Business Strategy Report: Loreal's Competitive Analysis

This report presents a comprehensive business strategy analysis for Loreal, a global leader in the personal and beauty care industry. It begins with an introduction to business strategy and its importance, followed by an internal and external analysis of Loreal. The PESTLE analysis examines the ...Read More

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
a) PESTLE and SWOT analysis of the organisation and an analysis to acknowledge the
organisational capabilities...........................................................................................................1
b) Prepare an analysis of competitive business environment of company with the help of
Porter's five forces.......................................................................................................................5
TASK 2............................................................................................................................................6
a) Evaluation of various types of strategic direction available to the organisation.....................6
b) Justification and recommendation of most appropriate growth platform and strategies........7
c) Strategic management plan with strategies, objectives and tactics.........................................8
CONCLUSION..............................................................................................................................10
REFERENCES ...............................................................................................................................1

INTRODUCTION
Business strategy is described as a set of decisions that guides and direct a business
personnel in attaining specific business targets and objectives. Business strategy allow a
company to sustain a advantageous competitive position within market, by satisfying the needs
and requirements of customers in a desired manner (Bharadwaj and et. al., 2013). This
assignment is based on Loreal which a personal and beauty care organisation, headquartered in
Clichy with registered office in Paris, France. Company operates its business operations at global
level and offers skin and hair care, sun protection, perfume and make-up products to its
customers. This report covers internal and external business analysis so that a basis for strategic
planning can be prepared. Also, it includes Porter's model to analyse the competitive
environment of company. Different types of strategic directions are mentioned so that company
can appropriately take its strategic decisions. Beside this, justification and recommendations are
given regarding business strategies. At last, an appropriate strategic business plan is formed
including strategies, objectives and tactics.
TASK 1
a) PESTLE and SWOT analysis of the organisation and an analysis to acknowledge the
organisational capabilities
Loreal is a beauty and personal care cosmetics company which is headquartered in
Clichy, France. Company is providing sun protection, Men's skin care, hair and skin care
product, hair colour etc. to its consumer. Due to the quality of products, Loreal is a renowned
cosmetic company at global level. To analyse business environment in an appropriate manner,
both internal and external analysis is needed. In this respect, PESTLE and SWOT analysis in
respect with Loreal is carried out below:
PESTLE analysis: PESTEL analysis is the tool to analyse macro level factors of the
company. It has political, economical,social,technological,environmental and legal factors that
impacts the company.
 Political factors: This factor help to understand how much government policies (fiscal
policy, trade policy) and regulations can affect any company. Political factor in context
of l'oreal is that cosmetic industry is regulated by European legislation in UK so company
has to do its production and other activities within the policies and framework of UK
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government. In case of breach of the law, company has to face the consequences and
penalty.
 Economic factors: This factor helps to understand how the economic condition (inflation
rate, GDP, development index) of a country can affect the company. In context of l'oreal
Now days cosmetic items counted in the basic requirement of the human beings that is
why even after the recession period in UK, customers are not ignoring to buy the
cosmetics and this is counting as the positive impact on the l'oreal. Even in situation of
inflation in UK l'oreal is able to maintain its sales level (Bharadwaj et. al., 2013).
 Social factors: These factors help in understanding the effect of social environment of
the market, cultural trends & population analytics. In context of l'oreal this factor affect
the company when taste and preferences of the customers changes and they want
something new in the products. This factor bring the impact of innovation in the
company, they start producing goods according to the requirement and choice of buyers
which increases the sale of the company by attracting customers. But sometime these
rapid cultural change also put negative impact on the company because they manufacture
the product on large amount And with change in demand & taste some product remain
unsold and get expires & left for no use.
 Technological factors: This factor is about how the technologies affecting the
environment of Loreal business. Technology plays a very important role in growth of the
company and for achieving that growth company is focusing on technological
development in their business by launching some app named MY UV PATCH which
helps in monitoring the UV rays in the skin. these type of innovative technologies are
giving positive impact on the company as well as help the companies to increase their
customers.
 Environmental factors: These factors are how the environment is affecting the l'oreal
business. Change in climatic conditions and weather impact the business of l'oreal
because some products of company are made for the particular weather conditions, like
creams made for winter purpose can not be used in summers because it will be very
sticky for summers (Blackburn, Hart and Wainwright, 2013). So these environmental
changes slow downs the sale of some products of the company.
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 Legal factors: There are some legal laws in every country that l'oreal has to follow to
continue its business in that country. Some of these laws are consumer law, employment
law, health and safety law. Company has to make sure that they are taking care of these
laws while production. They are using only those ingredients in their product which is
permitted in the law of the country.
SWOT analysis: It is a framework which is required to evaluate the competitive position
of the company so that an appropriate business strategy can be formulated. It stands for
strengths, weaknesses, opportunities and threats. In respect with Loreal, SWOT analysis is
mentioned below:
Strengths Weaknesses
 Company is a leader in cosmetics
company due to its innovative and high
quality of beauty care products.
 Along with skin and hair care products,
company is operating its business
activities in Pharmaceutical and
dermatological industry due to which
Loreal has formulated a positive brand
image.
 Handling large business operations and
activities is not an easy aspect.
Company is bulky and slow in nature
due to various sub-divisions and
decentralisations.
 Due to high investment in researching
and developing new innovative
products, company spends large
amount due to which profitability
reduces.
Opportunities Threats
 There is large opportunity for Loreal in
natural and organic field as customers
are changing their preference to herbal
and organic products.
 Extending the product line of company
will benefits the firm in achieving high
revenues and profitability.
 Change in the demand and preferences
of customers can be a risk to the market
share and sales of the firm.
 As cosmetic products are considered as
a luxury, economic downfall and global
crisis can impacts the sales of company
in a negative way.
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Analysis of SWOT: Company offers high quality products to its customers due to which
popularity of the brand is high in market. This results in enhanced market-shares and sales. As
company is also shown its presence in pharmaceutical and dermatological field, more people
have been familiar with the brand. But as Loreal is a large scale organisation, managing business
operation in a centralised way is not possible. Also, high expanses in R&D activities reduces the
profit margins of the company (Chang, 2016). Company has a good opportunity to enhance its
revenue by introducing products containing organic and herbal ingredients. As preferences of
people changes at a fast pace, company needs to update it product line on regular basis.
Otherwise, downfall in sales and revenues will be encountered. To acknowledge the
organisational capabilities of Loreal, VRIO analysis is carried out.
VRIO analysis
VRIO is an internal analysis which is used in identify and evaluate resources in the
company. It refers to four criteria which firm consider value, rarity, inimitably and organization
this resources used as an advantage. Using VRIO analysis is one of the best tool for the job and
this analysis business framework . In this, organization have good chance to find it beneficial
for business and specific sector or industry. This analysis carried out for Loreal to identify its
capabilities. It has all kind of product which include mass , medium and high. The continue
review the value of the resources because continue changes in internal and external condition
make them less valuable. Having rarity in the firm lead to competitive advantage the resources
and capability hard to find. If firm have the rare resources than company should initiate the
strategy for optimal use. In case, if the resources is rare and valuable than its create competitive
advantage . Its rare that the research and development of Loreal every year promote 100 of new
formulas and almost 500 patents (Fox, 2012).
Almost 500 manufacturing plants all over the world is operating in a very fast pace.
There is so many of cosmetic product in the market but the specific product is not imitable.
Product innovation they always looking for that extra something in their product. They have a
very good technology department at their company and they use high end technology to produce
their product. They are successful in the market because of innovation they are able to achieve
both long term and short term goals. This is the right choice of every lady all across the globe .
Organization competency to ex-polite the maximum out of resources. In this regard , Loreal will
be able to acknowledge its organizational capabilities properly.
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b) Prepare an analysis of competitive business environment of company with the help of Porter's
five forces
Porter's five force model : Porter's model is used by most of the companies to figure
out the sustainability of the profitability in the market,whereas the competition is cut throat in
the existing market. The model helps the company to understand the tactics , methods, strategy
used by different industry and also widely used to analyze the industry structure.
Porter's model is used for the company Loreal.
 Threat of new entry: Cosmetic industry has moderate level of threat as huge capital is
required for manufacturing setup. Loreal is a trusted and tested brand worldwide .
Customers has faith for the product of loreal . Generally the public use tested brand in the
field of cosmetic industry, as the product is used for sensitive area. When a new product
is launched in the market especially in the cosmetic field has to face many throwbacks
from the customers side as, loyal customers don't switch easily to new product (Ghezzi,
2013). To remain in the customers first priority proper research and development is done
on daily basis also, extensive advertisement is done on a large platform, and a huge
capital is used to promote the product to the general public.
 Bargaining power of suppliers: Suppliers has low bargaining power in the field of
cosmetic. In cosmetic industry there are several suppliers who can supply the same raw
material to the industry. There is negligible change in the amount when the company
think to switch from one supplier to another. The buyer has acquired the suppliers
through backward vertical integration which reduce the impact of the suppliers to zero
level. In Loreal cosmetic industry the raw material used for the production of product are
procured from different number of suppliers like general chemical supplier and cosmetic
index.
 Bargaining power of buyers: The power in the hands of buyer is high as the customers
are treated as the king of the market. Buyers has more power because there are similar
product in the market from different manufacturers like: Rice water bright cleansing
foam,Cure natural Aqua gel, Propolinse mouth wash so, the customers can easily switch
to some other product or brand. The power of buyer is high as the product segmentation
is relatively smaller (Grant, 2013).
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 Threat of substitute: Market is full of substitute product of different brands. If a
particular brand or a product does not satisfy the needs of the customers they can easily
switch to some other brand or product (Grover and Kohli, 2013). The tremendous
innovation in the cosmetic field has created barriers for other brand or the company to
deal with the threat. Suppose any unsatisfied customer who is using Rice water bright
cleansing foam and the product is not satisfying the customer needs can easily switch to
Loreal's product. Reason for switching to another product is customer's unsatisfaction
by all the means like: cost of the product, quality of the product, quantity ( 200ml,
500ml,100ml)of the product, availability of the product, durability.
TASK 2
a) Evaluation of various types of strategic direction available to the organisation
To formulate different kind of market strategies, manager in Loreal can implement
Ansoff matrix. It is a strategic marketing tool which links market strategies of an organisation to
the general strategic directions. This communication tool will allow Loreal to acknowledge
possible growth strategies. In respect with Loreal, Ansoff matrix is mentioned below:
 Market penetration: In this market strategy, a company tries to increase its growth and
sales with the help of already existing product line. Manager in Loreal can introduce a
loyalty scheme or offer some discounts to the customers so that sales of company can
enhance exponentially. To penetrate market in a advantageous manner, Loreal can invest
more in promotion and advertisement.
 Market development: In this business strategy, a firm expands its presence into new
markets so that customer base of company will enhance that benefits in increased sales
and revenues. For this, company can expand its presence into international market or
target different segments of customers by offering them products according to their
choice.
 Product development: In this business strategy, an organisation introduces new products
into market within existing market so that loyal customers will buy more and more
products. To develop a new product, company can research about new ingredients that
can be added to existing products. This will helps in developing a new product that can
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attract the attention of customers desirably. Other than this, company can jointly develop
new product by business venturing with another company.
 Diversification: It is considered as most risky kind of business strategy. In this aspect, a
company tries to enhance its market-shares and revenues by introducing new products in
new markets (Iacob, Quartel and Jonkers, 2012). Due to it, in this strategy a firm enjoys
little scope for achieving economies of sale. Loreal can implement this business strategy
to expand its customer base by offering products in new markets according to the choice
and preference of the masses.
b) Justification and recommendation of most appropriate growth platform and strategies
To achieve better outcomes, Loreal can implement diversification market strategy in
which new products will be introduced into new markets and exiting markets. As new product
will be sold in new and existing markets, customer base will be high. Due to this, company will
enjoy high revenues and profitability in a desired manner without facing any complexities.
Investing in this kind of market strategy is a risky process but if company will be successful in
introducing a successful product, high returns and market-shares will be achieved by company.
As manager in Loreal is going to use diversification strategy to achieve desired outcomes,
justification for choosing this strategy is mentioned below:
 As new products will be introduced by company, customer base of Loreal will increase.
This is because the new developed product will cater the needs of customers due to which
more number of people will willingly buy it.
 In this strategy, as company is going to target new markets, due to this the sales for
existing products will also increase. This will benefits the company in sustaining overall
high market shares (Köseoglu, 2013).
Recommendation:
 Sales and marketing manager in Loreal is recommended to properly analyse market
conditions and perceptions of people before introducing a new product. This will helps
them in satisfying the needs and demands of people in an appropriate manner due to
which sales will be increased.
 As company is sustaining a positive brand image, Loreal can try to introduce new
products in kid section. Due to wide popularity, company posses loyal customer base that
will willingly accept the new products introduced for kids.
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 Another recommendation which can be given to company is that rather than targeting
people from all age group, company can target a specific section and introduce products
which will be favoured by people of that age group. Due to this, for that specific product
high revenues and profitability can be attained.
c) Strategic management plan with strategies, objectives and tactics
Strategic management plan
It is defined as a management plan in which continuous planning, monitoring and
analysing of strategies takes place so that a company can achieve its targets and objectives in a
desired manner (Scholes, 2015). Strategic management process is a method which manager of
company can formulate and implement different strategies so that competitive advantage can be
gained against rival companies in a profitable manner. This plan will benefits Loreal to achieve
organisational success as elements of product portfolio are already acknowledged by
management which are mentioned beneath:
Summary: Loreal is expanding their product portfolio and product line so that
comfortableness and satisfaction level of employees can be enhanced in an appropriate manner.
Introducing new product line will benefits the company in satisfying the needs and demands of
customers in a more appropriate manner.
Aim: The main aim of the company is to enhance their market shares and brand
reputation so that high revenues and profit margins can be attained. For this purpose, Loreal is
going to enhance the product line by introducing new products in different ranges.
Objective: Major objective of the company is to increase their sales and market shares so
that company can sustain its position as a market leader within beauty and cosmetics industry.
For this, company will be required to provide high quality and effective products to the
customers. Along with this, company will need to develop products according to the perception
of customers so that high sales can be achieved.
Organisational structure: Loreal follows Hierarchical organisational structure in which
a company has to operate at different levels and divisions. In this kind of structure, lower level of
working staff reports each and every activity to middle level staff. It is the responsibility of
middle level staff to report activities and information to upper level management including board
of directors and CEO (Smith, 2013).
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Vision: Main vision of Loreal is to gain appreciation and recognition form maximum
customers so that company can achieve their targets in a desired manner.
Mission: Mission statement of Loreal is to offer high quality beauty & personal care
products to the customers so that brand image of company can be maintained in market. For this,
company is planning to expand its product portfolio so that new customers can get attracted
towards the offerings of the company.
Values: Main values associated with Loreal are mentioned beneath:
 Basic value of company is passion for business that is associated with culture and
humanity.
 Another core value of company is innovation. It is very essential for company to
innovate new products so that demand of customers can be catered in a desired
manner (Spender, 2014).
 A production unit that targets excellence.
Costs: Estimated cost for product portfolio expansion is 1,00,000 pounds. This cost is
estimated after calculating costs associated with all activities.
Time: Estimated time period which is required to expand product portfolio is one year.
This time period is estimated on the basis of market analysis.
Scope: The scope for this product expansion is very wide as company operates at global
level due to which customer base of company is very high. Introduction of new product and
expansion of product portfolio will going to be a successful step for the company.
Quality: Company is highly focused towards the quality of the product which is offered
to the customers. Organisation is using high quality raw material so that production of products
can takes place in a desired and appropriate manner. To reduce wastage and ensure optimal
utilization of resources, company is going to use total quality management and lean production
methodology.
Problem: Main problem which is faced by Loreal is tough competition for the rival
companies such as Garnier, Maybelline, Lakme etc. products of company are higher priced than
the competitors as company prefers to use resources and raw material of good quality.
Strategies: To gain competitive advantage, Loreal is going to use diversification strategy
in which new products will be offered by company to the customers in new marketplace. By this
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customer base of company will increase due to which high revenues and profitability can be
achieved in a desired manner (Verbeke, 2013).
Measure the progress: Company needs to formulate different kind of programs that will
helps in evaluating the performance of employees. By this, company will get to know which
employee is highly contributing towards the success of the company.
Modify long term strategies into short term actions: Company needs to formulate their
policies and procedures according to the perception and choice of customers so that potential
risks can be eliminated.
Marketing strategy: To advertise and promote product in a desired manner, company is
going to use social media and their official website. By this large number of customers will get to
know about the newly introduced products (Wang and Verma, 2012).
CONCLUSION
From above mentioned report, it has been concluded that both micro and macro
environmental factors posses a considerable impact on the functioning of company. Analysis like
PESTLE, SWOT and VRIO, porter's five forces will helps in understanding the business
conditions in a desired manner. There are different business strategies such as product
development, market development, market penetration, diversification which can benefits the
firm in formulating and implementing advantageous strategies. A strategic marketing plan will
benefits the firm in achieving their targets and objectives in an appropriate manner.
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