Business Strategy Report: L'Oréal Company Evaluation

This report presents a comprehensive business strategy analysis of L'Oréal, a prominent player in the personal care industry. The report begins with an introduction to business strategy and its importance, followed by a detailed analysis of L'Oréal's internal and external environments. It employs PESTLE and SWOT analyses to assess the company's capabilities, opportunities, and threats. Furthermore, the report utilizes Porter's Five Forces Model to examine the competitive landscape. The report then evaluates different strategic directions and recommends the most appropriate growth platform and strategies for L'Oréal. Finally, it proposes a strategic management plan, including strategies, objectives, and tactics, to guide L'Oréal's future endeavors. The analysis covers various aspects, including political, economic, social, technological, legal, and environmental factors, and provides insights into L'Oréal's strengths, weaknesses, opportunities, and threats.

BUSINESS STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
PESTLE and SWOT analysis for organisation for assessing its capabilities..............................1
Porter's Five Forces Model for examining competitive environment.........................................4
TASK 2............................................................................................................................................6
Evaluation of different types of strategic directions available to an organization......................6
Justification and recommendation of most appropriate growth platform and strategies............7
Strategic management plan for L'Oréal by including strategies, objectives and tactics.............8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
In modern era, business strategy can be defined as a course of action and a number of
determinations that an organisation basically takes in order to attain specific goals and objectives
in specific time frame. On the other hand, it can also be said that a master plan (business
strategy) is built to secure a competitive position within the market (Buckley, Burton and Mirza,
2016). With the help of this, a business organisation can easily grab attention of customers in
specific time frame. Away with this, it is also essential for every single business company to
focus on code of conduct, while developing a range of strategies so that it do not affect the
society. Under this report, firm which has been chosen i.e. L'Oréal which was found in the year
of 1909 by Eugène Schueller. Away with this, assignment will cover both PESTLE and SWOT
analysis of L'Oréal that mat aid them in developing effective business strategy. Assessment will
also put light on Porter's Five Forces Model for examining competitive environment and lastly, a
strategic management plan for L'Oréal will also include various strategies, objectives and tactics.
TASK 1
PESTLE and SWOT analysis for organisation for assessing its capabilities.
In present business world, every single business organisation looks forward to plan for
uncertainties that are present in both external and internal environment. With a proper plan it can
easily be said that a business company could directly improve profit margins, gain competitive
advantages and remove/reduce risks that may affect productivity and profitability. Under this,
there are many tools and techniques that are present in both external and internal environment
which could be used by business organisation in order to analyse both of the surroundings, there
core competencies and weaknesses as well (Chen, Eshleman and Soileau, 2016). A world famous
French personal care company i.e. L'Oréal is offering customers with a range of products related
to personal care like, skin, hair and other kind of care products. There are many other companies
like MAC, Maybelline, Chanel and more could be considered as some of rivals of L'Oréal that
basically offers different range of products and services. Due to continuous improvement in
technology, quality and performance of rivals, it has become vital for L'Oréal to analyse both
strengths and weaknesses in order to improve its presence at marketplace and sustainability as
well. It is being found that there are a range of tools like SWOT, PESTLE and more can be
effectively used by L'Oréal to perform well at marketplace or to assess its capabilities.
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SWOT analysis
Strengths Weaknesses
L'Oréal, specifically has a large range of both
personal and beauty care product line (with
approximately 800 products) which can be
considered as one of the core competency
which basically helps in gaining competitive
advantages. On the other hand, it can also be
said that L'Oréal is having around 60,000
effective staff members that performs there
level best in all over the world to make the
organisation for proficient and innovative at
the same time (Fletcher, De Massis and
Nordqvist, 2016). It's pricing policy is also
somehow strong enough that could help in
reaching to new heights.
In present time, there are a range of problems
that L'Oréal face like it follows less centralized
structure which directly disturbs the overall
communicational process among employer and
employees. Another weakness that came in
front i.e. all the actions are taken by BOD
without considering suggestions made by
employees for the betterment of L'Oréal. Here
it can be said that, strategies that are already
made by L'Oréal, are less effective in nature
and they are also impacting negatively upon
performance level as well.
Opportunities Threats
Apart from cosmetic, beauty and personal care,
L'Oréal, could effectively expand its business
in other sectors as well like, clothing, apparels
and so on. But, for this, it will be required for
L'Oréal to keep on developing themselves and
also it will be required to analyse the market
and then come to a decision so that it could
directly reach to new heights in specific time
frame. On the other hand, L'Oréal may also
launch new products in existing markets in
order to fill the gap, so that their grip in those
market get improved.
It is being analysed that, personal care industry
has kept a rapid changing business
environment which means L'Oréal has to make
modifications in its products and services. On
the other hand, another threat is that people in
all over world and their taste are changing on a
regular basis as it is shifting from synthetic to
Ayurvedic or towards herbal beauty products.
Here, it will be required for L'Oreal, to
continuously work on different risks and start
offering customers with herbal beauty products
in order to sustain at marketplace for a longer
period of time (Holotiuk and Beimborn, 2017).
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PESTLE analysis
L'Oréal, which is dealing in personal care and it is also performing well at international
marketplace. Based on the requirements of customers, L'Oréal most of the time focuses on
offering customers with modified products and services related to fashion industry. In order to
gain knowledge related to market feasibility of L'Oréal, PESTLE analysis has been done
beneath:-
Political factor : This factor involves all those factors which are directly related to a
government policies such as, employment laws, taxation policies and so on. All these activities
are performed by every business effectively. In context of L'Oréal, it is one of the biggest
cosmetic brand. Apart from the government, company has also made different rules and
regulation related to the employment. They basically develops some strategies regarding this,
performing their activities effectively and efficiently (Jansen, 2017). If an organisation ignores
any law then they have to face a legal problems. So, It helps L'Oréal for performing effectively
which also helps in capturing a good market share. This could be understood with an example,
where changes in taxation policies is directly affected the profitability of L'Oréal. Therefore,
considering all the changes might impact in both negative and positive manner, it is required for
company to focus on all the alterations made by governmental authorities.
Economical factors : This factor basically plays a crucial role for every single business
organisation as this basically linked with finance and growth of both company and country at the
same time. L'Oréal It is very important for managers of L'Oreal to study and understand the
economical conditions of the nation in which they are performing their businesses. As is the
economical conditions of the nation is not stable and good it can be very tough for them to
sustain in the market and gain some profits, but if the conditions are strong then it will become
easier for them to gain profits and also it will help them in growing their business. This could be
understood with a good example where, if the economic conditions of a country it is not stable
then it will become very tough for L'Oréal in gaining profits, where as if a nation like United
Kingdom's economic condition is stable then customers can easily buy their products and
services as well (Joyce and Paquin, 2016).
Social factor : Another crucial factor of external business environment that basically aid
a company like L'Oréal in gaining deeper knowledge related to facts and figures that L'Oréal
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faces that are linked with modernisation and luxury lifestyle. As L'Oréal offers a range of
products for beauty and personal care, and trends of society is towards modernisation and luxury
lifestyle. Therefore, the products provided by them are according to the demands and it can be
very easy for them to make customers and society satisfied. This help them in making new
products which are very much waited by their customers. This could be understood with an
example where, interest of consumers basically got shifted from synthetic to herbal products,
here it will be required for L'Oréal to develop a range of products and services.
Technological factors : The factors which are associated with technology are known as
technological factors. L'Oréal use to update their technology on regular time period, which make
it easy for them to improve their production and profitability. This also help them in making new
products which are innovative and that can help them in improving the customer satisfaction
also. For example, the speed of time has been changed and production in most of the
organisation are now get performed by automatic machineries. If L'Oréal still use man power in
production house, then it will affect their profitability and also their efficiency of production.
Legal factors : It is very important for an organisation to handle the legal factors with
very care. As L'Oréal is very huge organisation and the competition faced by them is also very
high, therefore it is very important for them to make strategies which can help them in gaining
competitive advancement but which also can follow the legal process also. This will help them in
performing their activities according to the laws of nation, so that they can survive and perform
in effective manner (Julien, 2018).
Environmental factor : The factors which are concerned by the environment and it's
safety is known as environmental factors. These factors has power to affect the performance of
their operations, L'Oréal have to keep in mind while producing and selling their products that
they should follow the rules of global and environment safety, so that they do not get fixed in
any type of legal problem.
Porter's Five Forces Model for examining competitive environment.
L'Oréal company offers varieties of products related to L'Oréal luxe, Consumer Products,
Professional products, Active cosmetics and Body shop. Variety of products are offered by
company for gaining customer satisfaction and customer retention. So, it is very important for
managers of L'Oréal to formulate strategies to maintain efficiency and effectiveness. Strategies
can be formulated by using Porter's five force model which are given below:-
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Bargaining power of Buyers- This factor describes market of outputs, as customers put
pressure on companies which affects customers price sensitivity towards price changes. If large
number of alternatives available buyers power is high. Whereas, if few choices are available than
buyers power is low. The products offered by L'Oréal have moderate pricing but many other
companies also uses low pricing strategy which leads to competition. In context to L'Oréal,
bargaining power of buyers is very high as there is huge probability of customer attraction
towards products offered by company.
Bargaining power of supplier- L'Oréal is biggest cosmetic and beauty industry in world
so, it is clear that level of production is also very high. L'Oréal level of production is at very huge
level so, requirement of raw material is high. Suppliers influence prices of products to a large
extent (Laguna and Marklund, 2018). If company is switching from supplier to another than cost
is almost negligible. As, suppliers have been acquired through vertical integration which helps in
reducing impact of supplier to zero. Suppliers of L'Oréal are not even able to manipulate or force
company to buy raw material at higher costs. Therefore, bargaining power of supplier is very
low. L'Oréal has availability of many suppliers for processing of products including raw
materials, packaging, point of sales, and equipments. So, their bargaining power is low
(bargaining power of buyers, 2019).
Competitive rivalry- L'Oréal faces cut throat competition in cosmetic and beauty
industry, as there are many companies in market offering perfect substitutes to customers at good
quality. L'Oréal spend huge amount on regular basis for research and development, innovation
for introduction of new and modified products. Their are huge number of competitors of L'Oréal
such as Nivea, Revlon, ponds etc. which are strongly competing to capture market share.
Competitive rivalry for L'Oréal is high as large number of players are in market with diversified
products.
Threat of new entrants- The cosmetic and beauty care industry is part of profitable
industries which yields higher returns and this attract new entrants or firms. L'Oréal have high
level of threat of entry of new firms. This factor decrease profitability of company. Their are
many entry barriers and restrictions to enter a industry so,its not easy for new entrants. L'Oréal
has strong brand identity,and economies of scale. The major threat for L'Oréal is their luxury
products which can do economic downturn but they are able to act globally and locally. L'Oréal
main competitors are Dior, Maybe-line, Chanel, Urban decay, and Procter & Gamble.
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Threat of substitutes- Products offered in cosmetic and beauty industry have close
substitutes in market. So, consumers force manufactures to provide products at reduced prices
otherwise they will shift to substitutes. This is major challenge faced by L'Oréal across the
world. L'Oréal have high substitutes threat for their products and services offered. If consumers
are dissatisfied from products of L'Oréal than consumers will easily switch to another brand for
his satisfaction very easily. So, to retain and attract consumers company can focus on quality,
price and quantity (Lloret, 2016).
After considering all factors of porter five forces model it has been analysed that L'Oréal
is very successful after facing all factors. Their are many factors which are affecting the business
of L'Oréal which are competitors, suppliers, customers and substitutes. Cosmetic and beauty
industry is fastest growing sector. In this competitive environment it is difficult to maintain its
position in market. Various factors which can help in maintaining this position are quality, price,
quantity and customer satisfaction. Based on the analysis, it can easily be said that L'Oréal is at a
good level which could easily aid in reaching
TASK 2
Evaluation of different types of strategic directions available to an organization
In present time, it can be said that there are a range of strategic directions basically stays
available for business organisations in order to attain specific goals and objectives. In the same
way, L'Oréal also try its level best to develop a positive working environment within L'Oréal.
For this, company's leaders uses a range of elements in order to hit its targets. It is identified that
L'Oréal goes through ample number of different situations that are basically impacting,
challenging its operations on a regular basis (Neugebauer, Figge and Hahn, 2016). In present
context, there are a range of strategic decisions related to Ansoff Matrix in context with L’Oréal
are presented in given beneath:
Market penetration : This type of penetration basically covers a specific process that is
used by business organisation when it comes to refers to a process which is used by organisation
so that they increase the market share of their existing products and services. This only can be
possible by following various activities and by adopting various marketing tools like
advertisements, promotions, discounts and other offers etc. In a few years back, L’Oréal has
opened ample number of stores in different parts of world. Along with this, it has been analysed
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that reducing the value of products results in increasing it's sale. Through using different
penetration strategies, manager of L’Oréal can improve their market share and customer base.
One of the main disadvantage of market penetration strategies is, it cannot be used in luxury
products.
Market development : This factor of the model Ansoff Matrix, it can be said that
strategic decisions are basically being taken by L’Oréal in order to improve the sales of different
beauty products that are being offered by them in both new and existing business markets. Under
this, it can be said that marketing teams plays a crucial role in order to build up brand image of a
business organisation like L’Oréal to improve its performance level at marketplace. On the other
hand, it is also required this company to adopt various new strategies along with global strategies
and policies that can help them in enhancing their future growth.
Product development : It says that to make a new innovative product or to modified a
existing product at market. In an organisation they make some policies and strategies regarding
development of new product so, that they attract more customers towards their product which
helps in increasing their sales. It also helps in capturing market share. In context of L’Oréal, after
analysing a market place, they said it is not easy to make a new product because it required more
finance which also contains more risk. Further that if they get success from their new product
then they earn more profit which also helps in capturing market share (Oriesek and Schwarz,
2016).
Diversification : In present time, diversification is being considered as one of the most
appropriate factor that aid in removing all the hazards arranges all the objectives as well. Away
with this, it can also be said that, it is very much necessary for both manager and leader of
L'Oréal to keep on adjusting all the requirements of customers through offering them with a
range of products and services. Away with this, L'Oréal would also require to improve its
customer base in an all new place considering new items, and this could be done through a range
of tools and techniques (Paulus-Rohmer, Schatton and Bauernhansl, 2016).
Justification and recommendation of most appropriate growth platform and strategies
Considering all the information, it can easily be said, following a functional structure,
L’Oréal could easily develop effective communication among employer and employees. Along
with this, it can also be said that company would also require to focus on risky elements that are
present in all over the world. Therefore, it is recommended for L’Oréal that, they can also adopt
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this strategic management plans, so that they can improve and enhance their areas of operations
and also help in making strong customer base (Rauter, Jonker and Baumgartner, 2017). The
another recommendation for L’Oréal is to produce herbal and diversified products, so that they
can able to provide products which are less allergic.
Strategic management plan for L'Oréal by including strategies, objectives and tactics.
A strategic management plan is a document which consist of organization's goals and
objectives, setting priorities, strengthening operations, allocation of resources and ensuring that
employees and stakeholders are working to achieve common goals. This plan is most important
part of documentation of organisation. As, this helps in effective functioning towards
profitability and success. Strategic management plan of L'Oréal including goals and objectives
which are to be accomplished in specific time period.
Aim: L'Oréal is committed to achieve 100% products to have environmental and social
benefit. Also, sustainable consumption of products by consumers to enhance beauty (Vlachos,
2016).
Organisational structure: The manager of L'Oréal follows division of labour and
departmentalization structure. L'Oréal divides its labour into innovation and global research
centres which ensures development and a unique portfolio designed by distribution channel and
geographical zone. To do industrial production in integrated manner. Also, L'Oréal has a very
clear range of departments including product, customer and geographical.
Vision: Vision of L'Oréal is “ To establish sustainable growth in their business and
increase its market share.
Mission: Mission of L'Oréal is “To offer cosmetics to men and women with effective
quality, efficacy and safety. And help men and women realizing their aspirations by expressing
individual personalities and needs.
Value: L'Oréal believes to apply values and ethical principles in daily operations with
integrity, courage and transparency. Core values are leading innovation in beauty, giving value to
individual talent, enriching through diversity and passion for adventure.
Objectives: Manager of L'Oréal to set effective objectives uses SMART tools. The
current objective is to increase their sales by 25% within 5 months . Also, their objective is to
increase their customer base and profitability (Spieth, Schneckenberg and Matzler, 2016).
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Goals: the cosmetic company have set goals to win trust and confidence of billions of
new customers in next 10 years. Also, target to reduce greenhouse emissions waste and water
pollution up-to 50%. on other hand, long term goals is to gain competitive advantage by making
collaborations with several manufactures.
Strategies and tactics:A unique strategy has been chosen by L'Oréal which is
Universalisation. It means globalisation which captures and understands differences. Also, to
offer tailor-made beauty products to cater aspirations of consumers at global level (Teece,
Peteraf and Leih, 2016). To increase customer base manger of L'Oréal uses different methods of
marketing strategies and promotional activities. L'Oréal do segmentation of its products on basis
of demographics factors.
CONCLUSION
From the above mentioned report it has been concluded that, in an every organisation
managers and leaders plays their own role. They helps an organisation for achieving their
organisational goal effectively and also for capturing market share. This report says that, they
should have self directed objectives which helps a business for maintaining a cost effectively.
Also it says that a business should study or analyse market for identifying their competitors
techniques or their strategies, because it helps a company to make their unique strategies for
dealing with their competitors. It also gives a advantage to a company for making reputation at
market place and earning profit.
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<https://writepass.com/journal/2017/09/bp-porter-five-forces-analysis-essay/>/.
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