Business Strategy Report: L'Oreal's PESTLE, SWOT, and Recommendations

This report provides a comprehensive analysis of L'Oreal's business strategy. It begins with an introduction to business strategies and their importance for achieving organizational goals. The report then delves into a PESTLE analysis, examining the political, economic, social, technological, legal, and environmental factors impacting L'Oreal's operations. A SWOT analysis is also conducted to assess the company's strengths, weaknesses, opportunities, and threats. The report further explores strategic directions for L'Oreal, offering recommendations and justifications for business growth and development. Finally, it outlines a strategic management plan, covering various aspects of managing the firm's functions and activities. The report concludes with a summary of the key findings and recommendations.

BUSINESS STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
PESTLE Analysis of L'Oreal......................................................................................................1
SWOT Analysis .........................................................................................................................3
TASK 2............................................................................................................................................6
Strategic directions for L'Oreal...................................................................................................6
Recommendation and Justification.............................................................................................8
Strategic management plan.........................................................................................................9
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Business strategies defined organizations high stage plan for achieving a goal and
reaching particular business objectives. Company management and owner make strategy to
position its firm in its target market area or to compete successfully (Amran and et.al., 2016).
Through making good business strategies company satisfy their customers and achieve good
performance. This process help firm to constantly developing business more and more and
increase its profitability. It is a long term plan of action which is designed to raise position and
reputation in market place.
The present report is based on L'Oreal, it is a French personal care organization which is
located in New York City. They established their headquarter in Berkeley Heights, New Jersey.
In this report include SWOT and PESTLE analysis of company reflect their capabilities and
power of supply goods. This study also clarifies Porter's Five Force Model for analysis the
competitive business environment of company. Furthermore, it justifies different types of
strategies that help to direct firm toward success. Moreover, in this report will also give
recommendation and justification for growth of business and define strategic management plan
for managing entire firm function and activities.
TASK 1
PESTLE Analysis of L'Oreal
PESTLE analysis is the best tool using by marketers to monitor and analyze external
marketing environment or factors that impact on company (Razak and et.al., 2016). This is one
of the best strategic tool that help to understand market declination and growth, potential and
direction for management and business position.
 Political factors: Political factor include government rules and policies in which
organizations have been working. L'Oreal is one of the most famous and leading
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cosmetics and beauty firm in the world. They make many different types of beauty
product to meet up with the needs of modern global fashion trends. As supplying their
products globally the government policies affect firm very much. Trading policy and
taxation policies impact L'Oreal business because they get changed according to the
situation needs by the government. Import policies play vital role in growth and success
of firm which directly effect on its profitability and productivity. Thus, to run business
smoothly company need to follow all the rules and policy.
This factor influence L'Oreal trading policy and international access that make difficulty
for their business, however if government low taxes charges on trading that will be beneficial for
organization.
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Illustration 1: PESTLE Analysis
(Source:Pestle Analysis of L’Oreal, 2019)

 Economic factors: Economic factor determine economy's activity that directly influence
organization and have long termed affect. For example, rising inflation rate, foreign
exchange rates, interest rates and economic growth etc. are the element of this factor.
Products prices play essential role which impact on business profit margin. Rise inflation
rate of economy affect company price its goods and services (Veit and et.al., 2014). It
also impacts buying power of consumers and change provide and demand models for that
economy. For some regions skin goods cost is high and so is then business in that region.
People get more interested in buying branded products like L'Oreal items that increase its
profit and financial budgets more than others. Rising inflation of rate refers to the rising
of material that are using to manufacture cosmetic products which effects L'Oreal variety
of beauty and cosmetic goods' strategy.
 Social factors: Social factors include cultural or current trends, population analytic,
demographics and also covered areas that include shared attitudes and belief of
population (Chu, KrishnaKumar and Khosla, 2014). These factors consider as age
distribution, economy growth and health consciousness and so on. Modern societies are
more curious or interested in current fashion trends and follow it in their life's as well.
L'Oreal make beauty products according to the trends and current fashion style that meet
with customers needs and demands. Changes in consumers need impact on organization
business and productivity because sudden change make instability in firm process of
manufacturing goods. Ethical and social pressures and trends play outstanding role in
L'Oreal business. They need to change their entire process of making beauty regarding
clients requirement.
 Technology factors: Raising new technology for producing services and goods,
distribute products and communicating with set markets are the factors that Impacts on
L'Oreal business very much. Current market environment implement new or modern
technologies which help them to raise the position in market. It refers to research and
development, automatic etc. that affect organization operation management and market
unfavorably and favorably. According to the need of supply goods to customers
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effectively firm has to apply new and different types of technology that helps them in the
entire business function like making or distribute products globally.
Thus, to supply good things to the clients firm make innovation and creation by using current
technological trend which build their reputation more and more in marketplace. Brand need to
follow contemporary trends and implement new techniques for growth and success. L'Oreal
have the capability to make creation and innovation within seconds as according to fashion.
Through their efforts customer purchase their goods which give them proper satisfaction.
Rising competition in market place require implementing new technologies in business that help
to deliver good services and also helps to gain competitive advantages.
 Legal factors: Legal factor have internal and external both sides that impact on L'Oreal
business very much. Government laws affect business environment in country while there
are many policies that firm maintain for themselves. It includes equal opportunities,
health and safety, customer laws and rights, advertising standards and product labeling
and safety. At the current business environment many competitors get raise which is very
unsafe for L'Oreal. They need to maintain its graph of success by follow all the legal
procedures which impact on their business reputation. Products labeling is the most
important part of adverting things in market. It need to be different form the other that
make their image in the same. Changes in laws has influence on organization goal and
objectives. Thu, to run business smoothly company need to understand all the legal
factors and apply within the territories which they operate in. L'Oreal must aware change
in legislation and effect that have on business operations.
 Environmental factors: Environmental factor relate to impact of surrounding climate
and environment which influence of ecological aspects. Recycling process, climate
change, waste sustainability and disposal and carbon footprint are the factors that include
in environmental elements. These factors encompass assorted global environment safety
laws that abide by the worldwide standards. The world has now focused on making
planet beautiful and free form pollution that create healthy atmosphere. According to that
perspective L'Oreal support them through campaigns and make Eco-friendly products
that less harmful.
SWOT Analysis
Strength of L'Oreal
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 Good quality: The products of L'Oreal are well renown for their high quality products
and services all over the world (Jocovic and et.al., 2014). They are been used by many
celebrates and famous personnel who are quality consciences and want to have a good
quality product on a reasonable cost.
 Organic products: As environmental concerns and reluctance against chemical based
products have increased, L'Oreal have launched many organics and nature based products
that will help in getting the trust and satisfaction level of their customers. This will
reduction of pollution and animal testing.
 Variety of cosmetic and beauty products: L'Oreal is one of the biggest brand and give
their bigger share in cosmetic and beauty world that no one has give. They fully invest
money in making good variety of products that build their positive reputation in market.
Firm provide their goods such as make-up, skincare aisles and hair product to customers
through supplying at local department store. Their portfolio of goods is astounding and
fully listed with many things like Garnier, Maybelline etc.
 International access: L'Oreal expand their business at international level where they
garb many opportunities that develop its production more and more. In 120 countries they
boast their brand which make them more popular in all over the world. Firm manufacture
and supply products in Bulk which is less costly than buying small amount at a time.
Weakness of L'Oreal
 Decentralized organizational structure: L'Oreal produce many different variety of
products that manage by having good management in company (Bansal and DesJardine,
2014). Due to subdivision of firm they face difficulty in control and operate entire
procedures. It slows down the manufacture of organization because of the want of giving
reference to other directors and board members of industry.
 Growing saturation: Every day new hair care line launching that impact on L'Oreal
business very much. People adapt many techniques for straight their hair and curl or
blonde them. They are no more dependable on straightening machine or other products.
Thus, all these segments in hair care industry affect organization, but they do not be
worried about these things or name of new company.
 Shrinking profit margins: L'Oreal highly invests money in research in developing good
quality products according to customers needs. This process is much costly that directly
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influence on their profit margin. They want to make clients happy and satisfied which is
quite expensive and it's ingestion away at their profit at least compare to its competitors.
 Slow division: Organization offers so many products to customers that necessitate
number of subdivisions to handle each and everything. Thus, for that they need more
employees for developing and manufacturing product and help customers through their
good service. To produce goods company need many workers to manage entire function
that is one of the issue lead as slowness.
L'Oreal overcome with these weaknesses by managing whole functions and operations
management process that help to build positive image in marketplace better than others. Before
investing money in market research organization must make plans that give them proper
direction where they need to invest.
Opportunities of L'Oreal
 Expand Industry: L'Oreal move into newer spaces in cosmetic and beauty industry,
such as personal care sector. Customers always need something new and best for their
structure. They branch out into countries and economies where saturation is not as
prevalent. Brand recognised to achieve their aim and business objectives like expanding
industry etc.
 Create new beauty and cosmetic product: L'Oreal give tough competition to the other
organizations who work in their niches. They create new products for customers
according to their needs that satisfied them. It is one of the best opportunity that they
need to grab for raising their position in marketplace.
 More organic: L'Oreal focus on eco-friendly products that helpful for their business
growth and reputation. Customers are looking for particular product that are paraben free,
sulfate and silicone free. So for that organization manufacture goods regarding this
requirement that is very essential for them. In the modern world organic and natural
goods is highly on demand right now. Company take that things as advantage for develop
growth and success in business.
Threats of L'Oreal
 Growing competition: In beauty and cosmetic sector many other brand come up in the
marketplace within having different and new products. L'Oreal get worried about
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competitive environment and make some efforts to beat them by offer good and better
quality goods.
 Quick Changes: Beauty and cosmetic industry moves faster than according to people
needs and requirement. Changes in clients demand also affect organization producing
products and services. The entire process will create issues for L'Oreal and make barriers
in their productivity.
 Tricky cash flow: Organization has countless goods and profits are divided into these
various segments. Changes in economy will create problem for L'Oreal. They do business
in declining economy that will impact cash flow. Economies is not always steady, it
depends on many factors. Economic downswing is one of the biggest threat to firm that is
quite evident in other countries.
L'Oreal will overcome with these weaknesses by using their capabilities such as
manufacture good quality of products that raise the attention of customers more than another.
This will help to beat growing competition in marketplace. They make some changes in beauty
and cosmetic products after identify customers needs and requirements.
Porter's Five Force Model
Competitive rivalry
Competitive rivalry is high for the loreal company. As there are so many brands
available in the marketplace such as Ponds, Revlon etc. that give strong competition to the
company. As the competitors of L'Oreal is spending huge amount of money on research and
development, innovation and bring new idea every day in the market. As there are large number
of competitors in the market that give diversify product to the customer that is the competitive
rivalry for L'Oreal.
Threat of New Entrants
As L'Oreal is the cosmetic industry has lot of threat in the market of new entrant. Huge
capital investment by the other companies in the market become the threat for L'Oreal.
Development cost of the product is also the threat for it as new entrant bring new development
strategy in the market so this will be the biggest threat as the customers are shifted from L'Oreal
to other brands in the market.
Bargaining Power of Suppliers
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This is the ability of the buyers that affect the price of the product in the market. As in
cosmetic industry raw material is procured from the different suppliers and there are many
suppliers in the market. As there are large number of suppliers so the competitors of the L'Oreal
is using the vertical integration that reduces the impact of the supplier.
Bargaining Power Of Buyers
The bargaining power of the buyer is high. Because of increasing competition in the
market there are variety of manufacturers in the marketplace so the consumers can shift from one
brand to the other brand. As buyers is having the high bargaining power so that force the
manufacturer to lower down the prices of the product.
Threat of Substitute
As there are many products available in the market so if the consumer of the L'Oreal is
unsatisfied then it can easily shift to the other product that will satisfy the needs and wants of the
consumer. High level of innovation in the cosmetic industry create the threat for the L'Oreal
industry.
TASK 2
Strategic directions for L'Oreal
Bowman's Strategic Clock
This concept researches the options for strategic positioning for example, how the
product will be positioned to offer it the most competitor position in market. It gives many
options to organization that they apply for raising their position in marketplace. Firm choose a
position from this model which offers competitive advantage (Martinez-Simarro, Devece and
Llopis-Albert, 2015). Bowman's strategic clock model is based on eight fundamental strategic
positions that is very helpful for company. Thus, if L'Oreal understand these stages it will make
them enable to better evaluate and analyze their current strategy.
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Position 1. Low price and low added value: L'Oreal is well known organization and
they produce many products or services within low price offers. In that position customers have
very low value regarding with the low price product. This is one of the best strategy or method
that they are using to beat with other suppliers or competitors in business world. Keeping the
cost low is the only technique that attract customers towards L'Oreal.
Position 2. Low price: Low pricing is the best strategy that required for L'Oreal to be
successful against its competitors. Company produce large quantities products in this position
within low price that is very beneficial for its business (Teh, D. and Corbitt, B., 2015). Selling
goods at lower price leads to low profit edge on respective products. High volume of outcomes
generate more profits for company that develop their growth in market position.
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Illustration 2: Bowman's Strategy Clock
(Source: Bowman Strategy Clock, 2018)

Position 3. Hybrid: L'Oreal involved this position in their firm for products
differentiation. At this stage they make goods which are highly valuable for customers as well as
them. It is very effective strategy that consistently added value and well applied method for
producing product. Organization need to offer good quality goods to clients by continually
include more values in things.
Position 4. Differentiation: Differentiation strategy is one of the best strategies that aim
is to provide consumers the highest level of perceived within added value. L'Oreal produce many
products within affordable prices that attract clients more than the others. They offer good
quality product at average cost that is very beneficial for their business growth. Firm focus on
goods quality and also on branding; putting epochal and reliable brand on marketplace that
retrains clients.
Position 5. Focused differentiation: L'Oreal focus on differentiation process which is
very important for them. They make luxury products that are high in price and quality,
organization offer that goods by set target markets. They segment, distribute and promote their
services in country which help to lead them to higher profit margins. Their aim is to attract
customers more for buy its products because of high detected value within good costs.
Position 6. Risky high margins: L'Oreal adapt this strategy which is very risky for their
business. With this method they set high costs without offering or include anything extra in term
of sensed value. Thus, as taking this strategy in long term period this is quite risky for their
position in market this is like to fail. Raising prices without including such things impact on their
business and customers start cutting their losses. Clients turn over to the other companies that
offer them better quality services and products in same price which L'Oreal give to them. But on
the other side if consumers continue to buy their product at high prices, the profit of business get
higher.
Position 7. Monopoly Pricing: Monopoly is the strength of L'Oreal that they use as
business strategy for raising their position in market. Where there is monopoly in marketplace,
there is only one business offer products that is L'Oreal. Thus, because of that firm do not have
to fear the competitors and they only determine the price. It is not only concerned regarding
value of clients perceives in goods, they basically choice that customers buy or not. This is one
of the best strategy that help firm at any situation wherefore competitive environment. According
to that thing clients is basically dependent on services and products that monopoly offers to
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