Comprehensive Business Strategy Report: L'Oreal's Market Position

This report provides a comprehensive analysis of L'Oreal's business strategy, examining its performance within the cosmetic industry. It begins with an introduction to the importance of strategic planning for business growth, using L'Oreal as a case study. The report delves into the influence of the macro environment, utilizing the PESTEL analysis to assess political, economic, social, technological, environmental, and legal factors affecting L'Oreal's operations. It then analyzes the internal environment through a SWOT analysis, identifying the company's strengths, weaknesses, opportunities, and threats, and also employs the McKinsey 7S model to evaluate internal elements. Furthermore, the report applies Porter's Five Forces model to assess the competitive landscape, including the threat of new entrants, the bargaining power of suppliers and buyers, the threat of substitutes, and the intensity of competitive rivalry. Finally, the report discusses concepts and models for strategic planning, offering insights into L'Oreal's market position and competitive advantage.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1 ...........................................................................................................................................1
P 1 Influence of the macro environment .....................................................................................1
TASK 2 ...........................................................................................................................................2
P 2 Analyse the internal environment .........................................................................................2
TASK 3............................................................................................................................................4
P 3 Porter’s Five Forces model ...................................................................................................4
TASK 4............................................................................................................................................7
P 4 Concepts and models for strategic planning .........................................................................7
CONCLUSION................................................................................................................................9
REFERENCE ................................................................................................................................10

INTRODUCTION
To make strategies are important for the growth of business and its success. It provide
help to accomplish the objectives of corporation which is helpful to run the firm smoothly and
effectively. For an organisation it is essential to make strategies so that goals of can be achieve as
per the requirement. To better understand this concept L'Oreal has selected which is a personal
care company of France. In this report there are following topics are covered such as: influence
of macro environment, analysis of internal environment and capabilities, porter's five forces
model to analyse competitiveness. Apart from this it also discuss about concepts and theories for
strategic planning.
TASK 1
P 1 Influence of the macro environment
Macro environment is associated with the external environment factors which can
influence the business performance and its growth. For the organisation it is necessary to control
this factor so that operational activity does not get hamper. With the help of PESTEL, a company
can analyse external market where the operations of corporation are executed. There are six
factors which are related to it such as: political, economic, social, technological, environmental
and legal factors.
PESTEL analysis is considered best fit subject to analyse the viability of external
environment. It provides wide synergies to analyse the feasibilities for effective and efficient
working in external environment. SWOT and stakeholder Porters’ analysis only provides the
internal aspects of organisation but it do not reliable for external analysis and evaluation process.
Moreover, if organisation is seeking for expanding business at global level, in that case PESTEL
is the only analysis that remains effective to analyse the environment of proposed destination. In
the above case of L’Oreal Company PESTEL analysis opted because organisation wants to
expand its operation at large level.
Political factors: The business operations of an organisation can be influenced through
political factor. It includes rules, regulations and policies which are introduced by the
government. L'Oreal operates its business at various nations so it is important for it to follow the
government regulations. As Europe and Canada have harsher ingredient requirement & out of
1328 cosmetic ingredients that have banned over 500. It corporation wants to survive in these
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countries than L'Oreal have to follow specified rules of these nations otherwise it can not make
expansion of its business. So the business of organisation has influenced (Liu, 2013).
Economic factor: To effectively survive in the market, it is important to make better
strategy as per the need of economic factor. It includes inflation, foreign exchange rate,
economic growth, interest rate etc. To run the business in international market, it is essential for
corporation to set the price of beauty products according to the inflation rate & economic
conditions. If inflation rate has increased in France, in such case buying power of persons can
affect as a result sales will minimize. So it can be said that this specific factor can adversely
influence the business of organisation.
Social factor: The business of company can grow if it fulfil the desires of society and
this factor includes: taste, habit, age group, preference etc. IF L'Oreal does not focuses towards
social needs than operations of organisation can be influenced. As consumers have concern about
herbal products & natural ingredients. So by keeping this factor in mind corporation has
introduce a new range which is “Garnier Ultra Blends” will be spread across shampoo,
conditioners, cream and oil segment. So it is beneficial for the company because it can satisfy the
demands of people who lives in society as a result this factor will not influence the operations of
corporation (Fanale and Demaerschalk, 2012).
Technological factor: Now a days technology plays an important role in the growth of a
company. It is beneficial to bring efficiency and maximize productivity. As persons of United
Kingdom are very concern about new technology. L’Oréal's technological attributes &
innovations helps to satisfy the needs of customers. A new Keratin shampoo has introduced by
corporation which is based on latest technology so it is helpful for the organisation to increase
sales. So it can be said that, this factor can positively influence the business of company.
Environmental factor: The climate and weather condition of a nation can affect the
business operations of company. As beauty industry is focusing more than ever to try & 'go'
green. So this factor has been kept in mind by L’Oréal's and in packing organisation is using eco-
friendly technique as a result environment of France has protected and corporation will run for
long time. So it can be said that, this factor can positively influence the business of company.
Legal factor: To survive in the market it is important to follow legal laws, rules,
regulations and compliances so that business of company does not get influence. As L'Oreal is
operating its business in international market like: USA, UK, France so it is essential for the
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corporation to follow Drug & Cosmetic Act and Fair Packing & Labeling Act. So it is beneficial
for the organisation to expand its business across various nations.
TASK 2
P 2 Analyse the internal environment
For an organisation it is essential to perform its business activities as per the need of
environment. Internal environment includes all those factors which are available within the
corporation and influence the performance of firm. It is essential for L'Oreal to analyse all
interstice elements which are helpful to introduce effective strategies for the expansion of
organisation. With the help of SWOT analysis business capabilities and internal environment of
corporation can be consider. This analysis is beneficial for L'Oreal to understand its strength,
weakness, opportunities & threats and these are as mention below:
Strength:
 Well known and reputed brand in cosmetic industry.
 Different types of products are available such as: sun protection, hair colour, skin care,
perfumes, make -up etc and L'Oreal is active in dermatological & pharmaceutical fields.
 Effective promotional and advertisement strategy which is helpful to attract target
consumers across different countries and it has around 60000 staffs globally.
 Company operate its business approx 130 nations across the globe (Doloreux and
Shearmur, 2013).
Weakness:
 Company have lots of subdivisions which create difficulty for the L'Oreal to handle the
activities and functions.
 Lots of competitors available in the market such as Lotus, Oriflame, Maybelline etc.
these beauty brand provide tough competition to the L'Oreal company. Because of the
competition it will reduce the profit margin of the company.
 Because of the competition business not able to meet their expectation such as 50,000
sale of beauty product in the next quarter which already set by the L'Oreal company.
 Company spend lots of money on their promotional activities which is very expensive for
the organisation.
Opportunity:
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 L'Oreal can capture the market by introducing various aging beauty cream among the
consumers. Because there are vary less number of products available in the market.
 L'Oreal can expand their business in the developing country by introducing various
products and it will defiantly increase the market share as well as sale of the product.
 According to current market requirement, eco friendly products are very much popular in
the market. If L'Oreal introducing these type of product so it will increase the profitability
and provide market growth to the organisation.
Threats:
 Cosmetic industry change very rapidly and it have huge diversification in their product
line. So it is important for the L'Oreal to cope up with market trends otherwise they will
not able to survive in the market (De Langen, 2013).
 Big brand are the biggest threats for the L'Oreal such as Revlon, MAC, Chambor, Lakme
and Maybelline. These organisations are the biggest competitors of L'Oreal company
which can affect the business very well.
 Economy of every country is not the same it can be fluctuated so if L'Oreal run their
business in the decline economy will affect the cash flow of the organisation.
McKinzie's 7s model can be useful to analyse internal environment so that appropriate
findings can be present.
Strategy: As L'Oreal makes strategy to make effective plan in order to get competitive
advantage.
Structure: The management structure of L'Oreal campany have to be effective so that
employees can know to whom they have to report to enhance the channel of communication.
System: These are the set of specific process and procedures which are needed to be
follow by the organisation. As L'Oreal is following standard system in order to produce quality
products.
Skills: The employees of L'Oreal have possess excellent qualities and capabilities so that
they are able to perform as per the specific requirement of company.
Staff: These are most valuable assets for an organisation and to enhance the capabilities
of staffs management of L'Oreal provide training to them so that their skills and knowledge can
be develop.
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Style: As L'Oreal follows the vertical style in which top level management takes the
important decisions and subordinates have to follow it. As a result work can be done as per the
requirement of company.
Shared values: As L'Oreal has set some values, beliefs and ethics which are needed to be
follow by the all members in order to maximize efficiency and effectiveness.
Findings based on analysis:
Form the above analysis, It has been analysed that L’Oreal makes strategy so that it can
expand its market share in untapped areas in order the take the advantage of competitiveness.
Chain of command has been followed properly and top level management has take all important
decisions which have to follow by the employees as a result they perform their task as per the
requirement. As management hired skilled employees and also provide training in order to
enhance the skills and capabilities. All workers has perform as per the shared values so that
efficiency and productivity can be increase.
TASK 3
P 3 Porter’s Five Forces model
Competitive factors are those which can influence the competitive position of a company
are known as competitive forces. In the growth of company it plays an important role and
beneficial for strategic analysis to analyse the competitiveness in the organisation. It is necessary
for a corporation to gather useful information and data so that effective strategies can be
implemented for the growth of L'Oreal. The Porter's five force model is useful for competitive
analysis as a result company can know the areas of opportunities and on the basis of it company
can take important decisions for the further improvements.
Porter five force model: This specific model has developed by Michael Porter and based
upon five forces which is beneficial for the company to analysis competitiveness. This model is
effective and useful to know rivalry in the existing market so that L'Oreal can make appropriate
strategy to beat the competition and expand the market share. This specific model involves:
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(Source: Porter's five forces model, 2018)
The description of each is as follows:
 Threat of new entrance:
In any industry there are some restrictions as well as liberality on a
new entrant as the new entrant may come up with new innovational product using updated
technology and various tactics of producing a new product but the same time few organizations
put pressures on the new entrants. For a cosmetic brand, Loreal huge amount of funds is required
to develop new products and to meet the needs of the customers, so the threat of new entrants is
moderate within the market sector. Besides this, product quality, pricing, and marketing have to
be considered by new entrants but at the same time for some organizations entry is easy because
of their high-quality products and lower price strategy. This strategy can be relevant when
company makes effective policies as a result the threat of new entrance does not affect the
performance of company.
 Threat of substitute
A substitute product is a product which may offers similar benefits in place of other products.
Substitute means anything in place of other things. Threat of substitutes means many other
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(Illustration 1: Porter's five forces model, 2018)

organizations come up with similar products and satisfies the needs of the target customers.
Threat to substitute of Loreal is high as there are many other organizations which offers
similar products with similar characteristics at low price. There are various number of substitute
available which are experts in satisfying the market needs by offering various substitute products
at the time they demand. This strategy can be effective when L'Oreal make quality products as
per the need of consumers so that consumers would not search for a substitute. As a result profits
can maximize.
 Bargaining power of suppliers
Suppliers plays an important role as they provides the raw material to various
organizations at the time order is placed. They offers variety of products, and to meet the
demand of customers there are huge number of suppliers available in the market. The bargaining
power of suppliers as Loreal makes various contracts with different suppliers as well as manages
to build the effective chain of multiple suppliers, though if any supplier wishes to charge high
price, Loreal shift to another one and manages to strengthen the distribution channels.
 Bargaining power of Buyer
Any organization produces or plan to produce the products by considering the wants,
need, preferences of the buyers. Buyer wants to buy high quality product at low prices.
Manufacturers and suppliers are the one who predict the future demand because consumers have
high demand of power and produces the products to satisfy the needs. The bargaining power of
buyer is generally high as Loreal is having huge competitors which satisfies the customers in the
market which provide products and services at low cost but this affects their profitability in the
long run. As L'Oreal is producing quality and innovative products which can fulfil the demands
of consumers. As a result consumers will purchase the products of company. This specific
strategy can be effective to maximize sales as well as revenue.
 Competitive rivalry
There are many rivals surrounded by any organization and such rivals are major
determinant factors which determines the intensity level of competition level in the market.
Many competitors in any industry reduces the overall profitability of various organizations. The
competitive rivalry inside the industry is high as many competitors are there against Loreal but
the selected organization is proactive in making sudden changes against the competitors in the
dynamic market as and when required as well as makes plans and strategies to collaborate with
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the competitors in order to minimising the competition level and to capture major market
segment. The management of L'Oreal has emphasis to make effective plans and strategies in
order to beat competition and focuses to produce more superior and quality products at
reasonable price so that more number of consumers can attract towards the organisation.
TASK 4
P 4 Concepts and models for strategic planning
For the marketing strategy, Ansoff matrix tool can be used by organisation. This model is
based on mainly four elements which are associated to market and services. Strategic directions
for L'Oreal company is describe below:
Market development: As per this specific strategy, a corporation should focuses for
market development so that sales can be increase. So L'Oreal has opportunity to introduce its
existing product in different market. Company can sell its shampoo in untapped areas and market
such as Cape Verde from Africa.
Market penetration: According to this strategy, company should emphasis to capture
high market share so that its sales and profits can be increase. L'Oreal has an opportunity to
expand its operations in Indian market by adopting aggressive marketing strategies such as: to
spend more funds on integrated advertising plans & its execution (Campbell and Reyes-Picknell,
2015).
Product development: For an organisation it is important to introduce new products in
the market so that it can grab more share and maximize the profits. As L'Oreal is more focusing
towards women segment so it has an opportunity to target male consumers so company can
launch sun screen cream for men's segment. As a result product line will also increase and more
number of consumers can attract towards the corporation.
Diversification: For the growth of company diversification is important because it allows
the corporation to generate more profits. But it is highly risk strategy for the organisation where
it can launch new product in new geographic area. As L'Oreal can enter in African continent &
introduce sunscreen cream for men's segment. That particular strategy is risky but if it get
success than organisation can generate higher revenue.
Justification & recommendation
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For L'Oreal product development is beneficial so that it can grab more market share and
sustain for long time. As company target untapped area with its new product such as sun cream
for male segment and this is beneficial for organisation to maximize its sales. Now a days people
are giving more importance to natural and herbal products so it has good opportunity to produce
these products which have natural ingredients. Demands of herbal products are increasing in
countries like India so it scope for the firm to produce these products and earn maximum profits.
Firm should focuses to provide quality products at reasonable price so that maximum number of
people can attract towards it. There are lots of scope available in the existing market so L'Oreal
should emphasis to capture it as a result corporation can beat the competition. As product
development strategy would be helpful to increase sales as well as profits. As company operates
its business across the globe so it try to grab those market where it is already exist so that
maximum profits can be generated. Diversification strategy is not beneficial because it involves
more investment as well as risk (Beamish and Lupton, 2016).
Strategic management plan is a document which is made by the top authority of
corporation. In this plan manager formulate the policies which are helpful to achieve the targets
as per the requirement of organisation. It is beneficial to communicate appropriate information
and data within the company so that important decisions can be taken for the growth of L'Oreal.
As competition is increasing in the market and competitors are putting maximum efforts to
capture more market share. So to maximize the revenue and bring effectiveness & productivity
management of organisation can provide training to its staffs as a result their skills and
knowledge can be improve and they can work according to the need of company. Bowman's
strategy clock model is helpful to develop strategic management plan.
Low price and low added value : According to this specific strategy products are not
differentiated & the consumers perceives very low value but the price of product is low.
Differentiation : As per this strategy an organisation can provide differentiate product
which is not available in the market and that provide high value to the consumers. Differentiate
and high quality product of L'Oreal are helpful to make better reputation of the company in the
market.
Focused differentiation : This specific strategy is useful when company provide luxury
products. L'Oreal can use this strategy by introducing new luxury product so that higher profit
can be generated by the organisation.
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