Business Strategies of L'Oréal: A Comprehensive Analysis

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Business Strategies

Table of Contents
Introduction......................................................................................................................................1
LO1..................................................................................................................................................2
P1 Applying appropriate frameworks analyse the impact and influence of the macro
environment on a given organisation and its strategies...............................................................2
M1 critically analyse the macro environment to determine and inform stetaegic management
decisions......................................................................................................................................3
LO2..................................................................................................................................................5
P2 Analyse the internal environment and capabilities of a given organisation using appropriate
frameworks[M2]..........................................................................................................................5
VRIO Framework........................................................................................................................5
LO3..................................................................................................................................................9
P3 Apply Porter’s five forces model and to evaluate the competitive forces of a given market
sector for an organization............................................................................................................9
M3 Devise appropriate strategies to improve competitive edge and market position based on
the outcomes..............................................................................................................................11
LO4................................................................................................................................................13
P4 Apply a range of theories, concepts and models, interpret and devise strategic planning for
a given organization...................................................................................................................13
M4 Produce strategic management plan that has tangible and tactical strategic priorities and
objectives...................................................................................................................................14
D1 Critique and interpret information and data applying environmental and competitive
analysis to produce a set of valid strategic directions, objectives and tactical actions..............16
Conclusion.....................................................................................................................................17
References......................................................................................................................................18

Introduction
Business strategy is establishing standards and objective of an organization. A business strategy
effectively helps an organisation to encourage and increases the present organizational existing
approach. Moreover, the business strategy can also be stated as an art that a business
organisation effectively creates operational plans, resources allocation, skill analysis of staff
members for delegating all the role and responsibility for attaining the organizational aims and
objectives successfully. Thus, for understanding the business strategies and its importance
L’Oréal is taken into considered, by identifying all its macro and micro environment using
various tool for effective Strategic management for bring success in systematic manner.
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LO1
P1 Applying appropriate frameworks analyse the impact and influence of the macro environment
on a given organisation and its strategies.
L’Oréal is a personal care and cosmetic firm of French. The organisation offers diverse product
like perfume, hair color, and skin care product for men and women. L’Oréal presently has 89000
employees generating € 25.8 billion (L’Oréal 2019)
Mission Statement: L’Oréal believes that every individual need to aspires to beauty, with the
mission of L’Oréal is to help the women and men around the world to release their aspiration and
express their personalities with quality product by frosting innovation and researches.
Visions Statement: L’Oréal’s vision is represents in its motto “Because I’m worth it”.
Accordingly the organisation is designing its aims and objective to offer best services and
product to the customers.
Objectives:
 To become world leader in cosmetic industry.
 To create a strong brand image.
 To develop quality service and products with the help of advance technology and tool.
 To please the customers according to their need and expectation.
 To encourage and sustain in the present market position through marketing and CSR
activity.
Thus the organisation need to implement effective strategies for taking proper decision according
to the present requirement of the organisation to achieve the goals and objectives by operational
policies and strategic planning techniques like benchmarking, budget planning, business
analysis, business model and business case, forecasting etc. But before making plan the manager
need to understand the macro and micro factor effecting the organisation and functions.
PESTLE analysis
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Political Factors: This factor includes various government policies and rules for cosmetic
industry that influence L’Oreal (Chailan, 2010). Being a manufacturing firm of Paris,
governmental policies of France are applicable along with various regional import policies, that
is effective in determining L’Oreal’s success. Globalization is offering a positive role for
L’Oreal.
Economic Factors: This factor includes Exchange rates of state of working. Recession element
is also an element of mainstream for upbringing L’Oreal. Economic factors including product
prices which may varies in different areas. GDP of the state is also a contributing factor in the
luxury products of L’Oreal. Developed states and countries with Human Development Index and
be customers will be prone to branded products increase the revenue and profit rate.
Social Factors: Technical trends of the society in this factor. Customers of modern societies are
interested more in fashion trends and cosmetic product offered by L’Oreal. Societies ware eager
to adopt the trend in contemporary trends of technical innovations. However, the organisation
need to maintain other ethical issues like safety and animal protection to attain sustainable
development and business growth (Chailan, 2010).
Technological Factors: In this age of technology, ramifications are present in every product and
human being. In case of L’Oreal, trust and innovation played a significant role. L’Oreal is prone
to innovation and tends to follow different contemporary trends that are to be followed for
attaining success.
Legal Factors: L’Oréal needs to effectively maintain success graph for marinating its position
among its competitors. Legalities of region need to be maintained. L’Oreal is common brand
among upper middle class.
Environmental Factors: Global laws of environment safety laws falls under this factor to
maintain global standards. All international brands therefore support in maintaining their
function and reducing wastages. L’Oréal to attract more customer can take positive strategies for
encouraging this type of campaigns.
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M1 critically analyse the macro environment to determine and inform stetaegic management
decisions
Considering the Pestle analysis for understanding the macro environment affecting the
organisation effective strategic management decision are taken accordingly. Strategic
management in L’Oréal is required for creating effective plan and for monitoring the attainment
of the organizational objectives (Wheelen, et al). Hence, the strategic management requires
various information and data for PESTLE analysis done. Combination of pestle and strategic
management will successfully support the organisation to monitor the factor effecting business
functions and operations. The analysis of Pestle factor provides the management with proper idea
regarding the performance of the organisation along with opportunities so that action plan can be
created accordingly.
4

LO2
P2 Analyse the internal environment and capabilities of a given organisation using appropriate
frameworks[M2]
Business of L’Oréal is influenced by various factors of the Internal environment like
management style applied, training methods, culture etc. the internal environment of L’Oréal is
effective in influencing the employees behaviour within the organisation (Hong, and Doz,
2013). Internal environment determines the business environment and employee’s attitude while
working for the organisation to achieve its goals and objectives i.e. to make profit through
product and services offered to the customers. L’Oréal’s success is dependent highly on
employee’s commitment and stakeholder’s attitude. The marketing manager is responsible for
analysing external environment and internal environment of L’Oréal for understanding all the
strengths and weaknesses possessed by the organisation so that effective decisions can be taken
for attaining competitive successes to attain sustainability and growth.
VRIO Framework
VRIO is a framework used for analysing the internal environment and various strategies and
attributes implemented in the organisation through effective research for L’Oréal for attaining
competitive advantages that will ultimately will be helpful in supporting the organisation for
attaining sustainable growth (Santos, et al 2018). VRIO model all together has four different
factors “Value”, “Rare”, “Inimitable” and “Organised” through which a healthy working
environment can be attaining in the organisation for encouraging the efficiency and productivity.
For a large multinational organisation success can be attained by optimal resource utilisation and
allocation and enhancing their capabilities through as healthy working environment.
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Figure 1: VRIO framework
(Source: VRIO frameworks, 2019)
Valuable: Some or other resources in every organisation is considered as valuable, this entity
will directly or indirectly will be helpful for the organisation to attain competitive success in the
present market. For instance, in case of L’Oréal trained and skilled employees that are
considered as valuable as it will be effective in being opportunity to the organisation among its
competition by offering quality product and services to the customers as per current market
trends.
Rare: Rare is all the exclusive resources that is associated with the organisation and is not
available for the competitor because of various reservation and legal rights (Santos, et al 2018).
In case of L’Oréal, efficiently trained employees and chemical ingredients used in the
organisation regarding the along with tool and technologies for production of product are their
rare. This rare is effective in gaining competitive benefit for increasing customer base and
efficiency.
Imitability: Different strategies along with the coordinated activities are performed in the
organisation involving the employees for minimising the risks if product duplication by the
competitors. The employee’s loyalty in the organisation like L’Oréal is maintained through
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friend environment and proper communication for sharing issues and ways of mitigation for
achieving the determined goals and objectives effortlessly. Along with for seamless product
distribution proper balance is maintained between supply and demand according to the current
market demand.
Organizational: Employees are effectively proper training according to the organisational scope
and accordingly prevailing changes in term of service and technologies. For minimising the
failure due to the changes in the present business scenario effective proper interaction was
established a hierarchical structure.
The VRIO analysis is done for L’Oréal, from the analysis it can be stated that from the research
the manager will be aware of all the strength and opportunity of the organisation that will support
in formulating objectives for the organisation. Attaining the objective helps in gaining
competitive advantage in the present contingent environment.
SWOT analysis
For understanding the internal environment of L’Oréal, SWOT analysis is conducted so that the
organisational Strength, Weakness, Opportunities and Threats can be identified and accordingly
strategic decisions can be taken for the organisational benefit (Wheelen et al 2017). The
strengths support the present organisational growth and opportunities must be to attain the
success of business in future. Through SWOT analysis, the weakness and threats related to the
business organisation can be classified and accordingly the higher authorities can make strategic
plans for market growth in the international level.
Strength
1. Continuous innovation and research in
terms of beauty product assures that
cosmetic offered by L’Oréal is best
making it a leader even in competitive
market.
2. The organisation strength includes
High-end promotion and advertisement
for increasing customer base operating
Weakness
1. L’Oréal has a decentralized structure.
Thus controlling of so many
subdivisions become difficult.
2. There is a stiff competition in the field
of cosmetic
3. Profit margin is comparatively lower
due to high investment in R&D.
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in more than 130 countries globally.
3. The organisation offers differentiate
products including skin care, hair
Colour, perfumes, make-up, hair care
etc.
4. LOreal offers high quality of products
creating a strong brand image among
consumers.
Opportunity
1. L'Oréal can effectively hit the growing
market with the increasing product
demand in developed countries.
2. High market share due to numerous
registered patents
3. High demand for organic cosmetic
with raising animal activities and Peta
4. Expansions of overall product line lead
to product mix.
Threat
1 High competition among cosmetic brands with
similar products.
2. Downturn of the economy in different countries
can be a threat to L’Oréal.
3.Constant demand for updating in the sector of
cosmetics, and keeping up time is quite difficult
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LO3
P3 Apply Porter’s five forces model and to evaluate the competitive forces of a given market
sector for an organization
Porters Five Forces model or framework can be defined as the tool for analyzing competitive
environment of the business. This model includes five forces that will help in determining
competitive intensity of the L’Oreal business and its attractiveness in term of profitability.
Figure 2: Porter’s Five Forces model
(Sources: www.visual-paradigm.com, 2019)
Bargaining Power of Buyers: Buyers in the market always would like to buy skin care products
and accessories at lower prices with good quality. The increase in competition in the market
leads to increase in buyers force so L’Oreal needs to develop products or pricing strategy
effectively to overcome competition (Dälken, 2014). L’Oreal needs to identify customer needs
and then have to design, develop and sell personal care product with good quality to meet
customer needs and gain competitive advantage in the market.
Bargaining Power of Suppliers: The price of the final products depends upon the cost of
materials that are supplied by the different suppliers. It is essential for the L’Oreal to build
healthy relationships with large numbers of suppliers in the market that will make available raw
material or others products at lower prices and hence enhance the profitability of the business.
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And if there are only few or limited suppliers available in the market then the L’Oreal will have
to buy products at higher cost that will increase selling prices of the final product.
Threat of Substitution: There are large numbers of brands in the market that are selling similar
types of personal care products and accessories at lower prices than the L’Oreal. Availability of
substitutes at lower prices in the markets will divert the L’Oreal customers towards other brands
or organizations (E. Dobbs, 2014). Therefore, L’Oreal needs to design, develop and sell quality
products at reasonable or lower prices to attract large numbers of customers and hence gain
competitive advantage in the market.
Threat of new entrants: High entry barriers reduce the threats of new entrants into the market
for the existing businesses. L’Oreal has good market share and customer base so it will be not
easy for the new brands of personal care products and accessories to enter into the market.
L’Oreal has large range of personal care products and has good market image because of its
quality products that is helping it to generate high profitability in the market. Hence L’Oreal has
low possibility of threats of new entrants because of its market strengths and value.
Intensity of Rivalry: There are large numbers of competitors available in the market that is
selling similar products of good quality at lower or reasonable prices. Availability of large
numbers competitors is reducing the market share and profitability of the L’Oreal and also
reducing the future growth opportunities of the business (Dälken, 2014). Therefore, L’Oreal
needs to focus on improving the quality of products and offers quality products to customers at
lower prices than other competitors to face the intense rivalry in the market and gain competitive
advantages.
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