Business Strategy Report: L'Oréal's Strategic Management Plan

This report provides a comprehensive analysis of L'Oréal's business strategy. It begins with an introduction to business strategy and the company itself, followed by an examination of internal and external factors influencing L'Oréal's growth and success. The analysis includes a SWOT analysis to assess strengths, weaknesses, opportunities, and threats, as well as a PESTLE analysis to evaluate political, economic, social, technological, legal, and environmental factors. Furthermore, the report applies Porter's Five Forces model to analyze the competitive landscape, including the threats of new entrants and substitutes, and the bargaining power of suppliers and customers, as well as competitive rivalry. The report also evaluates strategic directions, recommends growth strategies, and concludes with a strategic management plan, offering a detailed overview of L'Oréal's business operations and strategic approach.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
The Analysis of External and Internal Factors Which Directly or Indirectly Affect the
Organisation in Their Growth and Success.................................................................................1
Competitive Analysis of L’Oréal by Using Porter’s Five Forces Model....................................5
TASK 2............................................................................................................................................7
Evaluation of The Different Types of Strategic Directions........................................................7
Justify and Recommend Growth Platform and Strategies..........................................................9
Produce A Strategic Management Plan.....................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business strategy is a set of decisions or course of actions which are taken by
entrepreneurs/businessmen for achieving business objectives and goals. It is the plan which
management of company implement in the business to direct all the activities and tasks in one
direction towards achievement of organisational goal. L’Oréal is a French company, producing
and selling personal care products with registered office in Paris. It is the world's largest
company providing hair colour, make-up, skin protection products, perfumes etc. This report
will cover the analysis of external and internal factors which affect the organisation. Also, it
explains the growth strategies and directions which company follows with a effective strategic
management plan.
TASK 1
The Analysis of External And Internal Factors Which Directly Or Indirectly Affect The
Organisation In Their Growth And Success
There are basically two factors through which analysis can be done for the organisation
that is the Internal factors and external factors which affect the organisation directly and
indirectly (Nguyen, 2015.).
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Here is the study of internal factors which can done through SWOT ANALYSIS which shows
the strengths, opportunities, threats, and weaknesses of the company. L’Oréal’s SWOT analysis
are as follows-
STRENGTH
 Strength of the L’Oréal is their continuous and regular invention and research towards
the beauty products make satisfy the customers regarding their beauty care products.
 L’Oréal expanded its business globally with 60,000 employees.
 L’Oréal just not only deal in beauty care products like, perfumes, hair care, hair colour,
sun protection, skin care products etc. but they also deal in some dermatological products
also and it is patent holder I US of nanotechnology.
 Despite the competition in the industry L’Oréal is growing leader of providing cosmetic
and body care products to satisfy the customers’ needs and requirements.
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 Advertising makes customers attracted towards the product of L’Oréal and also adapts
the culture of target audience. L’Oréal has spread in 130 countries and having
manufacturing plants in around 40 nations.
WEAKNESSES
 L’Oréal facing tough competition with other brands of skin and haircare products. They
are followings strategy of decentralisation as company is subdivided into different
regions through which L’Oréal faces difficulty in controlling the units. They have a
heavy expenditure on Rea search and development to make customers attracted towards
them like they are producing the organic and natural products as per customers demand
as people wants to avoid usage of heavy chemicals.
THREATS
 Competition is rising day by day which may be severe threat to L’Oréal, customers tastes
are quite changing, and according to their taste and preference they will buy the product,
so thus rapid change in taste make very difficult for business to make changes in their
production too as quick changes will lead to wastage of many resources.
OPPORTUNITIES
 L’Oréal has many patents which they have registered and because of this advantage they
capture a larger share of the market.
 Company have a very great opportunity for expanding the industry by investing in the
production of body and personal care products. Customer always looks for innovative
product for their body. More organic products can be produced by firm as demand for
organic product is much higher than customers and people always prefer to use natural
products instead of using chemicals on their body and skin.
 Hence, there is great opportunity to satisfy the demand of customers by producing the
organic products which have greater success in the market.
Analysis of External factors which can affect the L’Oréal company is PESTLE analysis.
Pestle is basically the analysis of various factors including political, environmental, legal,
technological, economic, social, etc.
 Political factors - Political factors include the norms, rules and regulations of
government under which the company works. L’Oréal is a Paris based company that is
its manufacturing unit is in Paris than the policies of France government are applicable
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on the company. Any variations or changes in the policy bring a huge impact on the
organisation as working under the government policies and following the rules of
government is a duty of every citizen to work in legal way. (Suarez, Calvo-Mora and
Roldán, 2016)
 Economic factors - Economic factors which include exchanges rates, employment
opportunities, GDP all come under the economic factors. Any changes in exchange rate
will result in changes in the cost of the product of company. As company is directly
affected by the exchange rates. Also employment rate also affects the cost of company.
 Social factors - L’Oréal has a good brand image in the mind of customers so they are
maintaining the brand loyalty towards their customers by providing them the better
quality at effective price which helps company to retain their customers for long run and
helps in attracting more and more profits. Company is focusing on providing good
quality and also creating employment opportunities by opening subdivisions in different
areas which further contributes towards society by raising their standard of living. Also
Company do customer relationship management activities which helps the company to
sustain in long run time and maintain the reputation of the company between society.
 Technological factors - Technological changes is highly responsible for success of any
organisation. Company like L’Oréal make creative and innovative changes through
continuous working on Research and Development by using new technologies which
leads to great success of organisation as they clearly satisfy the customers’ needs and
expectations by providing better qualitative products. Also, firm opens own website,
social networking sites and online platforms which help the company to come closer with
its customers.
 Legal factors - L’Oréal is beauty brand company, so its necessary for company to follow
THE FEDERAL FOOD, DRUG AND COSMETIC ACT and THE FAIR PACKING
AND LABELLING ACT in which company have to fulfil all the legal formalities to
avoid any disruption and interference in their any operations. Also, company have to tell
their employees about the legal policies made by company so that they can get
compensation in case of wrongful act.
 Environmental factors – Environmental factors are those which contribute towards the
safety of environment and control pollution. Many Companies including L’Oréal give
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their contribution to do not pollute the air, water and land. Also, company tries to go
GREEN and produce eco- friendly products. Also, company makes sure about the
standards which government make to protect the environment. Only the company know
about their resources which they have to us eit efficiently.
The VRIO analysis says about the
 V-it means how the organisation is able to exploit the opportunity. L’Oréal provide the
global distribution network and also maintaining a global presences large product range
of the company helps them to serve the global audience (VRIO Analysis, 2019). Brand
image also drives the value which is important for making impressive market presence.
 Rareness- it is not easy to create a strong brand position or to maintain it for long run.
Continuous research and development is required for maintain a strong brand position.
for L’Oréal the ability to innovate and wider market reach are factors which can be
considered as rare.
 Imitability it is somewhere difficult to imitate the same resource or product which leads
to significant cost disadvantage. It is difficult to imitate business model such as L’Oréal
and by organisation will definitely be facing a cost disadvantage.
 Organisation- it is firms, policies readiness of exploiting the resources and capabilities of
organisation which result in providing standard quality, skilled human resource also
helps in training large product range of L’Oréal (Schaltegger, Hansen, and Lüdeke-
Freund, 2016)
Competitive Analysis of L’Oréal by Using Porter’s Five Forces Model
To analyse the competitive factors of L’Oréal, company porter's five force model can be
used as through same competitive factors and their impact on the company can be identified.
Porter's Five Force Model is a strategic analytical tool through which company can identify its
competitiveness by the help of five forces. These five forces are as follows -
 Threat of New Entrance
 Threat of Substitute
 Bargaining Power of Customers
 Bargaining Power of Suppliers
 Competitive Rivalry.
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Figure 1:Porter's Five Forces
(Source: Porter’s Five Forces, 2018)
1. Threat of new entrants - L’Oréal being a strong brand value dealing in beauty and
body care products has many competitors in the industry. Being technological advanced have
become necessary for every organisation to survive in the competitive market and for
technological advancement a heavy expenditure on technology requires and being a strong
brand, Company is able to afford the high technology hence, its threat for new entrants is low
also, Company possess a strong distribution network so that the customers remain loyal to
company’s products and do not opt for substitutes available in the market. L’Oréal always tries
to work in manner that their production contributes towards the economy, if the time any
company stops contributing towards economies of scale than they would be substitute from
another, as contribution towards the economies of scale is required by industry for long lie of
any business
2. Threat of substitute- L’Oréal does not have much strong competitors in the industry
where the customers can substitute the firm's products with others. There is a threat of
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availability of substitutes to company such as P&G and olay but this threat can be eliminated by
continuous improvement in their product and technology.
3. Bargaining power of suppliers- L’Oréal purchase-its raw material for the final
product from various suppliers without cost effective supply its difficult for organisation to
produce and earn a larger amount of profit. If the supplier of material of company is bargaining
power is high than it is difficult for organisation to earn more profit. But the distribution channel
is diverse that is there is more than one supplier for the company than it is beneficial for
organisation to negotiate and purchase material from the supplier who is providing at least cost
and by maintaining quality standards. Suppliers also bargain on the basis of bulk of material
buyers are purchasing. L’Oréal purchase materials in bulk through which it is capable le of
availing good amount of discount as for suppliers volume is critical element (Pisano, 2015).
4. Bargaining power customers- Customers are the king of the market, every
organisation is able to exist in the market on the basis of customers. If the needs and satisfaction
of customer are not fulfilled than the customers will not purchase the company's products and as
a Result company will fail to exist in the market with longer profitability. And if there is the
availability of substitutes, then customer is in powerful position of bargaining that the will
negotiate with the company as they are in the strong position. L’Oréal is trying to maintain its
quality standard by keeping the prices low as customers seek lower prices and better quality as
customers are price sensitive.
5. Competitive rivalry- As if in the industry there is large competition than government
seeks to limit competition to avoid rivalry if there is large industry size which result in more
competitors and hence, more rival firms and sometimes rival competition with price cutting
leads to heavy loss to economy and hence, there is no contribution towards economy. So,
L’Oréal is maintaining its brand value to avoid rivalry among existing competitors. In this
industry there is higher competition amongst the rival firms such as P&G, Olay, Maybelline
which are possessed with equivalent technologies and capital as L’Oréal. The company can
focus to engage its loyal customer base to ensure sustainability.
TASK 2
Evaluation of The Different Types of Strategic Directions
Strategic Direction is a strategic path through which L’Oréal can achieve its strategic
goals. There is one matrix who sets out different strategic directions. This matrix is known as
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ANSOFF MATRIX. It is also known as the Product/Market Expansion Grid. Ansoff Matrix is a
strategic tool which analysis the current strategies used by L’Oréal and plan the future strategies
for the growth of L’Oréal. Ans-off Matrix uses two dimensions - 1. Product & 2. Market. Again
these two dimensions are divided into 4 categories -
11 New Product11 Existing Product11 New Market11 Existing Market
On the basis of these Categories, there are 4 strategic directions -
A. Market Penetration B. Product Development
C. Market Development D. Diversification
MARKET PENETRATION – Market Penetration is a strategic direction which allows
a business to achieve its strategic objectives by providing existing products in existing markets.
In case of L’Oréal, it can use various strategies to grow more in the existing market. Company
can grow by increasing its sales and revenues. For that firm can use various strategies like
promotional strategies, e-marketing strategies and e-commerce strategies. Company uses
advertising, personal selling, sales promotions and public relations in promotional strategy. In e-
marketing strategy, Company can use marketing strategies on various social media platforms to
increase its sales. Firm also can deal with various e-commerce companies to increase its sales.
(Mathooko and Ogutu, 2015. )
PRODUCT DEVELOPMENT – Product Development is a strategic direction through
which company can achieve its goals by developing and providing new products at existing
market. L’Oréal can also use this strategy to increase its sales, profits and grow more. Firm can
choose new business line like company's accessories which includes bags, sunglasses and
jewellery. Company can produce new products by using various new product development
strategies like LOCAL PRODUCT DEVELOPMENT STRATEGY in which L’Oréal can
produce new products according to the demand of their loyal customers of existing market and
LOCAL ADAPTATION STRATEGY in which company can produce those new products
which can match with the taste and preferences of local customers of existing market.
MARKET DEVELOPMENT – Market Development is a strategic direction through
which company can expand its market by using existing products for more profits and growth. In
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this strategy, company can use various corporate restructuring strategies like JOINT VENTURE
in which L’Oréal can work with another companies (who operate their business in another
market) for the achievement of particular goal. Company also can do MERGER in which it can
combine with another business (which is established in another market) to achieve
organizational goals. Firm can go for ACQUISITION/TAKEOVER in which it can acquire
another business who has great market share in another market.
DIVERSIFICATION – It is a strategic direction through which company produces new
products and sells it in new market. It is considered to be most risky strategy. L’Oréal can
choose new business line like company's accessories which includes bags, sunglasses and
jewellery. Here firm can produce new products and sell them to new customers of new market.
Here company can choose various combinations of strategies like promotional strategy, e-
marketing strategy, growth strategy, corporate restructuring strategy, local adaption strategy,
generic strategy etc. By using various strategies, Firm can expand their new business to new
market, earn profit and achieve the goals.
Justify and Recommend Growth Platform and Strategies
L’Oréal has growth opportunity in market penetration strategic direction where
promotional strategies can be beneficial for the growth of business. In promotional strategies,
Company uses advertising for the promotion of their products. To make attractive advertisement,
they can use better tag lines, go for celebrities sponsorship and use of colourful advertisement
can be promoted. Advertisement is considered to be most successful approach for a business to
penetrate into the market. L’Oréal can e-advertise their products and services. Also company
uses personal selling to promote their products. This can lead to increase their sales and also
profits. Through e-marketing strategy, company can grow in e-market by using e-advertise,
sample delivering and provide discount. This all lead to existing buyers to buy more products of
L’Oréal. Company had already adopted e-commerce strategy in which Company dealt with
famous e-commerce company like Amazon, flip kart, Nyka etc. to increase their sales and
Comapny successfully increase their sales.
L’Oréal has growth in product development strategic direction where both local product
development strategy and local adaptation strategy can be adopted successfully. If company
conducts correct analysis of the taste, preference, income, values, beliefs and demand of
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potential customers and identify the base for which consumers need the products then company
can produce those products which can satisfy the needs. (Miller, 1987.) For example – By the
analysis of market, L’Oréal identify that specific preferences of the prospects and can serve the
same as the part of their growth strategy. For instance: Accessories can be a sector to which
L’Oréal can expand. So Company will produce those bags and sell it to the consumers.
Moreover, L’Oréal is a big brand and has already created brand image in the mind of existing
consumers. So, it will be beneficial for the company to produce and sell new products under its
brand.
L’Oréal has growth opportunity in product development, by providing quality products to
customers so that They will gain customer trust easily as company is strong and have own
customer base. If it will launch the product with another company in the new market, it will be a
crucial expansion opportunity for company and also the new product risk will also be reduce as
both company will share. Market share will also expand. Profits and Sales volume will increase.
Brand image will also increase (Chang, 2016).
L’Oréal has chances to grow if its market penetration is strong and efficient. If company
want to know about the new market base customers' tastes, values, demands, preferences and
incomes so company will conduct market analysis. After analysis, company found out that in
this new market what is the actual need and demand of the customer. As through advertising and
customer attraction they will be able to know the customers' reaction for the particular product
and-accordingly, L’Oréal can produce goods which are in high demand by consumers like bags,
sunglasses for travelling purposes and for the purpose of shopping, company can either launch
its own clothing brand or can do merge/joint venture with famous clothing company. This will
be beneficial for the company itself as well as another company too. By this, company can win
customers' trust and expand their market shares.
Accordance with the analysis of these strategic directions, it has been recommended that
L’Oréal should go for product development strategic direction. It is a good company in personal
care industry where it is gaining competitive advantages, strong brand image and has strong
consumer base. By using these 3 biggest advantages, company can diversify in another business
line so that company can reduce its competitive loss and consumer switching risk. Also, L’Oréal
can gain more consumers too. Company can provide all the facilities under one root which
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increases the consumer satisfaction level. This all lead to increasing the sales of firm and also,
firm can earn profits (Burns and Dewhurst, 2016).
Produce A Strategic Management Plan
Mission Our mission is to provide best services to the world and give chance to
make their personalities more diversify.
Vision Our vision is to make people, societies and world more beautiful and
stylish.
Core values A belief in maintaining a beautiful life
A commitment to building beautiful communities.
Goals To attract and sustain more costumers and increase customer loyalty.
To expand market shares.
To earn more profit.
To reduce the brand switching.
Objectives Sale increase by 25% at the end of the year.
Profit increase by 40% at the end of the year.
Market expands by 15% at the end of the year.
Strategic Direction L’Oréal will use product development strategic direction in which it
will produce more products like bags, sunglasses and accessories to
fulfil the demand of customers so that customer loyalty can increase
and customer can get all the things at one place.
Market Analysis L’Oréal will conduct market analysis to know about the current
market and accordingly plan the strategies and implement those
strategies. Firm can do market analysis on the basis of following
characteristics like Demographics basis, Demand basis, Target basis
etc. After choosing basis, company will do market analysis by
conducting research and analysis of results.
Operational Direction In product development strategic direction, L’Oréal will do first
analysis the current and future trend in the chosen business line. Firm
will hire product development experts to consult regarding products.
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