L'Oreal Business Strategy: Macro & Internal Analysis Report

This report provides a comprehensive business strategy analysis of L'Oreal, a multinational personal care company. The analysis begins with an examination of the macro-environmental factors impacting L'Oreal using the PESTEL framework, considering political, economic, social, technological, environmental, and legal influences. The report then delves into L'Oreal's internal environment, employing a SWOT analysis to assess strengths, weaknesses, opportunities, and threats, and utilizes the VRIO model to evaluate the value of its resources and capabilities. Furthermore, the report applies Porter's Five Forces model to assess the competitive dynamics within the cosmetics industry. Finally, the report outlines a strategic management plan for L'Oreal, including proposed strategies, objectives, and tactics to enhance its market position and achieve its goals. The report offers a detailed overview of L'Oreal's strategic position and provides insights into its future direction.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
P1 Applying appropriate frameworks analyse the impact and influence of macro
environmental factors on Loreal and its strategies......................................................................1
TASK 2............................................................................................................................................3
P2 Analyse the internal environment and capabilities of a given organisation using appropriate
frameworks .................................................................................................................................3
TASK 3............................................................................................................................................5
P3 Porter's Five Forces Model for examining competitive environment....................................5
TASK 4 ...........................................................................................................................................7
P4 Strategic management plan for Loreal by including strategies, objectives and tactics..........7
CONCLUSION..............................................................................................................................10
REFERENCES .............................................................................................................................11

INTRODUCTION
In order to sustain in this dynamic environment it is essential for the organisations to
develop effective business strategy so as to gain competitive advantage. Business Strategy refers
to the actions and decisions taken to meet long term and short term objectives of the organisation
(Acquaah, 2013). It allows the business to follow appropriate directions towards the attainment
of goals. The project is based on the Loreal company. It is a Multinational French company
specialises in personal care products, headquartered in Clichy and has registered office in Paris.
Its products mainly includes hair colour, skin care products, sun protection, make up products
and perfume and many more cosmetic products. The project will throw lights on the impact and
influence of the various macro environmental factors on the organisation, it also evaluates
organisations strengths and weakness and therefore determines capabilities and weakness among
them. It also elaborates Porters five forces model in order to judge the competitive position of the
industry and applies models and concepts to determine strategic directions available to the
organisation.
TASK 1
P1 Applying appropriate frameworks analyse the impact and influence of macro environmental
factors on Loreal and its strategies
PESTEL is a macro level tool which help the company to analyse the external factors
which is impacting their organisation. It stands for political (impact of government and its
policies on them), economical (impact of economy of the country on them), social (impact of
change in trend on them ), technological (impact of technological and innovation),environmental
(impact of climate, carbon footprints,waste),legal (impact of laws and legislation on them). In
context of l'oreal this is how they are applying it into their business to know the external factors
that are affecting them (AlsudiriAl-Karaghouli and Eldabi, 2013).
Political- Company like l'oreal is working under the rules and policies of the the France
government because its manufacturing unit is in Paris. Any political change in that country will
impact the company. By the globalisation, political factors are affecting the company's strategy
in negative as well as positive way as when the brand globalise itself it has to follow the rules of
different country which may be completely different from their own country. In this scenario the
negative impact is that it become very difficult for the company to manage them all because any
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political change will lead difficulties for the company. But this political factor also have positive
impact and that is if the company follow the government of each country they can attract
customers because people are conscious about brand affiliation with the government.
Economical- It is related to the country's exchange rate in which the company is
working. Decrease in exchange rate will bring decline in production and sales of the company's
product. Like inflation rate of UK has increased and because of which purchasing power of
buyers of UK has decreased which is causing negative impact on the company's sales and
production. Development index is also considered as the economical factor for the l'oreal like
developed countries are buying more beauty products as compare to underdeveloped countries
so working in developed countries is positively impacting the company (Bharadwaj and et. al.,
2013). This factor impacts the Loreal strategy as with the inflation consumers buying process
decreases which forces the respective company to decrease price of its products which is not
possible for high brand strategy and therefore affects business strategy.
Social- These factors includes the social trend & belief among the people of the country.
Countries with modern living standard have different taste and preferences from the others.
Every country have different social factor like in UK disposable income of people is increasing
which is causing changes in their habits and choices, people are preferring to buy more
cosmetics and beauty products which leads to the change in their standard of living. This is
putting positive impact on the company like l' oreal because of the high demand of their
products. But this rapid change in buyers behaviours is also causing negative impact on company
as their old products which are getting wasted because of new demands.
Technological- It focuses on technology, research and innovation factor that is affecting
the company either positively or negatively. In case of l'oreal they has launched a very
innovative technology for the make-up lovers named MKEUP GENIUS a beauty app. This app
transform the mobile or iPads camera into virtual mirror and users can virtually try product and
can judge according to their skin tone (Chang, 2016). This innovative technology of l'oreal has
positive impact on the company because it increases the sales of products and goodwill of
company. There are some more technologies that l'oreal has launched or is going to launch which
is making make-up lovers crazy. These technologies also have some negative impact on their
life and that is by making them more addicted toward their mobile phones which is in reverse
causing dangerous health issue in people.
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Environmental- these factor includes laws related to global environment safety. Breach
of this law will impact the companies in bad ways. Like at the time of decline in sales, l'oreal
started using environment friendly ingredients in their product to gain the trust of customers and
started advertising about it. It had a positive impact on the company. But when company try and
test their products on the animals before selling it to the human beings they harm the
environment by killing them which causes the negative impact on the company.
Legal- L'oreal is working on different countries so it is very important for them to follow
the legality of that particular region (Eaton and Kilby, 2015). As l'oreal's focus is on segment of
upper middle class and elite class citizens and they are very much concerned about legal stuff.
When company faced dermatological issue because of the new law in EU, company was legally
not allowed to use particular chemical (phthalates) in their products and was asked to produce
safe products only. It gave negative impact on brand because it declined the sale of the product
and put a question mark on the image of l'oreal. Positive impact of this issue that because of the
new laws and regulations company started producing much safe products which brought back the
trust of customers again.
TASK 2
P2 Analyse the internal environment and capabilities of a given organisation using appropriate
frameworks
In order to develop business strategies it is essential for the mangers at Loreal to analyse
the internal environment of the organisation and analyses its own strengths and weakness and
determining opportunities according to the strengths identified as well as implementing strategies
to minimise the threat and assist organisation towards the attainment of organisational goals.
Manager conducts SWOT analysis of Loreal which is described as follows-
SWOT Analysis-
It is a strategic planning tool which assist in determining strengths, weakness,
opportunities and threats of the organisation as well as evaluates competitive position and to
develop strategic planning. It helps in analysing current and future potential of the organisation.
 Strengths- It includes the internal capabilities of the organisation which assist them to
enjoy competitive advantages. The major strength of Loreal includes it has a large
number of products in their portfolio range including from skin care, hair care and many
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other cosmetic products which assist the company to expand their products lines as it has
a good brand image in the market. As consumers want glowy skin and healthy hair and
demands for more organic products. This made Loreal to provide complete range of
organic products and attracts larger customer base towards it. This is the capability of the
firm to sustain in this dynamic environment.
 Weakness- This factors hinders the growth and development of the Loreal and makes it
difficult to sustain in this competitive environment. There is no centralised structure as
there are lot of employees in Loreal and offers many products. This leads to chaos and
problem under the company and leads to ineffective customer service. This is the major
weakness of the firm which leads to problem in manufacturing and distribution of its
products (Iacob, Quartel and Jonkers, 2012).
 Opportunities- These are the major capabilities of the firm which assist the firm to
maintain sustainability in the market for a long term period and therefore aids to
competitive advantage. As Loreal has established well renowned image in the the market
it is an opportunity for the company to expand into the newer areas in the beauty industry
to attract more customer base. Company can opt for market expansion strategy or can opt
for diversification strategy to increase sales of the Loreal products.
 Threats- The major threat to the Loreal is there are the large number of competitors of
cosmetic products, if Loreal sacrifices with the quality of products then there is threat that
consumers can easily switch to another products, so there is a competition. Major threat
to the Loreal is the inflation condition in the economy which will affect the sales and
profitability of the company (Jocovic and et. al., 2014.).
These all the factors assist in determining the internal capabilities of the organisation and
maintain its sustainability for a long period of time.
In order to judge the internal capabilities of Loreal strategy deputy manager uses VRIO Model to
determine whether the resources whether the resources are valuable to the company or not. It is a
four dimension framework which is explained as follows-
 Valuable- It explains resources available to the company are valuable or not. Therefore
Loreal has all valuable physical, financial and human resources which helps towards the
attainment of organisational goals. As Loreal have all the valuable tools and technology
and the skilled manpower which are very essential for the production of the company are
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valuable to the company and are nor rare. This helps the respective company towards the
attainment of organisational goals.
 Rare- Resources are considered valuable if they are not rare with the organisation.
Loreal has more than 60, 000 employees which are valuable and not rare and has large
amount of funds which assist them to sustain in market for a longer time period.
 Imitate-If the resources available with the organisation are difficult to imitate or copy for
others, then it would be the organisations greatest opportunity to establish brand mage n
the market and remain ahead of competitors.
 Organised to capture value- Loreal is able to manage all its resources and perform its
business activities, which assist them to sustain in the market for a longer term period.
Loreal is able to manage systems, process and policies in a proper manner and achieves
competitive advantage (Khalili, Shavarini and et. al., 2013).
TASK 3
P3 Porter's Five Forces Model for examining competitive environment.
In order to evaluate the competitive position of the industry it is necessary for the
managers at Loreal to evaluate the attractiveness of its industry in terms of profitability and
adopts strategy according to the situation. It includes five competitive forces such as bargaining
power of suppliers, bargaining power of buyers, threat of substitutes, industry rivalry as well as
threat of new entrants within the industry. Porters five forces model is described as follows-
 Threat of New Entrants- As there is large consumer demands in the fashion industries it
is necessary for the firm to keep changes in their product so as to provide maximum
customer satisfaction. Cosmetic sector industry is the fast growing attractive industry in
the world as it provides products according to customers demand. But as Loreal provides
high class quality products it has established a renowned image in the market which will
makes difficult for the new entrants to enter into this segment and attracts customer
towards it. Moreover this require heavy investment for the company to enter in this
segment and requires more research and development to provide products according to
customer demands (Lawton, 2017). Therefore threat of New entrants is low in this
industry which will benefits the Loreal to much a greater extent. In such case Loreal
should adopt market expansion strategy in which firm should focus on expanding number
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of product ranges in their portfolio and thereby increasing the sales. This strategy would
be beneficial for the company to enhance profitability on a larger scale.
 Bargaining power of suppliers- Loreal brand has large number of products in their
portfolio. This requires them to purchase raw materials from different suppliers. As when
the company has large number of suppliers it leads to low bargaining power among
suppliers and high bargaining power among companies. Frequent changes in the prices
of raw materials makes the brand easily switch to another suppliers because of the variety
of suppliers in the market and would prefer purchasing raw materials from the suppliers
which are offering them at a lower price and with efficient quality. Therefore Bargaining
power of suppliers is low. In such case company should adopt market penetration strategy
which focuses on increasing sales for their existing products in their existing market so as
to capture larger market share and enhances profitability of the company.
 Bargaining power of Buyers- It is concerned with when there are large number of
buyers in the market it leads to high bargaining power and vice versa when there are few
buyers for the product. As Loreal has a well established image in the market and provides
high quality products according to customer needs , therefore this attracts large number of
buyers towards the product. This leads to high bargaining power among the buyers. If
Loreal would change quality of products or frequent changes in the prices of the product
would makes the buyers easily shift towards another company's product. Hence there is
high switching cost among the buyers under this cosmetic industry. When there is high
switching cost for the buyers, managers at Loreal should adopt Pricing for market
penetration strategy (Li and Tan, 2013). This strategy entitles that Loreal should provide
products at a lower price so but should not sacrifice with the quality so as to attract
customers on a larger base. This would assist Loreal to minimise the switching cost of the
buyers to the another brand in cosmetic sector.
 Threat of Substitutes- Consumers now days started demanding more fashionable
cosmetic products which forces Loreal to make changes in their products so as to gain
competitive advantages and maintains sustainability in the market for a longer time
period. As there are various substitute products available in the market it becomes
necessary for the Loreal to keep upgrading their products which makes difficult for the
consumers to switch to another company product. Loreal faces competition from MAC,
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Maybelline, P&G which poses moderate threat to company from the substitute products
available in the market. With large variety of substitute products available in the market
it is necessary for the firm to opt differentiation strategy which focuses on providing
differentiated products from the competitor. It ensures adding some extra qualitative
features in the product to make it attractive to the customers in order to capture larger
market share. This strategy will allow the respective company to be ahead of its
competitors and maintains its sustainability in the market for a longer period of time.
 Rivalry among the existing competitors- It generally refers to when there are large
number of firms selling the same variety of the products in the existing market. This
poses great competition to the Loreal (McGrath, 2013). Their are large number of firms
selling the same variety of products such as MAC, Maybelline, P&G which offers
various types of skin care products. Therefore there is high rivalry among the existing
competitors. When there is high rivalry among the existing competitors managers of
Loreal should adopt innovative strategy to make modifications in their existing products
so as to remain competitive and remain the number one brand in cosmetic sector. This
strategy will allow managers to bring up-gradations in their existing products according
to the fashion trends in the market.
Here mentioned are all the strategies which the firm should adopt in order to remain
competitive in the market and sustain in market for long period of time.
TASK 4
P4 Strategic management plan for Loreal by including strategies, objectives and tactics.
Business Strategy consist of the actions and decisions taken by the manager at Loreal to
achieve their long term and short terms objectives of the organisation. It therefore assist in
effective utilisation of resources and helps the company towards the realisation of goals. In order
to execute its business activities in a proper manner it is necessary for the mangers at respective
company to develops and formulate effective strategic management plan to make its
sustainability in market for long period of time. There are various types of strategic directions
available to the company which the company can choose in order to enhance sales in the market.
In order to determine the most effective strategic direction , managers at Loreal made the use of
Ansoff Matrix Model to choose the most effective strategic directions (Murthy, 2012).
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Ansoff Model – It is an strategic analysis tool which provides framework to the
managers at Loreal to devise and implement strategies for their future growth (What is the Ansoff
Matrix?. 2019.). It is a four dimension grid which provides four types of strategic directions to
the company which are described as follows-
Market Penetration- Under the market penetration strategy respective company tries to
enhance it sales and profitability by selling the existing products and services in the existing
markets. This way it can enhance its market share by selling new products and thereby finding
new customers within the existing markets. This strategy can be accomplished by the following
ways-
 By increasing more of advertising and promotional efforts to increase customer
awareness regarding the product so as to enhance sales (Oestreicher-Singer,and
Zalmanson, 2013).
 By decreasing the prices of its existing products by a way of offering discounts and offers
so as to increase the sales of the company.
 Introduction of the loyalty schemes which will attract customers towards the product.
Example of Market Penetration- Loreal can penetrate in the existing market by a way of offering
discounts on the skin care products and targets large number of customers.
These are the ways in which Loreal can increase the sales of its products but attracting
more customers towards it.
Market Development- Under the market development strategy, company enters a new
market with their existing products and expands its market into a new geographical regions,
countries etc. This is a growth strategy in which firm positively enhances its sales by targeting
new customers within new region. This strategy can be opted by the firm by following ways-
 Entering in the the specific geographical regions where demand of the product is high
will assist company to increase sales.
 Respective company can opt for new distribution network which makes products easily
reachable to the customers (Peng, 2017).
 Company can opt for competitive pricing strategies so as to make product affordable to
the customers and indirectly helps company to enhance its profitability.
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This is comparatively a riskier strategy in which firm enters a new market with their existing to
increase sales and profitability of the company. This requires investment in research and
development to analyse the needs of customer and provides the product accordingly.
Example of Market Development- Here Loreal can enter into small towns and villages to create
awareness about its products and targets maximum sales.
Product Development- Under this strategy respective company develops new product to
cater needs of the existing market . This requires more investment in research and development
regarding expansion of their product portfolio. This could be done by following ways -
 Company should analyse customers demands in the market and therefore develops the
new product according to their needs.
Diversification- This is a different strategy in which Loreal decides to develops new
products targeting for newer segments of customer base. Here the firm enters with totally new
product in the new market. Under such strategy firm can introduce baby products which is totally
a different product and will target small kids which would be a new segment of the customers.
These are the various strategic directions available to the company in order to increase sales and
profitability of the company.
Justification and recommendation for growth platform and strategies
It has been analysed from all the above strategic directions that company should adopt
market penetration strategy to enhance sales and profitability of the business because the
company has established a well renowned image in the market can easily attract the customers. It
would be easy for the firm to attract new customers towards their existing products and indirectly
enhances sales of the company. With its high quality features customers get easily attracted
towards the product as well as it is recommended to the respective company that it can also offer
various promotions and discounts to the customers to attract customers product and motivates
them to buy it (Schaltegger,Lüdeke-Freund and Hansen, 2012).
Strategic Management Plan
It is a strategic planning tool which takes actions and decisions and set priorities and
effectively allocates resources so that business activities can be performed effectively towards
the attainment of organisational goals.
Aim- Main aim is to enhance brand image in the company by providing quality products.
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Vision- Its vision is to maintain long term sustainability in the market by providing quality
products.
Mission- Its mission is to provide quality products to the consumer to meet up their satisfaction
level.
Objectives- To enhance market share by 20% in upcoming 1 year by providing quality
products.
Strategies- Company formulates strategy to conduct business operations in a effective manner
company has adopted market penetration strategy to enhances its sales and thereby increasing the
market share of the company. Company should also conducts market research so as to analyse
customers needs and desires and then provide the products accordingly.
Tactics-
In order to achieve objectives, Loreal manager has planned some tactics which are
described as follows-
 Improved packaging- Company focused on increasing packaging of its products to
make it more attractive and easy to carry for the customers towards the attainment of
organisational goal.
 Cash Management- Managers at Loreal should make effective budget on a prior basis
and therefore makes arrangement for cash so that business activities can be carried
properly without any hurdles or problems (Verbeke, 2013).
CONCLUSION
From the above report it has been concluded that formulating and developing effective
business strategies is essential for the company for its smooth business operations. It gives the
company appropriate business directions towards the functioning of its activities. Managers
should effectively analyse the macro environmental factors and the company's internal
environmental to determine strengths and weakness of the company and therefore covert
strengths into opportunities to sustain in market for a longer period of time. Along with this it is
essential for the company to develops effective strategic marketing plan to work according to
the mission and vision of the company and attains goals and objectives in a systematic manner.
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