Business Strategy Report: L'Oréal Strategic Management Plan

This report provides a comprehensive analysis of L'Oréal's business strategy, examining the impact of the macro and micro environments on its operations. The report utilizes the PESTLE framework to assess political, economic, social, technological, legal, and environmental factors influencing L'Oréal's performance. A SWOT analysis evaluates the company's strengths, weaknesses, opportunities, and threats. Furthermore, the report applies Porter's Five Forces model to analyze the competitive environment and assess the intensity of competition within the cosmetic industry. Finally, the report evaluates different strategic directions available to L'Oréal and proposes a strategic management plan, including objectives, strategies, and tactics to achieve competitive advantage and maintain its market position. The analysis covers various aspects of the business, from market analysis to strategic planning, providing a detailed overview of L'Oréal's approach to business strategy.

Business Strategy

Table of Contents
TASK 1............................................................................................................................................3
P1 Applying appropriate framework analyses the impact and influence of the macro
environment.................................................................................................................................3
P.2 The analysis of comparative environment of organisation by using Porter's five force
model...........................................................................................................................................6
TASK 2 ...........................................................................................................................................8
3. Evaluation of different types of strategic directions available to an organization.................8
4. Strategic management plan for L'Oréal by including strategies, objectives and tactics.........9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business strategy is defined as a set of opinions or ideas that helps entrepreneurs in
achieving preset objectives or targets. In addition to this, it is a plan which is used by the
managers for gaining competitive advantage in the marketplace. Furthermore, it is an effective
tool which is used by the managers of organisations in formulating or implementing the plans so
that major goals or objectives can be achieved in an effective manner. Present assignment is
based on L'Oréal which provides personal care product across the world and based in France.
This assignment will discuss about the impact of micro and macro-environment on the strategies
of a firm. Porter's five forces model and capabilities of firm will also covers in this report. In last,
report will talk about strategies and plans which are beneficial for the firm in defeating
competitors in the market.
TASK 1
P1 Applying appropriate framework analyses the impact and influence of the macro environment
Organisation was established in 1909 by the young French chemist Paul Louis Sceuellar
but in current scenario, L'Oréal has captured the whole market and also gain #1 position in the
marketplace. The company have an effective management through which they have created a
huge customer base in the world. Main basis behind their good market share is that, they
provides an effective variety of personal and skin care products to their customers through which
a large pool of customers are attracted towards the offerings. In this modern era, the competition
is enhancing day by day because customer are health conscious and they wants quality products
from the manufacturers (Aithal, 2016). Therefore, players in cosmetic industries such as
L'Oréal, cult beauty, Tesco are regularly providing good products to the customers so that a good
position can be gained in marketplace. For this, Managers of L'Oréal have to make effective
plans or strategies so that position of firm will be maintained in the marketplace. Hence, for
sustaining in the marketplace managers of L'Oréal have to consider external or internal
environmental factors which can influence the performance or business operations in positive or
negative manner. For analysing these factors managers of firm have to conduct PESTLE or
SWOT analysis which is given as under:
Political factors - These factors includes tax rates, stability of government, trade policies
etc. which can impact positively or negatively on the performance of any organisation. In the

context of L'Oréal, the firm provides products and services across the world so their managers
have responsibility to adhere the rules and legislations which are formulated by specific
governmental authorities of a nation. For instance current rate on the personal and beauty care
products is 20% which is very higher then the last year that was 17.5% which can negatively
impact on the growth and success of organisation. Apart from that, individuals of UK nation are
more conscious about their personal and health care which can provide favourable results to the
firm in terms of gaining sustainability in the marketplace. As government of UK nation is in
stable condition so that, managers of L'Oréal have no need to change their strategies on the
regular basis which can provide beneficial results for their long time strategies.
Economic factors - These factors comprises of economic growth of nation, GDP, Per
capital income etc. As the firm is doing operational activities in various countries so that their
management have to consider such elements as per the economic condition of nation. For
example- global trade rate in UK is 44% which can provide profitable outcomes for the company
through which the company can expand their customers base and market-share in UK. On the
other hand, Big players of Cosmetic sector such as Tesco, cult beauty etc. who can adversely
influence the strategies and estimations of the L'Oréal with their plans and policies
(Chang,2016).
Social factors- These factor includes beliefs, values, taste, market trends etc. that can
influence the strategies of business organisation in positive or negative manner. As organisation
has gained #1 position in personal and beauty care product in the world so the customer base of
firm is very huge in nature. UK is a well developed nation and its citizens also believes in quality
who are always ready for tasting new and fresh beauty care products which will be profitable
sign for the L'Oréal in future. On the other hand, customers are more emphasise on their health
and beauty so the managers of L'Oréal should consider these elements which can negatively
influence on their sustainability and present customer base in marketplace.
Technological factor - It comprises of latest tools, techniques which can adversely or
favourably influences on the profitability of L'Oréal. As organisation have created their good
brand image across the world so they have to implement new tools and technology in the
workplace so that firm can better sustained in the marketplace. Apart from that, if management
of L'Oréal will display false advertisement in the marketplace then it can adversely impact on
their customer base. Hence, it can be said that the implementation of new technologies in

workplace is very necessary because it will provide ability to the managers in defeating their
rivals in market.
Legal factors - UK government has formulated various laws and legislations such as
employment law, Health and safety etc. which should be followed by every organisation.
Therefore, Managers of L'Oréal have to determine such kind of laws which will be profitable for
them in getting sustainability in market. As the competition is very high in market so the
managers of L'Oréal have duty to maintain their workplace in proper code of conduct so that
good brand image of firm can be maintained in the marketplace.
Environmental factors It includes natural climates, weather of a specific nation which
can adversely of favourably impact on the growth and success of firm. As the firm has created a
good brand image in the world and also uses natural ingredients in their products so that effective
quality in the offerings can be given to customers. Apart from that, UK government has
formulated a law 1223/2009 which should be followed by every firm of cosmetic sector.
Therefore, Managers of L'Oréal have to consider such law and formulate their strategies so that
brand image of firm can be maintained in the marketplace. Whereas, if R&D department of
organisation will not consider such law then the managers of firm have to pay penalties which
will be not beneficial for the brand image of organisation (Spender, 2014).
For achieving growth and success in the market, Managers of L'Oréal have to measure
their strength and weaknesses so that future opportunities of marketplace can be gained. For this,
they have to conduct a SWOT analysis of firm which is given as under:
SWOT analysis of L'Oréal
Strengths Weaknesses
 Organisation has created a good brand
image and also a world leader in
cosmetic industry through which they
have created a good customer base in
the market which is enough for
defeating their rivals.
 Firm offers a large number of beauty
products to its customers which makes
a good strength of company among
 The managers of L'Oréal are using
decentralised organisational structure in
their workplace therefore, expected
outcomes are not received by the
managers by their divisions which is a
major weakness of firm.
 Advanced tools and technologies are
not using by the large number of their
divisions which is also a weakness of

their rivals. firm.
Opportunities Threats
 Firm can expand its market-share and
sales figures through making joint
ventures with small players of cosmetic
industries.
 Managers of L'Oréal have opportunity
to introduce Herbal and skin friendly
product in the Indian or Asian markets
which will be helpful for the firm in
enhancing their profitability.
 Pricing strategies and quality of
offerings of the rivals can reduce the
profitability of firm which is a major
threat of firm.
Analysis of S.W.O.T – As the organisation has created a good customer base and providing
personal and beauty care products in the world due to which they can easily compete with their
rivals. Company also offers a huge variety of products to their customers which also defines a
good capturing strategy of managers of L'Oréal. As organisation have adequate funds and
effective management team so that they can gain the opportunity of introducing new herbal and
skin friendly beauty products in the new market areas. Managers of organisation should make
restrict those divisions not to use outdated technologies that can negatively affect the overall
sales figures of company. With the help of this, brand image of firm will be maintained in the
market and helps the managers in formulating effective pricing strategies so that competitors in
the market can be defeated in easy manner (Wang, 2012).
P.2 The analysis of comparative environment of organisation by using Porter's five force model.
This porter's five force model is a powerful tool which is used to determined competitive
principles which influences market. It is broadly based upon corporate strategy which meets
opportunities and threats while examine organisational external environment. The analysis of
competitive strategy is based on understanding of structure and the way industry changes. The
L'Oeral Paris manager used this model to analysis external factor which effects the growth of
company and to analysis competitive environment. The forces also helps manager to determines
intensity of competition, attractiveness and profitability of company in particular industry. The

goals of competitive environment is to modifies forces in a way that improves position of
company in market. The factors are:-
 Threats of new entrants:- If market is generating profit then new entrants are attracted.
If barriers to enter into new industry is high then new businesses can hardly enter into
the marker due to cut throat competition and high cost. If barriers to enter into industry is
low than new businesses can take advantage of economies of scale or key technology and
enter into market. Threat of new entrants is low for L'Oeral Paris as they have loyal
customer base, strong brand equity, etc. They are required to analysis this also because
they have existing competitors in market. The analysis is required to examine in advance
that if any new company is enter in market.
 Power of suppliers:- It refers to situation at what extend buyer can influence the price of
product in market. If number of suppliers are high then buyers can easily shift to another
supplier because no supplier can actually influence price control of industry. On the other
hand if supplier are less then they can push the prices up and be powerful in market.
L'Oeral have large number suppliers in industry, so suppliers can't influence prices. They
are required to analyse all the suppliers available in market so that prices are not
influence by them (Pretorius, 2011).
 Power of buyer:- It refers to process in which consumer have power to influences prices
and quality of product and services. If customer are low then they have power to
influence or effects the price. The L'Oeral are required to conduct research about
consumers power so that prices are set accordingly and strategic plans are also draft as
according to research. The company customers have less bargaining power due to strong
brand image and equity.
 Threat of substitute:- The L'Oeral substitute companies are Maybelline, Lakme etc. to
which consumers can easily shifts if companies prices are high. If company chose
product differentiation strategies then it become hard for consumers to shift to another
company. The threat is low if company chose product differentiation strategy. The
customer relationship, trends, up-to date are considered are threat to substitutes. If other
company is using these factors.
 Competitive rivalry:- This industry is highly competitive in nature, companies have no
control. On the other hand if industry is monopoly in nature then businesses have full

control over the prices of goods and services. Rivalry consist when L'Oeral Paris
competitors have same size, comparable strategies, low market growth rates, existing
barriers are high etc. are factors to influence competitive rivalry.
TASK 2
3. Evaluation of different types of strategic directions available to an organization.
Strategic direction is defined as a force or pressure which moves the organisation towards
its desired goals or objectives. In addition to this, it is established or implemented in the
workplace when elements like vision, mission, strategies of a firm are interrelated with each
other. In order to generating revenue and profitability, Managers of L'Oréal should consider
such elements and take support from them so that positive outcomes can be received in future.
By taking support of vision and mission, managers will easily define the roles and
responsibilities to their employees through which the organisational objectives will be achieved
in systematic manner (Jeston,2014). The managers of L'Oréal have to adhere various
responsibilities in the firm such as determining the position of organisation in the market,
acquisition of small players, formulating pricing strategies etc. Some kind of strategic decisions
which are formulated by the managers of L'Oréal for gaining growth and success in the market
are briefly explained as under:
Market penetration: It is a procedure through which an organisation increases its present
market share by selling existing product or service in the market. In this, Management of firm
can use various promotional tools like discount offers, advertisements, sponsorship in an event
etc. Managers of cited firm can also formulate competitive strategies so that market share of
L'Oréal can be enhanced. In 2014, managers of L'Oréal have also opened new outlets in various
cities across the world. Apart from that, it has also determined that managers have also increases
the prices of their offerings so that revenue of firm can be enhanced.
Market development: It is also an important strategic decision in which company have to
target new market places or new areas with the existing products so as to increase their existing
market share. In this, marketing team have to play very crucial role so that brand image of
organisation can be maintained in the market. For this, managers of L'Oréal should formulate
global strategies so that productivity of firm will be enhanced. The managers of company are
trying to selling same products to the different customers which can adversely influences on the

brand image of firm so the managers of L'Oréal have duty to make proper plans and strategies
and provide good offers and discount coupons to existing customers so that new market will be
captured with the new customers in it.
Product expansion: It is used by the managers when the popularity of existing products
are regularly decreasing in the market so that managers have duty to introduce new products in
the existing market areas so that customer base of organisation can be maintained in the market.
In this process managers have to make modifications in the existing products or manufacture
new products so that large pool of customers gets attracted towards new introduced products of
organisation. In context of L'Oréal, their managers have launched new eyeliner, lipstick, make-
up kits etc. which are different from their old products. By doing this, managers will be able in
enhancing their market share which will be beneficial for the firm in gaining competitive
advantage in marketplace (Chen, 2014).
Diversification: It is also an essential part of Ansoff matrix in which organisation have to
introduce new products or services for new market places. In it, managers should determine the
level of risk along with enhancing the customer base. For this, Managers of L'Oréal have to
motivate and encourage their employees so that they get motivated and provide support to the
manager in decision making. With the help of it, productivity of firm will be enhanced which
will be beneficial for the organisation in gaining competitive advantage.
A justification and recommendation of the most appropriate growth platform and
strategies: It has been determined from the above Ansoff matrix model that, Strategy of
diversification and market penetration is very helpful for the managers of L'Oréal through which
they can easily create a strong customer base in the marketplace. It is recommended to the
managers of L'Oréal that they have to produce more attractive products so that needs and wants
of customers can fulfilled in easy manner. They have to use herbal and authentic ingredients in
the skin and personal care products so that loyalty in the mindset of customers towards firm will
be increased.
4. Strategic management plan for L'Oréal by including strategies, objectives and tactics.
Strategic management plan is defined as a set of documents or plan which is formulated
by the managers of organisation to communicate the desired targets within the workplace. It is
also essential to the firm because it provides growth and success to the firm. With the help of this

plan, Managers of L'Oréal will definitely achieve the predetermined goals and objectives within
the allotted time period.
In order to making effective strategic plan it is very essential for the managers of L'Oréal to
adopt Porter's generic model which will help them in formulating an effective strategic plan for
the firm. Model is briefly explained as under:
Porters Generic Model: This model was introduced by Michael porter in 1980 and it also
describe paths or ways through which any organisation can easily gain competitive advantage in
marketplace. With the help of this model, managers of L'Oréal will be able in formulating
effective strategic plan which will help them in creating strong market presence. Strategies of
this model are given as under:
 Cost leadership: In this strategy, Managers of L'Oréal have to set effective pricing
strategies and provide products at affordable prices to their customers so that large
number of customers gets attracted towards the offerings of firm. With the help of this
strategy, organisation will easily enter in new market areas and make their strong market
presence in-front of the new customers (Wang, 2012).
 Differentiation: It includes formulation of strategies in which managers have to
implement or add new features in their existing products so that they can make different
products from their rivals. With the help of this strategy, Manager of L'Oréal will easily
manufacture unique products and attract a large number of customers which will helpful
for them in gaining competitive advantage in the marketplace.
 Focus: This part is basically categorised in two parts in first part managers of firm have
to make focus on the cost of product and second one is related with the differentiation
focus. Focus on cost is connected with those activities which are only concerned with
those products that are provided in the market place. This strategy will encourage the
L'Oréal in enhancing its market share. On the other hand, in differentiation, managers
have to make different products with unique features for the customers so that they can
easily attracted towards offerings of firm.
Management of L'Oréal can easily adopt differentiation method of porter's generic model
because it is most powerful strategy of expanding their market share. With the help of this, firm
will easily introduce new products along with reducing its cost.

Strategic management plan.
Summary:
Management of L'Oréal is focusing on expanding its market-share through expanding product
line so that better satisfaction can be provided to the customers
Costs: At the time of launching new product for the market, managers have estimated 100000
pound for it.
Time : In order to complete the project R&D department have estimated 2 years time for it.
Scope : The scope of product is very large so managers have to understand their product line in
an effective manner (Shuen, 2018).
Quality: At the time of producing new product, firm have to focus on the quality of product for
this, they can use advanced technologies so that better results can be received in future.
Aim: To enhance the market-share along with providing quality product to the customers.
STP: They have targetted middle or rich class customers who are very conscious about their skin
and not use any chemical ingredient for their skin and also prefer herbal and skin friendly
product.
Objectives: Their objectives are to enhance the productivity along with quality so that the better
products or services can be provided to the customers.
Tactics: In order to achieving predetermined goals or objectives, Managers of L'Oréal should
adopt some effective tactics which are given as under:
 Set priorities: The main aim of L'Oréal is to satisfying the needs and wants of
customers in an effective manner and expand the market share.
 Focus on energy and resources: Firm have to allocate more effective sources from
which they can provide best and affordable products for their customers.
 Strategies: In order to completing the project in an effective manner, firm have to
manufacture products which are differ from their competitors and can easily satisfy the
needs and wants of customers.
VRIO model – This can be described as an effective framework which can be considered as a
strategic analysis tool designed in order to support organisational uncover along with securing
resources and capabilities that provides competitive advantage for a long time. It include to four
important components such as value, rarity, imitability and organisation which should be

focussed by A David & Co. Ltd to establish large strategic scheme for executing plans for
achieving goals with desired results.
McKinsey’s model – This model indicates that several internal components are required to focus
in order to improve effectiveness of organisation. However, it consist seven factors including
strategy, structure, systems, shared values, skills, style and staff which should be aligned and
reinforced by A David & Co Ltd in terms of attaining success of organisational goals. This
framework is used as a strategic planning tool by companies to execute plans and gain better
outcomes through achieving success.
CONCLUSION
It has been concluded from the above report that Business strategy is an essential part of
growth and success of an organisation. Before planning or implementing new strategies
organisation have to make focus on various factors of internal and external which can influence
on the performance of organisation. Through the model of Porter's five forces, Managers of
company can easily determine upcoming opportunities of future and easily allocate resources for
grabbing it.
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