L'Oréal Strategy Report: Macro, Internal, and Strategic Planning

This report provides a comprehensive strategic analysis of L'Oréal, a leading global cosmetics company. It begins with an introduction outlining the company's background, mission, vision, and objectives. The main body of the report analyzes L'Oréal's macro environment using the PESTLE framework, examining political, economic, social, technological, legal, and environmental factors influencing its business. The internal environment is then assessed through SWOT analysis, identifying the company's strengths, weaknesses, opportunities, and threats. The report also employs McKinsey's 7S model to evaluate the internal environment's elements: strategy, structure, systems, shared values, style, skills, and staff. The report concludes with a summary of findings and strategic recommendations for L'Oréal's continued success in the competitive cosmetics market. The analysis covers key aspects of strategic planning and provides a holistic view of the company's position and potential future strategies.

L’ORÉAL STRATEGY
REPORT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
LO 1.................................................................................................................................................3
Analysis of macro environment..............................................................................................3
LO 2.................................................................................................................................................6
Internal environment capabilities...........................................................................................6
LO 3.................................................................................................................................................8
Porter’s Five Forces model evaluating competitive forces for an organisation.....................8
LO 4.................................................................................................................................................9
Theories, concepts and models of strategic planning.............................................................9
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Strategic report is a part of annual financial report with a purpose to inform all the
members and employees of the company, which will help them in assessing the way directors
have performed their duties. This assignment will lay emphasis on Strategic report of L’Oreal
organization. L’Oreal is a personal care French company headquartered in Clichy and was
founded on 30 July 1909 (Ketata, Sofka and Grimpe, 2015). They have their registered office in
Paris. It is one of the largest cosmetics and beauty products company present globally. They
make products for hair, skin care, make-up, sun protection, perfume etc. They have more than
90,000 employees all over the world. This assignment will lay emphasis on analysis of macro
environment of the organization in order to inform and determine strategic management
decisions, it will also analyse internal environment to access all the strength and weakness of
L’Oreal organization's internal capabilities, structure and skill set. This assignment will also
explain appropriate strategies in order to improve market position and competitive market based
on the outcomes and lastly strategic management plan that has strategic priorities and objectives
are explained.
MAIN BODY
LO 1
Analysis of macro environment
Mission, vision and objectives of L’Oreal
Mission: Mission Statement of L’Oreal is beauty of All. To offer all the people worldwide best
quality cosmetics which can safely satisfy all the desire and beauty needs of their diverse
customers.
Vision: To integrate principles of sustainable development in their business model in order to
build a sustainable growth united and responsive.
Objectives: Objective of L’Oreal is to make it a model company that is extremely good in terms
of production, sustainable innovation, consumption.
Strategy helps the organization's stakeholders in knowing where they want there business
to be and to provide immediate targets and goals to their employees so that they can achieve set
objectives and goals of the company. There are various types of strategic planning techniques

that can be used to develop strategy, planning for its execution. These strategies give a direction
to the company in achievement of its goals, objectives.
PESTLE Analysis is used for identifying all the external forces that affects an
organization's macro environment. In this simple analysis of organization's political, economical,
social, technological, environmental and legal factors. L’Oreal is one of the major leading
cosmetics brand present globally. There are many factors that affect the companies' growth,
influence companies marketing strategies and various other things (Salim, Ab Rahman and
Wahab, 2018). Here, macro environment analysis of L’Oreal will be done with the help of
PESTLE Analysis.
Political Factors: In this all the rules, regulations and policies made by government for
companies like L’Oreal have been working are included. As it is one of the major Cosmetics
manufacturing company of pairs, So, majorly all the policies made by government of France
affect the company in many ways. Other that this all the import policies of various regions also
affects the success of L’Oreal. Globalization has helped companies like L’Oreal to gain the
political advantage in different countries.
Economic Factors: In this exchange rates of different countries where L’Oreal has been
operating is included. Economic factors such as prices of the products also plays a most
important role in influencing the business of L’Oreal as price of all the products of L’Oreal
varies from country to country. GDP of a country also influences the business of L’Oreal as well
as sales of their products in those countries. Moreover, it can be said that these cosmetics and
beauty industry is completely immune to the economic downturn faced by many companies in
various countries. Today many middle class people are also buying L’Oreal beauty products
which has helped them in increasing there sales as most of the middle class people prefer to buy
its products which has continuously increased their sales and has affected their business in a
positive way as a whole.
Social Factors: In this factor mostly the ongoing trend in the society is focused. Today most of
the people prefer to use trendy fashionable cosmetics products. L’Oreal is one of the most
famous cosmetics brand in young generation. But today most of the customers today are
becoming conscious about their skin and effect of such beauty products on their skin. So, most of
them sees product formulation and if they find any ingredient which might be harmful for their
skin then they stop using all the products of that company which is affecting the business of

L’Oreal. This is also affecting the loyalty of customers towards L’Oreal. Due to this most of the
cosmetics companies like L’Oreal are struggling to set their image in the market and win their
customers heart by making products that suits all the customers (Gheibi and et.al., 2018).
Technological factors: Technical factors plays a great role in influencing the business of
companies like L’Oreal. Many companies today are selling their products online on E-commerce
websites or applications as it is more convenient to directly sell their products online without
worrying about the storage of their products on warehouses. This has also helped companies like
L’Oreal to increase their customer base and brand loyalty in them. Technological factors also
plays a grate role in manufacturing of products as this advancement in technology has helped
many companies to automate or fasten their manufacturing process. So, focus of companies on
this innovative technology in manufacturing and selling has increased the competitive edge for
companies like L’Oreal and has also increased their struggle for maintaining their leadership
position in the market.
Legal Factors: In this beauty industry ingredients used in manufacturing of cosmetic products
are tricky. There are two laws that each and every beauty or cosmetics company need to follow
which are: FD&C Act (The Federal Food, Drug and Cosmetics Act), FPLA (the fair packaging
and labelling Act). FD&C monitors all the beauty products ingredients according to their use, if
they find any issue related to the product or its ingredients then it might not reach the shelves.
They even have the authority to recall the products. If they find that any harmful ingredients or
ingredients that are not according to the code then they have the authority to ban the product. So,
these regulations have put a pressure on L’Oreal.
Environmental Factors: Awareness regarding the environment is increasing continuously. Many
companies are focusing on sustainability and environmental management and promoting
sustainable innovation in formulation of their products (Bull and et.al., 2016). Environmental
factors mainly encompass different global environment safety laws that follows all the global
safety and environmental standards. So, many beauty companies are focusing on making
environment friendly products. They are even focusing on making eco-friendly packaging for
their products. So, L’Oreal can also focus on making eco-friendly products and packaging
according to all the global standards.

LO 2
Internal environment capabilities
In order to evaluate internal environment to assess all the strength and weakness of the
organization's internal capabilities, structureless and skill-set, SWOT analysis of L’Oreal will be
done. SWOT Analysis help in identifying all the strength, weaknesses, opportunities and threats
of an organization.
Strength: One of the biggest strength of L’Oreal is that it is one of the largest Cosmetics and
beauty product present globally. They have focused themselves completely on beauty and
cosmetics products which is one of the biggest reason for their success (Getnet and et.al., 2018).
L’Oreal offers high quality, inexpensive products to their customers which attracts many
customers. There continuous research and development regarding their products and their effect
on skill in hot or cold environment and various experiments regarding the safety of their
customers is also one of the main reason for its success. Presence of L’Oreal in more than 130
countries with a widespread distribution also helps them in leading economics of sales where
controlled expenses of warehouses, factories which also helps them in controlling the
manufacturing cost of products.
Weaknesses: L’Oreal is known to be bulky and slow organization due to its various sub divisions
they have and due to this they have a huge human capital expenditure. Due to this massive
investment in research and development department and expenditure in human capital, profit
margin of L’Oreal is continuously decreasing as compared to their competitors. Not only this
their hair care segment is continuously de-growing as competition in hair care segment is too
much because of presence of brands like Garnier, Sunsilk etc. Presence of these brands has
increased competition for L’Oreal in this segment.
Opportunities: One of the biggest opportunity for L’Oreal is the increasing market potential of
beauty, cosmetics and personal care items, especially in under developed and developing
countries. Exploring these new market segment can help L’Oreal in increasing their sales. Today
as customers are growing more and more aware about organic and eco-friendly products. This
demand for organic products can also give an opportunity to increase their market segment.
Threats: One of the biggest threat to L’Oreal is the changing demand of customers and they
dynamic nature of cosmetic industry is making it difficult for the organization to keep up with
the continuous changing demand. Today competition in this industry in continuously increasing

as many new companies are emerging in this sector which has increased the competitiveness for
companies like L’Oreal in the market. L’Oreal has many products and the profit gained by the
sell of these products if divided into various segments (Al-Refaie and et.al., 2016). If any change
in the economy comes then it will hinder the sales of the company and will be a major threat to
them.
McKinsey's 7S model
This model is used as an organizational tool analysis to monitor and access changes in the
internal environment of an organization. It consists of seven factors that which are further
divided into soft and hard elements. Hard elements include: Strategy, structure and system
whereas soft elements includes: shared values, style, skills, staff.
Strategy: It is a plan developed by the organization in order to remain competitive in the market
and that particular industry. In other words it is an approach which is used to establish a strategy
for long term and communicates with goals and objectives of the company. L’Oreal main
strategy to remain competitive in the market is universalization where they capture, respect and
understand all the changes and differences.
Structure: Strucutre of the organization is completely made up of its chain of commands,
hierarchy, division which helps in outlining all the operational functions and interconnection. It
gives the details about employees responsibilities and helps in configuration of management
functions. L’Oreal uses departmentalization structure where they have divided there departments
according to their geographical presence and products.
System: System of the organization refers their workflow, daily procedures as well as all the
decisions that make standard operations within the organization.
Shared Values: Shared values are the common and standard norms of the organization which
influences the behaviour of their entire management, employees and staff. All of these norms are
detailed in the guidelines, rules and regulation of the company. L’Oreal has their own defined
shared values for their employees and entire management (Ravanfar, 2015).
Style: Style is an approach that is taken by the management of the organization in leading the
business and the way it influences productivity, performance and corporate culture.
Skills: Skills consists of all the capabilities of management, staff and employees of the
organization which helps them in defining and determining the work, accomplishments and
achievements of the company. Sometime companies also assess and evaluate their available

skills to check what are the required changes that is needed to be implemented in order to
achieve the goals set by the organization like L’Oreal is bringing changes in their digital skills in
order to gain competitive advantage in the market (Shiri, Anvari and Soltani., 2015).
Staff: Staff reefers to the workforce of the organization where it is seen that how the workforce
can be trained, prepared and accomplished so that they can achieve the tasks assigned to them.
LO 3
Porter’s Five Forces model evaluating competitive forces for an organisation
Porters Five Forces model for any organization can be helpful in determining the
influence of external factors that may restrict company's development and growth. This model is
helpful in achieving
BARGAINING POWER OF SUPPLIERS
Bargaining power of suppliers for LO' real is low due to the emerging financial
capabilities of company. LO' real is continuously emerging in terms of its profit margins, market
shares (Mitroulis and Kitsios, 2017). This tends to develop low choices to within suppliers to
select or link with other brands. Company must strategically maintain this bargaining power at
lower level to attain maximum amount of diversified and significant support from its suppliers.
BARGAINING POWER OF CUSTOMERS
For company like LO' real, bargaining power of customers is high as they have variant of
options available in market at comparatively affordable prices. Hence, LO' real need to provide
diversified and new range of products to attract and retain its customers. In the same way, LO'
real may increase the number of its potential customers in the future.
THREAT OF NEW ENTRANCES
Threat of new entrances is high for LO' real as there is continuous development of
competitors with new models and strategies (Kassim and Hussin, 2019). New companies like
Avon, Olay are evolving with same level of competitive frameworks as LO' real. For reducing
this threat, LO' real need to be highly strategic for its new plan and must be aware of new
technologies, its applications and advantages to the company.
THREAT OF SUBSTITUTE
Customers have considerable range of options and they always have an option of
substitute if primary product is not available or failing to fulfill customers' demands. This threat

related to substitutes for LO' real company is high because of increasing similar range of
products with mostly same contents and results.
RIVALRY
Level of rivalry for the company is high due to the existence of established companies
that have range of quality and promising products as LO' real. Avon, Olay, Proctor and Gamble
are some brands that deliver high rivalry to LO' real.
Appropriate strategies to improve competitive edge and market position based on the
outcomes.
To improve the competitive edge of LO' real, the company need to focus upon its
dynamic working structure and its connections with suppliers and customers. As a result of
Porters Five Force model, the company need to build advanced plan regarding to its promotional
and marketing strategies (Prasad and Warrier, 2016). Since, the company do not target teenagers
and do have adequate range of products specifically for the age group of 15- 20 years, may affect
their customers' interests. Furthermore, the company need to adopt product development or
brand revitalization strategy to maintain interest level of customers.
STAKEHOLDER ANALYSIS MATRIX is also one of the effective model to assess the
interest level of stakeholders and the components that influence them. For example, LO' real may
undergo this dynamic assessment that will help it to provide and fulfill all requirements of their
stakeholders.
LO 4
Theories, concepts and models of strategic planning
For selecting the most appropriate strategic directions, companies may adopt Bowman's
model that will provide range of direction to company for increasing its sales margins and other
marketing functions.

LOW PRICE
The company may use this strategy for effective market entry or penetration but cannot
be applied by large or popular brands like LO' real (Grant, 2015). It can be fruitful for
organizations that are new to market and can be highly effective in driving customers' interests.
For LO' real, this strategy can be applicable to its extremely new range of products to increase
customers' attention.
LOW PRICE LOW VALUE
This is one of the ineffective strategy that are generally provided by companies which
may deliver them long term failure in market and tend to decrease their growth and development.
For large brands like LO' real, this strategy may decrease amount of its regular and potential
customers. Hence, this direction must not be adopted by the company.
LOW VALUE STANDARD PRICE
Illustration 1: Bowman's strategic direction model
(Source: Bowman’s Strategy Clock. 2018)

As for products with standard price, the customer tend to believe that the product must
have the standardize value as well. This strategy may lead to market share hence it must not be
adopted by LO' real.
HIGH PRICE LOW VALUE
This strategic direction can be adopted by the company or organizations with monopoly
(Batista and et.al., 2017). LO' real cannot adopt this strategy as variant of options are available
with customers and they can easily opt for the substitutes if LO' real apply high price margins
with low value to its products.
INCREASED PRICE STANDARD VALUE
This strategic direction is generally adopted by large companies like brand. This is a
standardized strategy that delivered satisfaction to customers and they easily get ready to pay
high amount in exchange of good quality of products.
FOCUSED DIFFERENTIATION
It is the most suitable strategic direction that every company must adopt for strategic
growth within the market. In case of LO' real, it must select this strategic direction in which it
will remain highly focused on its product development plan.
DIFFERENTIATION
It can be easily adopted by LO' real as it has strong brand awareness and customers'
interest. The company need to select differentiation strategy in terms of any of its elements to
make a different and incomparable features to its products (Haselwanter, Muskat and Zehrer,
2016). For example, LO' real can opt to alter the existing structure of its hair products with new
packaging and new pricing strategy.
HYBRID
This strategy inhibits the components of low price and product differentiation which can
be one of the most suitable plan for LO' real. By developing new range of products for a different
age group and by setting low price index for that particular products can be helpful in attracting
new customers. By maintaining a standard quality of product and by specifying affordable price
of the products, LO' real may attain desired profit margins and customers' loyalty as well.

ANSOFF MATRIX
Organizations may opt for different models or frameworks to establish its growth
strategies. There are number of models that are directly applicable and referred by marketers to
increase company's sustainability in market. As per the Ansoff's matrix of strategic planning, the
company may regenerate or redesign its growth strategies. Company LO' real may establish the
Market Penetration
This strategy of development is the least risky and can be easily adopted by organizations
(Ansoff Matrix. 2018). For large company like LO' real this strategy can be the most effective
one as the company need to drive its focus on selling procedure of existing range of products.
LO' Real must plan a new and attractive plan for market penetration which will be helpful for
increasing its revitalization process.
Market Development
Market development is the complicated strategy and require strong financial frameworks
to enter into a new market (Oertwig and et.al., 2017). For LO' real this strategy may prove to be
effective and can be adopted by it but strategic decisions need to be implemented for it. The
company may select more advanced channel of distribution and can increase the range of
services within E- commerce sectors as well.
Product Development
LO' real must opt for product development strategies to develop its competitive
advantages. For product development, it can manufacture its new range of products for different
age groups that is between 15- 20 years. Apart from this, LO' real may adopt its development
procedures with respect to its demands and interest of customers towards organic cosmetics and
other range of organic serums and oils for skin care.
Diversification
This strategy inhibits high level of risks as compared to other three because it requires
surplus amount of market researches and competitors' analysis for developing new range of
products within a completely new market (Xue, Choi and Ma, 2016). This diversification
measures can be adopted by LO' real as it has advanced level of market penetration sources and
highly skilled workforce to contribute in decision making process in context of same.
PORTER'S GENERIC STRATEGIES

With the inclusion of Ansoff matrix, Porters Generic Strategies can also be considered to
select appropriate strategies. This model includes basic considerations or elements that help
company to select one strategy according to the objective designed. Cost Leadership, Focus and
Differentiation strategies are covered under this model. LO' real utilize this framework to choose
the most suitable strategy for its products. For cost leadership, LO' real may cut down the prices
of existing products and easily enter into the market.
Strategic management plan
OBJECTIVES
 To continuously raise customer satisfaction and loyalty
 To expand the range of available products and developing new range of products To target customers of all age group
STRATEGIES
 To comply the designed objectives, LO' real need to implement a “Focus Differentiation
Strategy” to pay focus on its product development process. Furthermore, company also need to adhere with Hybrid strategy as well to receive
customers interests for its newly developed range of product.
TACTICS
 Regular training can be imparted to employees to improve the quality of new as well as
existing products.
 Strategic regular assessment regarding market trends, competitors and new entrances
need to be done by the company.
CONCLUSION
From the above assignment it has been concluded that impact of macro environment on
L’Oreal and its business strategies is high which has been explained with the help of PESTLE
Analysis, analysis of organization's internal environment and capabilities has been explained by
SWOT analysis and McKinsey's 7S model, Competitive force and its impact on the organization
can be explained by porters five force model. Lastly, strategic management plan with strategic
objectives and priorities Ansoff matrix and Hybrid matrix.

REFERENCES
Books and Journals
Al-Refaie, A., and et.al., 2016. Integration of SWOT and ANP for effective strategic planning in
the cosmetic industry. Advances in Production Engineering & Management. 11(1).
p.49.
Batista, F. F. and et.al., 2017. The Relationship Between Knowledge Management and
Innovation in Large Companies: A Structured Literature Review. In 18th European
Conference on Knowledge Management (ECKM 2017). Academic Conferences and
Publishing Ltd.
Bull, J.W., and et.al., 2016. Strengths, Weaknesses, Opportunities and Threats: A SWOT
analysis of the ecosystem services framework. Ecosystem services. 17. pp.99-111.
Getnet, H., and et.al., 2018. Supporting product innovativeness and customer value at the bottom
of the pyramid through context-specific capabilities and social ties. Industrial
Marketing Management.
Gheibi, M., and et.al., 2018. Controlling air pollution in a city: A perspective from SOAR‐
PESTLE analysis. Integrated environmental assessment and management. 14(4).
pp.480-488.
Grant, R. M., 2015. Five forces of competition. Wiley Encyclopedia of Management. pp.1-4.
Haselwanter, S., Muskat, B. and Zehrer, A., 2016. Strategic Planning in Micro Businesses:
Adapting the Strategic Clock for Micro Firms.
Kassim, E. S. and Hussin, H., 2019. A framework for omni channel differentiation strategy.
Integrating the information delivery and product fulfilment requirements. In Exploring
Omni channel Retailing. (pp. 251-265). Springer, Cham.
Ketata, I., Sofka, W. and Grimpe, C., 2015. The role of internal capabilities and firms'
environment for sustainable innovation: evidence for Germany. R&d
Management. 45(1). pp.60-75.
Mitroulis, D. and Kitsios, F., 2017. Fostering a Competitive Differentiation Strategy for
Sustainable Organizational Performance. In Operational Research in Business and
Economics. (pp. 85-112). Springer, Cham.
Oertwig, N. and et.al., 2017. Integration of sustainability into the corporate strategy. In
Sustainable manufacturing. (pp. 175-200). Springer, Cham.
Prasad, A. and Warrier, L., 2016. Mr. Porter and the new world of increasing returns to scale.
Journal of Management Research. 16(1). pp.3-15.
Ravanfar, M.M., 2015. Analyzing Organizational Structure based on 7s model of
McKinsey. Global Journal of Management And Business Research.

Salim, N., Ab Rahman, M.N. and Wahab, D.A., 2018. A systematic literature review of internal
capabilities for enhancing eco-innovation performance of manufacturing firms. Journal
of Cleaner Production.
Shiri, S., Anvari, A. and Soltani, H., 2015. Identifying and prioritizing of readiness factors for
implementing ERP based on agility (extension of McKinsey 7S model). European
Online Journal of Natural and Social Sciences: Proceedings. 4(1 (s)). pp.pp-56.
Xue, W., Choi, T. M. and Ma, L., 2016. Diversification strategy with random yield suppliers for
a mean–variance risk-sensitive manufacturer. Transportation Research Part E:
Logistics and Transportation Review. 90. pp.90-107.
Online
Ansoff Matrix. 2018. [Online]. Available through:
<https://www.tutor2u.net/business/reference/ansoffs-matrix>.
Bowman’s Strategy Clock. 2018. [Online]. Available through: <http://www.free-management-
ebooks.com/news/bowmans-strategy-clock/>.