Business Strategy Report: An In-depth Analysis of L'Oreal Company

This report provides a comprehensive analysis of L'Oreal's business strategy. It begins with an introduction to business strategy and its importance, followed by a detailed SWOT analysis, examining L'Oreal's strengths, weaknesses, opportunities, and threats. The report then delves into a PESTLE analysis, assessing the political, economic, social, technological, legal, and environmental factors impacting the company. Furthermore, it applies Porter's Five Forces model to evaluate the competitive environment within the cosmetic industry. The report interprets L'Oreal's strategic direction using various theories, concepts, and models, offering recommendations and concluding with a summary of the findings and references.

BUSINESS STRATEGY

Table of Contents
INTRODUCTION.....................................................................................................................................3
MAIN BODY.............................................................................................................................................3
SWOT analysis on L’OREAL.................................................................................................................3
PESTLE analysis on L’OREAL..............................................................................................................4
Porter’s five force model of L’Oreal.......................................................................................................6
Applying a range of theories, concepts and models, interpretation of strategic direction available with
L’OREAL................................................................................................................................................7
RECOMMANDATION........................................................................................................................10
CONCLUSION........................................................................................................................................11
REFERENCES........................................................................................................................................12

INTRODUCTION
Business Strategy can be explained as a long term planning or even an action which is
designed just to achieve organizational goal (Definition of Business Strategy, 2017). It is
necessary because it helps to decide that what a company can do in any particular situation as
there have been proper planning which is the most important thing. It is just formulated for the
purpose of achieving vision and mission, objectives and goal of an association. In this project
report, the discussion will be on L’OREAL company that how they can make their policies to
achieving success. There will be detail information regarding SWOT and PESTLE which helps
to determine internal and external factors that can impact on the performance of a company. and
also Porter’s Five Model will help to do analysis of competitive environment. In task two it will
cover the report regarding how these theories, model can be applied just attain the organizational
goal on decided period of time.
MAIN BODY
SWOT analysis on L’OREAL
SWOT analysis is very important for any organization which helps to determine how
organization is performing at the current scenario internally. Here, S stands for Strength, W
stands for the weaknesses of a company where as O can explain about Opportunity which should
be created by company themselves and at the end T stands for Threads. It is necessary that how
well the authorized person understand the situation and looking at that what types of decisions
can be taken. In context of L’OREAL they are one of those company which deals in almost 130
countries so they must know what are the internal factors that can affect the company.
Strength: It is simply explained as the area where company is performing really well in past few
years and have the potential to do really well in upcoming period also. It enhances the overall
strength it is necessary that well coming is taking their day to day decision which plays vital role
in the development (Peng, 2017). In context of L’OREAL it is the company which always love
to perform on their strength. Their major strength is that they love to do research and
development on regular basis. Even in the most special strength of the company is that they are
known as the world’s largest company in cosmetic sector. Even they have wider range of
distribution which helps them to increase their revenue.

Weaknesses: It means that company have the potential but still there are some of the area
wear improvement need to be done. It is helps to detect the reason of weaknesses internally. In
context of L’OREAL, as they are one of the leading brands in the world still they need to face
various problem just because there are still some of the weaknesses which need to resolved very
soon for obtaining the better result in future. The weaknesses of L’OREAL is that they have very
low profit margin which doesn’t allow them to bring more changes in the company. Even
employee management system is also lacking in it so because of this sometimes dispute arises in
the company
Opportunity: The area which shows that how company can grab opportunity in upcoming period
or what need to be done. In terms of L’OREAL, they have many opportunities which need to be
focused very smartly and the main among them is that at present potential of market is increasing
day by day so according to this company need to explore more in the upcoming period. Also, the
demand of organic cosmetic is very high so company can try look at this field also which can be
very effective for them (Higgins, Omer and Phillips, 2015).
Threads: it means that the problem that company might face in the future just because of
the business activities which they are following at present. When taking about L’OREAL they
need to focus on the activities which they have been conducting. As, rivalries have been
increased in the field of Cosmetics. Even cash crunch is also one of the threads for them.
These are some of the area in which company have been effected. It is important that how
they study the situation and take their decision which the most important part from L’OREAL
points of view.
PESTLE analysis on L’OREAL
PESTLE can be explained as those external factors which affect the company. It is one of
those area which have a huge impact on day to day activities as it is never possible to work for
any organization without considering external factors. Here P stands for Political, E for
Economical, S for Social whereas T stands for Technological L for Legal factors and E for
Environmental factors which are covered under the topic. As it can be seen that L’OREAL is a
fast growing business which have lots of intent to do something new but there are this factors
which have been giving various trouble to the company.

Political Factor: The first step of PESTLE which shows that how political sector can have a huge
impact on business activities. It is very necessary for every organization that how they manage
their relation with political parties (Amran and et. al., 2016). They are the one who have power
to make laws and bring changes for the welfare of general public. In context of a L’OREAL,
they are one of those company which loves to perform at a greater level but only after
maintaining the relationship with local political parties. But, still lots of changes need to be done
by company which are the orders given by leading political party.
Economical Factor: The economic factor includes growth rate, inflation, interest rate,
taxation and many more elements which impacts on business production cost and make profit
margin accordingly. Favorable inflation and taxation rate is helpful for the company and if
anything goes wrong then company need to suffer from various losses. In context of L’OREAL,
it is important that react with the response of a common people. If response of a public is in
favorable condition, then company can grow more else they need to change their style of dealing
with customers.
Social Factor: It encompasses the technical trends in the society where mainly focuses on
trending styles of a market. In terms of L’OREAL it is very necessary for them to consider the
social factor as it helps the organization to grab changes according to the choice of people
(Zhong and Li, 2018). This factors plays very important role for the success of a company but
company need to find the requirement of people. The main area which it can effect are friends,
society, family etc.
Technological Factor: It is the most important factor which bring changes in the activity
of a company. It is necessary for a company that how they adopt the change according to the
situation. It is can clearly said that is technology are not being changes in every short period of
interval then it is not possible to survive for them. In terms of L’OREAL, it necessary for them to
keep updating themselves in terms of technology. At present society want changes as they are
always willing that what company can bring new to satisfy them and for that it is important to try
latest technology. This factor is not affecting the L’OREAL as much because this company
always want to keep them update.
Legal Factors: This factor affect the condition of a company by some of the legal factors which
always keeps on changing as per the requirement of a country. It is important for company that

how they react as per the requirement of a situation (Yuliansyah, Rammal and Rose, 2016).
When taking about L’OREAL it is important that how they react to the legal formalities within
the region in which they are working. It is one of those factor which is very important in the
context of L’OREAL because single mistake can decrease the reputation of organization very
easily.
Environmental Factor: This factor is almost similar to social factor but it also has its own
feature. It says that it is necessary for every company to adjust with the environment. In terms of
L’OREAL it can be easily said that they need to change themselves according to the need to
need of environment and if they fail in this they it is never possible to achieve success. Here,
main focus of company should be that how they can manufacture more and more product by
harming very less to the society and even environment too.
This are essential points that need to be considered by the L’OREAL. These are those
factors which affect externally to the company. So, while conducting any organizational work
these factors must be considered which will be helpful to attain goals in short period of time.
Porter’s five force model of L’Oreal
L’Oreal is one of the leading organisation in cosmetic industry and it has been covered almost
every market segment including goods for men as well as women both. For identifying level of
competition within existing market L’Oreal has conducted Porters five force model which
include rivalries, Threats of substitutes, threat of new entrance, bargaining power of suppliers as
well as bargaining power of buyers. It is important for understanding various different hazards
as well as rewards of particular sector (Ghemawat, 2016). Respective model first published in
1979 by Michael E Porter and it is an strategic management tool which is utilise for industry
analysis. Implementation of Porter’s five for model in respect of L’Oreal are as follows :-
 Bargaining power of suppliers – In the factor suppliers are those who supply materials as
well as other products within the industry. Thus, if suppliers have high range of
bargaining in that case organisation gets less attraction. In simple term it can be said that,
bargaining power of supplier direly refers to the ability of purchaser to influence the cost
of goods. Moreover, in cosmetic industry, raw materials for production procedure are
procured from number of suppliers such as general Chem, cosmetic index and so on.

Thus, for L’Oreal bargaining power of supplier is low because they cannot force
respective organisation to buy material at high cost due to large number of suppliers.
 Bargaining power of buyers – Bargaining power of buyers for L’Oreal is high because of
high level competition as well as availability of same range products in the market area.
There are number of organisations in cosmetic industry who are manufacturing similar
goods so customers have choice of switching brand which result in high bargaining
power of buyers for customers (Teh and Corbitt, 2015).
 Threats of Substitutes – Cosmetic industry have number of organisation which is
manufacturing similar products. Thus, threats of substitute product is high for L’Oreal
because Maybelline and Revlon are also offering same products. Apart from this, high
level of innovation within same industry has made difficult for any specific company to
come out with this threat (Fiorino and Bhan, 2016)
 Threat of new entrants – L’Oreal have medium level threat of new entrance because
there is requirement of huge capital for entering into cosmetics market which is not
possible for everyone. Along with this, cost of developing these goods will be high
because it requires research and development, promotion and so on.
Competitive rivalry - There is high level of competition for L’Oreal because in market several
brands such as Maybelline, Revlon and so on. All these organisations have captured good market
share, regularly spending huge amount of research and development as well as bringing new or
innovative products in the market area which result in competition for L’Oreal. Hence,
competition is high for same organisation due to numerous players and diverse products
(Burlton, 2015).
With the assistance of above discussion manager of respective organisation has identified the
level of competition facing by L’Oreal. So that they can make better business strategy for
future growth as well as development.
Applying a range of theories, concepts and models, interpretation of strategic direction available
with L’OREAL.
Porter’s Generic Strategies: It is the concept of management which is useful to calculate that
how much risk any organisation can take. It is necessary that organization must take competitive

advantages in the market and for that Porter have introduced generic strategies which is very
useful for every companies. There are three types of generic strategies and they are lower cost,
differentiated or focus (McAdam, Bititci and Galbraith, 2017). For achieving success, it is up to
their decision that which one they want to select. In context of L’OREAL this theory and
strategy will surly help them to complete their task even more faster.
 Cost and Price Leadership: This leadership strategy is very useful as it is helpful to
reduce the overall cost of a given level of quality. Here, firm sells it its product either at
average price so that sale can be increased and through that profit can be earned more or
even sometimes company sells it below the average price just to attract more investor
through share market. In context of L’OREAL they need to take a healthy advantage in
the market as their rivalries are increasing day by day which is one of the negative sign
for them. It is better for the sustaining the market position, company must sale their
product at low price with best level of service. They need to make sure that company still
want to provide best services to its customer which is one the best sign for both customer
and company. Also, company need to hire that expertise who can do manufacturing
process at high level so that chances of wastage will decrease automatically. L’OREAL
must think that how they can find more appropriate way so that product can be delivered
in more efficient manner. But, it is never sure that this will work or not because in this
other company also do have the opportunity to decrease the price just to add on more
number of customer (Menon and Yao, 2017).
 Differentiation Strategy: It is one of those theory of porter where he suggested that
company must focus on producing better quality of product rather than producing number
of quality in the market. Here the main motto is to attract customer with quality of a
product. In context of L’OREAL it is important that what they think regarding their
customer and how they want to treat them which is one of the most crucial thing. But,
they must plan or focus on giving better quality in product rather than introducing
varieties of beauty product. As, they are one of the leading brand in the sector of beauty
product it is necessary to maintain the stardom in the market and for that they must not
dissatisfy their customer. For providing the top level of quality of product it is important
that must work on research and development by taking the help of modern scientific
equipment. Even they must appoint high skilled and creative product manufacturer team.

Also, the team which is doing marketing must be able to provide guidance that what can
be the benefit of L’OREAL product (Apenko, 2017).
 Focus Strategy: In this strategy the main aim of any company is to earn more amount of
profit or provide better quality to earn money. It is said that the company which uses
focus strategy enjoys more customer loyalty and even it discourages other company to
enter into any kind of competition. While taking about L’OREAL, it can be one of those
theory which will help them to earn more profit because in this strategy company doesn’t
allow much to do bargaining. Sometimes the quality of product is so high that even
company can do monopoly by taking additional amount of money from their customer.
Also, just because of focus strategy sometimes company faces various problem as do not
have much and more alternative sources.
Hybrid Strategy: This is a modern strategy approach where company changes the price of
product according to the demand of a customer. If they think demand is high, then they increase
the cost of a product and if they think demand is very low as compared with other oganisation
then they decrease the cost just to sustain in the market. In context of L’OREAL it is very
important that how they deal with their customer and for that they always want to come up with
new innovative ideas and plans. It is one of those strategy which L’OREAL don’t want t adopt
because they think that it will increase the gap between customer and company. Organisation
have a concept that if it will be followed then customer will not link with the company for longer
period of time and due to that overall cost can be decreased (Dranove and et.al., 2016).
Form the above mentioned data it can be clearly said that company will need to adopt
differentiation strategy which will be beneficial for them to take competitive advantage in the
market. Company must ensure that they will not compromise with any kind of quality and for
that if they will have required to charge extra then they will do that also.
Diversification: It is the responsibility of authorized person that how they think regarding
organisation but it is important to reduce the overall risk from the management as it very
important to ensure the long life of company (Brewster, 2017). Here, in context of L’OREAL it
is necessary that they must use diversification system so that their assets can be secured. For
doing this company must invest in small amount in various assets which can be the major source
of generating profit. The main concept of this is just to run business for longer period time and

try to earn minimum amount of money as per the requirement of a company. If L’OREAL uses
this method then they will have the opportunity to reduce primary risk which is very important at
current scenario (Habib and Hasan, 2017).
RECOMMANDATION
From my point of view, it can be concluded that L’OREAL must think for providing
better services and for they must take the review of their customer that what can be the
appropriate solution to provide best service. Even I think that company should try to invest
themselves in the field of herbal beauty products as most of the people want those products
where chemicals are used in very less quantity. Also, they must focus on technologies which is
being used at present because these technologies are being changed very quickly. At the end,
backup should be prepared so that if plan A doesn’t work, company can go for the next one.

CONCLUSION
In the lights of above theories, it can be easily concluded that business strategy is one of
those fields which is very necessary for achieving the organizational goal. It includes internal
and external environment including SWOT, PESTLE and Porters Five force model analysis of
given destination to make effective strategies. However, it involves the management of
stakeholders by involving them in meetings and maintain mutual understanding with them.
Moreover, it includes concepts of managing destinations to maintain its attractiveness
respectively. Also, it is necessary for L’OREAL that how they study the condition and take their
decision so that progress can be done on the positive side.

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