L’Oréal’s Business Strategy: A Comprehensive Report

Desklib provides past papers and solved assignments for students. This report analyzes L’Oréal’s business strategy.

UNIT 32 BUSINESS STRATEGY
L’OREAL STRATEGY REPORT

Table of Contents
LIST OF FIGURES.............................................................................................................................3
INTRODUCTION............................................................................................................................. 4
TASK1- INTERNAL AND EXTERNAL ANALYSIS.................................................................................5
PESTEL AND SWOT ANALYSIS OF L’OREAL WITH AN ANALYSIS OF ORGANISATION’S
CAPABILITIES..............................................................................................................................5
ORGANISATIONAL INTERNAL ENVIRONMENT.........................................................................10
CRITICAL EVALUATION OF INTERNAL ENVIRONMENT OF L’OREAL..........................................14
TASK 2- STRATEGIC PLAN ON BASIS OF ENVIRONMENTAL ANALYSIS..........................................15
ANALYSIS OF COMPETITIVE ENVIRONMENT USING PORTER’S FIVE FORCES MODEL..............15
DIFFERENT STRATEGIES TO IMPROVE COMPETITIVE EDGE AND MARKET POSITION ON THE
BASIS OF THE OUTCOMES........................................................................................................18
JUSTIFICATION AND RECOMMENDATION OF MOST APPROPRIATE GROWTH PLATFORM FOR
L’OREAL....................................................................................................................................19
STRATEGIC MANAGEMENT PLAN WITH STRATEGIES, OBJECTIVES AND TACTICS....................20
CONCLUSION............................................................................................................................... 24
REFERENCES.................................................................................................................................25

LIST OF FIGURES
Figure 1: PESTEL analysis of L'Oreal...............................................................................................6
Figure 2: SWOT analysis of L’Oreal................................................................................................8
Figure 3: Strategy Map of L'Oreal................................................................................................10
Figure 4: McKinsey's 7S model.....................................................................................................11
Figure 5: Organisational structure of L'Oreal...............................................................................12
Figure 6: Porter Five forces model of L'Oreal...............................................................................15
Figure 7: Ansoff Growth Matrix................................................................................................... 17
Figure 8: Porter's generic strategies............................................................................................18
Figure 9: Bowman's Strategy Clock..............................................................................................19

INTRODUCTION
Business strategy refers to the process of establishing the standards and the objectives of an
organisation which leads to encouraging the existing approach of the organisation and leads to
an analysis of the competencies and the skills of the organisation. This leads to the path of goal
achievement by evaluating the mission, goal, vision and objectives of an organisation.
This report will evaluate the mission, vision, goals and objectives of L'Oreal which is a leading
provider of the skincare and accessories. It is a global company with more than 1000
employees. As a Deputy Strategy Manager of L'Oreal, this report will conduct the
environmental analysis of L’Oreal so as to manage the strategic growth plan on the basis of the
internal and external strategic analysis tools.

TASK1- INTERNAL AND EXTERNAL ANALYSIS
L’Oreal is considered to be one of the largest cosmetics companies that are headquartered in
France and lays emphasis on manufacturing cosmetics. It provides mainly hair care, perfume,
skin care, make-up and so on for 100 years.
Mission statement
L’Oreal has a mission of devoting energy for the purpose of beauty which helps people in
expressing individuality and getting confidence. It is committed to providing the best quality of
the cosmetics innovation to the world's women and men (Wheelen et al., 2017).
Vision of L’Oreal
L’Oreal vision is to gather more people around the world with an unlimited variety of products
so as to satisfy the needs and desires.
PESTEL AND SWOT ANALYSIS OF L’OREAL WITH AN ANALYSIS OF
ORGANISATION’S CAPABILITIES
The strategy is defined as the art of planning which is designed in order to achieve the long
term objective under a set of conditions of uncertainty (Belton, 2017).
BUSINESS STRATEGY OF L’OREAL
L’Oreal’s global strategy is to capture and understand the globalisation of differences by
providing tailor-made cosmetics and beauty products. It also adopts a strategy of featuring
famous celebrities such as Jenifer Lopez and Penelope Cruz so as to gain attention worldwide
(Hill et al., 2014).
It has a business level strategy of gaining a competitive advantage over the competitors by
exploiting the core competencies in its individual products and services and gain a competitive
advantage by applying integrated costs leadership and differentiation strategy (Wheelen et al.,
2017).

IMPACT AND INFLUENCE OF THE MACRO ENVIRONMENT ON L’OREAL
There are different analytical frameworks which help in an analysis of the macro environment.
In the macro environment, environmental analysis is a vital one for L’Oreal which will be
conducted with the help of the PESTEL analysis and the organisational audit will be performed
with the help of the SWOT analysis (Hill et al., 2014).
PESTEL ANALYSIS OF L’OREAL
Figure 1: PESTEL analysis of L'Oreal
Source: (Haseeb, 2017)
POLITICAL FACTORS
In the manufacturing companies like L’Oreal the policies of the government and the rules and
regulations likely influences the operations of the company (Ferraris et al., 2017). The

governmental policies of France also affect the company to a great extent as the import policies
applicable in respective regions also to a great extent play a vital role in ensuring the success of
L’Oreal. Due to globalisation the political factors thus contribute positively to L’Oreal (Haseeb,
2017).
ECONOMIC FACTORS
The economic factors such as the exchange rates of the state where L'Oreal will be operating
will impact the working. Due to the recession element, there is a positive contribution to the
upbringing of the cosmetic organisation like L’Oreal. The GDP also to a great extent contribute
to the success of the brand like L'Oreal. The states with high Human Development Index has
been contributing to the business success of L'Oreal (Haseeb, 2017).
SOCIAL FACTORS
The social factors embrace the technological trends encountering the society which is more
inclined towards the fashion trends and thus contemporary technical trends are welcomed by
L’Oreal through innovations. There are also some ethical pressures which impact L'Oreal
business as well (Haseeb, 2017).
TECHNOLOGICAL FACTORS
Due to the technological traits such as innovations and the trust L’Oreal has to ensure these
two so as to ensure success. L’Oreal is more concerned about innovation and thus it always
goes with contemporary trends (Haseeb, 2017).
ENVIRONMENTAL FACTORS
The environmental factors such as safety laws and the global standards in the cosmetics
industry should be well abided by L'Oreal so as to support the world (Haseeb, 2017). For the
same L’Oreal supports campaigns and understanding the internal and external factors
effectively.
LEGAL FACTORS

The legal factors such as the legalities in the region and the legal aspects of the products also
impact L'Oreal business to a great extent. L'Oreal is mainly for the upper middle class and the
elites of every society who are more concerned about the legit stuff so it thus becomes more
essential to adhere to all legalities and procedures (Haseeb, 2017).
ORGANISATIONAL AUDIT OF L’OREAL BY APPLYING SWOT ANALYSIS
An organisational audit is an activity which is referred to assisting the organisation in boosting
the operations of the firm by identifying the strengths and weaknesses of the organisation
which ultimately helps it in achieving the objectives (Wheelen et al., 2017).
For the same SWOT analysis of L’Oreal will be conducted that will help in analysing the
strengths, weaknesses, opportunities and threats of the company.
Figure 2: SWOT analysis of L’Oreal

(Source: Frue, 2018)
Strengths
L’Oreal has a wide variety of the product portfolio which is astounding and has invested a lot in
this space. It has also strength due to the high quality of its products which is not just
inexpensive but is also luxurious (Bhasin, 2018). It has its catalogue brands from across the
world. It has been moving into the organic products as well which involves fewer chemicals and
comprises of natural ingredients. It has wide experts in research and development which
focuses on the products that are safe for the bodies and providing top-of-the-line products to
its customers (Frue, 2018).
Weaknesses
L’Oreal faces with the weakness of the growing saturation in the new hair care line as there are
more hair care line products for the straight hair, blondes, curly and so on which are seeking
more attention. L’Oreal also is heavily investing in the R&D which is creating fewer profit
margins for it and is massively expensive as compared to competitors (Frue, 2018).
Opportunities
L’Oreal has opportunities in the form of the newer spaces in the beauty industry which is likely
to change in the coming time (Frue, 2018). L’Oreal can also take advantage of branching out
into the developing economies and it can also cater new products for niche consumers that will
focus on the darker skin and the curly hair. It can go for more organic product lines that will be
helpful for the customers and will not tax the environment (L’Oreal, 2018).
Threats
For L’Oreal some of the threats that encounter it include the quick changes in the cosmetic
industry which is changing with rapid pace (Bhasin, 2018). This is thus leading to changes
regarding the new products. L’Oreal also has countless products which have the profits divided
into these different segments (Frue, 2018). These are a likely threat from the changing
economic conditions which will lead to an effect on the products.

ORGANISATIONAL INTERNAL ENVIRONMENT
STRATEGIC CAPABILITIES
It is a term referred to the ability of the business to successfully employ the competitiveness by
applying the strategies which in turn will lead to increase in the value of the products over time
(Hartman, 2018).
Key components of strategic capabilities
Some of the key components of strategic capabilities of L’Oreal are the organisational structure,
human resource, assets stakeholders and the competitors (Hartman, 2018).
L’Oreal’s strategy map is as under which is centred by the mission of ‘Beauty for all’:
Figure 3: Strategy Map of L'Oreal
(Source: Author’s Work, 2019)
Beauty
for all
Human
resource
management
Finance
Corporate
social
respnsibility
Marketing
Reserach
and
innovation

MCKINSEY’S 7S MODEL
Through McKinsey’s 7S model the internal analysis can be conducted of L’Oreal which in turn
will lead to the overall effectiveness of the business (Hill et al., 2014).
Figure 4: McKinsey's 7S model
Source: (Hill et al., 2014)
Strategy
L’Oreal follows a strategy of universalization which seeks to capture, respect and understand
the differences of the customer’s needs and traditions. This helps in differentiating it from its
competitors.
System
The systems followed by L’Oreal are the use of the AI systems which boosts the customer’s
satisfaction and allows receiving easily the personal experiences. It also adopts a tailor-made
solution where it supplies the products according to customised needs (Hill et al., 2014).

Structure
L’Oreal follows divisional structure where different departments are divided and they follow a
chain of command and interact on basis of the different levels of authority (Ceballos, 2016). The
structure is as under:
Figure 5: Organisational structure of L'Oreal
(Source: Palomares, 2014)
Skills
L’Oreal focuses on enhancing the skills of the employees and for the same, it has introduced the
digital acceleration strategy where from the ‘digital upskilling Plan’ massive of employees has
been benefited (L’Oreal Annual Report, 2016).
Style
The management and leadership style at L’Oreal is a participative style under Jean-Paul Agon
where the employees are encouraged to participate in research and improve the existing
products (L’Oreal, 2014).