Strategic Analysis and Recommendations for L'Oreal Business Strategy

This report provides a comprehensive analysis of L'Oreal's business strategy, encompassing various aspects of its operations and market position. It begins with an introduction to business strategy and its importance, followed by a detailed examination of L'Oreal. The report then delves into the external and internal factors influencing L'Oreal's strategies, utilizing PESTLE and SWOT analyses to assess the political, economic, social, technological, legal, and environmental factors, as well as the company's strengths, weaknesses, opportunities, and threats. The VRIO model is also applied to evaluate the company's resources. Furthermore, the report analyzes the competitive environment using Porter's Five Forces model, assessing the industry's competitive dynamics. The report evaluates various strategic directions available to the organization, recommending appropriate growth platforms and strategies. Finally, it presents a strategic management plan with defined strategies, objectives, and tactics, concluding with a summary of the key findings and recommendations.

BUSINESS STRATEGY

Table of Contents
INTRIDUCTION.............................................................................................................................1
TASK 1............................................................................................................................................1
PESTLE and SWOT analysis of an organisation...................................................................1
Analysis of competitive environment using Porter's Five Forces Model..............................5
TASK 2............................................................................................................................................7
Evaluation of the different types of strategic directions available to the organisation.........7
Justification and Recommendation of the most appropriate growth platform and strategies.9
Strategic management plan with strategies, objectives and tactics........................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRIDUCTION
Business strategy is all about the courses of actions and a set of decision which help in
assisting an entrepreneur for achieving the targeted aims and objectives in specified time period.
In addition to this it can be defined as the process of master plan which the management uses in
order to secure the competitive position in the marketplace as well as in achieving the desired
end of an organisation. Therefore the company which is being taken into consideration in order
to carry out this assignment is L'Oreal which is one of the personal care company with its
headquarter in France. In addition to this it is one of the world's leading providers of wide range
of skin care and accessories products. This report mainly focuses on analysis of the impact and
influence which the macro environment has on an organisation. Additionally, this file also
focuses on the evaluation of the outcomes of an analysis by using Porter's Five Forces model.
Lastly, in this assignment models, theories and concepts are also being applied so as to assist
with the understanding and interpretation of strategic directions available to an organisation.
TASK 1
PESTLE and SWOT analysis of an organisation
Business strategy is the technique which render entrepreneur and a manager with a long
range sketch of the desired image, direction and destination of an organisation. In addition to this
it is all about the scheme of corporate action and intent which is flexibly designed and carefully
planned by the manager of L'Oreal with the aim of achieving effectiveness, mobilising resources,
meeting threats and challenges, perceiving and utilising opportunities. But in the way of
achieving effective business strategy there are certain internal and external factors which greatly
influence on organisation and its strategies. So in order to measure such factor influence manager
of L'Oreal takes PESTLE and SWOT analysis into consideration which are explained below
(Higgins, Omer and Phillips, 2015):
PESTLE analysis :
PESTLE here refers to the political, economic, social, technological, legal and
environmental factors which are term to be the external factors which greatly influence the
working of L'Oreal organisation and its strategies as they are not under the control of an
organisation.
Political factors:

These factor specifically include the rules and policies of the government related to
tariffs, trade control, consumer protection, laws that regulate environmental pollution etc. All
these factors greatly influence the business strategies of Loreal organisation, as if there take
place any changes in government laws then accordingly manager of Loreal need to make
strategies so as to sustain for long period of time in the marketplace. For example: As per
government law Loreal is restricted to make use of certain chemical like Phthalates while
producing their products, so accordingly manager of Loreal need to make business strategies in
order to produce safe products taking into consideration that it doesn’t contain any harmful
substances.
Economical factors:
These factors here refer to changes taking place in interest rate, exchange rate, recession,
inflation, taxes, demand and supply etc. Therefore, changes in all these factors greatly influence
the working of business strategies (Wheelen and et. al., 2017). For example: Loreal products are
generally sold at high price, so if in case there take place deflation in a region where it sells its
products them it greatly influences the business strategy as accordingly manager of Loreal need
to set its pricing strategy by adopting penetration pricing strategy which will greatly affect the
profitability ratio of an organisation as well.
Social factor:
These factors here refer to the technical trend in the society. As the preferences and
demand of the customers as per the traditions and culture of society keeps on changing, so
accordingly manager of Loreal need to make its business strategy in order to meet the demand of
the customers (Veit and et. al., 2014). For example: If the targeted customers of Loreal is high
class people, then accordingly manager of organisation need to produce its products strategies as
high class people specifically shows more of eagerness to adopt the contemporary technical
trends and which is always welcomed by the innovations of Loreal. In addition to this some
people consider its products as holy sin, so it can be said that such ethical and social pressure
greatly plays a prominent role in the development of business strategy of Loreal.
Technological factor:
These factors here refer to the changes taking place in the advancement of technology, as
it has its ramifications in every sphere of life. Therefore changes in such technological
advancement greatly influence the strategies of Loreal organisation. For example, mostly people

prefer to use those skin products which does not harm their skin so taking this aspect into
consideration manager of Loreal need to make strategies and that is of adopting such technology
with the help of which company can produce such product which will not harm the skin of
people.
Legal factor:
These factors here refer to the legal rules and regulation under which company needs to
carry out is operational activity. Factors such as discrimination law, health and safety law,
copyright law etc. therefore such legal aspects greatly influence the strategies of the Loreal
organisation (Spender, 2014). For example As per health and safety law management of Loreal
need to develop its strategies in order to produce products which does not harm the health and
skin of people. This is because people have become much vigilant about the legal aspect of
products. In addition to this company also need to follow the discrimination law as this law
specify that no individual in an organisation should be discriminated on the basis of age, sex,
religion, marital status etc. if the manager of L’Oréal will adopt such legal aspects into
consideration then it will help in creating positive brand image of an organisation in the mind-set
of customers.
Environmental factor:
These factors encompass about the various global environmental safety laws which must
be abide by the global standards. As the world has taken avow of making a clean and beautiful
planet with pollution free into consideration (Spender, 2014). So taking this perspective into
consideration most of the international brands plays their supportive role in keeping the
environment clean and beautiful. Loreal also follows the norms of the world and plays a vital
part by supporting such campaigns. In addition to this manager of Loreal also need to build up
startegies taking environmental factors into consideration and this can be done by best
understanding of internal and external factors which affect the company as a whole.
SWOT Analysis:
SWOT here refers to strength, weaknesses, opportunities and threats which the manager
of L'Oreal takes into consideration so as to identify the strength and weakness of an organisation.
So that if there exist any weaknesses then it can be overcome by analysing and implementing
effective solutions to it. In addition to this it also helps in identifying the opportunities for an
organisation which can prove to be beneficial for achieving a successful growth in future.

Moreover, threats are also being identified with the help of SWOT analysis so that accordingly
strategies and policies can be implemented. Therefore, SWOT analysis of L'Oreal is being
explained below (Klettner, Clarke and Boersma, 2014):
Strength
The major strength of Loreal is that no other
brand has a bigger share in the beauty and
cosmetics products than L’Oréal. In addition
to this it not only offer inexpensive products
but also moved in rendering luxury brand by
offering high quality products for those people
who prefer to shop on a richer budget.
Weaknesses
The weakness of L’Oréal is that its profit
margins get shrink and this is mainly because it
heavily make their investment in research and
in development but its massively seems to be
expensive enough at least in comparison to its
competitors.
Opportunity
One of the opportunity which can be availed
by the L’Oréal company is that they can easily
move into newer spaces in beauty industry
specifically in personal care beauty sector. This
is because people generally prefer for the best
product for their body.
Threats
Whereas the major threat for L’Oréal is that it
has tricky cash flow and this is because
L’Oréal has countless products and profits are
divided into several segments, but in case of
something happens to an economy then the
organisation will have to suffer from loss.
In order to analyse the organisation capabilities manager of Loreal can take VRIO mode
into consideration which is explained below:
VRIO Model:
VRIO here refers to Value, Rareness, Imitability and Organisation and all these four
essential elements are term to be the best analytical technique to find the current position of an
organisation. In context of L'OREAL, as they are one the biggest company in the world for
manufacturing the cosmetics products, VRIO model will be the best choice to find accurate
answers regarding their organisation. There are various resources with the firm such as skilled
and talented Cosmetic Professionals, technological resources like Alliagel, which have
ingredients with antinomic properties, equipments with automation and AI. All these resources
have various aspects which could determine the present position of the firm in the industry.
VRIO analysis of the company is mentioned below:

 Valuable: It is essential for resources to be valuable for a company to help it exploit
opportunities. Professionals working at L'OREAL are extremely valuable as they apply
their competence and skills to enhance the production and cosmetic products of the
company. In addition, technologies like Alliagel would enable the company to gain a
competitive advantage over its competitors by providing high end value to its customers.
Equipments with AI and latest technologies like Automation would enable the
organisation to improve its cosmetic production and hence is valuable. Rare: Finding talented professionals are very rare for a company as big as L'OREAL.
These are very hard to find and employed to effectively produce world-class products.
With effective copyright and intellectual property, technologies like Alliagel becomes
rare for the company. However, each large-scale company is technologically advanced
and have adopted various advanced equipments and thus, these equipments are not rare
seeing their easy accessibility. Imitable: It requires talent and effective practice of years to develop competence needed
to sustain performance of a company as big as L'OREAL. Thus, it is hard to imitate the
professionalism of the human resource of the company. The technologies like Alliagel
are also not very much imitable seeing the process of its production is protected by the
company and the firm could take legal actions for its usage without its consent. But the
equipments could be created and developed to serve the standard quality of production as
equipments of L'OREAL do and this enhances imitability of this resource with the firm.
 Organisational: Each of these resource is organised in ways in which it could provide
maximum value to its customers. The processes could include the high end equipments
and Alliagel technology which would provide the customers products which are as per
their skincare requirements. In addition, human resources of the firm could be utilised by
the firm in ways which contributes to its growth and effective marketing position. Thus,
all the resources could provide maximum output to the firm if organised well.
Analysis of competitive environment using Porter's Five Forces Model
In order to make an analysis of competitive environment manager of Loreal takes Porter's
Five Forces of Model into consideration which is being explained below (Laudon and Traver,
2016):
Porter's five forces of model:

It is an analysis tool which is being used by the manager of Loreal as it explains about
five industry forces which helps in determining the intensity of competition in an industry and
upon its profitability ratio.
Illustration 1: Porter's five forces model
Source: Porter's five forces model, 2018
Threat of new entrant:
This force of model helps in determining how easy it is to enter into a specific industry, if
in case an industry is running at profitable growth and there exist barrier of new entrant then in
that case rivalry soon get identifies. In addition to this when more of business compete for same
market share then in that case profitability level starts falling down. Whereas the main threat for
Loreal is that their products term to be too luxury which can result in economic downturn as well
as can affect their distribution system,
Bargaining power of buyer:

It refers to that force under which buyer possess strong barraging power to demand lower
price or higher quality products from producer. Lower price demand will result in rendering
lower revenue for producer and higher quality products leads in raising production cost of an
industry. Bargaining power of buyer will term to be high if there exist large number of similar
products in the market. For example, the product which the L’Oréal sell there exist large number
of similar product in market of which the price term to be low as compared L’Oréal products
then in that case bargaining power of buyer will be high for L’Oréal products.
Bargaining power of supplier:
This force refers to the bargaining power which the supplier possesses. If supplier of
Loreal products seeks strong bargaining power then it will help them to sell products at higher
price or law quality products to customers which would term to be specify that bargaining power
of supplier is high Thus, it will positively affect the L’Oréalfirm in the form of achievement of
greater ratio of profit. So it is very much essential for the manager of L’Oréalto keep the
bargaining power of their supplier strong enough.
Threat of substitute:
This forces take place when there exists any substitute for L’Oréal products. If the price
of its substitute products of L’Oréal like shampoo, other bath and body products get reduced than
in that case people will shift towards in making purchase of its substitute products rather than
L’Oréal products which would represent that threat of substitute is term to be high in this case.
Thus, it will directly hamper the profitability ratio of an organisation, so it is very much essential
for the manager of L’Oréal to make analysis of its substitute strategies so that accordingly
effective strategies can be made.
Competitive rivalry:
This force of model refers to the competitors which exist in the market and it affect
greatly on the profitability ratio of an organisation. There exist large number of competitors for
L’Oréal product like Avon, Revlon etc. which result in specifying that threat of competitive
rivalry term to be high. So it is very much essential for the manager of L’Oréal to make an
analysis of its competitors strategies and policies like of Cover girls, Avon, Revlon etc. so that
accordingly best strategies and policies can be developed which would result in achieving great
competitive advantage in marketplace.

TASK 2
Evaluation of the different types of strategic directions available to the organisation.
Strategic direction is one of the most important forces in a business, as it helps in
establishing the structure for internal responsibilities which each department and the workers
must take on. Therefore it is very much essential for the manager of L’Oréal firm to set a perfect
strategic direction and which can be established only if the firm establish clear cuts vision,
mission, tactics, strategies etc. Thus, in order to evaluate the different types of strategic direction
available in an organisation manager of Loreal takes Ansoff matrix into consideration which is
explained below (Lawton, 2017):
Ansoff Matrix:
It can be termed as a marketing planning model which helps a business in determining it
market and product growth strategy as well as help in setting effective strategic direction for an
organisation. Therefore, this matrix consists of four core elements which are explained below
(Lawton, 2017):
Source: Ansoff Matrix, 2018
Market penetration:
Illustration 2: Ansoff Matrix

This is one of the growth strategy which can be adopted to set strategic direction by the
manager of Loreal. According to this strategy a business focuses on selling of existing products
in the existing market itself so as to increase and to maintain its market share of its existing
products. In addition if the Loreal company takes this strategy into consideration only when they
want to restructure its mature market by driving out its competitors as well as when they want to
increase usage by existing customers and this can be done by introducing loyalty schemes.
Market development:
It is another strategy which can be adopted by the manager of Loreal to set effective
strategic direction. This strategy generally focuses on selling of existing products in new market
segment. The company can prefer this strategy in case when their objectives will be to explore
new geographical markets or in case of new product dimension or packaging etc.
Product development:
This is another strategy which can be adopted by the manager of L’Oréal when the
business will aim to introduce its new products into its existing market segment. In addition to
this it can be best suitable in case if the L’Oréal wants to differentiated its products from others
so as to remain competitive in the marketplace.
Diversification:
This is another strategy which can be adopted by the manager of L’Oréal when the
business will aim to market its new product in new market. In addition to this while adopting this
strategy manager of L’Oréal must have clear idea about what it expects to gain from specific
strategy as well as an honest assessment of the risk factors.
Justification and Recommendation of the most appropriate growth platform and strategies.
There are several growth strategies which can be adopted by the manager of L’Oréal
company in order to set appropriate strategic direction for the organisation and for the workers.
Strategies like diversification, market development, product development and market penetration
etc. all this are the growth strategies which can be taken into consideration by L’Oréal
organisation. Thus, it can be recommended that manager of L’Oréal company must take product
development strategy into consideration as it is term to be most appropriate growth platforms and
strategy for the company in order to earn maximum profit. As per this strategy manager must
focuses on innovating new products so as to sell in existing market which would result in
increasing of revenue for an organisation as well as would result in achieving greater competitive

edge in marketplace (Peng, 2017). In addition to this product development strategy also be
beneficial for L’Oréal in case of improving the existing products so as to stimulate an existing
market. Thus, overall it can be said that it will result in achieving greater profitability ratio for an
organisation by establishing long term relationship with existing customer which would result in
achieving successful market growth as well.
Strategic management plan with strategies, objectives and tactics.
Strategic management plan is all about the process of organizational management activity
which are being used to set priorities, resources and to strengthen operations so as to ensure that
employees and stakeholders work towards achievement of common goal of an organisation.
Therefore, strategic management plan of L’Oréal with its strategies, objectives and tactics are
explained below (Scholes, 2015):
Aims:
The main aim of the L’Oréal is to enhance its business at an international level.
Objective:
The main objective of the Loreal is to increase its profitability margin by 20% within 2
year.
Vision:
The vision of L’Oréal is to achieve greater market share by establishing a sustainable
business growth.
Mission:
The main mission of Loreal is to render better quality products to customers by taking
skin conscious aspects into consideration, as People mostly prefer to use those skin care products
which doesn't harm their skin in any way.
Organisational structure:
L’Oréal has segregated its organisational structure into two main parts namely division of
labour and departmentalization (Scholes, 2015). In order to ensure its development manager of
L’Oréal divides their labour into global innovation and research centres, distribution channels,
geographical zone and in integrated industrial production centre. Secondly, L’Oréal has also
segregated its departments into two main segments namely product departmentalization and
geographical departmentalization.
Values: