Business Strategy of L’Oreal: A Comprehensive Analysis

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BUSINESS STRATEGY
L’OREAL
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Table of Contents
LIST OF FIGURES.............................................................................................................................3
INTRODUCTION............................................................................................................................. 4
TASK 1- INTERNAL AND EXTERNAL ANALYSIS................................................................................5
ANALYSIS OF ORGANIZATION’S CAPABILITIES AND SWOT AND PESTEL ANALYSIS OF L’OREAL.5
INTERNAL ENVIRONMENT OF THE ORGANIZATION.................................................................10
CRITICAL EVALUATION OF INTERNAL ENVIRONMENT IN CONTEXT TO L’OREAL.....................15
TASK 2- STRATEGIC PLAN ON THE BASIS OF ENVIRONMENTAL ANALYSIS...................................16
USING PORTER'S FIVE FORCES MODEL FOR ANALYSIS OF COMPETITIVE ENVIRONMENT.......16
STRATEGIES TO IMPROVE COMPETITIVE EDGE AND MARKET POSITION ON THE BASIS OF
OUTCOMES.............................................................................................................................. 20
JUSTIFICATION AND RECOMMENDATIONS OF MOST APPROPRIATE GROWTH PLATFORM FOR
L’OREAL....................................................................................................................................22
MANAGEMENT PLAN WITH STRATEGIES WITH OBJECTIVES AND TACTICS.............................23
CONCLUSION............................................................................................................................... 29
REFERENCES.................................................................................................................................30
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LIST OF FIGURES
Figure 1: PESTEL analysis............................................................................................................... 6
Figure 2: SWOT analysis.................................................................................................................8
Figure 3: Strategy map of L’Oreal................................................................................................ 10
Figure 4: McKinsey's 7S model.....................................................................................................11
Figure 5: Organizational structure of L'Oreal...............................................................................12
Figure 6: VRIO framework............................................................................................................13
Figure 7: Porter Five forces model of L'Oreal...............................................................................16
Figure 8: Ansoff growth matrix....................................................................................................18
Figure 9: Porter’s generic strategies............................................................................................20
Figure 10: Bowman’s strategy clock model.................................................................................21
Figure 11: BCG matrix.................................................................................................................. 27
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INTRODUCTION
This report emphasis on business strategy, which refers to the set of decisions to assist the
entrepreneurs in obtaining desired objectives. Business strategy is called a master plan used by
management to secure a position in the competitive market by carrying its operations and
satisfy the customers to achieve the stated goals and objectives of the business.
L’Oreal is one of the world’s leading providers of French Personal Care Company with a wide
range of skincare and accessories. This company was founded by Eugène Schueller on 30th July
1909, and its headquarters is in Clichy, France and registered office in Paris. Its products served
globally as it is a worldwide company with more than 1000 personnel.
As a Deputy Manager of L’Oreal, this report will include the impact of internal and external
environment on L'Oreal as well as this also evaluates the outcomes of this effect by using
Porter's five models for understanding and interpretation the strategic growth plan of L'Oreal.
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TASK 1- INTERNAL AND EXTERNAL ANALYSIS
L’Oreal is one of the world’s leading providers of French Personal Care Company with a wide
range of skin care, Hair care and colour, sun protection, make-up, perfume and men's skincare
accessories since more than 100 years (Cunha, 2017).
Mission Statement
L’Oreal mission is to aspire beauty either men or women. The mission is to emphasise both to
realize their aspiration and express their personalities, which gives meaning to the value of the
business. Its mission is ‘Beauty for all.’
Vision Statement
L’Oreal represents its vision as the motto ‘Because I’m worth it’. The company achieves its
objective by keeping this motto in mind and serves the best to its customers. Vision statement
helps in marketing and targeting policy for better performance and captures the whole market.
ANALYSIS OF ORGANIZATION’S CAPABILITIES AND SWOT AND PESTEL
ANALYSIS OF L’OREAL
The strategy is used by management to secure a position in the competitive market by carrying
its operations and please the customers to attain the definite goals and objectives of the
business (Olson, 2018).
BUSINESS STRATEGY OF L’OREAL
Strategic management is used for implementation of strategic ideas and visions in the market in
an organized manner to capture the higher market share with a combination of various creative
activities for the success of L’Oreal (Olson, 2018). The company has a business level strategy to
over the competitors and gain attention globally on its products.
The company understands the globalization of modifications by providing beauty products and
suitable cosmetics by adopting the strategies of featuring famous celebrities such as Zoe
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Saldana, Black Lively and Penelope Cruz to gain attention. This is the advantage of L'Oreal by
applying different strategies and incorporated cost leadership. Its products are luxury products
for customer and professional products.
IMPACT AND INFLUENCE OF THE MACRO ENVIRONMENT ON L’OREAL
There are various frameworks to analyze the macro environment and this plays an important
and effective role for L’Oreal (Cunha, 2017). The effect of the macro environment will be
analyzed by using PESTEL Analysis and with the help of SWOT analysis, the organizational audit
will be performed.
PESTEL ANALYSIS OF L’OREAL
Figure 1: PESTEL analysis
(Source Cunha, 2017)
POLITICAL FACTORS
L'Oreal is a cosmetic and skin care company which serves globally, it gets affected by political
factors as the consumers are becoming conscious about the values and the political
connections with brands. The policies of government and regulations and rules also affect the
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company’s policies and play a vital role in ensuring the success of L’Oreal and owing to
globalization, therefore, the political factors contribute positively to L’Oreal.
ECONOMIC FACTORS
The economic factors like exchange rates, income rates etc. impact the L’Oreal, it is a cosmetic
and beauty products industry tough and due to the economic recession, it results in the positive
contribution to the organization. The GDP and the states with a high development index also
contribute to the great success to the brand L'Oreal. The cosmetic market has been a rise in the
context of the middle class to offshoot the growth.
SOCIAL FACTORS
L'Oreal gets affected by social factors as the consumers are becoming more conscious of the
formulations of products. Social factors also hold the technological developments meeting with
the society which are more persuaded with the trend and fashion. Due to these factors, L'Oreal
welcomes the innovations of technical trends.
TECHNOLOGICAL FACTORS
Technology affects any organization to the most in a positive or negative way. L'Oreal adopted
the new innovations and technologies traits for its success and it gives more emphasis on the
technological changes for its benefit and for consumer satisfaction and goes with the
contemporary trends with concerned to innovations.
ENVIRONMENTAL FACTORS
The factors include by the environment are the environmental changes, climate changes, safety
laws and global standards should be tolerated by L'Oreal to support the world and the
campaigns of L'Oreal support to understand the internal as well as the external factors in
respect to L'Oreal effectively.
LEGAL FACTORS
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L’Oreal is an international brand which has to follow the zero tolerance in its supply chain for
standard violations. The legal factors like legalities and the legal aspects of the products impact
the L’Oreal to great extent. By having a high level of market share globally, it has to implement
the strong agreement values for suppliers to avoid violations related to ethical, legal and social.
ORGANISATIONAL AUDIT OF L’OREAL BY APPLYING SWOT ANALYSIS
The activity of supporting the organization in improving the functions of L'Oreal by identifying
the strengths and weaknesses of the company and helps in achieving the objective is known as
an organizational audit.
SWOT Analysis for L’Oreal
Figure 2: SWOT analysis
(Source Harf, 2017)
Strengths
The company L’Oreal is a multinational brand which serves globally its beauty and skin care
products. Its main strength is that it has the power of strong research and development into the
market with the strongest development strategy (Harf, 2017). L’Oreal products are based on
safety as the products are made up of natural ingredients and its quality as the products are
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STRENGTHS
1. Global brand
2. Strong research and development
3. Strong business stretagy
4. Qulaity based product
WEAKNESS
1. Multiple acquisitions
2. Customers dependency on the
other brands
3. Dependent on suppliers
OPPORTUNITY
1. Establish new markets in middle
east and africa
2. Travel retail in big markerts
3. Establish many channels for
distriibutions
THREATS
1. Competitors of same indusrty
type
2. Expensive range of products
3. Consumer preference to other
barnds
SWOT

high in prices and luxurious too; due to this the company calls as the leader and serves to
various markets.
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Weaknesses
The company L’Oreal has a weakness in multiple acquisitions as it acquires many brands like
L’Oreal Paris, L’Oreal Professionnel, Giorgio Armani etc. thus the company is weak in handling
all the brands simultaneously. It also faces the weakness of growing capacity in more hair care
line products which wants more attention and depends upon the suppliers of its various
products within the market (Harf, 2017).
Opportunities
The company has many opportunities to make new markets in the Middle East and Africa
where L'Oreal can newer the spaces in the beauty and care industry which is likely to change in
the coming time. It can travel retail as the sales in duty-free shops are released from the
payment of certain national taxes, local and excise duties. L'Oreal can make and sell its products
for a fast-growing country like Brazil, Russia, India and China markets (Harf, 2017).
Threats
The biggest threat for L'Oreal is competition in the same industry of beauty care and cosmetics
products and also the occurrence of new business models. L'Oreal also has to divide the profits
into many segments as it has multiple acquisitions of brands (Harf, 2017). The changing
economic conditions also are the threats for L’Oreal to effect on its products. Consumers are
giving more preference to Ponds and Olay.
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INTERNAL ENVIRONMENT OF THE ORGANIZATION
STRATEGIC CAPABILITIES
It refers to the capabilities of the participants of the organization that permits the development
and formation of the strategy will lead to growth in the value of the products and in pursuit of
justifiable benefit (Goxe and Pires, 2019).
Components of strategic capabilities
The key components of strategic capabilities of L'Oreal are the human resource, organizational
structure, assets stakeholders and competitors (Goxe and Pires, 2019). Its strategy map is upon
its mission of ‘Beauty for All’.
Figure 3: Strategy map of L’Oreal
(Source Goxe and Pires, 2019)
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Beauty for
all
Human
resource
management
Marketing
and research
and
development
Corporate
social
responsibility
Finance

MCKINSEY’S 7S MODEL
This model will lead to overall effectiveness by an internal analysis of L’Oreal (Ravanfar, 2015).
Figure 4: McKinsey's 7S model
(Source Ravanfar, 2015)
Strategy
L'Oreal follows the strategic plan to design and build to maintain a competitive advantage for
its business over time. Strategies outline the allocation of resources in order to achieve the
results and the objective of the company (Ravanfar, 2015).
Style
L’Oreal follows the management and leadership style and style is the behaviour and value of
the workforce that adopted by L’Oreal. The company value system will influence by following
positive culture in the workplace by the managers (Ravanfar, 2015).
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