Business Strategy Report: Analysis of Loreal Company Operations

This report provides a comprehensive business strategy analysis of L'Oreal, a major player in the personal care industry. It begins with an introduction to business strategy and then delves into internal and external analyses. The PESTLE analysis examines political, economic, social, technological, legal, and environmental factors impacting L'Oreal. A stakeholder analysis identifies key stakeholders and their interests. The VRIO analysis evaluates the company's resources and capabilities. The report also applies Porter's Five Forces model to assess the competitive environment. The analysis includes the threat of new entrants, substitute products, bargaining power of suppliers and customers, and competitive rivalry. The report concludes with strategic recommendations for growth platforms, strategies, and a strategic management plan, including objectives and tactics.

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1............................................................................................................................................1
a) PESTLE and SWOT analysis of company along with analysis of organisational
capabilities...................................................................................................................................1
b) Prepare an analysis of the competitive environment of company by using porter's five force
model...........................................................................................................................................4
TASK 2............................................................................................................................................6
a) To include evaluation of various kinds of strategic directions available to the organisation. 6
b) Justification and recommendations to most appropriate growth platforms & strategies........7
c) Strategic management plan including strategies, objectives and tactics.................................7
Strategic management plan.........................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business strategy is defined as a course of action that supports an organisation to achieve
its desired business goals and objectives. It is a strategic plan that is used by management in a
company to sustain a strong and competitive position within marketplace, satisfying customers
and achieving desired outcomes. An appropriate business strategy will benefits the firm in
attracting millions of customers without any complex procedure (Barberá and et. al., 2012). This
assignment is written in context with Loreal which is a France based personal care company,
situated in Clichy, France. Company have a registered office in Paris. This report will cover
internal and external analysis that will offers a basis for strategic planning to the organisation.
Also, evaluation of various types of strategic directions are mentioned. Justification and
recommendations associated with appropriate growth platform and strategies are discussed. At
last, an effective strategic management plan is produced which includes organisational strategies,
objectives and tactics.
TASK 1
a) PESTLE and SWOT analysis of company along with analysis of organisational capabilities.
Loreal is a French company with registered office in Paris, France. Company is
considered as world's largest cosmetic organisation and offers hair colour, sin protection,
perfume, hair care, skin care products to the customers. In order to achieve high revenue and
market-shares within market, it is very important for the company to properly analyses internal
and external business environment. In case of Loreal, an PESTLE analysis is mentioned below
that will helps in analysing external business conditions in a desired manner:
 Political factors: These factors are associated with the rules and regulations of the
country in which Loreal has been working or planning to work. As it is a French
company, governmental policies and regulations of France impacts the organisation very
much. Different import and export policies of a country also plays a vital role in the
popularity of company in that particular region. As cosmetics is a wide industry and
people form all age group prefer to use cosmetic products, government of different
countries support these organisations and formulate those policies and laws which are in
the favour of company (Blackburn, Hart and Wainwright, 2013). When we consider
political aspects of a country, tax rate posses a major impact, current rate is 20% where as
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last year it was 17.5%. Increase in tax rate of UK will impact the company in a negative
manner as expenses of company will increase.
 Economical factors: These factors involves exchange rates, GDP and per capita income
of the country in which Loreal is operating. Economic recession which takes place in
2008 have a considerable contribution in upbringing Loreal. Beside this, price of a
product also impacts popularity of the company among people. In some regions such as,
United states and United kingdom, price of cosmetics are high due to which these
countries promises high revenue and profitability to company rather than regions Africa
and middle east Asia. Corporate tax rate in UK is low due to which it will be beneficial
for company to expand its presence there.
 Social factors: It encompasses the modern trends and value which are associated within
society. As UK is a developed country and people living there favour more trendy
products, it is beneficial for Loreal to invest more in UK. Those societies which are
modern and likes to incorporate contemporary trends such as US, UK, France etc. will
always accept new innovations carried out by company without considering their price.
Manager in Loreal needs to consider the ingredients of product before producing them so
that wide number of population can readily accept it due to its advantages.
 Technological factors: Along with people, technology is also becoming advanced day
by day. Changes in technology can impacts the requirement of products in the mind of
people. Updating technology means improvements in products otherwise new products
can overtake their place and a firm will have to face losses and disadvantages. If
marketing manager in Loreal will uses online and digital media to advertise about
products, more people will get to know about them in less time and without spending
much money (Chang, 2016).
 Legal factors: As Loreal is operating at global level, there are many competitors of
company. If the firm wants to gain competitive advantage over rival companies, they
needs to follow all the legal policies and regulations associated with a specific country.
There are different legal laws associated which are adopted by every nation such as
employment law, health and safety laws etc. Following these regulations will benefits the
company in sustaining a positive brand image within market. If company will not take
legal aspects seriously, they may have to pay heavy taxes and revenues.
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 Environmental factors: It includes different laws and factors which are related with
environment safety. As people are educated and wants to make earth as pollution free
planet, it is important for Loreal to stop those activities which can adversely impacts
environment. Company can initiate different campaigns and programs in which people
will be informed regarding those activities which can impact environment adversely. By
this, company will sustain a firm position worldwide along with enhanced revenues.
Stakeholder analysis: It is an important framework for identifying stakeholders and
analysing their requirements and needs in a proper manner. This tool will helps in identifying all
key stakeholders and their vested interest about the company. It will helps in developing a
strategic view of institutional and human landscape and the relation in different stakeholders.
Different steps of this analysis are discussed below:
 In this step main stakeholders of Loreal are identified so that all important stakeholders
can be included properly. Main stakeholders of Loreal are executive staff, consultants,
employees, customers, shareholders, investors etc.
 In this step, stakeholders of organisation are prioritised and major stakeholders are given
highest priority.
 In this step, communication with stakeholders is carried out so that their trust can be win.
Interrelation in PESTLE and Stakeholder analysis
Due to high quality of products, company has successfully maintained a stable customer
base in UK. Company also provides products associated with pharmaceutical and dermatological
field due to which large number of people are familiar with products and loyal to the brand. As
firm is investing high in research and innovation, new products are offered to the customers but
due to this profit margins of company have reduced considerably. To attain more revenues and
profitability, Loreal can expand its product line by targeting people from all age groups. But
economic instability in different countries can reduce the sales of company. Also, high quality
products offered by other company in less price will adversely impact the sales.
VRIO analysis
VRIO stands for value, rareness, imitability, organisation. If employees will be familiar
with the available resources, then they can get to know about their capabilities in a more desired
way. VRIO is defined as a strategic tool used by firm to identify their internal capabilities and
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resources. It will benefits Loreal in identifying their available resources so that targets can be
attend desirably (Hoejmose, Brammer and Millington, 2013). In context with Loreal, analysis is
carried out below:
(Source:Applying VRIO Framework to Loreal, 2018)
To analyse organisational capabilities, manager in company can use VRIO analysis. It is an
analytical technique which will benefits the company in evaluating its financial, material and
human resources so that competitive advantage against rival companies can be achieved
desirably. This analysis is complementary to PESTLE analysis. It will assists the company in
understanding their inside situation in a clear and precise manner. By this required improvement
can be made so that company can earn high revenues and gain advantages over rival companies.
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Illustration 1: VRIO of TESLA

If some resource will not add value to the company, then company can switch those resources
with other materials. If some resources will be rare company can initiate strategies to optimally
use them. In case if resources are valuable and rare but not costly then they will help company to
gain competitive advantage. In this regard, Loreal will be able to acknowledge its organisational
capabilities properly.
b) Prepare an analysis of the competitive environment of company by using porter's five force
model
Porters five forces model:
There are two different types of environment under which every company has to work
i.e., external and internal environment. Internal can be controlled by the company as it consist of
strengths and weakness only (Meskendahl, 2010). But on other other hand it is hard for any
organisation to control external environment as it is made up of market factors which changes
according to needs and demands of the market. It is important for any company to analyse and
monitor the external environment as it is directly linked with the performance of companies in a
positive or negative way. To analyse it, L'oreal can use porters five forces model which is
explained below with the functional strategies company can use to tackle the circumstances,
 Threat of new entry: It refers to chances of new competitors to enter in to market. Due
to increase in number of key players it becomes hard for any company to enter.
Moreover, scale of economies are high for new entrants and chances of getting success is
low. So it can be said that threat of new entry is low in cosmetic industry. But L'oreal
have to regularly assess the new competitors and its strategy and then modify it
accordingly.
 Threat of substitute: It means, different way of doing the same thing. There is no
particular substitute for cosmetic industry but home remedies could be one of it.
Nowadays customers are more concerned about their skin due to which they are coming
back to the home remedies. To cope up with that, L'Oreal have to bring any new product
in the market which has ingredients like saffron or kumkumadi tailam etc so that they can
attract those customers.
 Bargaining power of supplier: If the number of suppliers are higher then their
bargaining power will be lower and vice versa. In the cosmetics industry, there is low
differentiation in the inputs or raw materials due to which they have low power of
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supplier. But still switching cost is high due to which company does not prefer to change
their suppliers more regularly. To tackle this, L'oreal have to regularly assess the cost of
the raw materials and quality of it and then make the decision accordingly (Montgomery,
2011).
 Bargaining power of customer: In this factor, if there is high number of customers then
bargaining power of customers is high and vice versa. Due to increase in competitors list
and price sensitivity, customers changes their brand more regularly resulting in loss for
many companies. To tackle this situations, L'oreal have to opt change their price and set
it according to the competitors so that more customers would be attracted.
 Competitive rivalry: It refers to number of competitors in the market. UK cosmetic
market has large numbers of key players like MAC, Elemis, YSL beauty, clarins etc. So
it can be said that competitive rivalry is high in cosmetic industry. To manage the
competitions, L'Oreal have to opt various marketing activities like social media, sales
promotions etc so that their brand awareness would be increased to a certain level which
ends at increasing customer and market share in the market.
According to the porter's analysis, it is identified that company should try to lower down
their prices or make their product differentiate as compare to other so that potential customers
would be attracted from it. The threat of substitute is medium in cosmetics industry. Supplier
have low bargaining power but customer due to their varying demand have high power.
Company is required to make competitive strategies so that advantage against rivals can be
achieved.
TASK 2
a) To include evaluation of various kinds of strategic directions available to the organisation
To devise different kind of strategies so that desired objectives can be achieved, manager
in Loreal can use Ansoff Matrix. It is a strategic planning tool that will offers a framework so
that marketing manager of company can devise different kinds of strategies to sustain future
growth. There are four quadrants associated with this matrix which are mentioned below:
 Market Penetration: In this strategy, a firm enhances its presence by using its existing
products within existing market. Market development benefits a firm in increasing their
market shares. To achieve this, company can either enhances their sales within existing
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customers or by targeting new customers. For this purpose, Loreal can invest more in
advertising and promotions. To achieve high sales, company can decrease its price,
increase its promotions or acquire some rival company.
 Diversification: In this strategy, Loreal can increase its market shares by introducing
new offerings in new marketplace. This is a risky strategy as it involves both product and
market development. If Loreal will adopt diversification then manager in company is
required to analyse market in an appropriate manner so that the requirements of people
can be understood properly and in respect with that new product can be developed.
 Market Development: In this strategy, a company tries to expand its business into new
markets and segments with the help of its existing products and services. For this,
manager in Loreal can target different customer segments according to their preference or
introduce the company to a new foreign market. By this sales and revenues of company
will expand considerably (Newton and et. al., 2015).
 Product development: In this kind of strategy, a firm develops a new product or service
so that customer base within existing market can be enhanced. By increasing product line
of company, high profitability can be achieved desirably. To develop a new product,
manager in company can invest high in market research so that needs of customers can be
acknowledged desirably. Other than that joint venture with other companies that are
capable to help Loreal in successfully launching a new product is also an effective option.
b) Justification and recommendations to most appropriate growth platforms & strategies
In case of Loreal, company is going to use Diversification strategy in which company
will introduce new products. This new product will be offered in existing as well as new market
so that high sales can be achieved. Diversification is a risky procedure but taking high risk will
also benefits the company in achieving high returns. But this strategy will benefits Loreal in
reducing all risks which are associated with business portfolio. Some of the justifications related
to the benefits of using diversification strategy are mentioned below:
 With the introduction of new product, product line of company will enhance due to which
customers will have more variety to choose. This will increases the organisational sales
due to which high revenues can be generated (Peng, 2017).
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 As more products will be developed, company will require more markets to offer their
products. Distribution of products into new market will increases their popularity. Due to
this overall turnover of the firm will increases considerably.
Recommendations: It is recommended to the marketing manager in Loreal that before
developing a new product, marketing team is required to analyse the choice and preferences of
people in a desired manner. This will helps them to understand which kind of product
development will benefits the firm in achieving their desired targets. It is also recommended to
the company that rather than targeting all sections, if consideration will be given to the people of
a specific age group then product will become more successful. Also, it is recommended that
company can introduce their new product in Kid segment as it is a popular brand and customer
loyalty is high. There are chances that new product will achieve high success.
c) Strategic management plan including strategies, objectives and tactics
Strategic management plan
It refers to the plan in which the aims, objectives, strategies etc. are provided which are
predetermined by the management of Loreal. Through this plan, organisation can achieve the
success in the business market as the elements for expanding the product portfolio are already
determined by the management. These elements are discussed below:
Summary: Loreal is expanding their product portfolio for enhancing the satisfaction level
and experience of customers. The firm desires to increase their market share and position by
expanding the product line.
Aim: The aim of the Loreal is to increase the market share of its products and firm by
increasing the products in their product portfolio.
Objective: The objectives of the Loreal is to enhance their market share in the beauty and
cosmetics industry of UK. This can be achieved by increasing the range of their products to
ensure that the customers get what they want to purchase from the company based on their needs
(Schrader, Freimann and Seuring, 2012).
Organisational structure: The organisational structure of the Loreal is Hierarchical
which means that the firm has operates of several level. The lower level employees report to
middle level, middle level employees report to upper level management and the upper level
management reports to the CEO and Board of Directors.
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Vision: The vision of Loreal is to get the recognition and appreciation from the customers
from the products provided by the firm.
Mission: The mission of Loreal is to provide highest quality and performance standards
beauty products to the consumers for their enriched experience and satisfaction. The firm has
decided to expand the product portfolio of their brand for attracting more customers.
Values: The values of Loreal are given below:
 A culture shared by all employees at every level
 Using high quality based raw materials and packaging A production unit which targets the excellence
Costs: Loreal has estimated an amount of 1,00,000 pounds for expanding their product
portfolio in the UK.
Time: The time period for successfully expanding the product portfolio is 2 years which
is estimated based on market analysis.
Scope: The scope of product expansion is wide as the firm is expanding the portfolio so
that the products of the Loreal can reach to remote areas of UK for getting the accessibility to
customers in these areas.
Quality: Loreal is focused on the quality of the products provided to the customers. The
firm is using the quality based raw materials in manufacturing their products. Also the company
is using the TQM and Lean manufacturing for eliminating the waste in production department.
Problems: Loreal is facing tough competition from the competitors such as Maybelline,
MAC, Dior etc. The products of Loreal are comparatively higher than the competitors due to the
quality of raw materials and manufactured products. The problems faced by the firm is due to the
prices of products provided by the competitors (Spender, 2014).
Strategies: The firm is using the diversification strategy for this expansion through which
Loreal can provide the unique features based new products to their existing and new customers
so that the market share along with the profit of the firm can improve in the UK cosmetics
industry.
Measure the progress: The management of the Loreal needs to evaluate the performance
of the employees so that they can be provided with additional training for obtaining the improved
results.
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Modify the long term strategies into short term tactics: The management of Loreal
should needs to change their strategies and policies accordingly to the situations for eliminating
the involved risks. Through this, the firm can obtain sustainability in the UK market after
expanding the product portfolio.
Marketing strategies: The company has decided to use the social media and their website
for attracting the customers towards the newly introduced products. Also the firm has decided to
offer the discounts and rewards to the existing employees when they purchase the new products.
CONCLUSION
From above mentioned report, it can be concluded that internal and external analysis will
benefits the company in acknowledging marketing conditions in an appropriate manner.
Techniques like Porter's five force will benefits the company in analysing the competitive
environment in which company is operating. There are different kinds of strategies which can be
used by company to enhance its sales and revenues. With the help of an effective strategic
management plan, a firm can achieve its objectives and goals by efficient means.
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Online
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