Business Strategies of L’Oreal: A Comprehensive Analysis

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Business Strategy
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Table of Contents
Introduction......................................................................................................................................3
LO1 analyze the impact and influence which the macro environment has on an organization and
its business strategies.......................................................................................................................4
P1 Applying appropriate frameworks analyze the impact and influence of the macro
environment on a given organization and its strategies...............................................................4
M1 Critically analyze the macro environment to determine and inform strategic
management decisions.............................................................................................................7
LO2 Assess an organization’s internal environment and capabilities.............................................8
P2 Analyze the internal environment and capabilities of a given organization using appropriate
frameworks..................................................................................................................................8
M2 Critically evaluate the internal environment to assess strengths and weaknesses of an
organization’s internal capabilities, structure and skill set....................................................11
LO3 Evaluate and apply the outcomes of an analysis using Porter's Five Forces model to a given
market sector..................................................................................................................................12
P3 Applying Porter's Five Forces model evaluates the competitive forces of a given market
sector for an organization..........................................................................................................12
M3 Devise appropriate strategies to improve competitive edge and market position based on
the outcomes..........................................................................................................................14
LO4 Apply models, theories and concepts to assist with the understanding and interpretation of
strategic directions available to an organization............................................................................15
P4 Applying a range of theories, concepts, and models, interpret and devise strategic planning
for a given organization.............................................................................................................15
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M4 Produce a strategic management plan that has tangible and tactical strategic priorities
and objectives........................................................................................................................17
D1 Critique and interpret information and data applying environmental and competitive
analysis to produce a set of valid strategic directions, objectives and tactical actions..........19
Conclusion.....................................................................................................................................20
References......................................................................................................................................21
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Introduction
The strategy is considered as a formulation of a plan which is required to be implemented in
order to achieve the goals or the objectives. This report is based on the business strategies
adopted by L’Oreal Company in order to achieve a competitive advantage as well as a huge
success rate in the market. This report will include the analysis of the impact or influence of the
macro environment factors on the business of L’Oreal Company. The company is one of the
world’s leading organizations which provide a wide range of skin care as well as accessories. It
is a French personal care organization which is headquartered in Clichy and has a registered
office in Paris. This report will provide the internal as well as external analysis of the company.
The PESTLE analysis, Porter’s five forces analysis as well as SWOT analysis will be made in
this report in order to form a business strategy for the business of L’Oreal.
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LO1 analyze the impact and influence which the macro environment has on an
organization and its business strategies.
P1 Applying appropriate frameworks analyze the impact and influence of the macro
environment on a given organization and its strategies.
L’Oreal is one of the leading organizations in skin care products as well as a wide range of
accessories. It is a French organization having its business globally. It has its goals, missions as
well as objectives which are as follows:
Mission: The mission of the company is to offer all men as well as women worldwide the best of
the innovation related to cosmetics in terms of safety, quality as well as efficacy.
Vision: The vision statement of L’Oreal is “Because I am worth it”. Through this vision
statement, the company is creating value for its products as well as customers.
Objectives: The objective of the organization is to earn the trust as well as the confidence of the
customers in the next ten years. The objective of the company also includes gaining a
competitive advantage in the personal care industry.
Strategy and its role
Strategy is considered as an action plan used by the businesses in order to achieve the short term
as well as the long term objectives of the businesses. It has become very essential for each
business to use such kind of business strategies which can be helpful in maximizing the profits of
the company and also gain the competitive advantage in this cut-throat competition market
(Stalk, et. al., 2012).
There are several numbers of strategic planning techniques which can be used by the business
organizations in order to understand the market situation as well as the value of the business in
the market. These techniques are Porter’s Five Forces Model, PESTLE analysis, SWOT
Analysis, Balanced scorecard etc.
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A PESTLE analysis is being made in order to identify several political, economic, social,
technological, legal as well as the environmental factors which are influencing the business. The
Porter’s Five Forces model is being used by the companies in order to make the external analysis
of the company and understand the situation of suppliers, buyers, competition as well as the
substitutes of the company. Further, the stakeholder's analysis is being made in order to manage
the stakeholders of the company and to analyze the possible stakeholders of the company.
Using Analytical frameworks of macro environment for L’Oreal
PESTLE Analysis
Political Factors: The political factors include the rules as well as the policies made by the
government. L’Oreal is a manufacturing company and the governmental policies of France will
definitely have an impact on the business. As the advent of the globalization is observed, the
political factors have proven to be very positive for the business of L’Oreal.
Economic Factors: There are several numbers of economic factors that have impacted the
business of L’Oreal. The exchange rates within the state where the company is operating are one
of the main elements which can have an impact on the business of the company. The prices of
the product, as well as the interest rates, are also important economic factors.
Social Factors: In the cosmetic and personal care industry, the customers are having changing
opinions as time is passing. The customers are very much sensitive about the products and they
are shifting towards natural products instead of artificial beauty products.
Technological factors: The continuous technological changes have brought some benefits for
the well-established companies like L'Oreal. The company is focused on the research as well as
innovation to gain the competitive edge and maintaining its leadership position in the market.
Legal Factors: There are several numbers of laws as well as regulations which are required to be
compiled by the business organizations. In order to gain the success, L’Oreal is also required to
fulfill all the legalities of such place where the company is working. The business of L’Oreal is
the brand for the upper-middle-class people and it follows all the legal requirements.
Environmental Factors
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There are various environment safety laws that are required to be abiding by the global
standards. This has become essential to make the environment pollution free. L’Oreal generally
support all the campaigns associated with the safe environment and also formulating the future
policies in order to make the environment safe and secure.
Stakeholder’s analysis
The stakeholder’s analysis is an important model in order to identify the stakeholders of the
business and also understanding the stake they have in the business. There are two categories of
the stakeholders within the L’Oreal Business. These are external and internal stakeholders. There
are three steps of making the stakeholder’s analysis. In the very first step, there is requirement of
identifying the stakeholders of the company. There is made the use of brainstorming technique in
order to identify the stakeholders. In the second step, the priorities to different shareholders are
given in order to identify which stakeholders are more important. At the end, there is
requirement of understanding the key stakeholders (Leonidou, et. al., 2015).
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M1 Critically analyze the macro environment to determine and inform strategic
management decisions.
It can be identified that the macro environment of any business is made out of the external
factors having an effect over the company. In order to understand the trends of the market and
their impact on the business of L’Oreal, PESTLE analysis is considered as the best framework.
In order to make informed strategic decisions for the business, the company is required to make
an analysis of the market in which the business is operating. After making the analysis on the
political, economic, social, legal and technological factors, the company will be able to
understand that which strategy should be adopted by the company in order to achieve the
competitive edge. It has been identified after analyzing the Macro environment of beauty and
personal care industry that the company is required to make such strategies which can help the
businesses in maximizing their profits (Lieder, et. al., 2017).
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LO2 Assess an organization’s internal environment and capabilities.
P2 Analyze the internal environment and capabilities of a given organization using
appropriate frameworks.
Strategic Capability: The strategic capability is considered as the ability of a business to
employ the competitive strategies into the businesses that can allow it to survive into the market
and increase the value of the business over a period of time. The strategic capabilities take into
account the strategies used by the business, assets of the organization, market position as well as
the resources of the business (Ghodsi and Webster, 2018).
The three key elements of the strategic capabilities within the business of L’Oreal are:
 Human
 Physical
 Financial
The internal environment of business
The organization’s internal environment is generally composed of certain elements such as
current employees, corporate culture, management which generally defines the behavior of the
management. There are several factors that have an impact on the internal environment of the
business. There are several numbers of theories which are associated with the internal
environment of a business such as SWOT Analysis, McKenzie’s 7s model, VRIO and Porter’s
five forces model. These all have their process of making the analysis of the internal
environment of the business (Dulčić, et. al., 2012). Following is provided the SWOT and
McKenzie’s 7s Model analysis in the business environment of L’Oreal:
SWOT Analysis
Strengths
 The L’Oreal Company has a very strong brand portfolio. The product lineup includes
Maybelline, Garnier, Body Shop, Redken which are globally recognized.
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 The Company has a wide geographic presence all over the world. It has business
operations in more than 130 countries in the world.
 There is a strong capability of using its research and development department.
Weaknesses
 The company is having a weak performance in North America.
 The revenue growth of the company is being slow.
Opportunities
 There are several numbers of acquisitions made by the company and furthermore,
alliances are waiting.
 There is a growing consciousness of beauty among the people in the US which is very
much beneficial for cosmetic companies.
 The cosmetic market is also having growth in emerging nations.
Threats
 There is a growing popularity of cosmetic surgery which can cause the loss of business
for L’Oreal.
 There is very intense competition in the cosmetic market.
McKenzie’s 7s model
There are 7S elements in this model which are required to understand in order to analyze the
internal environment of any business. Following is provided the 7S model analysis of L’Oreal:
Shared Values
The shared values of the business L’Oreal helps the employees of the company to perform their
roles and responsibilities as per the values decided by the company. These are treated as the
foundation of the business.
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Style: This element generally is related to the management as well as the leadership style used
by the L’Oreal Organization. The company is using very effective management and leadership
styles to motivate and manage employees.
Staff: There is a very large staff of the company L’Oreal which is helping the organization in
operating its business in the global market.
Systems: The working system within the L’Oreal organization is appreciable as it is very easy
for the business to identify such tasks which are helpful in making the business decisions.
Skills: There is the skill base among the employees working with L'Oreal which is helpful for
the business in attaining success.
Structure: There is a very effective structure of a business organization. There is a hierarchy
maintained within L’Oreal.
Strategy: It includes the plan of the company which is being used by it in order to achieve the
long term goals. The company is using great business strategies.
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M2 Critically evaluate the internal environment to assess strengths and weaknesses of an
organization’s internal capabilities, structure and skill set.
Following are the strengths as well as the weaknesses of L’Oreal’s internal capabilities, structure
and skill set:
Strengths
 L’Oreal has a great research and development department which can be used for further
innovation.
 The employees of the company are all over the world having a great set of skills.
 The company is geographically present in several numbers of countries.
Weaknesses
 In some parts of the world, the company is facing the issue of low performance.
 There is a continuous decline in the sales of the company.
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