Business Strategy of L'Oreal: A Comprehensive Analysis

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UNIT 32 BUSINESS STRATEGY
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Table of Contents
LIST OF FIGURES.......................................................................................................................3
INTRODUCTION........................................................................................................................4
LO1........................................................................................................................................... 5
MACRO ENVIRONMENT ANALYSIS OF L’OREAL....................................................................5
LO2......................................................................................................................................... 10
INTERNAL ENVIRONMENT AND CAPABILITIES OF L’OREAL................................................10
LO3......................................................................................................................................... 15
COMPETITIVE ENVIRONMENT ANALYSIS USING PORTER FIVE FORCES..............................15
STRATEGIES TO IMPROVE COMPETITIVE EDGE AND MARKET POSITION ON THE BASIS OF
THE OUTCOMES................................................................................................................. 18
LO4......................................................................................................................................... 20
STRATEGIC MANAGEMENT PLAN BY ADOPTING A RANGE OF THEORIES, CONCEPTS AND
MODELS WHICH INCLUDES THE TANGIBLE AND TACTICAL STRATEGIC PRIORITIES AND
OBJECTIVES.........................................................................................................................20
CONCLUSION.......................................................................................................................... 28
REFERENCES........................................................................................................................... 29
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LIST OF FIGURES
Figure 1: PESTLE ANALYSIS.......................................................................................................6
Figure 2: Strategy Mapping for L’Oreal..................................................................................10
Figure 3: McKinsey's 7s Model...............................................................................................11
Figure 4: VRIO analysis of L'Oreal...........................................................................................13
Figure 5: Porters Five Forces model.......................................................................................15
Figure 6: Ansoff Growth Matrix of L'Oreal..............................................................................17
Figure 7: Porter's generic strategies.......................................................................................18
Figure 8: Bowman’s strategic clock........................................................................................19
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INTRODUCTION
For the highly competitive world and rinsing management issues there is a need for strategic
planning by every organisation which will ensure the setting of the priorities so as to
strengthen the operations and serve in the interest of the stakeholders so as to gain
competitive advantage and accomplish desired goals. This report on, therefore, deals with
the working plan of L’Oreal that through incorporating several business strategy models,
theories and concepts will draw out a strategic management plan and will analyse the
internal as well as external factors so as to designing winning business strategy for future.
L’Oreal is a French cosmetics and personal care Company that has its registered office in
Paris and is considered as the world’s largest cosmetic company which focuses on sun
protection, skin care, hair colour and make-up and perfume products. It was founded in the
year 1909 and it serves worldwide. At L’Oreal number of employees accounts to 89,300 with
revenue of €26.024 billion in the year 2017.
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LO1
As a trainee Strategic Planning Manager of L'Oreal, an environmental analysis will be
produced that will help in the strategic growth plan for L'Oreal by applying the internal as
well as external tools to attain the objectives.
Mission of L’Oreal
The mission statement of L’Oreal is to offer across the world to all men and women the best
of cosmetic innovation by ensuring the high quality, safety and efficacy of the products
which satisfies all desires and beauty needs in a diverse world (Hill et al., 2014).
Vision
The Vision of L’Oreal is to understand the differences due to globalisation and fulfil the
differences in desires and needs by tailor-made products and thus accomplishes the
aspirations of every customer in the world (Haseeb, 2017).
Objectives of L’Oreal
The objectives of L’Oreal are to reach over nearly one billion customers across the world by
2020 by creating the cosmetic products which meet effectively the infinite diversity of the
needs and desires of the customers.
MACRO ENVIRONMENT ANALYSIS OF L’OREAL
BUSINESS STRATEGY
Business strategy is defined as the process of planning the blueprint which helps in attaining
and fulfilling the long term objectives of the firm under pre-determined conductions and
some uncertain conditions (Haseeb, 2017).
L'Oreal has a business strategy to understand the needs of the customers and capture the
large customer base by featuring the famous celebrities such as Penelope Cruz and thus gain
a competitive advantage over its competitors (Hill et al., 2014).
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ANALYSIS OF L’Oreal BY APPLYING PESTLE ANALYSIS AND SWOT ANALYSIS
PESTLE ANALYSIS
PESTLE analysis is considered to be a strategic tool which helps in conducting an analysis of
the factors present in the external environment which directly or indirectly influences the
marketing strategies of a company (Haseeb, 2017). L’Oreal for the same applies this
framework so as to consider these factors in designing effective strategies for the future
(Frue, 2018).
Figure 1: PESTLE ANALYSIS
Source: (Haseeb, 2017)
Political factors
As L’Oreal is a manufacturing company of Paris so it needs to follow the rules and policies of
the government in which it has been working which may lead to the effect on L’Oreal (Shtal
et al., 2017). There are also a few import policies that play a role in affecting the success of
L’Oreal. L’Oreal must also adhere to the product safety guides in the cosmetic segment
which will ensure the safety of all ingredients (Frue, 2018).
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Economic factors
The economic factors such as the taxation rate, economic rate, disposable income and the
interest rate and other factors influence to a great extent to the L’Oreal (Frue, 2018). There
are volatile exchange rates that impact the investment plans of L'Oreal. Due to the
recession, the L'Oreal gets impacted and the price of products varies in different regions.
When L’Oreal operates in the developed states that has a high Human Development Index
then it may lead to good sales figures as the customers are more likely to get branded
products (Haseeb, 2017).
Social factors
In the skin care products and the cosmetics industry the demographic, gender roles,
attitudes, migration and societal norms forms as essential factors that impact L'Oreal as well
(Haseeb, 2017). The social factors such as demographics will have a great impact as in
modern societies there is a high fashion trend and the preferences of the customers are
therefore changing. The societies have a sense of the latest technology which leads them to
move towards adopting contemporary technical trends and thus it opens a wide scope for
the acceptance of the innovations by L'Oreal. Due to the same, there do emerges some
ethical issues which play a prominent role for L'Oreal (Frue, 2018).
Technological factors
Due to the technological factors rising and a trend of innovation is accompanying the
cosmetic industry as well L’Oreal has a great impact. Due to the technological advancement,
L'Oreal speared the innovation and thus within seconds captures new customer segments
that are more likely to purchase the trendy products. Thus innovation in products, supply
chain disruptions and the mobile phone empowerment has driven L’Oreal to innovate its
customer services and products (Haseeb, 2017).
Legal factors
In the cosmetics and Personal Care industry it is vital for L'Oreal to ensure the graph of
success which can be ensured when it fulfils the legalities of the regions in which it operates.
L'Oreal shall adhere to The Federal Food, Drug and Cosmetic Act and the Fair Packaging and
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Labelling Act that will help in overcoming the issues related to legalities and procedures
(Frue, 2018). As it targets the upper middle class or the elite customers so these target
segment usually has more concern about the legit stuff which affects the competitiveness of
L'Oreal.
Environmental factors
L’Oreal also faces some environmental impacts due to the global environment safety laws
which are followed by global standards. L'Oreal, therefore, plays a major role in supporting
the world by conducting the campaign and following the norms of the world. It alters its
priorities of product innovation and then designs the products based on environmental
standards and expectations which meet the traditional value propositions (Frue, 2018).
SWOT ANALYSIS
In order to conduct an organisational audit of L’Oreal the operations of its business will be
analysed by identifying the factors present in the internal environment which emerges as
strengths, weaknesses, opportunities and threats (Bhasin, 2018).
Therefore SWOT analysis will be performed of L’Oreal which will lay out the internal
analysis of the firm:
STRENGTHS WEAKNESSES
 Variety of cosmetics and beauty
products by L’Oreal which dominates
the industry with high profile brands
 It offers high quality predicts and the
luxury brands that too in a cost-
effective manner (Frue, 2018)
 L’Oreal has its operations in more
than 120 countries and it has recently
moved into organic product
categories as well
 The changes in the hair care industry
due to vying of the specific ethnicities
L’Oreal is getting impacted
 There are shrinking profit margins
due to the heavy investments by
L'Oreal I R&D (Bhasin, 2018)
 There is a need for subdivisions in
order to handle everything which is
leading to many issues in managing
the divisions (Frue, 2018)
OPPORTUNITIES THREATS
 For L’Oreal it has an opportunity to  L’Oreal faces the threats of the
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move in new spaces which can be
done by branching out in developing
economies and to attain their brand
recognition (Bhasin, 2018)
 L’Oreal can create new products
focusing on the darker tones and the
curly hair which will help in rendering
products for everyone rather than
just specific demographics (Frue,
2018)
 It has another opportunity to target
the eco-friendly shoppers that will
focus on specific products that are
paraben, silicone-free and sulfate
changes in demands due to the quick
changes
 L’Oreal also has a tricky cash flows
which may lead to the declining
economies leading to the extra cash
required to be spent on the products
(Frue, 2018)
 There are also many competitors in
the cosmetic industry which may lead
to threat for L’Oreal
Thus on the basis of this analysis provided on the macro environment, L’Oreal can
determine the strategic management decisions which it can undertake so as to attain the
organisational objectives and attain competitiveness (Bhasin, 2018).
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LO2
In order to ensure the success of L'Oreal, it also becomes vital to gain insights about the
internal environment as well which will help in analysing the competencies of the business
and will help in assessing the strengths and weaknesses of the internal capabilities.
INTERNAL ENVIRONMENT AND CAPABILITIES OF L’OREAL
Strategic capabilities are termed as the business abilities which are helpful for an
organisation in attaining the competitiveness by applying effectively the strategies that may
lead to the value addition and attainment of the insights related to internal capabilities
(Hartman, 2018).
Key components of strategic capabilities of L’Oreal include the human resources, assets
stakeholders and competitors. For L’Oreal the strategy mapping lies around the mission
statement of the business ‘Beauty For all’ (Hartman, 2018).
Figure 2: Strategy Mapping for L’Oreal
(Source: Authors’ Work, 2019)
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Beauty
for all
Human
resource
management
Finance
Corporate
social
respnsibility
Marketing
Reserach
and
innovation

McKinsey’s 7s Model
In order to analyse the internal capabilities and the strategies that align with these factors
will be conducted through McKinsey’s 7’s model application over L’Oreal which in turn
ensures the effectiveness and internal strengths (Hill et al., 2014).
Figure 3: McKinsey's 7s Model
(Source: Hill et al., 2014)
System
At L’Oreal AI system is adopted so as to boost the personal experiences of the customers
and render the tailor-made products to the customers fulfilling their customised needs
(Palomares, 2014).
Strategy
L’Oreal usually designs a customised and innovative strategy to capture the diverse
population with diverse needs. It respects and understands the values and the needs of
different customer base and the traditions and thus adopts a strategy of universalization
(Hill et al., 2014).
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Skills
L’Oreal has a skilled and competent workforce who works for accelerating the strategy of
L’Oreal and for the same L’Oreal has developed the digital up-skilling Plan which will help in
enhancing their skills and retain the competitiveness.
Structure
Glancing at the management structure of the L’Oreal it appears to follow a specific chain of
common to communicate and interact at various levels. This leads to better clarity and
effective communication within different departments (Ceballos, 2016).
Shared values
At L’Oreal the values revolve around the beliefs of the respect for the customers, integrity,
clarity and transparency which combinable forms the brand reputation and gains the
customer loyalty in return (Robson, 2015).
Style
Glancing at the internal management style of L’Oreal it can be witnessed that Jean-Paul
Agon adopts a participative style of management which leads to better participation of the
employees in conducting the innovation and the improvement in the products of L’Oreal
(Hill et al., 2014).
Staff
L’Oreal employs about 89,000 employees who are innovative and creative and are highly
skilled to fight tough competition in the cosmetic industry. L’Oreal has a large family of staff
where all the decision is taken in the best possible way by involving the participation of all
(Robson, 2015).
VRIO ANALYSIS OF L’OREAL
According to the internal analysis resources also needs to be analysed so as to attain
competitive advantage by laying out the analysis in the basis of the value, imitation,
organisation and rarity of L’Oreal (Chatzoglou et al., 2018).
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