Business Strategy: Macro, Micro, and Competitive Analysis of L'Oreal

This report provides a comprehensive analysis of L'Oreal's business strategy, focusing on its external and internal environments. The analysis begins with an examination of the macro environment using the PESTEL framework, assessing the impact of political, economic, social, technological, environmental, and legal factors on the company. The report then delves into the internal environment, utilizing a SWOT analysis to evaluate L'Oreal's strengths, weaknesses, opportunities, and threats, along with VRIO analysis. Furthermore, the report applies Porter's Five Forces model to assess the competitive environment within the cosmetic industry, evaluating the threat of new entrants, the bargaining power of suppliers and buyers, and the threat of substitutes. Finally, the report proposes a strategic administration plan, outlining strategies, objectives, and tactics for L'Oreal, culminating in recommendations for future success. The report also highlights the company's focus on product quality, international presence, and adapting to consumer trends, while acknowledging challenges such as high advertising costs and competition.

Business Strategy

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Apply proper frameworks assess the effect of macro environment on chosen company and
also its tactics..........................................................................................................................1
TASK 2............................................................................................................................................4
P2 Assess internal environment and ability of company by adopting proper frameworks....4
TASK 3............................................................................................................................................6
P3 Porter's Five Force Model for competitive environment of business organisation...........6
TASK 4............................................................................................................................................8
P4. Strategic administration plan in addition with strategies, objectives and tactics.............8
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business strategy is determined as a competitive action that can be adopted by business
organisation for attracting large number of user in competitive marketplace. And, it helps in
strengthening performance and accomplishing objective in timely manner. This report is depend
upon the company name does L’Oreal. It is considered as a French organisation which is located
in clichy. It is the largest cosmetic organisation and founded in the year of 1909 and manufacture
cosmetic products. This report provides discussion regarding micro and macro environmental
factor as well as Porter five forces model for achieving competitive edge at market place.
Therefore, it is necessary to maintain strategic administration plan along with strategy and
objective, assessment of various kind of decisions related to strategy is also discussed in this
report (Anwar, 2018).
TASK 1
P1. Apply proper frameworks assess the effect of macro environment on chosen company and
also its tactics
Macro environment is considered as a external environmental factor that is impacted by
strategy of organisation and taking decision in timely manner. In reference of L'Oreal, it signifies
those elements that are determined as external force of organisation and their main focus is to
adopt PESTEL analysis for assessing external environmental factor that is going to be mentioned
below:
PESTEL analysis is determined as a framework which is adopted by company to assess
macro environmental element that impose direct effect on organisation. This assessment involves
different factors that are given below:
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Figure 1: Pestle Analysis
(Source: PESTEL Analysis, 2019)
Political this element is connected to policies of government, political issues, funding
and many more. L'Oreal is the international organisation operates its functions in Paris and
government imposes different rules on France that imposes direct effect on company. This
organisation manufacture product that do not signifies any kind of harmful substance but it is
affected by legislation in advertisement. For instance, if the UK Government changes policies
related to trade than it generates positive effect on organisation. Otherwise, it generates negative
effect on organisation and the company must design innovative policy as per changes and it
consumes time and cost for implementing new policies during the particular phase of time period
(Chaffey, Edmundson-Bird and Hemphill, 2019).
Economical it involves economic growth, exchange rate, interest rate and many more
which is considered by organisation in order to conduct their operations. For instance, L'Oreal
focuses on operating their organisation in another country. Therefore, interest rate possess direct
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effect on price of capital of organisation that imposes direct effect on exporting product and cost
of imported product within an economy. Therefore, the changes in currencies can impose a direct
impact on the business organisation. In addition to these, due to economic stability in UK, they
provide product and services to its user at low price that imposes positive effect on organisation.
Social it is connected to brand, lifestyle, trends, consumer purchasing pattern as well as
many more. Therefore, it is necessary to consider trends within social element that imposes
direct effect on needs of product of company in front of customer in marketplace. Due to
frequent change in demand and taste of customer, it is not possible for L’Oreal to provide them
product according to their needs thus it imposes negative effect on the company. But if
organisation focuses on a conducting appropriate market research and offer goods as per needs
and wants then it imposes positive effect on organisation during the period of time. Therefore, in
addition to this, the L’Oreal focuses on adopting the natural goods like Aloe Vera, coconut as
well as other ingredients that help in increasing sales of organisation that handle services related
to customer satisfaction.
Technological this element involves technology legislation, computer technology,
innovative technology and many more. In context of L'Oreal, it is connected to research and
improvement in technological changes and many more. The organisation focuses on adopting
innovative technology in order to provide superior quality product and services to its user during
particular phase of time period. Therefore, through promotional technology, they can attract
large number of users that increases sales of organisation and increase productivity. Hence, it
imposes positive effect on growth of business organisation in future period of time. In addition to
this, due to implementation of technology that increases cost for company that imposes negative
effect on organisation (Fassnacht, Beatty and Szajna, 2019).
Environmental the primal element involves environmental regulation; sustainability and
many more. These elements create positive and negative results for L’Oreal. The organisation
adopt ingredients related to chemical in beauty as well as hair product and offer herbal goods
that help in increasing growth of business organisation in front of customer at marketplace. But
sometime the regulation of environment generate threat for strategy of organisation because
nation possess own rules. Therefore, the effective strategy of organisation like if organisation
adopt chemical, it demotivate consumer that impose negative effect on company.
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Legal this element is connected to employment law, consumer law, safety law and many
more. The L'Oreal focuses on operating their functions in different country and follow
discrimination as well as employment law and overall advantages as per law to it subordinates as
it generates favourable outcomes for organisation. For instance, the organisation is criticized in
the year of 2017 for forcing labour as well as slavery risk in supply chain that imposes negative
effect on success and growth of organisation.
TASK 2
P2 Assess internal environment and ability of company by adopting proper frameworks
Internal environment involves element in business organisation involve management,
subordinates, corporate culture that signifies behaviour of subordinate (Franceschelli, Santoro
and Candelo, 2018). For instance, the L’Oreal adopts SWOT analysis that is given below:
SWOT analysis it is a determined as a framework which is adopted by organisation to
assess competitive position and also it helps in assessing strengths, opportunities, weaknesses as
well as threat of company.
Figure2: Swot Analysis
(Source: Woerner and Wixom, 2015)
Strengths Weaknesses
 High qualities as well as
International access the organisation
 High advertising cost the organisation
increase their investment in
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offer superior quality goods as per
need of customer in low cost. L’Oreal
focuses on operating their functions in
above 120 country and produce goods
in bulk that is less costly then
purchasing in small quantity.
 Organic herbal product: It is
determined as a cost for organisation to
adopt natural ingredients as well as
produce herbal goods. Therefore, the
organisation provide these kind of
herbal product that help in increasing
brand image or reputation of company
in front of customer at Marketplace.
advertisement of good so it decreases
profit margin of organisation that is
determined as a weakness of
organisation.
 Slow division the organisation provides
different goods so they are needed
subdivision to manage everything but
organisation do not have it. There are
different kind of issue generate in
handling subordinate of product
improvement, customer services and
many more.
Opportunities Threats
 Industry expansion L’Oreal can
focuses on grabbing opportunity into
innovative spaces related to beauty
industry. For instance, they focus on
providing baby care goods that is
preferred by mothers that is determined
as a main opportunity for organisation.
 Create new product the organisation
can produce innovative product for
niche user and grab opportunity for
organisation. They can manufacture
innovative product like darker skin
tone as well as curly hair and many
more.
 Quick changes cosmetic industry is
determined as a factor in which changes
or alteration is made in quick manner
and their taste as well as preferences of
user changes in regular basis that create
threat for L’Oreal.
 High competition due to increase in
competition level within cosmetic
sector, there are different kind of
competitor for organisation like Sun
silk, Dove and any other. They all
created threat for organisation named as
L’Oreal.
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VRIO Analysis is adopted by L’Oreal that is going to be mentioned below:
Valuable there are different kind of valuable resource for business organisation such as
Global presence, competent employees, distribution Network and brand image. These are
determined as a valuable resource for organisation. Due to global presence, it increases brand
image or reputation of company in front of customer at Marketplace. In addition to this, due to
having a competent workforce it is helpful in increasing brand image of company in front of
customer at Marketplace. Apart from this, due to having a superior distribution channel that is
superior for business organisation.
Rare there are those resources which is rare and unique. The brand image, competent
workforce and distribution channel are rare resource of organisation. Due to having a competent
workforce they provide branded product and services to its user that is unique according to its
competitive firm. In addition to this, due to have a unique distribution channel it help in
achieving competitive advantage over rival firm at marketplace.
Inimitable resources are those which are not copied by other organisation. Therefore, the
distribution channel and competent subordinates are inimitable. Inimitable resources of business
organisation they have qualified workforce and effective distribution channel that is not copied
by other competitive firm.
Organised resources are determined as a distribution channel due to having a superior
distribution that is organised resource of company.
TASK 3
P3 Porter's Five Force Model for competitive environment of business organisation
Porter's Five Force Model
It is determined as a framework which is adopted by organisation to assess intensity level
of competition within an industry and its level of profitability. The management team of L'Oreal
can adopt this model to assess competitive forces of organisation at marketplace. Therefore, this
model is adopted by organisation that is given below:
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Threat of new entrants this is connected to entrance of innovative organisation, brand
as well as company. L’Oreal operates their functions in cosmetic sector so there is different kind
of competitor like Lakme, Gamble and so on. For new organisation sometime, it is not difficult
to take entry in the industry because of superior goods at low cost. Therefore, the threat of
entrance for new organisation is low because L’Oreal provides superior quality goods at low cost
to its customers that help them in satisfying than. Therefore, there are different kinds of
competitor such as Revlon, Avon and many more that imposes direct effect on sales of
organisation. In context of UK, the rules and policies considered as strict so it is not easy for new
firm to take entrance in this sector. Therefore, it consist low risk during the particular phase of
time period (Goretzki, Lukka and Messner, 2018).
Bargaining power of suppliers’ supplier is determined as that organisation which
supplies material to organisation to manufacture good. If supplier possess higher bargaining
power than the company have a less attraction in respect of buying material. Therefore, the
L’Oreal possess different supplier in market in which they can purchase material for producing
goods so that the bargaining power of suppliers is considered as a low.
Bargaining power of buyers there are various competitive firm of L'Oreal in
marketplace such as Procter & Gamble, Avon and so on. Therefore, the bargaining power of
consumer is determined as a high because there are various organisations with various good so
there is a wider choice in front of customer and they can take product according to their needs
and wants. L’Oreal faces different kind of challenges due to premium pricing as well as higher
competition. Therefore, the organisation manufactures goods as per needs and wants of customer
in order to provide them product according to their needs that help in increasing sales of
company in future period of time.
Threat of substitute for this, the user easily examines substitute good with higher quality
so that they switch to other brand. There are different kind of brand and create competition level
for organisation but L'Oreal produce superior quality goods and adopt natural ingredients like
Aloe Vera, coconut and many more so that threat of substitute product is determined as a low.
Rivalry among existing competitive firm this is connected to competition and low user.
There are different kind of competitors of L'Oreal like Avon, Estee Lauder and many more.
L’Oreal focuses on providing superior quality product and services to its user in order to increase
sales and profit margin in front of customer at Marketplace. Thus, their focus is on reducing level
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of competition and enhances purchasing behaviour of user. Because, there is a strict rules in UK
and it is not easy to take entrance in this actor so that there is low competition for L'Oreal during
particular phase of period (Grewal, Roggeveen and Nordfält, 2016).
Figure 3: Porter's Five Force Model
(Source: Verbeke, 2013)
TASK 4
P4. Strategic administration plan in addition with strategies, objectives and tactics
For sustaining in competitive atmosphere, every company focuses on appropriate
assessment of business environment. It aids assistance to organisation to accomplish target in an
appropriate manner. There are different kinds of models offer strategic direction to organisation
in respect of growth. Therefore, L’Oreal adopt Ansoff model that is given below:
Ansoff Matrix this framework is adopted by organisation to assess strategies for growth
at marketplace. This Matrix provides strategy that provides L’Oreal to grow to produce as well
as assess risk that is linked with strategy that is given below:
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Market penetration this is determined as growth factors that emphasize on selling or
marketing of existing goods to its prevailed its user (Platova, 2020). For accomplishing growth,
by using this strategy, the chosen company can emphasize on these kinds of features that is given
below:
 Decreasing cost of existing goods for attracting new as well as existing user
 L’Oreal can enhance market share by using different strategy related to pricing and
promote goods by using personal selling as well as other sales promotion techniques.
This strategy is determined as a less risky provides organisation ability to grow. This aids
assistance to L’Oreal to grab largest share in the market and reduced price of advertisement and
increase awareness of individual person related to price, competitive nature and many more.
Market developments in this strategy, the organisation take entrance in innovative
segment of the market with existing goods. By using this, the strategic growth is possible by
using different way.
 Expanding business into new market by assessing need and want of customer.
 Using innovative channel related to distribution like enhancing sales by using E-
Commerce.
L’Oreal use various policies related to pricing for assessing need of various elements of
user. This strategy is helpful for brand as they have specific way to meet need of various segment
of user.
Product development herein, the organisation improve innovative product for meeting
requirement in prevailing market. It includes higher level of investment in order to expand
product in existing market.
 It increases investment in research & development as well as improving innovative
goods. Assessing products of company in order to provides innovative goods to satisfy
needs and wants of customer.
This kind of technique is more risky in comparison to another because there are chances of hire
growth in context of profit of organisation.
Diversification in this strategy, the organisation takes entrance with innovative product
in innovative market (Sigurdardottir, Ujwary-Gil and Candi, 2018). This tactic is determined as a
risky in comparison to other organisation and organisation take entry in new market with
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