Business Strategy: Analyzing L'Oreal's Macro and Internal Environment

This report provides a comprehensive analysis of L'Oreal's business strategy, examining the impact of the macro environment on the organization and its strategic decisions. It utilizes frameworks such as PESTLE analysis to evaluate political, economic, social, technological, legal, and environmental factors. The report further assesses L'Oreal's internal environment and capabilities, including system values, goals, organizational structure, and human resources. It then applies Porter's Five Forces model to evaluate the competitive forces within the market sector. Finally, the report interprets and devises strategic directions for L'Oreal, culminating in a strategic management plan with tangible objectives and tactical actions. The analysis also includes a stakeholder matrix to understand stakeholder influence, and it highlights how L'Oreal adapts to changes in the external environment, focusing on innovation and ethical practices to maintain its market position.

Business Strategy
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Table of Contents
Introduction .....................................................................................................................................4
LO1 Analyze the impact and influence which the macro environment has on an organization and
its business strategies.......................................................................................................................5
P1 Applying appropriate frameworks analyze the impact and influence of the macro
environment on a given organization and its strategies...............................................................5
M1 Critically analyze the macro environment to determine and inform strategic management
decisions.......................................................................................................................................7
LO2 Assess an organization’s internal environment and capabilities.............................................9
P2 Analyze the internal environment and capabilities of a given organization using appropriate
frameworks..................................................................................................................................9
M2 Critically evaluate the internal environment to assess strengths and weaknesses of an
organization’s internal capabilities, structure and skill set........................................................11
LO3 Evaluate and apply the outcomes of an analysis using Porter’s Five Forces model to a given
market sector..................................................................................................................................13
P3 Applying Porter's Five Forces model evaluates the competitive forces of a given market
sector for an organization...........................................................................................................13
M3 Devise appropriate strategies to improve competitive edge and market position based on
the outcomes..............................................................................................................................16
LO4 Apply models, theories and concepts to assist with the understanding and interpretation of
strategic directions available to an organization............................................................................17
P4 Applying a range of theories, concepts, and models, interpret and devise strategic planning
for a given organization.............................................................................................................17

M4 Produce a strategic management plan that has tangible and tactical strategic priorities and
objectives...................................................................................................................................19
D1 Critique and interpret information and data applying environmental and competitive
analysis to produce a set of valid strategic directions, objectives and tactical actions..............20
Conclusion.....................................................................................................................................20
References......................................................................................................................................21
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Introduction
All the external environmental factors are very necessary to be analyzed as because they can
have the strong & the unfavorable impact on all the organizational activities of the business
organization, "L'Oreal". "L'Oreal" is the most leading cosmetics company in the whole World
which manages the activities related to skin care, hair color, make-up, hair care, sun protection,
and many others. The company was founded in the year 1909. The complete assignment includes
effective measures for controlling the internal as well as the external factors of the environment.
Effective business strategies & plans are also been determined in order to manage the overall
organizational operations. The complete internal & external analysis is being enhanced in order
to eliminate all the negative consequences of the external environmental factors.

LO1 Analyze the impact and influence which the macro environment has on
an organization and its business strategies
P1 Applying appropriate frameworks analyze the impact and influence of the macro
environment on a given organization and its strategies
In order to eliminate the effective concept of "traditional cycle" the complete process of
"strategic analysis" is being processed. All the external factors of the environment are being
included in the macro environment and are completely uncontrollable. These factors may
influence the organizational activities of "L'Oreal" in a negative manner. Hence, it is necessary to
analyze all of them in an effective & efficient manner.
Following are the external factors which are to be analyzed properly before conducting the
research on environmental analysis:-
 Political: The Government policies in the country of France affect the rules & policies of
the business organization of "L'Oreal" in Paris. The import policies also play a major role
in the effective growth & success of "L'Oreal" of the regions. The company does not
indulge in the animal tests.
 Economic: It includes the prices of innovative products, the exchange rates of the state in
which the company is established. The rate of GDP is being considered as the most
essential factor for all the branded luxurious products of "L'Oreal". The higher number of
people is interested in purchasing L'Oreal products (Birnleitner, 2013). The middle class
people can not afford the costly products of “L’Oreal” because of which the level of
profitability of “L’Oreal” gets hampered.
 Social: The modern groups of people are very much interested in buying the fashionable
products of "L'Oreal". The company utilizes the innovative technologies & methods in
manufacturing & selling its branded products which attracts a large number of people
towards the company. Some of the ethical & social issues negatively affect the operations
of "L'Oreal". The products of “L’Oreal” have the unique & innovative capabilities to
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attract all the social groups & people of the country. They possess the unique importance
of the beauty.
 Technological: The technological methods & attractive innovative products have raised
up the level of sales of the L’Oreal products, as because the company implements the
“contemporary trends” & the higher level of “innovation”. Therefore, the key factor for
the increased growth & success of “L’Oreal” is its innovative branded luxurious
products. The active ingredients are being included by “L’Oreal” research team. They
have the high technological innovation. Also they implement the feature of 3D hair
animation.
 Legal: The Company needs to analyze & effectively study about the different legal
aspects which can affect the operations of "L'Oreal" in both the positive & negative
manner. The other reason behind this is that the company is mainly the brand for upper &
middle-class groups, therefore, it needs to consider all the legal aspects of the economy
(Birnleitner, 2013).
 Environmental: The leading brand of "L'Oreal" need to follow up & also support the
different environmental norms, campaigns & the programs in all over the World. It is one
of the most "leading international brands". The innovative trends of the company can also
be affected by future policies related to the environment. “L’Oreal” uses 34% of its raw
materials from the plants for their products of shampoo which have the grat impact on the
biodiversity. Apart from this, the products of “L’Oreal” include the sustainable sources &
renewable raw materials.
Stakeholder Analysis:
Stakeholders are the personnel, that are being considered to be a crucial part of the
company owing to their interest and power to influence the decisions taken regarding the
operations and functioning of entity. It is essential for every business enterprise to carry out a
stakeholder analysis in order to determine the impact of various stakeholder groups upon the
decisions and strategies devise by management. In this regard, Stakeholder Analysis Matrix
serves to be an effective strategic tool that segments the groups as per their power as well as

interest within the company. L’Oreal has conducted this analysis to gain knowledge of the
impact of its key stakeholders upon the company.
Figure 1: STAKEHOLDER MATRIX
(Source: STAKEHOLDER MATRIX, 2019)
Stakeholders
Group
Influence on L’Oreal
Consumers If it is talked about L’Oreal, customers are said to be one of the most
important stakeholder for the business organisation. Basically, L’Oreal
develops a range of plans and procedures in order to gather the attention of
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customers. Major modifications are basically being made focusing upon
interest of these stakeholders.
Supplier These are the individuals who provide supplies of raw materials to the
entity. It is may be possible that, these stakeholder might ask L’Oreal to
make timely payments against credit purchases by the respective
organisation.
Trade Union This is being considered as the stakeholder group, which focuses upon
organisational workforce derives fair compensation (wages) and also helps
employees to work in a much more healthier and safe working
enviornment.
Local
community
Actions undertaken by L’Oreal have a significant impact upon the
community and thus they desire that L’Oreal operates in the interest of
environment and society.
Government Government of any nation basically makes rules along with the
regulations that are required to be taken into account by L’Oreal in order
to improvise the existing sustainability at market.

All these factors are very difficult to be controlled & analyzed for enhancing the smooth
& effective operations of "L'Oreal". The top-level managers of the business organization must
grab out the most favorable opportunities for the changing policies & plans of the Government.
With the help of effective tools & innovative techniques, all these factors must be evaluated &
eliminated.
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TRADE UNION OWNER
GOVERNMENT MANAGEMENT
INFLUENCE
SUPPLIERS
LOCAL COMMUNITIES
CUSTOMERS
LOW HIGH
INTEREST
Illustration 1: Stakeholder Analysis Matrix of Tesco

(Figure: PESTLE analysis of L’Oreal).
(Source: joeshammas, 2017).
M1 Critically analyze the macro environment to determine and inform strategic
management decisions.
All the effective implemented strategic decisions of the business organization are being affected
& influenced by external environmental factors. The leading brand "L'Oreal" has the ability &
capability to manage its operations against all these factors very effectively & promptly. For all
the departments of "strategic management, human resource, research & development" the
PESTLE analysis is very necessary to be conducted. "L'Oreal" needs to timely identify all those
external factors which may have a negative impact on the sustainable growth & success of the
business organization. The effective business strategic decisions & efficient plans get changed
according to the changing elements of the external environmental factors. With the help of
positive & effective measures, all the negative impacts can be reduced & eliminated from the
overall business organization (Banahene and Mensah, 2016). The responsibility of the “L’Oreal”
business managers is to enhance & encourage the effective “strategic thinking” among all the
members of the business organization.

For example, with the increase in the standard of living of people, increasing awareness among
people & also increase in the level of their education, they prefer high quality of goods &
services provided by the business organization. Therefore, “L’Oreal” offers the highly effective
cosmetic & hair products to increase the number of its effective customers.
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LO2 Assess an organization’s internal environment and capabilities
P2 Analyze the internal environment and capabilities of a given organization using
appropriate frameworks
The different elements or the factors are being included in the process of “internal
environmental analysis” such as the changing attitude or the behavior of all the organizational
employees, the trending culture of the complete business organization and many other factors. In
order to enhance the effective internal strategic decision making, the business managers are
required to conduct the training sessions & motivational programs for motivating all the
employees in the business organization. Below are the factors which are considered for the
internal environmental analysis & also managed in accordance with the internal capabilities of
“L’Oreal”:-
 System Value: In order to eliminate the ethical & social issues, the leading brand
"L'Oreal" achieves all its defined business objectives in accordance with the effective
implementation of the ethical measures. All the internal policies & effective procedures
are being determined & implemented ethically for sustained organizational growth &
success (Banahene and Mensah, 2016).
 Goals & Objectives: Besides from earning the maximum amount of profits in the
business organization, the main goal of L’Oreal is to earn the trust & the high level of
confidence of the billions of new customers in the upcoming years along with reducing
the emissions of greenhouse gases and the consumption of water in the context of each
finished branded product. All the employees must be trained, directed & guided in the
way of achieving these defined goals.
 Organizational Structure: All the business strategic decisions of “L’Oreal” may be
influenced by the changing nature of the overall structure of the business organization.
The company has the ability to enhance its smooth operations in an effective & efficient
manner for implementing strong decisions promptly & enhancing the potential growth of
the business.