Business Strategy of L'Oreal International: A Comprehensive Analysis

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BUSINESS STRATEGY

Table of Contents
INTRODUCTION............................................................................................................................. 2
TASK 1............................................................................................................................................ 3
TASK 2............................................................................................................................................ 9
TASK 3.......................................................................................................................................... 14
TASK 4.......................................................................................................................................... 16
CONCLUSION............................................................................................................................... 18
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INTRODUCTION
The organization goals are formed as the per the quality requirements of the firm with the
support of the business strategy. This is helpful in enhancing the present structural framework
of the business. Business strategy can be identified as the art of the operational planning,
coordination in the various resources and assessment of the abilities and competencies so that
the organization objectives can be accomplished. The main objective of this assignment is to
concentrate on the various types of business strategy and develop an understanding of the
various models that will portray the strategic choice of L'Oreal International.
L'Oreal International has been known in the global market for the long term. The main strength
of the organization is the standards of the products that are provided to the consumers. This
one of the largest manufacturer of cosmetic around the world that provide several kinds of
goods that are related to hair, colour, skin care and other types of cosmetic products. The
organization has a very high turnover in the global industry.
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TASK 1
The cosmetic industry is the most profitable for organizations that want to earn higher
revenues from the market. L'Oreal International is the provider if the hair colour, skin care, sun
protection, perfumes and hair care and it is one of the world largest cosmetic beauty
companies (Akter et al., 2016). The organization structures its business strategy that is based on
targeting teenage consumers along with the older individual. It has a wide range of expensive
and luxurious products that attract the attention of consumers from higher society. The
organization has formulated its vision and mission so that the goals of the organization can be
accomplished in an effective manner.
Vision
L'Oreal has the vision statement that has also been represented in its motto that is "Because I
am worth it". This based on the improvement of the performance by capturing the target
market so that the goals and objectives of the organization can be accomplished. It has been
also found that the organization is also planning for the expansion in the global market until the
end of the year 2020 (Amran et al., 2016).
Mission
The mission statement of the organization is based on the belief that states that the "Everyone
aspires beauty". The main objective of the business is to support the men and women so that
they can aspire. Additionally, the value of the organization in the global market can be raised
with the help of this.
Objectives
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The main objective of the organization is to generate a strategic plan that has been given
below:
 To be one of the topmost market leaders of the cosmetic industry.
 To establish a strong brand image
 To meet the requirements and expectation of the consumers
 The implication of the CSR regulations and marketing so that the growth and
competitiveness can be sustained by the organization
 Manufacturing higher quality of the products with the support of the new techniques
and tools that are available in the market
 Diversification of the teams with the universalization of team for all
Role of the strategic planning to accomplish business objectives
The framework of the business strategy is significant for the organization so that the
understanding of the global market can be developed with the market presence in the external
environment of the cosmetic industry (Boyd et al., 2017). This environment is impacted by the
various factors that involve the social, economic and political strategies. Thus the L'Oreal
implied the business strategies that are sustainable enough for the diversification of the
organization in the global market scenario.
The analytical structure of the macro environment
For the maintenance of the market presence in the external environment, it is essential that the
different models and theories are implied by the L'Oreal. The business strategies can be
developed with the utilization of the PESTEL structure and Ansoff Growth matrix so that the
strategic positioning of the organization can be done (Buckley et al., 2016).
PESTEL ANALYSIS
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This model can be implemented by the organization so as to assess and monitor the influence
of the external environment elements on the business. This acts as a significant strategic tool
for the purpose of the environmental scanning and the impact of the several factors on the
business performance can be maintained. PESTEL analysis in the context of the L'Oreal group
has been given below:
Political factors
o The organizational operation can be
affected by the political governance
o Influence of political stability in the
international market
o Legislation related to the private
investment
o Variation in government regulations
o Categorization of the merit and
demerit goods (Chang, 2016).
Economic factors
o With the changes in the inflation rate
variation in the economic rate.
o Influence of the globalization and
control policies
o Fluctuations in the prices along with
the monetary policies
o Due to the global operation the
variation in the foreign exchange rate
Sociological factor
o The trends in the market are
changing with the perception of
society
o The mobility of the distribution of
income and resources
o Attitude towards the products of
Technological factor
o Utilization of the innovative
technologies that can lead to the
prosperity and development of the
L’Oreal.
o The higher level of efficiency can be
attained with the integration of the
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L’Oreal
o The growth rate of the population
latest IT equipment (Chen et al., 2016).
o Production barriers can be reduced
with the automation of the tasks
Environmental factor
o Variations in the weather and climate
o Waste management regulations
o Motivating the use of the products and
services that are environmentally
friendly.
Legislative factor
o The legislative problems can influence
the business operation of the L'Oreal.
o The laws and regulation related to
consumer protection and employment
can be implemented.
o Along with the health and safety laws
for the success of the L’Oreal (Dahlberg
et al., 2016).
Structure- conduct- performance Model
The model focuses on the interrelationship among the organizational environment and
performance. This determines the organizational framework and determines the situation of
supply and demand in the market. thus with the help of this model the L’Oreal can assess its
position in the competitive market. this impacts the behaviour of the organization presenting
the key feature of the strength and drawbacks with the support of the SCP model.
Ansoff’s growth vector matrix
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The matrix represents the four options that are available for marketing approaches for product
development and growth. Therefore there are growth strategies that are set for the business
strategy. They are given below as:
1. Market Penetration
This includes the increment in the
market share with the rise in the sales
of the goods and services to the
consumers that are existing of the
organization. This involves the
structuring of the new strategies so
that the identification of the new
consumers in the market can be
performed (Eaton and Kilby, 2015). For
instance, L'Oreal promotes celebrities
by making them the brand ambassador
so that the products of the company
can be promoted.
2. Product Development
This includes the growth of the new product is
that the requirements of the consumer can be
meet along with the expectation in the recent
market scenario. This can help in gaining a
competitive advantage over the other
organizations in the cosmetic industry. In the
existing line of the L'Oreal, there were new
variants that were added to the line. For
instance, the organization develops the 2-3
shades of the product so that the wide variety
of the products can be offered to the
customers.
3. Market Development
The strategy includes discovering the new
market for the products that are existing
with the help of market research and
investigation. L'Oreal has implemented the
direct marketing channel so that sales of
the organization can be raised. As per the
report the company is about to open
almost 500 shops in the year 2019.
4. Diversification
This approach is identified as the riskiest
strategy as it includes movement of the new
products in the new goods into the new
market. Therefore the diversification strategy
is more exposed to the maximum amount of
uncertainty. For instance, the organization has
been acquired by Carol's daughter so that the
brand of the hair care products can be mixed
(Fontana et al., 2017).
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Therefore the growth of the organization is dependent on the strategic marketing of the
present product or the new product so that the growth of the organization can be attained. The
consumers of the company can be increased with the help of the market penetration that is to
about 1 billion new consumers with heavy publicity and product differentiation.
STAKEHOLDER ANALYSIS
The importance of the stakeholder assessment can be estimated in the context of the
development of the new strategies and helping L'Oreal to recognize the power and interest of
the stakeholder (Higgins et al., 2015). This approach will be helpful in the management of the
organization to gain an understanding of the contribution and assessment of the efficiency of
the stakeholder in the procedure of the development.
Additionally, the strength and weakness of the stakeholder can support to enhance the
business strategy so that the goals and objectives of the business can be met. The management
of the L'Oreal is required to be implied in the CRM system for effectively sustaining the public
relation and taking the feedback of the consumers.
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TASK 2
The internal assessment is significant for judging the competitive nature of the L'Oreal in the
global market. This will further support in the future while assessing the resources and
capabilities so that the competitive advantage can be attained. Thus the internal analysis of the
organization can be performed for the organization as given below with the help of the various
approaches.
STRATEGIC CAPABILITIES
L'Oreal has represented a great example in front of the other companies that are related to the
global branding strategy of the organization. This will bring growth opportunities for the
organization in the future (Kourdi, 2015). The organization has been facing higher amount of
the competition in the market due to the presence of the Revlon, Chamber, Nivea and Lakme
that has led to the increase in the demands of the innovation capabilities in the organization.
The key driving force behind the growth of the L'Oreal is the resource-based strategy and
management skills. The organization has the ability to identify the requirements of the
consumer in different regions.
MCKINSEY 7S MODEL
Strategy The strategy can be defined as the determination of the scope for the
long term objective of the organization with the allocation of the
resources in an efficient manner. The growth of the L'Oreal relies upon
the consumers that are present around the world.
Structure The structure indicates the hierarchical arrangement and line of the
authority that dictates the duties and the roles among the various level
of the company. Therefore L'Oreal has implemented the Matrix
organizational structure that is based on combining the two or more
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organization duties (Lieder et al., 2017).
System The system is utilized by the company for the changes of input into
output. It is significant for the L'Oreal to establish the formal structure for
the efficient formal structure facilitating the quality of services to the
consumer.
Shared Value This can be considered as the beliefs and attitudes of the individual in the
company. Therefore it is needed by L'Oreal to exchange the core values
so that the diversification of the consumer base.
Staff The style indicates the management style that has been adopted by the
L'Oreal group. Therefore the L'Oreal comprise of the disciplined
environment so that the deliberate problems can be avoided (Moseley III,
2017).
Style This represents the management style that has been adopted by the
L'Oreal. Therefore the L'Oreal comprise of the atmosphere that is
disciplined enough to deal with the problems.
Skill There are highly skilled and talented staff members that add to the
productivity of the business. Therefore the L'Oreal group can facilitate
with the training programs such as the on and off job training so that the
individual ability can be improved (Oldman and Tomkins, 2018).
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VRIO FRAMEWORK
This framework can be implemented by L'Oreal so as to assess the internal strength of the
organization and revealing the resources that are tangible of the company. Therefore the
assessment can be used to determine the competitive potential in the market.
V-Valuable This indicates the organizational abilities to utilise the resources and
implying the strategies so that it can accomplish the effectiveness.
R- Rare For the generation of the perfect competition and dynamics while gaining
the highly specialised stud the global presence of the L’Oreal is important
(Olson et al., 2018).
I- Imitate There are rare and valuable resources that are imperfectly linked with
the account of the social complexities and the casual ambiguity
N/O- Organization The organization resources are proved to specific in the case when they
are not strategically equivalent and valuable.
VALUE CHAIN ANALYSIS
This model of the assessment L'Oreal comprised of the primary and support practices so that
the identification of the most valuable products can be done with the accomplishment of the
competitive advantage in the cosmetic industry.
Primary Activities
o Inbound Logistics
For meeting the requirements of the consumer L'Oreal has devoted their time. Therefore the
organization has been producing the raw material from the efficient suppliers so that the high
quality of the services can be delivered (Peng, 2017).
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