological, environmental, and legal influences on L'Oreal's operations. It also compares the organizational cultures of L'Oreal and Body Shop, highlighting the benefits and challenges of their compatibility. Furthermore, the case study delves into critical factors to be considered before acquiring Body Shop, such as brand image, market share, competitive advantages, and supply chain efficiencies. The study also points out factors that could negatively affect the acquisition, including poor brand image, negative marketing, and product segment overlap. The analysis aims to provide a comprehensive understanding of the strategic considerations and potential challenges associated with the acquisition.

Case Study on Loreal

Table of Contents
INTRODUCTION.................................................................................................................................3
MAIN BODY........................................................................................................................................3
Impact of macro environment factors on business.............................................................................3
Organisation culture..........................................................................................................................5
Factors overlook before acquisition...................................................................................................7
Factors negatively impact acquisition................................................................................................8
Reflection..........................................................................................................................................8
CONCLUSION.....................................................................................................................................9
REFERENCES....................................................................................................................................10

INTRODUCTION
Business environment is defined as the effects of external factors on the operations of
the corporate houses. This report is based on the case study of L’Oreal Company. Company
was established in the year 1909 by Eugene Sheller. Headquarter of the L’Oreal Company is
established in Clichy, France. Company is associated with cosmetics sector and serve its
business operations across the globe. Henceforth, this report emphasis on effect of macro
environment factors on the company’s operations. Organisation culture of L’Oreal and Body
Shop will also be summarised in this report. What are the factors L’Oreal Company must
considered before acquiring Body Shop Company will also analyse in this report. Future
implication of acquisition will also summarise in this report. At the end reflection will also be
address in this report.
MAIN BODY
Impact of macro environment factors on business
Macro environment is considered as the external factors associated with business
environment influence business operations of company. PESTEL Analysis is a tool utilises to
assess impact macro environment put on business organisation.
PESTEL Analysis
PESTEL Analysis is reflecting different factors involve in macro environment. This
analytical tool comprises with factors such as political, economical, social, technological,
environmental and legal factors associated with the macro environment.
Political Factor: Political factor involve all policies frame by government in respect to the
corporate sector. Management of L’Oreal Company frame all business strategies related to
operations and growth based on the policies of government (Baciu and et.al., 2017). Political
stability is also a huge aspects associated with the political factor in macro environment. In
case the nation has stable government it will drive government to channelize long term
policies and strategies for the growth of the corporate sector. Corporate sector play a crucial
role in the economic growth of the country and all government across the globe support the
corporate sector. L’Oreal Company consists up with global business operations that also
involve political situation not just at regional level but also at the global level.

Economical Factor: Economical factor is also a crucial macro environment factor involve in
PESTEL Analytical tool. This factor comprises with the GDP growth rate of country,
currency exchange rate and other associated factor involved in the economy. Inflation in the
economy is also considered as the huge factor of macro environment involve in the
economical factor. Inflation directly restricts the purchasing power of the potential customers
of company. All the factors involve in economical factor directly influence the growth
potential of company in the target market. L’Oreal Company deals in cosmetic sector and the
purchasing power of the potential buyers of company create huge influence in the growth
potential of company in target market.
Social Factor: Social factor is also an important macro environment factor involve in
PESTEL Analysis. Social factor comprises with culture, fashion, trend, religious beliefs of
people and other social aspects. Social factors create huge implications on the sales of the
company as latest trends and fashion highly influence the purchasing decision making of all
potential customers of L’Oreal Company. Company also channels marketing campaign in
order to create trends related to its products in the target market. Marketing team of L’Oreal
Company also use the technique of brand promotion with the support of famous celebrities
across the globe to make the products fashionable and trendy. Social factors influence not
only the sustainability of company but it also influences the future growth potential of
company in target market.
Technological Factor: Technological factor involves all technological advancement in the
business environment. Technology play crucial role in proving growth opportunities to
companies in the target market. All operations in L’Oreal Company utilise technological
equipment to operate the operations. Company management also use technology in
conducting marketing and customer relation operations (Bee Li, 2018). With the support of
technology company management channelize all its marketing and promotional campaign to
influence the sales of company in target market. Innovation is also important aspects involve
in the technological factor of macro environment. Today’s entire corporate sector highly
depends upon the digital and technological tools to channelize its business operations. As
technology provide opportunity to not just control the operational functions but also to
operate the same as well.
Environmental Factor: Environmental factor involve in PESTEL Analysis tool focuses on
different environment related aspects such as ethical practices, eco friendly products and

other associated aspects. This factor has been started recognised recently after the awareness
of people towards environment protection has increased. Company management also get
involve in many corporate social responsibilities as a part of the environment factor involve
in macro environment. With the support of corporate social responsibility practices
management of L’Oreal Company try to shines the brand image of company in target market.
Along with all other factor of macro environment environmental factor also influence the
sustainability and growth of L’Oreal Company in target market.
Legal Factor: Legal factor involve all laws and legislation frame by government related to
corporate sector entities. Laws such as equality act, equal wage payment act, data protection
and other associated legislations applicable on the corporate houses are a part of the legal
factor. Management of L’Oreal Company also gives emphasis to coping up with the
legislative requirements of different acts and laws applicable on the company. Licensing is
also crucial aspects involve in the legal factor. In order to expand business in other locations
and target market company management also needs to deal with licensing requirements
associated with the new location and market.
All the above factors indicate about the impacts of macro environment on the business
operations of company.
Organisation culture
Organisation culture is defined as the value and belief an organisation possess in order
to operate business operations. This is more like a philosophies corporate organisation follow
in order to implement business operations. L’Oreal Company is considered as among the
leading corporate house in cosmetic sector. L’Oreal Company has achieved such a huge
success in the cosmetic and beauty care sector. Organisation culture play huge role for the
organisation in achieving success in the target market (Foulkes, 2017). L’Oreal company
management implement effective policies that also provide effective opportunities to
organisation along with its work force. Company management focuses on providing training
to employees in order to improve the work efficiency of employee’s of company. Company
management also focuses on giving rewards and incentive to all productive employees’ of
company in order to motivate them. Company’s culture is growth oriented which enabled
company management to cater with more than 25 brands in more than 130 countries across
the globe.

Organisation culture of the Body Shop Company is well diversified in nature.
Company is involved in natural ingredient cosmetic products and personal care products.
Organisation culture of company is motivated towards ethical working practices. Company
serve the aim to cater with effective cosmetic products in the most affordable price structure.
Company management also give emphasis on creativity and innovation as a part of functional
activities of company.
Benefits from compatibility of culture
Benefits can be summarised with the compatibility of both the culture in the following
points.
Improve customer satisfaction: Body Shop Company and L’Oreal Company consist up
with its own loyal customer base. With the support of collaboration between both the
companies management will be able to cater more efficient products and services. This
collaborative partnership will improve the customer satisfaction as loyal customer from both
the side will get access to more choices in cosmetic and body care products. L’Oreal
company management is aiming to utilise the delivery network of the Body Shop Company
with the support of strategic partnership. Both the companies share vibrant culture that also
supports the growth of corporate organisations.
Improve growth potential: Organisation culture of Body Shop Company and L’Oreal are
growth oriented. Both companies are well known brand recognised in the cosmetic and skin
care sector. This strategic collaboration will improve the growth potential of both the
organisations. Company management will also able to channelize each other resources in
order to cater the needs of potential customer base. Growth is considered as the ultimate
objective of the corporate houses. This collaboration will potential improves the market share
and growth opportunities for both the corporate entities.
Challenges of compatibility of both cultures
Challenges also associated with the collaborations that can be summarised in the
following manner.
Negative brand image: Both the companies have been associated with negative brand
publicity that will restrict the market potential of the collaborative partnership. Brand image

play crucial role in the sales of the company (Kamarapu, 2017). Negative brand promotion
can also reduce the growth potential of both the organisations.
Resource sharing: Collaborations also involved sharing all the associated resources which
also involve sharing of human resources. Many times employees face several issues in
adjusting into new work culture. This can also reduce the productivity of human resources of
both the organisations.
The above challenges are considered as the primary challenges this collaborative
partnership might face.
Factors overlook before acquisition
Following factors must be overlooked before making any acquisition with the Body
Shop Company.
Brand image: Brand image play huge role in the sales potential of the corporate
organisations. Management of the L’Oreal Company must assess about the brand image of
the Body Shop Company in the target market. Negative brand image can also restrict the
growth potential of the L’Oreal Company.
Market share: Management of the L’Oreal must analyse the market share of the Body Shop
Company before making any collaborative partnership. Market share is the indicator of the
company’s presence in the target market. By analysing market Share company management
will be able to analyse the decision making in future respect of the L’Oreal Company.
Competitive advantages: Management of the L’Oreal Company must assess about the
competitive advantages company will address from this partnership (Korengkeng and
Tielung, 2018). Collaboration is only developed to improve the growth potential of the
companies. Company management must assess all the competitive advantage it will entertain
from the collaboration.
Supply chain advantage: Management of the L’Oreal will also analyse about the supply
chain system of the Body Shop Company. Management of the L’Oreal Company has also
analysed about the supply chain advantage company will get from the collaboration. Supply
chain management enables companies to cater effectively all its potential consumer’s.
All the above factors must be analysed before making any acquisition decision.

Factors negatively impact acquisition
Factors that can negatively affect the acquisition can be addressed in the following
manner.
Poor brand image: Body Shop Company has been engaged with negative brand publicity
that has damages the brand image of the company. Negative brand image can also restrict the
competitive advantage of the L’Oreal Company from the strategic partnership (Shah, 2019).
Brand image play huge role in improving growth potential of company in target market. Due
to negative brand image L’Oreal Company can also effective market share. This can make
the acquisition a huge failure for the L’Oreal Company.
Negative marketing of company: Body shop has also been involved in negative marketing
that can also spoil the competitive advantages of the L’Oreal Company from the acquisition.
Marketing play huge role in Imporving Company’s sales potential. This can also damage the
brand image of the L’Oreal Company and can prove the acquisition as damage.
Same product segments: Body Shop Company also engaged in meeting the customer needs
related to cosmetics and body care products (Tournois, 2016). L’Oreal Company is
considering as the leading brand in the cosmetic market. Company consist up with the
business operations in more than 130 countries that effective denote about the brand presence
of the company in the target market. Due to such a huge brand presence the acquisition will
not provide effective competitive advantage to the L’Oreal Company as company will also
get to cater the same target customers. Due to these aspects the acquisition might face the
failure in future.
All the above factors can restricts the competitiveness of the partnership and make
this as a failure for the L’Oreal Company.
Reflection
This report has provided the experience to analyse about different aspects involve in
the acquisition between L’Oreal Company and Body Shop Company. I could assess the
impacts of macro environment factors on the business operations of companies. I also get to
understand about the organisation culture of L’Oreal Company and Body Shop Company.
This report gets the opportunity to deeply assess about the acquisition and identify the factors
that can improve the competitiveness of the L’Oreal Company. I also experienced the factors

that can create failure out of the strategic partnership between the L’Oreal Company and
Body Shop Company.
CONCLUSION
This report was based on the case study of L’Oreal Company in respect to acquisition
of Body Shop Company. Macro environment factors like Pestle, social, economical and other
factors also analysed with the support of PESTEL Analysis tool. Benefits of the acquisition
like improve customer satisfaction and improve growth potential also concluded as result of
the acquisition. Challenges like negative brand image and resource sharing has also
summarised. Brand image, market share, customer satisfaction and relatable factor must
overlook by L’Oreal Company before getting into the acquisition with the Body Shop
Company. Poor brand image, negative marketing and same products segment can also proved
as the failure of the acquisition for L’Oreal Company.

REFERENCES
Books and Journals
Baciu, S. and et.al., 2017. THE MARGINAL FIT OF MILLED-CERAMIC INLAYS–A
COMPARATIVE THREE DIMENSIONAL AND MICROSCOPIC
RESEARCH. International Journal of Medical Dentistry. 21(1). pp.62-68.
Bee Li, Y., 2018. Antecedents of Customer Experience Value on Halal Cosmetics Products in
Malaysia (Doctoral dissertation, Asia e University).
Foulkes, T. P., 2017. Developing an active, high-heat-flux thermal management strategy for
power electronics via jumping-droplet phase-change cooling (Doctoral dissertation).
Kamarapu, S., 2017. Impact of Celebrity Endorsement on Consumer Purchase Intention.
In National Conference on Marketing and Sustainable Development October (Vol.
13. p. 14).
Korengkeng, M. R. and Tielung, M. V., 2018. Consumer Perception and Buying Decision for
Indonesian Cosmetics Product in Manado. Jurnal EMBA: Jurnal Riset Ekonomi,
Manajemen, Bisnis dan Akuntansi. 6(1).
Shah, M. M. R., 2019. Astaxanthin Production by Microalgae Haematococcus pluvialis
Through Wastewater Treatment: Waste to Resource. In Application of Microalgae in
Wastewater Treatment (pp. 17-39). Springer, Cham.
Tournois, L., 2016. When markets stagnate: finding new territory through reverse
innovation. Journal of Business Strategy.