Comprehensive Business Strategy Report: L'Oréal's Analysis

This report provides a comprehensive analysis of L'Oréal's business strategy, examining both its internal and external environments. The introduction outlines the importance of strategic management and its role in achieving organizational goals. Task 1 focuses on analyzing L'Oréal's environment using PESTLE and SWOT analyses to identify opportunities and threats. Task 2 evaluates different strategic directions, recommends growth platforms, and develops a strategic management plan with objectives, strategies, and tactics. The analysis includes an examination of L'Oréal's capabilities and the application of Porter's Five Forces model to assess the competitive landscape. The report concludes with a summary of key findings and recommendations for L'Oréal's future strategic direction.

Business Strategy

Table of Contents
Table of Contents...........................................................................................................................2
INTRODUCTION...........................................................................................................................1
1 Analysis Internal or External business environment in order to identify the company
capabilities..................................................................................................................................1
2. Analyzing the competitive environment of the organization by using Porter’s Five Forces
Model..........................................................................................................................................5
TASK 2............................................................................................................................................7
1. Evaluation of different types of Strategic directions available to the organization................7
2. Recommendation of the most appropriate growth platform and strategies............................9
3. Produce a strategic management plan with strategies, objectives and tactics.......................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business strategy involves the formulation and implementation and evaluation of cross
functional decisions that will enable an organisation to achieve the company aims and objectives.
Another advantage of strategic management is that it provides overall direction to the company
in order to accomplish the set aims and objectives. Present study based on business strategy of
L’Oréal under which report will analyse internal and external environment with the help of
PESTLE and SWOT analysis model respectively. Furthermore, it explains about competitive
environment of the organisation by using Porter’s five forces model. At last, study discusses
about the strategic directions available to organisation and a strategic management plan is
developed with appropriate strategies, tactics and objectives.
L’Oréal is the big international brand in cosmetic industry with high range of products. It is
one of the top beauty brand across the world which committed to their high innovative products.
TASK 1
1 Analysis Internal or External business environment in order to identify the company
capabilities.
L’Oréal is one of the leading cosmetic brands across the world. Company produces many
varieties of cosmetic products that attract the customer and helps in gaining maximum sales
revenue. L’Oreal needs to analyze internal or external environment in order to adopt some
competitive business plan (Ali and et.al., 2018). L’Oréal perform its best work in their own
domain. In order to make some effective business strategies, company requires to conduct
external analysis to identify impact of various factors on business.
PESTLE Analysis
Political Factor: Political factor is one of the significant factor in external environment
which affect company due to changes in rules and policies of the government. Government
policies of France may affect the company policies that directly affect company functional
activity. Country policies generally affect the overall company's structure. Due to changes in
interest rate, company should liable to increase the prices of products. Through some customers
might get affect and switch to other brand. After the globalization political factors have been
given positive impact on the business strategy.
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Example: Due to yellow revolution in France it affects the company in terms of
prices and make the process and feeling. Due to this political influence industry has suffer lots of
trouble.
Economic Factors: Economic factors generally affected by the changes in exchange
rates of the state in which the company is working. Recession element is the another influencing
factor that might affect company. Due to different economic region, company set product prices
accordingly (Aydin and et.al., 2018). Moreover, GDP is the most essential tool that contributes
the business of the luxury products brand like L’Oreal. High standard economy growth of the
countries more attracted to the high level of goods and services. For example: Due to high
inflation rates in the economy will decreases the demand of the product due to high prices. This
will be given wrong impression on the overall performance goals.
Social Factor: Social reason sometimes is the most leading and challenging external
factor that affect company's reputation and growth. The social factors encompass the technical
trends in the society. People of France looking for new trend and always eager to adopt latest
technological brand or services. But on the same side, some cultural issues and ethical issues has
created hurdles for the company. For example: Social factor affect business product or services,
Social factor affected by the customer preferences due to changing in demand.
Technological factors: Technology factor provides opportunity for the companies to
bring some new advanced services or product to attract people. L’Oreal is the advanced
company that always looking for new technical way of moving work into more effective way.
Apart from that, technology give new way to fashion industry, such as it enhances the product
quality richer and trendy. For example: With the help of new technology in beauty products can
change the mind of the customers. Besides, Loreal should need to invest in the new technologies
in order to gain the customer attention.
Legal Factors: Legal reason affect company by the unnecessary implications of
government. In order to maintained good reputation in front of the government and society,
company has to abide all imposed government laws and regulations to their business
management functions. It is very difficult for the company to maintain its position in highly
competitive market and fulfill all the legalities of the region in which it is working. L’Oreal is the
most competitive brand which is more serious about its legal structure and make sure to adopt all
legislations.
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Environmental factors: The environmental factors encompass environmental safety
laws that must be abide by company as per the global standards (Bohari, Hin and Fuad, 2017).
The world has ready to adopt pollution free environment, for which government imposed several
legislations and implications plans. Therefore, it is necessary for L’Oreal to consider these
factors while determining the policies for the company. Ignorance of environmental laws may
create issues for company in running its business operations smoothly. For example:
Environmental factor affect company products in terms of changing weather condition. Beauty
demand also changes as per the changing environmental factors.
SWOT Analysis
Strength
 L’Oréal has a unique brand portfolio of
beauty product. It makes good
impression on the overall task to keep
sustained the long-term market value.
 L’Oréal maintains its product's quality
for their richer section clients.
 L’Oréal moving ahead to the organic
products to keep buyer's skin healthy
(Yun and et.al., 2016).
Weaknesses
 Growing saturation is the biggest
company's weaknesses.
 Shrinking profit margins, is another
weakness of L’Oréal that restrict the
company's profit margin.
Opportunity
 L’Oréal can expand its business to
other country to expand their buyers as
well to earn more profit revenue.
 L’Oréal can also expand its product line
to attract or retain existing customers.
Threats.
 Fierce competition in market for that
company needs to adopt the new
strategies to beat the competitive
market.
 Another threat to the company is
uncertain business environment due to
which company might affected and
suffer high cost. In order to certain the
market company should need to make
contingency plans to handle the
particular situational task.
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From the basis of above discussion, it has been concluded that external or internal factors
affect the business in direct or indirect manner. Above PESTLE and SWOT analyse the deep
understanding of external factors and also described the threat involved in the business
environment.
Analysis of firm's capabilities
Valuable:
Global distribution network: this can be the strength of the company through they can easily
meet out the company set standards. This is important sources that helps L’Oreal to serve the
global market and maintain a global presence. This is the effective or valuable approach to
expand the business growth and new further growth.
Large product range: This capability of the company helps L’Oreal to reach national or
international customers with different tastes. Large product range valuable for the company to
attract more number of buyer’s attention.
Rare:
Research & Development: This is the main concern for the company to focus on the new
research of new product development process. R&D is necessary to invent new innovation and
new product development strategies for future expansion.
Marketing skills and expenses: L’Oreal marketing expenses are around 3 billion which is very
higher. But on the same side, it gives very good impact on the market research. Marketing skill
must be unique and different from other competitors to get the market attention.
Imitability:
Brand Image: L’Oreal having a good brand image in the market which is beneficial for the
company to beat the level of competition.
O: Organizations, global distribution network and firms policies and procedures are properly
organized help It to exploit valuable resources.
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2. Analyzing the competitive environment of the organization by using Porter’s Five Forces
Model.
Figure 1 : Porter's Five forces analysis
(Source: Porter five force analysis, 2018)
Porter’s five forces model
L’Oréal is one of the leading brand in cosmetic sector, that produce most unusual and
efficient product for their clients. Moreover, company has to maintained its quality and brand
value to overcome from the challenges. For analyzing competitive environment of industry,
porter's five force model is applied by organization which is mentioned below:
Threat of rivalry firms (High)
Threat of rival companies may affect the existence of company sometimes. Competitors
of cosmetic industry are Gamble, Avon, Estee Lauder etc. The pressure of competition is high
for L’Oréal (Dollet and et.al., 2017). In present competition market, L’Oreal has facing high
pressure of rivalry firms such as Mac, Maybelline, Dior, Lancôme, Clinique etc. all such big
brands create the pressure in the industry of some new innovative products.
Potential New entrants (Low)
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Threat of new entrants is low due to already having high range of product or services.
Firm has always under pressure of new entrants that create competition in the market. In order to
minimize the high impact, L’Oreal can use low pricing strategies to retain customers with the
firm for long-term manner. Besides, L’Oreal also uses different opportunity and adopt new
innovative product to beat the level of competition.
Threat of substitutes (Low)
Threat of substitute products is the most common threat for the company in which the
company cannot hold the pressure of new entrants. For that, L’Oreal should always need to adopt
new product initiation and take better product decision making approach. This can help to
control the risk of substitute products and retain the potential customers (Hong and
Yamkasikorn, 2015). L’Oréal is having low threat of other substitutes due to which they can
easily meet out the range of product or services. Loreal offering high range of unique product
that cannot be provided by other competitors. This is the reason company enjoying the low threat
of substitute products.
Bargaining Power of suppliers (Low)
L’Oréal spread into the large extent, due to which they consist low risk of supplier’s
power. In the context of L’Oreal, suppliers of this company are less negotiating the prices of raw
material. So that, L’Oreal can easily earn or maximize profit. As the company have many
suppliers to get raw materials for manufacturing products, so bargaining power of suppliers is
low for company. Therefore, company needs to be maintained the good relationship with its
suppliers so that it will help in creating a brand value and good image in front of the suppliers.
Bargaining Power of customers (High)
The power of customers is high in cosmetic industry, because customer can only know
what is best for them. Another reason of high customer power is due to having more other high
brands in the same industry (Yun and et.al., 2016) As the customer base of L’Oreal is quite high
therefore, it has been analyzed that the bargaining power of buyers are high and they have ability
to seek high discount and offers as well from the company.
On the basis of above growth and challenging business opportunity to identify the new
growth or management effective business opportunity and growth. company has to adopt this
model top analyze the competitive advantage and adopt the best approachable result outcomes. It
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has been analyzed that Porter five forces are the effective market tool to measure the effective
management task.
TASK 2
1. Evaluation of different types of Strategic directions available to the organization
Bowman’s Strategic clock model
Low Price and low value added: Low prices and low value added for a business affect
the overall challenging behaviors. Basically, this strategy is based on barging system in other
words, Strategic planning is an organizational challenging behavior to carry out the long-term
management task. Strategic management also very much crucial and effective in order to explore
the new opportunity and goals. Apart from that, the main purpose of strategic plan is to outline
the effective management task (Jaber and et.al., 2015).
Low Price: This style of strategy is totally based on low cost where market leaders are
based on low cost leadership. In this strategy profit margin of the product is very low and
ineffective.
Hybrid: In this strategy where company make customer more stable and believe but also
some product differentiation. The main purpose of this strategy is to influence customer that
there is good value added through the combination of a reasonable price and acceptable product
differentiation. In which all information of the company is exits. In other words, strategic plan
also includes company vision, mission, values and strategic priorities.
Differentiation: this strategy will help Company to focused on the branding rather than
other factors. The reason branding is very necessary for the company to maintained the customer
attraction. In other words, differentiation is the strategy that adopted by the L’Oreal to keep
attract more number of buyers at prime prices. In this first strategic direction company has to
decide what they actually need to do to perform the further specific task. It is the most basic
level, that corporate strategy that outline the business function (López-Gamero and Molina-
Azorín, 2016).
Focused differentiation: The main purpose of the focused differentiation where company
aims to position a product at the highest price levels. This helps to decontrol the effective
management goals. the main focused differentiation strategy is to outline the general overall
strategy of L’Oréal, define the markets it will operate in and make plans that how markets will be
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entered. Business strategy is reflected by corporate strategy that helps company to attract more
customer attraction towards the company product or services.
Risky high Margins: this is the high-risk strategy that company adopt with premium class
products. In this section, company sometimes fails to restrain the low effective working goals
and objectives that needs to be performed by the company. If customer continue with the same
price product so it is good for the company but if client get some other product with high value
added so that it switches to the other products. This strategic direction helps L’Oreal to move in
the right direction on the basis of effective management task. This functional direction manages
the day to day strategy that is going to keep the company moving on right path. Low Price and
low value added: Strategic directions or level of strategy is the most important forces in the
business. It establishes the internal responsibilities of employees or workers to accomplish the
company aims and objectives.
Monopoly Pricing: Monopoly is the market where only one firm handle the overall
market and enjoying the full attraction of buyers. In this market, customer have no choice for
other alternatives. Strategic direction helps to define what actually company wants to achieve
and what are the purpose of the organization. It is the central function of the business that propel
the business towards the intended goals.
Loss of market share: this position of this model is for disaster in competitive market.
Setting a middle or standard price for a product with low value is unlikely to win buyers
attraction who will have much more better options with some good quality.
2. Recommendation of the most appropriate growth platform and strategies
Recommendation strategies
From the above present strategies of growth L’Oreal should need to refer some of the
major effective growth tactics that helps company to develop and to stabilized their market
position in the long market, these two strategies have been given below:
Hybrid: In the present company scenario now, companies are capable in both maintained
the quality and keep stable the balance between the customer wants. As per the global scenario
Hybrid strategy is the most essential and popular. This strategy for L’Oreal will become more
competitive for the company growth and future development. Hybrid further divided into two
parts sequential or outpacing strategies and second one is simultaneous strategies.
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Sequential or outpacing strategies this strategy of hybrid is more concern on the initial
strategy. For instance, L’Oreal innovate new product and offer high value to the buyers at
premium price.
Simultaneous strategies are more focused on the company cost and differentiation
advantages at the same level of point. This systematic process has been done through design or
mixing of components.
Differentiation: it is another generic strategy from the above strategies that company
should needs to adopt. This strategy can help company to create market position that helps to
sustained in long term manner. Such differentiation has been based on some basis such as brand
image, distribution, design etc. differentiation strategy will enhance the customer value by
offering high quality products with premium prices. The effectiveness of this strategy depends on
how well the firm can balance product costs for the customer.
The advantages of differentiation strategy are it can make the good perception of the
company in front of the customers that their products or services are more premium and unique
from the other competitors.
Justification
L’Oréal should need to adopt this strategy as they more innovative, customer oriented,
and follows organisational learning. Hybrid strategy is helpful for the company to make
consistent strategic decisions to gain competitive advantage and align company resources in a
systematic manner.
Differentiation strategy seeks company strategies successfully and help company to get
high range of profit. The best advantage of this strategy is it help to reduce the competition level.
In order to maintained the company position company should also need to be considered
some other elements. L’Oreal needs to adopt customer focused growth strategy to maintained the
good relation with the other stakeholders. Customer focused strategy is the most challenging and
strong strategic link to improve business profit. This strategy also help company to earn more
surplus for the company to reinvesting.
3. Produce a strategic management plan with strategies, objectives and tactics
The main purpose of this strategic plan is to explore the new ways for the company to
explore more profit revenue.
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Objectives: The main aim or objective of the L’Oreal is to adopt new sustainability plan in
order to reach its target of 1 billion new consumers by 2020 by launching huge number of
products. Besides that, L’Oreal company also launch the campaign “Sharing Beauty With all”
which spread into some areas that are producing sustainably, living sustainably and developing
sustainably. New products of the company aiming that they provide social benefits, reducing
environmental carbon footprint by 60 percent. So basically, these are the objectives of the
company (Yuh and et.al., 2016). In the same way, L’Oreal target for a green future or maintain
high profile in the upcoming market.
Vision: Vision of the company is to enhance the organic makeup products.
Cost: In order to accomplish the plan company, incur approximately £1000.00.
Time: In order to accomplish the strategic management plan, it will take 1 year to
accomplish the project task.
Scope: scope of this plan is to explore the new product with new concept and goals.
Quality: Quality has to be maintained the by the company in order to get the best
response from the clients. Quality is the main concern or priority of L’Oreal that affect directly
or indirectly to the company profit.
Issues: Strategic issues and conflicts may affect the plan of the company such issues are
past history lessons, current products and services attractiveness and profitability etc.
Strategies: In order to explains strategic management plan, L’Oreal preparing for the
next evolution of digital marketing. Digital marketing and technology is changing the market
scenario. Currently company focusing on the strategies through they can more attract people
towards their product or services (Steyerber and Harrell, 2016) This strategy can give company
more profit revenue and growth in the future action plan.
Measures Progress: Measure progress is the most necessary function that should
adopted by the company. To control the performance and measure the performance is crucial
task for the company in order to identify some corrective action plan. Through effective
knowledge and control process company can easily meet their standard format.
Strategic tactics: As the strategic objective of L’Oréal is to increase profit margin and
improve quality standards, an organization is making huge capital investment on development of
its workers. As by doing this, business entity will be able to maintain high quality standards. In
addition, Under the incentive schemes, manager in an organization provide employees with
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