Loreal and Body Shop Case Study: Factors in Acquisition Failure

This case study analyzes the Loreal and Body Shop acquisition, examining the impact of macro-environmental factors, organizational culture, and the factors that Loreal needed to consider before the acquisition. The study delves into the factors that contributed to the acquisition's failure, including poor strategic fit, overestimation of synergies, cultural incompatibilities, and weak leadership. It also reflects on the strategic rationale behind Loreal's acquisition strategy, highlighting key areas such as cost analysis, cultural assessment, role definition, goal alignment, and competitive analysis. The analysis provides insights into the complexities of mergers and acquisitions within the cosmetic industry, emphasizing the importance of thorough due diligence, effective communication, and the retention of key talent for a successful integration.

Loreal and Bodyshop case
study

Table of Contents
INTRODUCTION...........................................................................................................................3
1. Explaining an impact of macro environmental analysis on present situation faced by the
Loreal...........................................................................................................................................3
2. Describing the organisational culture at the Loreal and the Body shop .................................5
3. Explaining the factors that needs to be taken into account by Loreal prior to acquire the
Body shop ...................................................................................................................................5
4. Explaining factors that resulted in the failure of acquisition ..................................................6
5. Reflecting report on personal experience ...............................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................1

INTRODUCTION
Present report is based upon the Loreal and body shop company which are dealing in
natural care products. As these are the two most recommended brand in beauty products and also
they are mostly liked by customer. Loreal was founded by Eugene Schueller in 1930 with
dealing in cosmetic products. As this business is carried by around 86,000 employees operating
the business at global level. In case of the body shop products they are mainly the subsidiary of
the Brazilian company Natura & co. This company is established in 1976 by Anita Roddick and
at present they are located in around 3000 places. The main difference between these two
companies is relating to the quality of the products and also the pricing mode, which stated that
the body shops products are more costly than Loreal. This report will includes the scenario of the
internal and external factors that is faced by Loreal in managing the integrity in market. It also
includes its organisational culture and also the factors through which they had to decide to
acquire body shop company.
1. Explaining an impact of macro environmental analysis on present situation faced by the Loreal
There are various factors that affects an enterprise with passage of the time, such factors
directly influences marketing strategies of an entity. There it is incumbent in considering these
factors in order to achieve growth in the long run without any external interferences.
Political factors- These are the factors that relates to the policies and the rule of the
government within which the firms like Loreal operates its business. As the company functions
across the globe so the it needs to look for the all the government policies in different countries.
In addition to this, import policies of different regions plays a crucial role in attaining success of
Loreal. With an advent of the globalization, political factors reflects a positive role role within
the industry.
Economical factors- It involves current exchange rates of all the states in which
company I running its business operations. Recession element in the economy acted as the
mainstream in an upbringing of cosmetic industry. Along with it such attributes pertains to
economic factors that is the product's price that is seen as varying in different regions of the
world (pestle analysis of Loreal, 2018). For example- In few of the regions, price of the
particular skin products remains to be high and this results in higher profitability for Loreal in
such regions. Moreover, GDP of state counted as main factor in contribution towards the
business of luxury brand like Loreal. High disposable income of the people in an economy

induces them to buy for a branded products which in turn acts as the positive sign with respect to
increase in the income and the sales revenue of Loreal.
Social factors- Such factors encompasses with the technical trends that are present within
the society. Evolving lifestyle of the people in the modern societies seems to be more and more
interested in the fashion trends. Community that have the sense of the latest technology and are
eager to in adopting contemporary technical trends that brings for an innovations by firms in the
cosmetic industry as like Loreal. There are some ethical issues associated with such industry in
relation to the use of chemical and low quality ingredients in producing the product impact the
brand reputation of the company negatively. All such ethical and the social pressures or trends
plays the prominent role within Loreal business.
Technological factors- It includes technological advancements in each and every sphere
of the life. For an organizations like Loreal, technological attributes such as innovation and the
trust plays an effective role. For example- Loreal brand sees to be highly prone towards an
innovation and in following contemporary trends. Technology provides for a possibility in
spreading an innovation within the short time frame and there are people who follows trend in
purchasing the fashionable products. Thus, brands that deals in luxury products like the Loreal
innovation is considered as the key feature in following and attaining the success.
Legal factors- It referred to the legal laws and the legislations that needs to be complied
by the company in order to maintain its success graph. For an entity like Loreal, it is seen as
incumbent in complying with all the legal formalities of each and every region that in turn
counted as a complex task for an enterprise. The world seems to be global village within which
people are becoming more and more vigilant regarding legal aspects of products.
Environmental factors- It encompasses with several global safety laws relating to
environment that are abided by global standards. In today's world people are more and more
focusing towards the product that keeps an environment pollution free. With this perspective, all
international brands plays a crucial role in showing support to world. For instance- Loreal
company conducts appropriate campaigns for producing organic products and acted as the
leading international cosmetic company. Thus, it is always been counted as the good strategy in
considering such factors in identifying the policies for an enterprise. In the same sense, future
policies of an entity must also be made in accordance to the contemporary trends.

2. Describing the organisational culture at the Loreal and the Body shop
The organisational culture of Loreal is seen as creating a shared values among the
employees specifically those who have recently joined Loreal group. It represents a significant
step in ensuring growth and the unity among the group which is been decentralised globally.
Culture of the company is made up the values and the particular way in doing the things that is
forge the feeling of the pride and the belonging.
Body shop makes use of the natural ingredients within their products for enhancing the
natural beauty of an individual (George and et.al., 2016). The hidden aspect in relation to the
culture of Body shop depicts all values of an entity that supports different measures like no any
animal testing, human rights, protecting planet, community trade in its business culture.
In my opinion, I observed that there present the compatibility among the culture of both
the companies as it follows similar concept of developing shared values within the work
environment. So it will be a benefit for Loreal in acquiring Body shop as it increases market
share and the potential workforce for the company that in turn helps in generating higher
profitability.
Benefits and the challenges
Maintaining a healthy organisational culture act as the major challenge that includes an
entity's own action in reflecting culture of the company that is imperative and remains as a
unifying element. On the other side, compatibility in organizational culture leads to increased
employee engagement in the company (Ahammad and et.al., 2016). As there present a real fit
between company's value and its members, a significant level of an increase is resulted in entire
job satisfaction.
Another challenge that is faced by the firm is to reinforce the culture on the constant basis
that is been represented throughout an organization. Ethics, values and general work place
environment of the companies need to presented on a routine or consistent basis.
3. Explaining the factors that needs to be taken into account by Loreal prior to acquire the Body
shop
The major factors that Loreal mus assess before acquiring Body shop are as follows-
Cost- In making acquisition several cost are incurred so it is important for Loreal to
accurately analyse that the company will generate higher profits, assessing the capability of the

target company in meeting its salary expenses etc. It should also investigate for the background
of the target company or Body shop and a detailed audit must also be made in checking for any
of the lawsuits and the bankruptcies.
Culture- Before acquiring Body shop, Loreal must look for tits culture as it is the main
factor that results in the success or the failure of the acquisition.
Role- At the time of acquiring another company, it is important for the company to assess
whether the roles of the managers are clearly defined in each of the departments within which
they operates (Gomez-Mejia, Patel and Zellweger, 2018). Loreal must decide that each of the
department is having an efficient or large amount of the people in case if some of the employees
are willing for moving the departments or there is a need for making new department. Defining
the roles helps in preventing any kind of ambiguity among the workers.
Goals- Establishing a main objective of the newly combined organization seems to be
important for Loreal prior to making acquisitions. Referring to this, company determines that
goals of both the company matches and are operating for attaining or achieving common goals.
Planning- At the time when the two companies comes together there are lot of several
aspects to be considered by Loreal. It has to make sure that before making decision in relation to
acquisition, company had made an effective plan that could be used for addressing all the
concerns or the questions.
Competition- Prior to making acquisition, it is essential to research in finding out the
potential competitors. In case there competitors are more and more advanced than Loreal then it
seems to be hard for the company in beating as compared to that enterprise which may not be
best for the acquiring company.
4. Explaining factors that resulted in the failure of acquisition
Strategy- Poor strategic fit is been resulted which means that strategy was not been used
for determining the integration goals.
Synergy- Overestimation of the potential synergies and an underestimation of the synergy
complexities has been accounted which results in the failure of Loreal acquisition of Body shop.
Culture- After the acquisition many of the fundamental incompatibilities has been seen
with respect to ineffective integration, squelching the positive attributes of the target culture in
the name of uniformity.

Leadership- Weak leadership qualities, delay in appointment of the new team of
leadership, loss of the key talent, integration processes and insufficient participation within the
transactions and the integration processes, failure in delivering the pledges and ego clashes
leaded to failure in acquisition.
Transaction parameters- Over spending, endless negotiations and inappropriate deal
results a failure for the company in relation to its acquisition.
Due diligence- Loreal had not made sufficient investigation specifically in context of
operational and strategic due diligence resulted in the failure for translating the findings into the
actions.
Communications- The company fails in communicating with a sufficient transparency,
frequency, depth and the awareness failure in taking the key measures towards an appropriate
stakeholders (Lebedev and et.al., 2015). After the merger, company failed in addressing concerns
of every group with the targeted yet a strategically constant messaging and in made for an empty
promises.
Key talent- The firm got failed in determining the key personnel, failure for acting as a
swift that is enough in retaining the key talent in the organization for gaining success in future.
Technology- An enterprise failed in determining the technological incompatibilities that
were present and this results in poor or no due diligence has been taken care off. It relates to
underestimating of the complexities or the time needed for the integration of the system has been
ignored.
5. Reflecting report on personal experience
Through this project I tried for underlining strategic rationale behind an acquisition
strategy of Loreal. As it is seen as the multinational firm which grows its business by entering
into the new markets by way of exploiting the merger and the acquisition transactions, high level
of carefulness at the time of starting new deal is seen as absolutely necessary. Body shop has
been proved even as the highly criticized and the contrversial situations that could end up in
successful manner whether it is managed properly or not. In today's world, M&A played a
critical role in development of sustainable competitive strategies. In the case study, I observed
one of the most common example relating to large companies that is acquiring a small company
in consideration with the strong CSR practices. In these terms, CSR had become an important
tool whether effective or strong, it resulted in being both as a key fro entering into the sustainable

and the new kind of ethical industries and thus appealing for more customers and key drivers in
the merger and the acquisition decision making process. I also observed that there are various
measures that made the acquisition as the failed growth strategy for Loreal and this causes a huge
loss to the company because of some incompatibilities and inappropriate assessment of the
factors.
CONCLUSION
From the above report, it conclude that it is necessary to maintain the integrity of the
business in market and also provide quality products with affordable prices. As in respect of
matter related to Loreal company, they fail to manage the reputation in market and also not fulfil
the customer needs in better way. Thus, in such aspects Loreal fail to manage the name of the
body shop for longer way and thus again sold the business to some other company. As Loreal
spend high amount to purchase the name of the body shop but not retain their management for
longer time period.

REFERENCES
Books and journals
Ahammad, M. F. and et.al., 2016. Knowledge transfer and cross-border acquisition performance:
The impact of cultural distance and employee retention. International business
review. 25(1). pp.66-75.
George, N. M. and et.al., 2016. A systematic literature review of entrepreneurial opportunity
recognition: insights on influencing factors. International Entrepreneurship and
Management Journal. 12(2). pp.309-350.
Gomez-Mejia, L. R., Patel, P. C. and Zellweger, T. M., 2018. In the horns of the dilemma:
Socioemotional wealth, financial wealth, and acquisitions in family firms. Journal of
Management. 44(4). pp.1369-1397.
Lebedev, S. and et.al., 2015. Mergers and acquisitions in and out of emerging
economies. Journal of World Business. 50(4). pp.651-662.
Online
pestle analysis of Loreal. 2018. [Online]. Available through: <http://marketingdawn.com/pestle-
analysis-of-loreal/>
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