Business Strategy of L'Oreal: A Comprehensive Analysis

Desklib provides past papers and solved assignments for students. This report analyzes L'Oreal's business strategies.

BUSINESS STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................................2
LO1..............................................................................................................................................................3
APPLYING APPROPRIATE FRAMEWORK ANALYSE THE IMPACT AND INFLUENCE OF MACRO
ENVIRONMENT ON A GIVEN ORGANIZATION AND ITS STRATEGIES........................................................3
CRITICALLY ANALYSIS THE MACRO ENVIRONMENT TO DETERMINE AND INFORM STRATEGIC
MANAGEMENT DECISION........................................................................................................................5
LO2..............................................................................................................................................................6
ANALYSE THE INTERNAL ENVIRONMENT AND CAPABILITIES OF A GIVEN ORGANIZATION USING
APPROPRIATE FRAMEWORK....................................................................................................................6
CRITICALLY EVALUATE THE INTERNAL ENVIRONMENT TO ACCESS STRENGTH AND WEAKNESSES OF AN
ORGANIZATIONS INTERNAL CAPABILITY, STRUCTURE AND SKILL SET.....................................................8
LO3..............................................................................................................................................................9
APPLYING PORTER'S FIVE FORCES MODEL EVALUATE THE COMPETITIVE FORCES OF A GIVEN MARKET
SECTOR FOR AN ORGANIZATION.............................................................................................................9
DIVERSE APPROPRIATE STRATEGIES TO IMPROVE COMPETETIVE EDGE AND MARKET POSITION BASED
ON THE OUTCOME................................................................................................................................11
LO4............................................................................................................................................................13
APPLYING A RANGE OF THEORIES, CONCEPT AND MODELS, INTERPRET AND DIVERSE STRATEGIC
PLANNING FOR A GIVEN ORGANIZATION..............................................................................................13
CONCLUSION.............................................................................................................................................17
REFERENCES..............................................................................................................................................18

INTRODUCTION
Establishment of organizational goals and standards related to a business strategy which is
helpful in the growth and it also inspires the approaches which are followed by the
organization. Business strategy is an art of operational planning, analysis of skills available in
the employees, providing resources to the employees, and operational planning and the
capabilities of the staff member for allocating role and responsibility so that they attain the
desired goals and objective. In this study, strategies for growth of employee and environmental
analysis, management planning is related to L'Oreal is discussed here. Apart from that, this
report will examine which are helpful in increasing the new business strategies for performing
the internal and external analysis of the business. This report also analyzes the estimation of
other strategies which are suggested for strategic development of business of L'Oreal and it
accesses the organizational internal and external capabilities. Furthermore, these reports will
analysis the roles and responsibilities of the employees and the information has been delivered
through the resources which are required for applying the strategies for achieving the business
goals.

LO1
APPLYING APPROPRIATE FRAMEWORK ANALYSE THE IMPACT AND INFLUENCE OF
MACRO ENVIRONMENT ON A GIVEN ORGANIZATION AND ITS STRATEGIES.
L'Oreal is a very famous brand of products related to the beauty product companies in the
world. L'Oreal has a huge variety of beauty product in the competitive world and company is
affected by many factors of environment. The business of the macro environment is including
many factors like customers, competitors, suppliers and the public. For analyzing and
monitoring the company the pestle rule is used in Macro environmental factor which are
reflecting the organization's performance (Zalengera et al, 2016). At the starting level of new
business, some tools are specially used and also helpful for startup in the market. The pestle
analysis of L’Oreal is as follows.
POLITICAL ANALYSIS
Policies and the rules of the government are contained by the political factor in which the
companies like L’Oreal are working. Paris is the manufacturing places for the company so the
government policies of France disturbing the company so much in Paris. Separately from that,
there are many policies which are imported by the states which play an important role in the
achievement of the L’Oreal. In the globalization, political factor playing an important part in the
business industry like L’Oreal.
ECONOMIC FACTOR
Exchange rates are made from the external factor of the region in which the company is
working in the present time. In L’Oreal, the education of beauty brand has a main element
which is recession component. In the high technological country the human development index
more and decent people will like the product of L’Oreal very much. There are many people
which like the products very much so that the sales of the product will increases. And it will
definitely affect the business in the world (Camilleri, 2018).

SOCIAL FACTOR
Society includes the technical trend as a social factor. Surely, the fashion trend is more followed
by modern society for maintaining their status. The society with the knowledge of latest
technology and the trends are always excited for new products in the market. They are always
ready to accept the change. The modern technical trend is always welcomed by the society and
the innovations are working of regularly.
TECHNOLOGICAL FACTOR
The innovation in the trend is always followed by L'Oreal. Through technology, society is kept
updating with the new trends. It is a key feature of the success which helps in selling the luxury
products of L’Oreal (Ismail, 2018).
LEGAL FACTOR
There are many competitors of L’Oreal which are competing with it for showing them better.
The legal requirements are very important for fulfilling the needs of the customer. The world is
now becoming a global village. It is an upper-middle-class brand so it does not need to worry
about the legal stuff.
ENVIRONMENTAL FACTORS
This factor is filled with different global environmental laws which are followed quickly.
Surrounding and pollution is the main factor which helps in maintaining the beauty of the
environment. L’Oreal is also supporting the government through the campaigns and also
follows the rules and regulation given by the government.

CRITICALLY ANALYSIS THE MACRO ENVIRONMENT TO DETERMINE AND INFORM
STRATEGIC MANAGEMENT DECISION
The efficiency of the employee can be affected in many ways and it is also affected from the
outer side of the organization. These type of factors can affect the organization vary widely in
some areas like sales, technology and international market. This type of factors is affecting the
employees and also reduces the effectiveness and efficiency of the organization. Reduction in
the strength may also affect these strategies. It also affects the pricing policy of the company.
Lots of changes are taking place which is very major in the respect of the organization. It is the
process of identifying the management which is related globally used. The promotions of the
product are based on the product but then when there is any competitor in the market then
the company planned accordingly. If the product is successfully introduced in the market the
company should accept the policies given in the government.
The trends like the change in income, inflation, interest rates, and exchanges rated and many
other trends are analyzed through the economic trend. And the trends like behavior, norms and
values are analyzed through the social trend, the total number of part-time worker and their
attitude towards global warming, population growth is also analysis through the social trend
according to their relevant ages in the industry (De Mooij, 2018). The technology is a factor
which is responsible for identifying technological change. Legal environmental analysis is the
same as the political environment which includes the court decision and focuses on liability
compensation. So the company needs to be regularly updated through the changes in the
policies.

LO2
ANALYSE THE INTERNAL ENVIRONMENT AND CAPABILITIES OF A GIVEN
ORGANIZATION USING APPROPRIATE FRAMEWORK
L’Oreal is one of the leading companies in the beauty market of the world. The products of
L’Oreal are selling with its own brand name. There are many shops which are display all the
brands which belong to L’Oreal. Here, SWOT analysis is used for analyzing the capabilities and
the environment of the organization.
STRENGTHS
There are many factors which related to the company’s strength like largest beauty and
cosmetic company, continuous R & D, Fantastic product and brand folio, high-quality products,
strong integrated marketing communications, good stars in a brand portfolio and products
should be natural and organic in nature (Kuma, 2015). The company focuses on products like
cosmetics and personal care. The experiment is important for the company because there
should be involvement of dermatology, skin care, cosmetic and what the effect of the product is
in different weather. That’s why continuous R& D is important for ensuring the safety of the
products. The brand is also an important part of the organization which only possible when the
customer is happy with the quality of the product they are using and purchase the product
again and again. Integrated marketing communication is done through the portfolio and the
marketing campaign. L’Oreal has a three-star in his brand portfolio.
WEAKNESS
There are too many divisions in the weaknesses of the L’Oreal. The large operation had to face
many problems for the growth of the company. L'Oreal has many subdivisions that are the
reason which is responsible for calling the organization a bulky and slow process. The segment
which is not growing in L’Oreal is hair care. In the L'Oreal, there is a high-level competition of
the brand with other companies. There are many hair care company which are competing with
the Garnier brand of L’Oreal. The margin in the profit is very low because of the high

investment in R &D, Because of the massive expenses of distribution in organic processes are
less in the profit margin although the L’Oreal R & D process takes the brand to the top
(KOBAYASHI, 2016).
OPPORTUNITIES
The marketing potential is one of the important parts for getting opportunities for checking the
market potential of increase in beauty items and personal care. Expansion in the product line
will increase the productivity in the market mix which results as a complete product mixed
expansion. The demand in organic cosmetic is the positive sign that the customer liking L’Oreal
which is using organic methods. Exploring the new market will give high sales and helpful in
staying in the same market.
THREATS
There are two main aspects of the threats first one is Dynamic nature of cosmetic companies
and the second one is Cash Crunch. The demand of the customer in the cosmetic industry is
continuously changing and keep updating with the time is very difficult which seems like the
problem which cannot be handled. The competition in the market is also difficult so the
company has to come up with the new tactics for the best result. L'Oreal is a brand which has
so many sub-brands in which the cash is divided into many segments. As a result, if the
economy falls down then the company has to face a big problem. The cash flow of the company
is affected by the economic problem of the company. Occur the cash crunch for the company
and it is also the reason of falling down of the economy (Ismail, 2018).

CRITICALLY EVALUATE THE INTERNAL ENVIRONMENT TO ACCESS STRENGTH AND
WEAKNESSES OF AN ORGANIZATIONS INTERNAL CAPABILITY, STRUCTURE AND
SKILL SET
Through internal analysis, the identification and evaluation of the capabilities of L'Oreal can be
found. By identifying the strength and weakness enable us to make a good strategic decision.
The environment provides an alternative for developing the strategies. L'Oreal group is capable
of developing activities in the different field for enhancing and for putting more concentration
in the regular activity. Through advertising, the growth of the company increases so the
company can earn a profit by that. The strategy is following the worldwide for removing the
weaknesses in which the campaigns are very useful. L'Oreal is increasing focus on skin care, hair
care for giving the opportunities to the employees for the improvement in their future and for
the growth of the company. By making lots of product the company can increase its share in the
market. The image of the brand is totally depended on the products of the company. Growing
competition is one of the threats to the organization. Spending habits of the customer is also a
thread for the company (Kerzner and Kerzner, 2017).

LO3
APPLYING PORTER'S FIVE FORCES MODEL EVALUATE THE COMPETITIVE FORCES OF
A GIVEN MARKET SECTOR FOR AN ORGANIZATION
Porter five force analyses for L’Oreal are discussed here. The company has lots of products
which are regularly used by the customer. L'Oreal is one of the topmost brands for the beauty
products. The porter analysis is as follows:
THREAT OF NEW EXTRACTS - HIGH
L’Oreal attracts the new entrants which are used for capturing market share and this is
responsible for a drop in profit of L’Oreal. There are many barriers to the beauty industry. The
sale of the product of the company is very high. The capital introduced for starting the company
is very high. Expectation realization and gaining access for the distribution is done at the
moderated level barriers. It's very hard to fulfil the required input for manufacturing is not so
difficult (Nessler, 2018).
THREAT OF SUBSTITUTE - LOW
In L’Oreal, there are two most important substitutes which are homemade and other product
related to the skin which is made up of natural ingredients like oils to product, herbs and
regeneration of skin. These products are used in rural areas for good skin. Some women’s are
not interested in old fashioned and in the products which are not effective. The substitute’s
buyer and the switching cost are low.
COMPETITIVE RIVALRY – HIGH
The competition with the rivals in the L’Oreal is high. There are many competitors of L’Oreal
because the beauty strategy is very trending now. There are many beneficial products which
are helpful in the growth of the company. There is not so much difference between the
products of different brands. The existing barriers to L'Oreal are very high.

SUPPLIER POWER – LOW
In L’Oreal, the number of workers is very large. The product is manufactured by many other
brands also and their input is the same. There is a forward integration which is also present
with the positive switching cost. The substitute for input and their impact cost is also low.
Lastly, the industry has low bargaining power (Nessler, 2018).
BUYER POWER – HIGH
Availability of the product and an increase in competition has increased the number of buyers
in the high power industry. The buyers are not having the rights to make a change in the price.
This is the reason for short term profitability. For reducing the prices of product for buyers to
easily switch the brand.

DIVERSE APPROPRIATE STRATEGIES TO IMPROVE COMPETETIVE EDGE AND
MARKET POSITION BASED ON THE OUTCOME
The strategies are used to improve the growth of the company by evaluating the strength and
the weakness of the competitive brands for filling the gap. There are seven strategies which are
used to improve the competitive edge are as follows.
1. Cost Leadership Strategy - when the companies want to make their brand best among
all at that time the company offer an attractive price to the customers. This leadership is
very helpful in the improvement of a brand and also affect in making customer
relationship (Hill, 2017).
2. Differentiation Strategy - when L'Oreal wants to differentiate itself from other
companies most commonly used technique is branding. It helps in districting their status
from others. The Individual those started using this strategy have the strength and
talent which makes them different from others.
3. Innovation Strategy - L’Oreal is moving ahead in the competition with the help of new
and different strategy and which are implementing in different ways. The company has
its medical device also which focuses on the ultrasound equipment for checking the
product is how much harmful for the skin.
4. Operational Effectiveness Strategy – L’Oreal is a company which wants to better than
other companies. The company startup a new innovation strategy which is helpful for
the growth of the company and it maintains the leadership in the company. Some
companies also started overnight shipping for giving the competition. It is creating a
system for individual and how to analyze new data. When the company wants to do well
for achieving the advantage of competition from those who are doing the work for a
longer time and slower also (Hill, 2017).
5. Technology-Based Competitive Strategy - Technology is a trend which gives a hard
competition to the brands by launching new and effective products. It gives the
company a broad are for development so that the company may earn more profit. The
workers started working with new technology and try to work with new technology are
always appreciated by the company.