Comprehensive Business Strategy Report: L'Oréal's Strategic Directions

This report provides a comprehensive analysis of L'Oréal's business strategy. It begins with an introduction to business strategy and its importance for firms. The report then delves into an analysis of L'Oréal, a leading cosmetics and skincare company, using the PESTLE framework to assess the macro-environment and SWOT analysis to evaluate internal capabilities. It further examines the internal environment using Porter's Five Forces model to determine competitive intensity. The report then evaluates different strategic directions available to L'Oréal, including the Ansoff matrix, and recommends appropriate growth platforms and strategies. Finally, it proposes a strategic management plan with objectives and tactics. The report concludes with a summary of the key findings and recommendations, highlighting the importance of strategic planning for L'Oréal's continued success in the competitive cosmetics industry.

BUSINESS STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1) Applying appropriate frameworks analyse the impact and influence of the macro
environment and its strategies.....................................................................................................3
2) Analyse the internal environment and capabilities of a given organisation using appropriate
frameworks..................................................................................................................................5
TASK 2............................................................................................................................................7
3) Evaluation of the different types of strategic directions available to the given organisation. 7
4) Justification and recommendation of the most appropriate growth platform & strategies.....9
5) Produce a strategic management plan with strategies, objectives and tactics......................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business strategy is an important aspects for every firm, because strategic action will
provide support to generate new customer's or enhance product development to accomplish
defined goals or objectives. In the current scenario, product development is necessary, because it
will not possible to retain customer with old goods (Scholes, 2015). For this, business strategies
are required to retain customer in different situation such as product development, less profit
base along with increased services suitability and profit generation. This report will be carry on
L'Oréal, which is one of leading cosmetics and skin care giant headquartered in Chicly, France.
They are actually specialized in skin care, cosmetics, hair care etc., product to their customer's.
Apart from this, report will be carried on analysis of Pestle and Swot analysis to know
various forceful forces, assessment of Porter five force model's to know competitive advantage
along with their critical reaction. Along with this, report will cover different types of strategic
direction and its evaluation, justification and recommendation of growth platform and strategies.
TASK 1
1) Applying appropriate frameworks analyse the impact and influence of the macro environment
and its strategies
In context with L'Oréal, there will be discussion of both Pestle and Swot, which is useful
to know the internal capabilities & business situation for L'Oréal. As, Pestle is considered as part
of macro-environments, which will helpful to find out forces such as political, economical,
social, technological etc.(Scholes, 2015). Along with this Swot will explain internal capabilities
or opportunities for business firm to make changes accordingly with productive matter and profit
generation. In context with L'Oréal, the clear analysis over Pestle is as follows:
Political: These factors involves various rules & policies of France government, in which
entities like L'Oréal is currently engaged. French business entities has impacted by weak political
power which includes interference of political consideration into business, continual changing of
France government with conflicts & stand against of authorities. These factors has led huge
impact over the L'Oréal in decrement in their profits or revenue. This is of impact that, business
entities in France needs to formulate business strategies on the frequent basis. If the changing in
government will continue for longer, it would be difficult for L'Oréal to operate its business for
longer period of time.

Economical: These factors involves flexible exchange rates and long monetary policies
of the country, in which business entities are engaged. Recession is the major part of economical
forces, by which business would get the automatically effected for cosmetic brand as like L'Oréal
Also, currency fluctuation and brought of the investment is one of the negative impact of change
of French government, which has led business entity to stay away from investment regulations. It
has been necessary to control these forces to get business advantage for L'Oréal (Amran, 2016).
Continuous flux of Euro in compared with Dollar is critical issue, as it has led business entity to
import higher from other country, includes resources.
Social: These factors are completely based on following trends running into culture and
environment. In cosmetic industry, generally women are higher followers of trends in compare to
men. Hence, thus segment is growing segment to run business for longer period of time. Actually
, business entities are required to notices these trends in order to get customer attention at desired
point of time. In context with L'Oréal, social trends such as what people thinks over products,
what they are expecting to use which cosmetics etc. It is necessary to understand changes in
these trends.
Technological: In business firm, technology has its own presence along with its benefits
for business organisation. Where people are following growing trends, technology is necessary
to make all these trends in real context along with technical innovation to make product more
unique and diverse to use to retain customer interest (Akter and et. al., 2016). As, this actually
involves higher cost to assist trends. Hence, complete control over trends is required to get
effective products, If it got failed impact will be severe to assist or solve.
SWOT analysis:
Strength Weakness

The major power of L'Oréal is its ability to do
research & development to find out new scope
for product. Also, safety & quality regulation
are their major presence into the market along
with customer loyalty. L'Oréal have pure trust
in their customer to retain with them along
with quality products to them.
Increasing rate of saturation is the major
weakness for L'Oréal. There command skin
care products has led skin care items to
struggle to gain effectiveness into the market.
Continuous shrink of profit margin is also
cause of investing huge in R&D activities to
enhance higher level of products.
Opportunities Threats
Industry expansion is the major opportunity
for this leading cosmetic firm to up-hold higher
market share and increased profits. Product
development is men segment is the major
opportunity for this leading business to provide
more products to customer with increased
brand loyalty.
Taking instant changes will be major threat
for this cosmetics business, for which they can
take strategic planning along with decision
making to handle critical situation in the firms.
Division of cash flow is also one most threats
for cosmetic business.
Value chain analysis
Value chain analysis is the strategic tool which can be used to analyse an internal firm
activities. The major goal goal is to recognized, which activities are the most valuable to the
business firm and which one can be improved to provide competitive advantage.

Sources: Value chain analysis, 2018
Conclusion: From the above analysis, it has been concluded that value chain model has
been resulted into knowing various kind of primary services and other related services of various
business organisation. This analysis will be useful to enhance the productivity level of every
business entity.
2) Analyse the internal environment and capabilities of a given organisation using appropriate
frameworks
Internal business environment are the major forces, which are required by business firms
to know the actual condition into the market-place. These involves competitive advantage into
the market, industry rivalries, substitution as well as complete industry analysis (Shuen, 2018).
L'Oréal will use porter's five force model to determined a competitive intensity, attractiveness of
an industry and also in terms of profitability. Strategic deputy manager can use porter five forces
model to analyse competitiveness faced by L'Oréal in personal hair care, skin care and cosmetics
products industry. This model will be helpful in understanding and providing solution to nature
Illustration 1: Value chain analysis

& level of competition and how L'Oréal can cope with competition. The complete analysis of
various forces on this leading cosmetics are as follows:
Bargaining Power of Buyers: Bargaining power of buyers are low for female because
they are loyal of what they actually buys whether using cosmetics, skin care & hair care products
and never care of what they are paying for that context. If the buyers have strong bargaining
power, then they usually tends to drive the price factors, which thus leads to earn higher &
sustainable profits. In context with cosmetics industry, there are large numbers of customers, out
of which most of them are females, in that case, no buyers tends to have bargaining leverage.
Hence, limited bargaining leverage power would helps L'Oréal to gain business effectiveness.
Bargaining power of suppliers: Bargaining power of suppliers is low, because there
exits large replacement of an defined inputs, in that case, supplier of this leading cosmetics have
less bargaining leverage over its producers (Wheelen and et. al., 2017). This is also because of
huge competition among suppliers, which has been increased over period of time. In response to
this, greater competition among suppliers would negatively impacts the L'Oréal. In context with
cosmetics, it is favourably easy to switch suppliers, if suppliers have strong bargaining power
then, they will extract higher price from L'Oréal.
Threats of Substitutes: In cosmetics, various leading and strong brands are exists such as
Chanel, Mac, Lancome, Estee Lauder etc., which have several risks associated with substitute of
the products, which is high (Chang, 2016). In order to deal this, L'Oréal must conduct research
& development to find out unique products to overcome substitution for taking advantage of the
competition. This will helpful in getting strengthen into business growth along with increased
productivity. Also product needs to be effective and unique to get relief from substitutions.
Threat of new entrants: The amount of money required to initiate cosmetic products,
which will meet the high profile people needs within France market is higher. If there will strong
threats for new entrants, then this leading cosmetic business tends to bring down their cost and
prices of the products. This is important to lower down price of per products. Apart from this,
effective pricing and clear quality of the products initiated to overcome new entrants for L'Oréal.
This force will bring actual realization for business to get effective competition to strengthen
business process.
Competitive Rivalry: The extent of competition within cosmetic & skin care industry is
relatively high. There are various rivalries presents cosmetics sector are Espa, Mac, Elemis,

Madeline. etc. The presence of business firm within this industry will reduced overall growth
matters and profitability of cosmetics companies such as L'Oréal (Kourdi, 2015). Thus, L'Oréal
must focus on concentration over effective quality & pricing of their cosmetic and skin care
products. In case, if competition is intense, then it would become difficult for existing players to
earn profits.
Conclusion: From the above report, it has been concluded that porter five force model is
necessary to take care of the various critical factors which are related to the organisational goals
and targets to make companies products more effective and based on targets basis. These factors
needs to be evaluate on frequent basis to enhance the business profitability.

Sources: Porter's five force model, 2017
TASK 2
3) Evaluation of the different types of strategic directions available to the given organisation
Strategic direction is one of the collective course of action taken by business firms to get
most informative and valuable suggestion to business entities on discussion, what accurate steps
or strategy will company must take to rise their market share or enables business growth. This
kind of strategy will be take place just after consideration of vision, mission, strategic objectives
etc. In context with L'Oréal, which is leading cosmetic and skin care product trader's, Ans-off
matrix will be suitable for strategic manager with choices to prefers either market penetration,
market development, product development or diversification. Out of these four, it belongs to task
of strategic manager to decides at-least two strategic through which they would acquired new
market by enabling new product development or either making changes in existing products.
These strategies will help L'Oréal to enhance business development of their company and also
led sales of their cosmetics or skin care products: The explanation over Ansoff is a follows:
Market penetration: This strategy mainly focuses on higher sales of existing products to
existing market. In this, firm uses its products in old or defined market, in Layman language,
Illustration 2: Porter's five force model

firm is completely aimed at increasing its market share through adoption of this strategy. In
response, this strategy will relevant for L'Oréal, by bring down prices of their cosmetics or skin
care products to pin-point their old or new customers and also, they can increase their promotion
& distribution channels to enhance ease for customer's (Peng, 2017). Also, this can also be done
by acquisition of their competitor or existing firms. In positive response, it has low risk, because
of already established in market.
Product development: This ans-off strategy has its on establishing new innovative &
creative products to an existing marketplace. In this strategy, role of firm is to develops new
product through induction of innovation & market trends practices to alter to its existing market.
In response, this strategy actually needs huge involvement of extensive research as well as
identifying development & expansion of different product types. Product development would be
suitable option for L'Oréal firm, because, strategic deputy manager have effective understanding
of their market condition along with ability to provide big solutions to caters desires & needs of
their existing market. In addition to this, product development will be done by investing high in
research & development, enables strategic alliances with different entities such as Unilever for
distribution channels, supply logistics and enhanced customer services.
Market development: This Ansoff strategy highly relies on entering new marketplace
using existing or renowned products. During this strategy, business firm enters different market
with existing products. In context with L'Oréal, expansion into new market actually means going
into new geography, customer structures, zones. Market development can be rise, if business
firm put its technology, effective tools to identify market to develop along with market
expansion options (Pisano, 2015). In case of L'Oréal, market strategy would led relevant, if this
might be achieve by looking into new buyers zone, with major focus on domestic market or
through buying pure resources. Here, risk is moderate, but measures are required to overcome it.
Diversification: This Ansoff strategy majorly relies on going to new defined market with
new developed products or services. In this strategy, business entities going to new place of
market with its creative products. Diversification is termed as highly risked strategy with damage
to brand image of L'Oréal. Less chances are their which says that L'Oréal can go for this strategy,
because establishing new zone's through developed products can declines an existing product
buying scope with strategic chances to beat rivalries products.

Sources: Ansoff Matrix, 2018
4) Justification and recommendation of the most appropriate growth platform & strategies
It has to be justify that market penetration and product development will be taken by this
leading cosmetics and skin care giant to develop their business at the higher level. Ansoff matrix
has again proved as important to bring growth as well as stability to the business operations. In
context with L'Oréal, market penetration will help to retain their existing customer's through its
efforts to developed or alter an existing products or services (Higgins, 2015). With market
penetration, company would get better knowledge of new customer's to get accomplish through
creating new products. With help of this model, it is also discovered that innovation and role of
diversity is important to bringing changes in existing products as per the customer's wants or
needs.
As strategic deputy manager, market penetration needs to be done under guidance of
research & development to get, if any relevant changes can be bring to existing products. It is
also recommendable that, product development is important strategy, through which L'Oréal can
bring herbal Face wash to counter its rivalries. Even this leading cosmetic and skin care trader
can practice these two strategy at the same point of time to get competitive advantage. This can
be a good option, but justifiable is that L'Oréal first focus on market penetration on primary basis
Illustration 3: Ansoff Matrix

to get more customer knowledge to get scope for new product portfolio as well as its creation.
Product development of different Face wash will assist L'Oréal to get market growth and
stability for generating higher profits & led business stability (Spender, 2014).
For now, market penetration will be taken by L'Oréal, through bringing new colour of
make-up equipments and skin care products. Along with this, customer knowledge will be get
through conducting extensive research for new product or services.
5) Produce a strategic management plan with strategies, objectives and tactics
Strategic management plan is a document, which has been used to communicates within
firms defined goals, set priorities, focus on energy, configures resources, strengthen operations,
ensure the employee's and other stakeholders which are working towards common goals and find
outcomes. This planned structure has been undertaken for provide strategies & action planning to
expand business to other countries for enhancing market share, new product with getting
business profits. L'Oréal needs to defines their vision, mission, strategic objectives and defined
goals & objectives to get business success and brand image. For this leading cosmetic and skin
care brand, strategic plan is as follows:
Aim: The major aim of L'Oréal is to enhance business productivity & strategies to get
customer knowledge for innovative product development with new market segment. This is one
of the strategic action taken by L'Oréal to enhance its business productivity and profitability.
Organisation structure: L'Oréal follows matrix structure, in which company is divided to
various sub-division which are focused toward selling different products or accessories. These
products can be skin care, cosmetics, hair care etc. (Scholes, 2015). This structure is focused for
bringing work culture into the positive manner and controlling various business activities.
Vision: L'Oréal has its vision focused towards being as “ Customer priority”.
Mission: The mission of this leading cosmetics & skin-care trader is to expand its growth
of business into the different region or nation to grab market share and selling more products for
business sustain & survivals.
Values & norms: L'Oréal have different values named as business practices with
sustainability and pollution less work. They are valued towards manpower empowerments,
understanding people and their needs along with fair business practices with delivering certain
morales & guidance for business sustainability.

Strategic Objectives: The strategic objectives of L'Oréal is to raise its business cycle
with rising the market share by defined estimation of 2.1 percent in their entire product lines.
This strategic objectives has been decided through critical analysis of chart given below, which
has been shows sales from year 2011 to 2017.
Sources: Sales of L'Oréal from year 2012 to 2017, (2018)
Illustration 4: Sales of L'Oréal from year 2012 to 2017

CONCLUSION
From the above report, it has been concluded that business strategy is necessary for firm
to led their venture in critical situation to positive outcomes. These strategies can be market
penetration, product & market development and diversification. It has played in major role in
firm's competitive advantage along with increased profitability through business alteration or its
products or services. Market penetration has been resulted into retaining existing customer's at
one point of time along new product development. Pestle analysis has been resulted into analysis
of external forces, which has negative impact on business operation of organisation along with
Swot analysis to know business's internal capabilities. Lastly, strategic management plan has led
to making strategic action plan through clear and complete understanding of vision, mission,
strategic objectives, defined goals or aims to increase business productivity & profitability.