Business Analysis: L'Oréal's Macro Environment and Acquisition

This report provides a comprehensive analysis of L'Oréal's business operations, focusing on the macro-environmental factors impacting the company, including political, economic, social, technological, environmental, and legal aspects, as analyzed through a PESTEL framework. It examines L'Oréal's organizational culture and compares it with that of The Body Shop, discussing the benefits and challenges arising from the compatibility of their cultures. The report further explores the factors L'Oréal would have considered before acquiring The Body Shop, such as rationale, due diligence, integration plans, and captive intensives. Finally, it assesses the factors that could have led to the failure of the acquisition, including external factors and integration difficulties. The report aims to provide insights into L'Oréal's strategic decisions and the complexities of business acquisitions within the cosmetics industry.

Context
of
Business

INTRODUCTION
Business is considered as activities through which a company can generate money by
selling and buying diverse type of products as well as services. In this an individual who is
running or operating business unit is known as businessman and failure or succession is depend
on his decision (Bargiela, Nickerson and Planken, 2013). Organization taken for this assignment
is L’Oréal which is one of the largest companies in cosmetics industry. It is founded by Eugène
Schueller in the year 1909, its headquarter is situated at Clichy, France. Respective company is
operating its business at worldwide level. Topics which are included in this report are macro
environment factor which impact on company business, organisation culture and benefits of
compatibility of culture. Along with this it will also include factors which are essential before
taking decision as well as it will also explain about factors which may affect respective company
decision of acquisition.
MAIN BODY
1) Discuss impact macro environment had on the current situation faced by L’Oréal
Macro environment is considered as situation that are exists at the business and that will
affect on external factors of environment. For a company management it is essential to conduct
analysis of macro environmental factors so that they can develop proper strategies effectively
that lead them to attainment predetermine goal (Palgrave, London and Chi, 2012). Moreover it
will also help them in designing products and services according to need of consumers at
particular market. There are number of method or tools which a firm can adopt by a company in
order to analyse macro environment. In respect of L’Oréal they are using PESTEL analysis,
which is given below:-
 Political Factor: This factor will include elements like government policies, corruption,
foreign trade policy, tax policy, labour law, trade restriction, political stability and many
more. In respect of L’Oréal, they conduct unethical practices due to which they may
faced political issues political like trade restriction, unstable situation and so on. So it will
be beneficial for companies to conduct their business operations by considering political
factors of different countries at which they are operating.
 Economical Factor: Respective factor include aspects related to exchange rate,
economic growth rate, interest rate, inflation rate, deflation rate, disposal income,

unemployment rate, employment rate and so on. In context of respective firm it is
essential for them to consider economic consideration of each and every country at which
they are operating.
 Social Factor: It will consider several aspects such as age distribution, population
growth rate, career attitudes, safety emphasis, health consciousness, lifestyle or standard
of leaving, cultural aspects and so on (Bell, Bryman and Harley, 2018). L’Oréal conduct
unethical practice that affect social values so it is essential for them to improve their
practices by adopting new strategies which value social factors.
 Technological Factor: Technological factor will include aspects related to the
technology incentives, level of innovation, research and development activities,
automation, technological change, technological awareness, level of innovation
acceptance etc. In respect of L’Oréal in order to avoid impact unethical practices related
to manufacturing they may adopt new technology which help them in many things such
as avoiding animal testing.
 Environmental Factor: This will include elements like environmental rules and
regulations, climate change, weather, pressures from NGO’s, climate and many others. In
respect of respective company it is essential for them to conduct those practices which
help them in avoiding illegal practices related to environment factors.
 Legal Factor: It will consider aspects related to the employment law, copyright and
patent law, health and safety law, consumer protection law, antitrust regulation,
discrimination rules and regulations and so on. For L’Oréal it is also essential to conduct
their business operations and functions by considering legal factors related to nature and
environment.
Along with this all these factors there are some other factors which impact on the L’Oréal
situations i.e. Social factors and Ethical factors. It is so because respective company is accused
in various unethical practices such as misleading claims, animal testing, airbrushing
advertisements and price fixing (de Sousa and Comini, 2012). These all practices affect social as
well as ethical factors because in today's time society are more concern with environment and
they prefer environmental friendly products which are based on natural ingredients. Along with
this respective firm also conduct animal testing which impact on their environmental and social
obligations that will directly affect the profitability as well as goodwill of firm. So it is essential

for L’Oréal to conduct effective operations by consider all above macro environmental factors
such as economical, social, environmental, ethical and so on.
2) What is organizational culture at Body Shop and L’Oreal and what are benefits or challenges
arising out of compatibility of culture
Organisational culture is consider as a system of values, shared assumptions and belies
that help in governing how people's behave within a company. It have strong influence on
employees at workplace which influence their act, performance, dress and so on. Every company
have their own diversify culture that help them in accomplishing work effectively for attaining
their predetermined goal and target. The organisation culture of L’Oreal is friendly, inspirational
and full of ideas which help them in making positive and happy working culture where
employees feel motivated as well as satisfied (Our Cultural, 2019). Employees of L’Oreal are
driven by a target or goal in order to change game at the marketplace by concentrating on
problems which influence to create difference in market. Along with this respective company
organisational culture is based on the diversity as well as they also provide huge opportunity and
value to their staffs which make them happy and satisfied.
On the other hand Organisation culture of Body Shop is based on the building
environment at which people do right things without being told in order to generate profit
through business (Body Shop Culture: Building an Environment Where People Do the Right
Thing (Without Being Asked), 2019). Body Shop is 43 year old cosmetic company which is
founded by Anita Roddick and its headquarter is situated at London Bridge, United Kingdom.
There are approx 120000 employees are working at respective company and their management
take care rights of all of them so that they can feel connected as well as satisfied. They belief in
manufacturing natural beauty products and for this they follow all environment legislation in
order to protect environment as well as they also against animal testing. In addition to this they
also develop their action plans or strategies by considering human as well as employees right of
staffs.
While arising out of compatibility of culture by L’Oreal as well as Body Shop they may
face number of benefits such as L’Oreal is accused due to conducting number of unethical
practices like airbrushing advertisements, animal testing, price fixing and misleading claims
(Frösén and et. al., 2013). Due to which negative publicity arise that impact on their business
operations as well as functions at potential market. So when they conduct acquisition with Body

Shop who is considering business by considering all legal practices L’Oreal able to improver
their market value as well as goodwill. Moreover it will also provide innovative strategies which
are used by Body Shop in order to develop natural beauty products. This acquisition will also
helpful for Body Shop because they able to strengthen their store as well as supply chain
impressively. But along with all this benefits L’Oreal faced some challenges because people
think that L’Oreal management is using Body Shop for improving their image at marketplace.
3) Discuss any factors that L’Oreal would have considered before deciding to acquire Body Shop
An acquisition is a situation when an organization purchase most or all shares of another
organization in order to generate control on that particular company. It is one of the most
common technique in business for expanding business (Hale, 2012). Large or biog firm conduct
acquisition as they gain huge as well as significant deals tends to dominate news. But the
respective practices is most in the middle or small firms. While conducting acquisition a
company need to consider various factors as it help them in insuring effectiveness as well as
authenticity of another partner. There are several factors which must be consider by L’Oreal
before deciding to acquire Body Shop, from which some major factors are given below:-
 Evaluate rationale behind acquisition: It is essential for a company to conduct
evaluation or analysis of rationale of conducting acquisition as it help in creating
effective decision which is beneficial for a firm (10 Factors To Consider When Making
An Acquisition, 2019). In respect of L’Oreal before conducting acquisition with Body
Shop it is essential to understand mission, vision, operations and other of business so that
decision can be taken accordingly.
 Study what you're acquiring: Before conducting any thing it is essential to do study
about it because it help in minimising mistakes (Johannsen and Leist, 2012). In respect of
L’Oreal, it is necessary for their management to conduct proper study of Body Shop
brand, their team, supply chain management, logistic, culture, products, services and so
on. This is so because it aid in taking most effective decision related to acquisition.
 Have proper integration plan: It is essential to have proper integration plan before
acquisition because it help in ensuring about dedicated team and strategies of working. It
is necessary to develop integrated plan as in many situation lack of respective plan lead to
fail of acquisition. In respect of L’Oreal by developing effective integration plan they

able to define clear long as well as short term objective in order to deliver quality services
to potential customers.
 Captive intensive: It is essential for a firm to analysis captive intensive which a
company may earn by conducting acquisition another firm (Lankoski, 2016). In respect
of service company, another firm get very limited captive intensive because their value
and profit is depend upon quality of personnel hiring. In respect of respective firm, Body
Shop is not conducting its business at service industry which is beneficial for them
because it may lead to high captive intensive.
 Defining roles: If a firm conduct acquisition they get more employees so it is essential
for both the firm to conduct proper meeting in order to define role of all staffs. In
respect of L’Oreal it is essential for them to conduct interaction with Body Shop
management in order to define roles and responsibilities of both companies staffs. It must
be done before acquisition because it will may hamper business operation if they do so
after the acquisition process.
These are the main factors which L’Oreal management should consider while conducting
acquisition with the Body Shop.
4) In your view what are factors that had effect L’Oreal acquisition of Body Shop resulting it the
failure
There are various factors which a company need to consider while conducting acquisition
because if they not do so they may face failure situation that affect business profit and market
shares. In respect of L’Oreal their management need to consider several factors while acquire
Body Shop, so it will not result in failure, from which some major factors are given below:-
 External factors: This may arise when there is issues arise due to economic collapse and
other factors of environment as it will impact on the performance of employees and deal
(Schefer and Strembeck, 2013). In respect of L’Oreal when they conduct acquisition with
Body Shop they may faced issues related to change in external factors and if management
not understand and conduct work according, then they may lead to failure of acquisition.
 Integration difficulties and process: This may arise when there is lack of clarity of
integration process of both companies. Due to respective issue their will be high chance
that company may face failure in acquisition. In respect of respective company and Body
Shop both h different ways of conducting work like L’Oreal conduct animal testing of

their products but Body Shop is against it. So this type of integration different may arise
issues which lead to failure of acquisition.
 Misreading new company culture: If two companies are not operating at same culture
then their will be strong chance that issues may arise due to misreading or
misunderstanding. In respect of L’Oreal and Body Shop both are operating at same
cosmetic industry but they both have different ways of conduct work or manufacturing
products due to which issues may arise which lead to failure of acquisition.
 Ego clash: When a company conduct acquisition with another company, then there is
high chance that clashes may occur due to ego of both manager, employer and employees
(Stuhec and Pentcheva, 2012). In respect of L’Oreal, when they conduct acquisition with
Body Shop them their will be chance that ego clashes may occur that impact on
employees performance as well as production. Moreover it may also lead to failure of
business operations as companies not able to generate profit.
These are some of main factors which is essential to be consider by L’Oreal so that they
can successfully acquire Body Shop.
5) Reflection report on your experience in writing this report
I am very happy that I get my initial opportunity to conduct report on such a informative
topic i.e. context of business. Through this I get various knowledge about how to conduct
business at international level, environment factor which impact business, theories to conduct
analysis and so on. Along with this it will also help me in analysing my strength as well as
weakness which will help me in my further career. Strength which I able to get improved while
conducting report are I have good communication, presentation skills, domain knowledge and
many more. On the other hand some of the main skill which I need to improve are decision
making skills, problem solving skills, analytical skills and many more. It is essential because it
will help me in growing my career in most effective as well as successful manner. In addition to
this I also able to know that when a company run or expand their business globally they need to
analysis environmental factors that may impact on business operations. For which they may
adopt analytical model such as PESTEL analysis, this will help in analysing macro
environmental factor. In addition to this they also need to analyse benefits as well as challenges
so that they may develop proper strategies or action plan successfully and impressively. So at

last I was very thankful that I get such great opportunity for experiencing great project at my
initial level, as it help me in enhancing my skills, knowledge and ability successfully.
CONCLUSION
By above discussed point it can be summarise that for running and growing a business
effectively a company management need to conduct number of practices such as evaluation of
macro factors, analysis of culture, factors to be consider and so on. For conducting environment
analysis an organisation may adopt different method or theories such as in order to analyse
macro environment, PESTEL analysis can be used. Along with this firm manager also need top
conduct analysis of culture so that they can identify benefits as well as challenges which they
may face when they acquire any business. It is essential because it help in understanding factors
through which acquisition of business may result in failure