Business Strategy Report: L'Oreal's SWOT, PESTLE, and Strategic Plan

This report offers a comprehensive analysis of L'Oreal's business strategy. It begins with an introduction to business strategies and their importance, followed by a detailed examination of L'Oreal's capabilities using SWOT and PESTLE analyses, considering political, economic, social, technological, legal, and environmental factors. The report then applies Porter's Five Forces model to assess the competitive environment within the cosmetic industry, evaluating threats of new entrants, competitive rivalry, threats of substitutes, bargaining power of buyers, and bargaining power of suppliers. Finally, it explores strategic directions available to the organization and concludes with a strategic management plan for L'Oreal, encompassing strategies, objectives, and tactics. The report emphasizes the importance of strategic planning, market analysis, and innovation for L'Oreal's continued success.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1. PESTLE and SWOT analysis for organisation for assessing its capabilities..........................1
2. Porter's Five Forces Model for examining competitive environment....................................4
TASK 2............................................................................................................................................5
3. Evaluation of different types of strategic directions available to an organization.................5
4. Strategic management plan for L'oreal by including strategies, objectives and tactics..........8
CONCLUSION................................................................................................................................9
REFERENCES .............................................................................................................................10
.....................................................................................................................................................11

INTRODUCTION
Business strategies is a name given to guidelines or frame work that is considered by
managers and owners of a business concern so as to achieve their organisational goals and
objectives within a specified time frame. Every entrepreneur or manager needs to follow a
certain code of conduct so as to develop effective strategies which further provide a competitive
edge in achievement of goals and objectives within a specified time frame. Business strategies
play a quite significant role in enhancing capabilities of a company which further provides them
a sustainable market position (Higgins, Omer and Phillips, 2015). In the present context report
has been framed based on Loreal which is French brand dealing in personal care and wellness
sector and has its headquarters in Clichy as well as Paris. This report further discusses various
key elements such as PESTLE and SWOT analysis which discusses organisational capabilities .
Also this report mentions Porter's five forces model along with strategic decisions . Lastly, a
strategic management plan has been discussed in this report.
TASK 1
1. PESTLE and SWOT analysis for organisation for assessing its capabilities.
Strategic planning is an essential framework which comprises of guidelines or activities
of a business which managers use in order to accomplish various goals and objectives. Along
with this a number of other business processes and activities are considered such as defining
priorities, strengthening their area of operations as well as ensuring about employees and
stakeholders performance which helps them in achieving organisational goals and objectives.
Strategic planning is basically a trained and developed effort which helps managers in producing
effective and fundamental key decisions. These guidelines further direct about goals and motives
of a business concern along with focussing on future prospects as well (Shuen, 2018). In present
context, Loreal has been considered which is a leading brand that deals in skin care and hair care
products and services. They further own a quite well developed and extensive portfolio in hair
and skin care products which provides a stable position in market. Today competition has risen
greatly and hence managers of Loreal will need to focus on effective strategy formulation along
with market analysis by SWOT and PESTLE analysis which has been discussed as under:
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SWOT analysis
Strengths Weaknesses
Loreal today happens to be a world leader
today in hair care as well as skin care products.
It is mainly because they have a quite
extensive portfolio and provide excellent
quality goods and services. Loreal happens to
be a quite large scale operating business
concern which currently employs around 6000
employees from all over the world. Another
important factor is that they provide diversified
as well as better quality goods and services
(Brewster, 2017).
Loreal also has certain weaknesses and
drawbacks . Organisational structure of Loreal
is quite decentralised and therefore cannot be
controlled by a single individual. Also there
happens to be a quite tough competition from
various other leading brands which has made it
quite complex for leading brands.
Opportunities Threats
Loreal today gains a number of benefits which
help in enhancing their overall productivity
and profitability as well. Benefits or
advantages in context of Loreal include
tapping advantage from growing market and
also owning a developed market share as well.
This is due to numerous patents that have been
registered in their brand name. One major
opportunity which can be grasped by Loreal in
present scenario includes manufacturing
herbal as well as skin friendly products and
services which help in growth as well as
expansion.
Threats for Loreal have been constantly rising
due to higher and tougher competition fro other
brands that are operating within cosmetic
sector. If Loreal does not innovate its products
and services on a regular basis then customers
may skip buying their products feeling that
products are not as per their requirements
(Cavusgil and et. al., 2014).
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PESTLE ANALYSIS
Loreal is a quite important and leading brand in hair care as well as skin care sector. In
current times, it manufactures a range of products and services which are responsible for meeting
needs and requirements of market and customers by infusing global market trends into them.
Loreal currently operates in approximately 130 nations as per the current scenario. Furthermore,
there are a number of factors which are part of PESTLE analysis. These factors have further been
stated as under:
Political Factors: Political factors are generally basic guidelines that have an influence
on business operations in a positive or negative manner. These factors include various elements
such as current legislations, political situation of a country as to whether it is stable or not. These
factors are basically related to policies or laws that are currently present in a country (Chang,
2016). In context of Loreal it has been ascertained that it is a French business concern and hence
managers will have to frame policies as per political conditions and laws that are prevailing in
France. Loreal has been globalising its business operations and hence it will have a quite
positive and significant impact on business. Also it will further help in raising profitability of
Loreal thereby providing it a stable market image and enhancing customer base as well.
Economic factors: Factors that basically focus on economic elements that are present in
a country are known as economic factors. Various economic components include exchange rates,
monetary policies, tax rates etc. In context of Loreal, it has been examined that various
important factors and elements such as financial stability, GDP, price of products etc. affect its
economic growth. Prices of products of Loreal keep on modifying based on different regions
This happens due to difference in tax rates, import export duties etc. GDP is an important factor
that affects growth of brands such as L’Oréal . Hence it has been said that people will be buying
products only if there is some unique feature in them which will further have a quite positive
impact on business.
Social factors: Factors that affect society as a whole are referred to as social factors. In
present context it can be seen that modernise society and luxury class people are more interested
in buying products of L’Oréal Functioning of a business generally gets affected by beliefs,
values and thoughts of individuals that reside in a society (Chen and Jermias, 2014). People in a
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society are usually first to identify if there are any new innovations in technology. Also they wait
for L’Oréal to bring innovations in its products along with maintaining quality of products. This
is usually done by using a minimal amount of chemical content in hair and skin care products.
Technological factors: Factors that get affected due to new advancements in technology
are referred to as technological factors. Technology plays a quite significant role in day to day
functioning of L’Oréal . Managers of Loreal always keep an innovative approach while
manufacturing products and services along with following both past as well as future trends.
Hence it can be noticed that innovation is the key to success behind operations of L’Oréal All
these have enhanced productivity of L’Oréal along with maximising its revenue as well.
Legal factors: In context of legal factors it has been ascertained that there quite a high
number of rivals for L’Oréal in present context. This further makes it quite complex or difficult
for managers and entrepreneurs so as to maintain a stable market image and growth as well. In
context of L’Oréal it has been examined that for achieving a strategic edge managers will need
to critically examine all legal requirements of a business and then fulfill them as well ( Jeston,
2014). By doing so entrepreneurs will also be able to focus on better and stable market position.
Environmental factors: Factors that deal in environment and its overall maintenance are
known as environmental factors. In context of Loreal it has been examined that to achieve
environmental benefits managers of Loreal will have to follow certain laws and policies that
have been set as per global standards. This will be quite beneficial in developing a stable brand
image of the company. Also these factors need to be considered before determining or setting
policies for a company. This will help in ensuring stable and healthy brand image of Loreal.
2. Porter's Five Forces Model for examining competitive environment.
Business concerns dealing in cosmetic as well as skin care industries have a quite wide
and well developed range of products and services that are used by a number of customers.
Hence in present context of L’Oréal, managers use Porter's five force model so as to achieve a
strategic and competitive edge in market against its rival firms. This will help managers in
analysing competitive environment. It includes 5 forces which are mentioned below. To analyse
the competitive environment of UK L`oreal has used Porter Five Force Model so as to gain a
competitive advantage at market place. This model has further been described as under:
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Threat of new entrants: To develop new product in a cosmetic brand huge amount of
investment is required, so the threat of new entrants is low within the marketplace. Along with
this, quality, pricing and marketing of a product have to be considered by all new entrants. Some
companies made their entry easy in the competitive market by offering high-quality products
with lower pricing strategy (Goffee and Scase, 2015). L`oreal face a lot of competition at market
place as Mac, Maybelline, and other companies offer same type of products to customers.
Competitive Rivalry: Competitors present within same industries are Elemis, Espa and
other local companies, so the degree of competition is very high . There are limited number of
spas and some of them have their own product, this situation shows that there is relatively low
demand than supply. To maintain the sustainability at marketplace many rival companies in
cosmetic industry started reducing their overall profitability by using low pricing strategy. So, to
grab the attention of customers company should focus on the quality as well as price of products.
Threats of Substitutes: Threat of substitutes occurs when companies come up with
similar products and met the expectations of customers (Jocovic and et. al., 2014). There are
many close substitute products which is already exist at market place, by providing low price
product they increases the probability of customers to easily switch towards alternative products.
Power of suppliers and attractiveness of market is reduced. In order to sell more products and
capture large number of customers and market L`oreal introduce normal price products to its
customers.
Bargaining Power of Buyers: Customer force to provide good quality products at lower
cost. Consumers have high demand power by which manufacturers and suppliers does not
predict the future demand of market. L`oreal has high bargaining power of consumers, which
increases the availability and competition of similar product from various manufactures. For
L`oreal it is not a risk because it is one of the biggest leading cosmetic company and almost
every customers prefer its services and products with the price they offer (bargaining power of
buyers. 2019).
Bargaining Power of Suppliers: For every company suppliers are the most important
part as they provide raw material to them. If the bargaining power of suppliers is high, then the
company start losing its customer. If the supplier of L`oreal increases their raw material cost,
then the final product cost will automatically increase. To meet the demand of customers,
company offer variety of products.
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As per this model it has been observed that Loreal owns a stable market position due to
its quality of goods and services. In addition to this, managers will have to consider adopting
new tools and techniques so as to maintain their customer base along with providing a brtter
goodwill to them.
SWOT ANALYSIS
Strengths Weaknesses
Loreal today happens to be a world leader
today in hair care as well as skin care products.
It is mainly because they have a quite
extensive portfolio and provide excellent
quality goods and services.
Loreal also has certain weaknesses and
drawbacks . Organisational structure of Loreal
is quite decentralised and therefore cannot be
controlled by a single individual.
Opportunities Threats
Loreal today gains a number of benefits which
help in enhancing their overall productivity
and profitability as well.
Threats for Loreal have been constantly rising
due to higher and tougher competition fro other
brands that are operating within cosmetic
sector.
TASK 2
3. Evaluation of different types of strategic directions available to an organization.
A strategic direction is combination of various forces that are present within a business
and help it in achieving its organisational goals and objectives within a specified time frame.
Strategic directions can only be undertaken in a business if essential driving forces and elements
of a business such as mission, vision, strategies, tactics etc work in absolute coordination or
collaboration with each other. Managers and leaders of Loreal consider all these elements so as
to maintain and promote a positive and healthy working environment in their business concern.
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Furthermore, strategic decisions or policies are an integral part of a business concern which
provide a more focussed view regarding organisational aims and objectives as well. These help
in providing a clear vision to employees as to what is expected of them and what they should
achieve within a specified time frame (Klettner, Clarke and Boersma, 2014). In relation to Loreal
managers many a times have to face certain critical or complex situations Specific strategies,
such as identifying product strengths, adjusting pricing, or acquiring another business, have
historically been used to get a small enterprise off the ground. Various types of strategic
decisions in context of Loreal has been stated as under:
Market penetration: Market penetration refers to a process which aims at successful
selling of goods or services in a specified market place. Also it can be known as the extent to
which a product or service is sold or purchased in a particular market. This also includes
activities or tasks which help in enhancing market share of a company. This is generally done by
adopting or applying effective and suitable marketing tools such as advertising, promotional
activities, discount offers etc. In context of Loreal it has been ascertained that market share of
Loreal can further be developed or increased by adopting effective and suitable business
strategies as well. In relation to this, Loreal has opened a number of stores in different parts of
the world.
Also it has been examined that decrease in value of products further helps in enhancing
sales of a company. A positive impact of this strategy is that it will help by providing growth
prospects in customer base as well as market share whereas negative ipm act of this strategy is
that it cannot be used in case of luxury products and commodities as they involve higher costs.
Market development: Another important strategic decision as per Ansoff matrix is
market development which involves a process in which companies can target new areas and
markets which further helps in growth and promotional activities. For undertaking market
development, marketing teams of a company need to be quite effective which will further lead to
a well developed brand image of a company in competitive market (Laudon and Traver, 2016).
In this process, business concerns may even undertake global strategies and policies which help
in developing new products and services. In context of Loreal it has been observed that they try
to sell almost similar products to every customer which is not safe as every product requires a
certain amount of time for getting settled in new market and environment. Also it requires quite a
lot of investment as well as resources.
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Product development: It is basically an entire series of steps which infuses a number of
processes or activities such as conceptualisation, designing of product, development and
marketing of a newly invented product or service (Lawton, 2017). Hence it has been known as an
innovative process. Product development can only be undertaken by managers of a business
concern if strengths or advantages of a firm are somehow related or interconnected to its
customers as compared to specific products. In present context of Loreal it has been ascertained
that development of new products and services is a quite complex and time consuming process
yet has quite a lot of benefits. By considering this strategy managers of Loreal will be able to
improve overall customer base and market share. Also there happens to be a drawback in
adoption of this process that it is risky in nature as customers do not trust new products and
services so easily.
Diversification: Diversification is another important corporate strategy that is considered
by business concerns which helps them in entering into new markets by means of creating new
products and services. It is a quite hazardous or dangerous strategy in context of Loreal as
achieving economic stability and economies of scale is not possible. This is due to a major
reason that demands or requirements of each customer is quite different from other and
manufacturing a different product for each customer is not possible in practical life situations.
Hence in this respect managers will need to employ quite higher amount of funds which further
helps in enhancing their customer base as well. Diversification of products and services has quite
a lot of benefits such as increase in customer base as well as profitability (Peng, 2017). Also it
provides a competitive edge to business concerns in respect of their rival firms.
A justification and recommendation of the most appropriate growth platform and
strategies: From the above stated Ansoff growth vector matrix it has been examined that
diversification will be quite beneficial for Loreal as it will develop scope of growth for Loreal
and also help in building its area of operations as well. Managers of Loreal in the present context
are recommended that they should bring in herbal and healthy products in their product line
along with medicinal qualities. This will be quite useful in building their brand image and
customer base as well.
4. Strategic management plan for L'oreal by including strategies, objectives and tactics.
A strategic management plan is an essential document of a business concern which is
considered by managers and leaders whenever they wish to communicate with their employees.
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This tool also helps in providing clarity to employees regarding their organisational goals and
objectives . Also it helps in strengthening business position of a company thereby ensuring that
employees and stakeholders are working for achievement of their organisational goals within a
specified time frame. It is an important part of a company and further helps in ensuring its
profitability and productivity (Eaton and Kilby, 2015). In context of Loreal it has been observed
that its strategic management plan helps in achieving their organisational goals and objectives
within a specified time frame.
Aim: In context of Loreal its main aim is to provide excellent quality products which
hleps in enhancing overall customer base.
Organizational structure: Organisation structure in context of Loreal is observed to be
divisional and decentralised . Also it has been observed that there are no in house production
units in Loreal hence they employ people from different cultural backgrounds.
Vision: Vision of L’Oréal is “To establish a sustainable business growth and market
share as well.”
Mission statement: Current mission of Loreal is to bring in innovative products and
services in their organisation and enhance their overall customer base as well.
Values: Loreal follows a quite developed set of values such as integrity, courage, respect,
transparency etc. For this they will have to adopt ethical business practices for their employees.
Objectives: Objectives refer to organisational goals which are considerd by their
managers. Hence in this context, managers of Loreal have used SMART tool for setting up of
their objectives. Objective of Loreal is to increase its overall customer base by 20% in 4 months.
Goals: Main goal in relation to Loreal has been found out to be winning trust and loyalty
of their customers. Also for this they will have to provide better quality products to their
customers that help in enhancing their overall well being (Buckley and Ghauri, 2015). Managers
of Loreal also focus on mobilization of their innovative strength which further provide support
to local communities and preserve environment from degradation as well. Long term goals of
Loreal are entering competitive market by gaining collaboration with local manufacturers.
Strategies and tactics: In the current scenario, managers of Loreal have chosen market
penetration strategy which will help in enhancement of market share as well as profitability
(Rugman and Verbeke, 2017). For this managers will further have to employ various marketing
tools which help in promoting goods and services as well.
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CONCLUSION
From the above mentioned report it has been concluded that business strategies are an
essential element which have a quite significant impact on growth and profitability of a business
venture. As per this report managers and leaders should develop effective ways in which
business strategies or processes can be considered. This further helps in providing long term
sustainability to businesses. This report further discusses various skills or policies of a business
which help in achieving their goals and objectives within a specified time frame. This report
also mentions SWOT and PESTLE analysis for assessing business environment. Also it has
been specified that every business should have a set goal and objective which they are directed
towards. This report further considers strategic management plan which combines vision,
mission and objectives of a company. Lastly, Ansoff matrix has also been mentioned in this
report.
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