L'Oréal Business Strategy: PESTLE, SWOT, and Porter's Model

This report offers a comprehensive analysis of L'Oréal's business strategy. It begins with an introduction to business strategy and its importance, followed by a detailed examination of L'Oréal. The report includes a PESTLE analysis to assess the macro-environmental factors impacting the company, covering political, economic, social, technological, legal, and environmental factors. A SWOT analysis is then presented, identifying L'Oréal's strengths, weaknesses, opportunities, and threats. Furthermore, the report utilizes Porter's Five Forces model to analyze the competitive environment, evaluating the threats of new entrants, the bargaining power of suppliers and buyers, the threats of substitutes, and the intensity of rivalry among existing competitors. The report concludes with a strategic management plan and references.

BUSINESS STRATEGY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Analysis PESTLE and SWOT of the organization ....................................................................1
Porter's Five Force Model for competitive environment............................................................4
TASK 2............................................................................................................................................6
Create Strategic Management Plan ............................................................................................6
CONCLUSION .............................................................................................................................10
REFERENCES .............................................................................................................................12

INTRODUCTION
Business strategy can be interpreted as the course of activity and set of decisions that aid
the entrepreneurs in accomplishing particular objectives of business. It is the important plan that
administration utilise to secure competitive position in the marketplace. Business strategy is the
long range description of desired image, direction and goal of the company (Bansal and
DesJardine, 2014). It is strategy of corporate purpose and activity which is carefully planned and
flexible formed with the aim of accomplishing effectiveness, using chances, securing beneficial
position, meeting challenges and threats of the firm. It is set of competitive moves and activities
that are utilised for attracting consumers, compete successfully and achieving the objectives.
This study is based on L’Oréal. It is world largest cosmetics firm and has evolved activities in
the area concentrating on hair colour, skin care, make-up, perfume and men's skincare. This
report will analysis PESTLE and SWOT of the organization. It will prepare analysis of
competitive environment utilising Porter's Five Forces Model.
TASK 1
Analysis PESTLE and SWOT of the organization
PESTLE Analysis of L’Oréal:
It is the tool utilised to analysis and monitor the macro-environmental factors which have
intense impact on performance of organization. This framework is useful when beginning new
business and entering foreign market.
Political Factors:
It involves regulations and policies which is regulated by government that company have
been working. Political factors involves taxation policies, working class regulations,
commercialism limitation etc. It also involves products as well as services that authorities wants
of give which directly affected by legislation for advertising (Martinez-Simarro, Devece and
Llopis-Albert, 2015). For example, globalization in terms of technology which is involved in
political factors that directly impact on L’Oréal positively. For instance: changes in taxation
policy is highly effected negatively on operation of L’Oréal.
Economic Factors:
It includes economic growth, interest rate, inflation rate and exchange rates in all the
nations which they are operating in. The recession element is also one of thought components in
heritage of company. The formulated states with high manlike improvement index as well as
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great efficiency can be more prostrate to branded goods such as organization. Exchange rate
influence costs of exporting products and supply as well as price of imported commodities in
economy. For example: Increasing the inflation rate is highly effected negatively on the selling
of products and services of L’Oréal. For instance: decreasing the inflation rate is effected
positively omn selling of goods and services of L’Oréal.
Social Factors:
It includes technological tendency in society. The modern society are more than
concerned in fashion trends in the company product. Current trends and demand of products
involves in social factors which is affected operations of firm (Evans and et.al., 2017). Social
factors involve ethnic feature, well-being awareness, population, growth rate, career attitudes and
accent on safety. For example: changes in the consumer needs and tastes which are highly
effected negatively on selling of good and services of L’Oréal. For instance: Increasing the
consumer awareness about L’Oréal brand which is beneficial for selling of company.
Technological Factors:
It involves environmental aspects like research and development, technology, automation
etc. L’Oréal has embraced the technological invention in various ways. They can define barrier
to entry, minimum prompt production level which is influenced on origin judgement. Moreover,
technical modification can affects costs, choice and lead of invention. For example: Adopting
the technological advancement in delivering the products and services of L’Oréal which is
positive impact on business. For instance: High cost and time are consuming in technology
advancement which are negatively effected on L’Oréal.
Legal Factors:
It involves various laws such as discrimination, consumer law, employment, health and
safety regulations. These factors have direct influence on operations, costs and demand of
product of organization. It is brand of high middle class and selected of every social group
(Hittmár, Varmus and Lendel, 2014). Company are more taken up about all legalities for running
the business smoothly. For example: If the company has not followed discrimination
regulations, so that its impact on negatively on the operations of L’Oréal. For instance: If the
company has followed health and safety for ensuring the well-being with the workplace. This
impact positively on operation of L’Oréal.
Environmental Factors:
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It includes different international surroundings safety regulations that must stay by
international standardized. In this context, all the global brands are played their role in the
worldwide in relation to offers better quality products to consumers. Therefore, L’Oréal also play
their part by helping such drives and applying the standards related to environment in the
business. For example: If the company is contributed in reducing the carbon emission that
effected on positively in the L’Oréal. For instance: If the firm do not followed environmental
regulations, so that it impact negatively on the operations of firm.
SWOT Analysis of L’Oréal:
It is strategic planning techniques utilised to aid person and firm determine strengths,
weakness, opportunities and threats related to competition and project planning of business. It is
supposed to specify objectives of business and projects (Torrent-Sellens, 2015). It identifies
internal and external factors that are approving and reproving to accomplish those goals. SWOT
analysis is very useful for strategy building matching, converting, marketing and corporate
planning.
Strengths:
The continuing research and invention for increasing interest in beauty which is strength
of L’Oréal. Therefore, they assure that offer the best product and services to consumers. Firm is
the leader in increasing cosmetic business dislike contention in market. L’Oréal follow high-end
ad that help to attract and target audience. Company has operations in over 130 nations and over
40 production plans. L’Oréal brand while walking by make-up, hair and skin care areas of
localized department store (Bocken and et.al., 2016). They clearly dominate cosmetic industry
because, they have approval such high profile brands under their name. Firm have also moved
into luxury brand offering high quality goods for single who purchase on easy budget. If the
consumers wants bit of both world like cost effective and expensive. They can easily find things
are looking for through L’Oréal.
Weaknesses:
The decentralised organizational structure is the large weakness which is faced by
L’Oréal. There are many difficulties to control of firm, because they have many subdivisions of
the business. Firm has stayed competitive in saturated market by highly focusing on research and
development, so that it is weakness for the brand. More goods for straight hair and specific
ethnicities are competing for attention (Kim and et.al., 2015). These are all just segments in the
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hair care industry that affecting L’Oréal. Company is highly invested on research and
development. If they want to keep their consumer happy, so that they must invest more on
research and development.
Opportunities:
Firm can sound developing marketplace which scope from wealthy, senescent and also
masses for mature nations. L’Oréal has larger market share, because of figure of patents
registered by them. Organization must have focused on providing the organic and natural
product, because of, consumer are high demanding of those goods. Company needs to adopt
technological advancement and invention which can create opportunities for increasing the sales.
This can help to achieve competitive advantage as compared to their competitors.
Threats:
There are high level of competition within area of cosmetic brands. There are many
rivals such as Revlon, Lakme, Garnier etc. Firm has infinite goods. The profits are divided into
various segments. It depends on different factors. One nation can be growing and another
country can be declined (Glass, Kruse and Miller, 2015) If firm run business in decline
economies, so that it can affect cash flow of business. The whole cosmetic industry moves
quickly. People are falling over themselves about new conditioner. It gets endless five star
reviews and endorsement.
VIRO Analysis:
This analysis can be used in analysing the capabilities of organization which involves
four factors such as value, rarity, imitability and organization.
Value:
First of all, it is needed to determine possible resources and whole value of firm. It can
aid to hold off threats that can potentially damage operations of L’Oréal. The understanding
value is one of primary experiencing success in the long term. Employees and brand image are
more valuable resources for organization. With this, L’Oréal easily achieving objectives and
goals within the business.
Rarity:
After determining value, firm have rarity that can lead to competitive advantage. Rarity
can be hard but it is valuable resources and capabilities of the L’Oréal. If the firm is having the
rare resources, so that can be beneficial to bottom line and put them to utilise effectively (Suh,
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2014). Firm utilise rare resources for producing innovative product that is help to competitive
advantage and targeting customers. This can help to achieve the objectives and goals of business.
Imitability:
It is hard to imitate to resource or capabilities by company. If firm have precious as well
as scarce resources that are difficult to copy by another organizations that can gain the first
mover advantages in the market. Also, it can gain competitive advantage. In this context,
L’Oréal needs to utilize the effective resource, so that any company do not copy with them.
Organization:
If company is well structured in such ways, so that it is able to use any and all benefits
that have been determined within the first three points such as value, rarity and imitability.
Porter's Five Force Model for competitive environment
Threats of New Entrants:
There are high level of fresh newcomer in aesthetic as well as skin care that are
competing businesses. Therefore, pull fresh entries attempting to acquire the market share. This
tracks to drub in profits of existing firms. There are numerous obstacles in this business. There
are large economic system scale by existent participants (Sammut‐Bonnici and Galea, 2015). The
capital needed to set up production established is very advanced. There is powerful brand
recognition of L’Oréal that increasing approach to distribution and expected retaliation is also
qualified level of barriers. The access to need inputs for producing is not very hard.
Bargaining Power of Suppliers:
There are large number of suppliers in the cosmetic and skin care industry. There are
various manufacturers of goods that are needed by business. There is low discrimination of
stimulation. There is particular shifting price and danger of progressive combination also live.
The presences of artificial of inputs. The impact of inputs on cost is very low. Overall the
bargaining power of suppliers in low in this industry. Also, this directly impact on operations,
and costs of L’Oréal.
Threats of Substitute:
There are primarily two utilities of skin care goods that are domestic cure as well as other
skin goods made at domestic with organic and natural components such as herbs and oils for
protecting as well as change skin. These goods are more utilised at agricultural fields. Some
women also consider of these artificial as old designed and ineffective. The shifting cost and
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buyer tendency to substitutes both are very low-level (PORTER’S FIVE FORCES: ANALYSING
THE COMPETITION, 2015). L’Oréal seems like does not disturb by any possible substitute that
come into market. There are fewer substitutions in the anti-anging products,so that it brings less
threat to the marketplace.
Bargaining Power of Buyers:
The power of buyers is high in cosmetic and skin care industry that is increased
competitions and availability of the goods. They are no positions to effect the costs of goods.
This make difficulties for firms to control long term profits. It can also power L’Oréal to
decrease prices of products. This can easily switch to other brands. Therefore, L’Oréal has faced
with threats of lack of consumers. In this context, firm must deal with this threat earnestly. Thus,
they maintain market share of this firm in profession.
Rivalry of existing Competitors:
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Illustra
tion 1: PORTER’S FIVE FORCES: ANALYSING THE
COMPETITION
Source: (PORTER’S FIVE FORCES: ANALYSING THE
COMPETITION. 2015)

The level of competition between challengers is very high in the cosmetic and skin care
industry. L’Oréal is the cosmetic company. They have many competitors involves brands like
MAC, Maybelline and other localized firms. The figure of cosmetic is controlled and numerous
of spas have their own goods. Therefore, supply is larger than demand. The level of distinction is
medium. There are minimal differences between goods of various brands. The exit barrier are
also very high. L’Oréal requires non-stop quality improvement for every manufacturing line in
relation to guarantee survivals of this firm in the industry. They must increase their marketing
channels with help of the highest technologies and inventions to acquire more market share ans
internationally targeted their market.
TASK 2
Create Strategic Management Plan
Strategic Management Plan (SMP) is the statement utilised to convey with goals, focus
strength, set up resources, ensure that workers as well as another stakeholder are worked towards
common objectives of firm. The plan is driving the collection of ongoing activities and
procedures that firm utilise to systematically coordinate and adjust resources and activity with
mission, vision and strategy.
MISSION AND VISION STATEMENT:
The mission statement is lasting formulation of company exists and its hopes of overall of
firm. It involves goals that want to achieve and outline intend to fulfil them. A strategic plan
requires clear statement of purpose of firm its reasons for existing in the first place (Damian,
Segundo and Merlo, 2014). In this context, the mission of L’Oréal is offering high-grade of
aesthetic invention in relation to choice, efficacy as well as safety to all men and women to
satisfy all their desires and all their beauty wants in their limitless diversity in the worldwide.
The mission statement is mainly focused on the products. Its mission statement can be more
specific and can discuss things such as competition, financial strength and target consumer etc.
Even these things are not involved in mission statement that are essential with regards to
allocation of resources and decision making. The vision of L’Oréal is to incorporate values of
sustainable evolution into its business model and to build sustainable development both
responsible and united. Firm explains the future of brand and where it wishes to be in upcoming.
CORE VALUE:
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It is necessary to focus on creating core value with mission and vision statement of
business by firm. It is wider principles that require guiding leaders and workers in their regular
and making long range decisions (Ahmadi, Dileepan and Wheatley, 2016). The core value
already exist as part of culture of company. The core values and principles are integrity, respect,
courage and transparency. The ethical principles form their culture, underpin reputation and must
be called and identified by all employees of L’Oréal. Action with Integrity is wide to build and
maintain trust and good relationships.
SWOT/TOWS ANALYSIS:
A SWOT analysis is run down of current situations of company from these key
perspectives. This analysis involves an examination for competitive advantage. This puts at the
front of area of firm in market. In this section, use TOWS analysis for identifying the threats,
opportunities, weaknesses and strengths of L’Oréal. It is tool which is utilised to generate,
compare and choose strategies of organization. There are four TOWS strategies such as strength
or opportunity (SO), weakness or opportunity (WO), strength or threats (ST) and weakness or
threat (WT).
Strengths/Opportunity (SO):
The strength of L’Oréal is continuous research and creation in the product, so that they
can exploit to chance to grow the market share of business globally. The company follows high -
end advertising which changes culture of targeted consumer that can achieve the opportunity of
growth and development of firm.
Weakness/Opportunity (WO):
The weakness is to number of subdivisions of the firm that can be difficult to control of
it. For reducing weakness, firm can hire skilled and qualified employees for handling all
subdivisions of business (Sica and et.al., 2015). Therefore, workers are helped for increasing
market share internationally.
Strength/Threats (ST):
If the firm will hire more skilled and qualified employees for working in many other
nations, so that it reduce problem of handling the cash flow of L’Oréal. Through, continuous
invention of interest of beauty of products that will help to beat competition in cosmetic industry.
Weakness/Threat (WT):
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If the company will increase number of employees for effective operations that can
reduce threats of consumer satisfaction. Therefore, they will try to improve quality of product,
increase consumers, sales and market share that can increase profits margin.
OBJECTIVES, STRATEGIES AND OPERATIONAL TACTICS:
The long term objectives represent that firm need to attention in relation to make vision
reality. These objectives have time horizon of several years and more. Firm use general strategies
in order to accomplish objectives and vision (Bello, 2014). After that, company can organize
shorter-terms priorities and initiatives of performance. Therefore, utilization of resources that
will leverage to achieve them.
OBJECTIVES:
The objective of L’Oréal is to create into model company that is exemplary in relation to
sustainable invention, production and consumption as well as shared growth by 2020. Firm has
defined new sustainability it hopes will aid to achieve target of 1 billion new customers by 2020
through producing more goods with less environmental impact and assisting consumer make
desirable by choice of sustainable lifestyle. The objective of L’Oréal is to consumer satisfaction
and increasing the awareness about the products and services.
STRATEGIES:
L’Oréal has selected unique strategy universalization. It refers globalization that captures,
determines and respect differences. Variation in desires, needs and traditions. L’Oréal is driven
through this vision that is to offer tailor-made beauty and meet the needs of customers in every
part of the world (Sica and et.al., 2015). The strategy statement of L’Oréal as its business
philosophy. The focus of statement is the various wants of different customer needs as its
compositions. Firm can be utilised the Ansoff's Growth Strategies for achieving the objectives
and growth of business.
Ansoff's Growth strategy:
It is alternate corporate growth strategies and matrix that focused on present and potential
goods and consumers. Company is considering different ways to grow through existing and new
products as well as existing and new markets. There are four different growth strategies such as
market penetration, market development, product development and diversification that can be
utilised by L’Oréal.
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Market Penetration: It is strategy is the least risky since it leverage many of existing
resource and capabilities by firms. The purpose of this strategy is to raise sales of existing
products and services on existence markets (Carayannis and Rakhmatullin, 2014). This can
increase market share and also can attract the consumers away from their competitors. L’Oréal
make sure that consumers are buying existing goods and services. This can be fulfil by decrease
prices, increase promotion and distribution support.
Market Development: This strategy involve the pursuit of additional market segment
and geographical regions. This refers to raise sales of existing goods and services on previous
unknown markets. Market development includes an analysis of way in which selling of existing
offers on new markets of L’Oréal and grow of existing market. This can be achieved by various
consumers segments, industrial buyers for good that was previously sold only to household
(Klettner, Clarke and Boersma, 2014). This strategy is more risky than market penetration
strategy. With the new market development, increase sales and profits of firm, through this,
L’Oréal achieve the objectives of business.
Product Development: If strength of firm is related to customer rather than specific
product, so that this strategy can appropriate for company. The aim is to establish new goods or
services on existing markets. This strategy can be utilised to increase the proposed offers to
present consumers with purpose of raising turnover of L’Oréal. Firm highly invest on research
and development of extra goods that can help to product development. Company also access
their distribution channels for growth of their brands in the international level. With the new
product development, increase sales and profits of firm, through this, L’Oréal achieve the
objectives of business.
Diversification: It is most hazardous approach of growth strategies since both product
and market development and outside core capabilities of firm. This refers establishing new goods
and services on previously undiscovered markets (Bansal and DesJardine, 2014). This strategy
includes marketing of completely new goods and services by L’Oréal. This can be reasonable
choice is the high risk is remunerated by the opportunities of high rate of returns. Company
needs to introduce the new products and services in new market for increasing sales and profits
of L’Oréal.
In this context, L’Oréal can be utilised product development strategy for exploration of
strengths and reducing the weakness of business. This strategy can advantage their strengths by
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