Business Strategy of L’Oreal: A Comprehensive Analysis

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BUSINESS STRATEGY

TABLE OF CONTENTS
Introduction......................................................................................................................................1
Task 1 (LO1 & LO2).......................................................................................................................2
P1 Applying appropriate frameworks analyze the impact and influence of macro environment
on given organisation and its strategies.......................................................................................2
M1 Critically analyze the macro environment to determine and inform strategic management
decisions......................................................................................................................................5
P2 Analyze the internal environment and capabilities of a given organisation using appropriate
frameworks..................................................................................................................................7
M2 Critically evaluate the internal environment to assess strengths and weaknesses of an
organisation’s internal capabilities, structure and skill set..........................................................9
Task 2 (LO3 & LO4).....................................................................................................................11
P3 Applying Porter’s Five Forces model evaluate the competitive forces of given market
sector for an organisation...........................................................................................................11
M3 Devise appropriate strategies to improve competitive edge and market position based on
the outcomes..............................................................................................................................14
P4 Applying a range of theories, concepts and models interpret and devise strategic planning
for a given organisation.............................................................................................................16
M4 & D1Produce a strategic management plan that has tangible and tactical strategic priorities
and objectives and critique and interpret information and data applying environmental and
competitive analysis to produces set of valid strategic decisions, tactical actions and objectives
...................................................................................................................................................18
Conclusion.....................................................................................................................................19
References......................................................................................................................................20

LIST OF FIGURES
Figure 1: Highest sales from L’Oreal..............................................................................................3
Figure 2: Ansoff's growth model.....................................................................................................5
Figure 3: VRIO model (Source: VRIO, 2016)...............................................................................7
Figure 4: Porter's five forces..........................................................................................................12
Figure 5: Balanced scorecard model..............................................................................................14
Figure 6: Framework of strategic clock.........................................................................................16

LIST OF TABLES
Table 1: Strategic management plan..............................................................................................18

Introduction
Strategy is identified as implementation, evaluation and formulation of actions or decisions for
achieving long term business objectives. The present report will study business strategies created
by L’Oreal by analyzing macro environment for planning strategic decisions. It will further aim
at emphasizing internal capabilities and environment by PESTLE and SWOT for identifying
weaknesses and strengths of business. The study will further apply Porter’s Five Forces that help
in evaluating market competitive forces by devising strategies for improving competitive edge.
At last, the study will apply theories for strategic planning in L’Oreal by producing strategic
management plan that will contain tactical and tangible objectives.
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Task 1 (LO1 & LO2)
P1 Applying appropriate frameworks analyze the impact and influence of macro environment on
given organisation and its strategies
Scenario – L’Oreal is identified as global leader in market of cosmetics that targets well-being
of society through energy, professional experts and know-how by effectively knowing cosmetic
industry from France. It is indulged in field that includes skin care, perfume, hair colour, sun
protection, hair care, make-up and men’s skincare. Its net revenues consist of €26.024 billion by
employing 89300 people (Scholes, 2015).
Mission – L’Oreal offers “Beauty for All” that dispenses bets innovative cosmetics for men and
women across world with diversity. The additional mission values of industry include “beauty is
language”, “beauty is science”, “beauty is universal”, and “beauty is commitment” that aims for
achieving beauty desires and needs.
Vision – The predetermined goals of organisation can be achieved by “because I am worth it”. It
target boost in marketing policies, it ensures to obtain high growth in market share. It minimizes
extra market segments and targets potential customers with middle and upper class people.
Objectives:-
 To increase motivation and awareness among employees for targeting environmental
sustainability.
 It has to boost consumer base for two billion every year till 2020.
 Aims at driving growth of sales by category expansion plans (Soltanizadeh, et.al, 2016).
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Figure 1: Highest sales from L’Oreal
(Source: Mark Dockray, 2016)
The business strategy is defined as decision set or action course that targets accomplishment of
business aims and objectives (Akter, et.al, 2016). The strategy is known as master plan that
maintains competitive position by operations, grabbing desired business and pleasing the
consumers. There are various levels in strategies that consist of corporate, functional and
business level strategy. The business strategies of L’Oreal require studying macro environment
for fulfilling objectives. The factors that are present internally are known as micro business
factors and outside are macro business factors. In reference for achieving goals in L’Oreal the
external factors can be analysed through PESTLE that provides fair view of business conditions
to stakeholders for investing funds.
L’Oreal PESTLE
Political Factors – The L’Oreal has to work in market by complying with political factors that
includes government rules and regulations. The policies created by France government needs to
be followed by organisation as products are manufactured in Paris. The success is depends on
regional and import policies. The globalized advent gives positive impact on L’Oreal by political
factors (Leonidou, et.al, 2015).
Economic Factors – The exchanges rates, recession and product prices are important elements
that bring success to L’Oreal. For example – the price and rates of enhancing business in some
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places is high that affects the growth factors. Therefore, business of cosmetic can be increased in
stabilized economy with low labour rates that helps in profit growth and market expansion.
Social Factors – It includes modern products and fashion according to society preferences. The
L’Oreal aims at giving updated and trendy services that are liked by consumers. The factors of
using material in product development play major role for society as some ingredients needs to
be avoided according to culture that creates ethical pressure on operations and profits of firm
(Chang, 2016).
Technological Factors – The firm just like L’Oreal carries trust and innovation factors that plays
technical role in business factors. It always aims to achieve contemporary market trends through
creativity and technical innovation that attracts fashionistas towards trendy cosmetics. Hence, the
technical key aspect innovation is targeted for L’Oreal success by luxurious products.
Legal Factors – The organisation face high market competition that requires cooperating with
legal laws for eliminating sudden audits and penalties. The stuff utilized in products required to
fulfil elites and middle class requirements of society for increasing brand image of L’Oreal.
Environmental Factors – The factors of environment encompasses global safety laws by global
standards. The business is aiming to make planet pollution free and beautiful. Hence, L’Oreal
can also focus on creating environmental protection campaigns that helps in increasing brand
reputation and will conduct environmental friendly business with natural products (Schaltegger,
et.al, 2016).
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M1 Critically analyze the macro environment to determine and inform strategic management
decisions
The macro environment of L’Oreal determines various factors that might become barrier in
achieving the objectives planned. For example – creation of environment friendly business needs
various programs and campaigns for getting better strategies. The tool helped in listing factors
that needs to be studied for avoiding such issues in path of business growth. With determining
factors of macro environment it is essential for firm to prepare strategies for strengthening the
strategic market positioning for avoiding problems and crisis in business. The model of Ansoff’s
Growth Matrix is suitable for strategising market positioning for fulfilling goals by searching
factors that are discussed below (Wheelen, et.al, 2017). Ansoff’s Growth Vector is defined as
tool of marketing that targets business growth. It selects strategic options for objectives
completion that are planned by L’Oreal by coordinating with four categories which are as follow:
Figure 2: Ansoff's growth model
(Source: Ansoff Matrix, 2018)
Market Development – The plan of increasing consumer base with two million can be achieved
by targeting and developing the market with potential customers that likes trendy products. It
will increases sales if target market has been correctly chosen by L’Oreal by market research.
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Market Penetration – The target market can be increased by market penetration that provides
real image and culture of business practises in various countries. The sales growth is based on
goods and services that help in penetration of market.
Product Diversification – The consumer satisfaction from is L’Oreal is high due to its variety of
products that is created looking each aspects. It helps in category expansion of business for
regular growth and acquiring high success results (Koryak, et.al, 2015).
Product Development – The production is done according to consumer demands, fashions,
trends that attract global customers. Hence, business must aim at strategising innovative skills for
producing attractive products with benefits.
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P2 Analyze the internal environment and capabilities of a given organisation using appropriate
frameworks
The factors employees, management and corporate culture are identified as internal environment
that identifies working attitude of employees. It is important for organisation to be capable of
handling internal factors as it affects employees and managers. The areas that contain capability
must be analyzed by managers without impacting strategies capabilities that are gaining growth.
Strategic capabilities refer to business ability that aims for developing competitive plans that aids
in business survival in given timeframe. The business operations are managed ethically that
boost growth paths by dealing with tough market competition (Salim, et.al, 2018). The L’Oreal is
identified as top most industry of cosmetics that needs study internal strategic capabilities for
dealing with market competitiveness that considers VRIN/VRIN model that is discussed below:
VRIN/VRIO Model – The theory was developed by Barney by introducing improvements in
VRIN. It was initiated for evaluating internal capabilities of firm by its resources for achieving
sustained competitiveness. It strategizes objectives, visions, environmental analysis, choices, and
strategic execution for L’Oreal. The practise of model in cosmetic sector will list competitive
forces exist for L’Oreal that is mentioned below:
Figure 3: VRIO model
(Source: VRIO, 2016)
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Value – It develops question that ask presence of valuable resources in firm that needs plans for
eliminating threats for surviving market competition (Krzakiewicz and Cyfert, 2017). The
answer yes depicts strong and valuable resources that help in boosting consumer base with low
price and product differentiation styles. The fluctuations in business culture can be easily
handled by analyzing the resource quality. It will benefit to L’Oreal as it produces variety of
products through innovative skills that ensures democratic product designing that helps in
solving rival competition.
Rare – The resources that are not available with all firms are counted as rare. It minimizes the
parity of competition by comparing rare and valuable sources that are not available with rivals.
There are many competitive brands for L’Oreal but it is firm that is working for specific purpose
that is beauty products that maintains its working focus. It becomes difficult for finding trendy,
price and quality goods with competitors as L’Oreal has gained image by developing fashionable
cosmetics that takes care of skin and hairs of customers.
Inimitable – The materials with preciousness and rarity cannot be finding with every cosmetic
industry as high prices and low profits cannot be desired by businesses. Duplicate products and
substitute are two ways for resource imitation. The competitor’s growth gets diminished as rare,
costly and valuable resources cannot be copied as it generates social issues, ambiguity and high
cost that flops rival’s market. Therefore, rivals should have time, money, culture and skills to
imitate the resources of L’Oreal for getting sustained success which is impossible.
Organized – Organising resources is important for competitiveness to boost firm’s value (Leker
and Bauer, 2017). It is essential to manage policies, process and systems for imitating costly, rare
and valuable material. With presence in market from 100 years L’Oreal has strong market and
brand positioning that brings huge business growth. It is important to adopt hyper dynamic
approach for dealing with market threats by organising valuable, costly and rare resources for
achieving competitive aims and objectives.
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