Loreal's Swot Analysis Signature Assignment Research Paper

L’Oreal Company
* Executive Summary
This report examines some of the trends in the beauty industry, and it also explains L’Oreal SWOT analysis to evaluate the company’s strengths, weaknesses, opportunities, and threats. Additionally, the paper has also evaluated L’Oreal’s internal competitive advantage and also describes the strategies that have been implemented by the company to ensure its success in the future beauty market. The report also explains how SWOT analysis may be used to develop a competitive advantage and the process that an organization may use to design a strategic plan. Additionally, the paper evaluates the role of managers in strategic planning, the importance of visual aids in presenting strategies and the functions of the board in strategy and planning.
* Introduction
L’Oreal is a French-based company which specializes in the production of cosmetic products. The company was founded in 1909 by Eugène Paul Louis Schueller, and since then the company has become the number one cosmetic group in the world. L’Oreal is one of the world’s largest cosmetic companies, and its headquarters are based in Paris. The company specializes in producing beauty products which range from perfumes, skin care, hair care, and make-up. The company also produces salon products and nail polish products. L’Oreal owns several well-known consumer and luxury brands which include Garnier, Maybelline, Lancome, and Kiehl. The company also produces perfume brands which include Giorgio Armani and Ralph Lauren among others. The company has implemented measures to ensure that it differentiates itself from other companies in the beauty industry. L’Oreal primary focus of late has been aligning itself closely to digital innovations. For example, the global beauty giant has partnered with other companies such as ModiFace to advance its technologies of 3D virtual makeup, color and skin products. This paper examines L’Oreal internal competitive advantage, the company’s SWOT analysis and the strategies that the company has implemented to ensure that it remains competitive. Additionally, it analyzes L’Oreal Company using three strategies which are SWOT analysis, PESTLE and five forces analysis.
* External Environment
Industry overview and analysis
Industry trend
Enhancement and innovations in technology are impacting the beauty industry. Digital transformations affect how business operates, and it also affects the way a business interface with its consumers. At L’Oreal, the clients' experiences are being used as the yardsticks of the company's digital transformation. L’Oreal has embarked on its digital transformation which is aimed at accelerating the design of its products, by managing shorter product lifecycles (L’Oreal, 2018). Additionally, the company has also developed new technologies which speed up design and production processes such as approving of prototypes during in the project phase.
The company also aims at using technology to develop more connected products which make goods more traceable and also provide the customers with greater transparency. Most importantly, enhanced technology will enable the company to deploy more flexible production lines. This is critical for the company since the consumer demand is ever-changing and therefore, it is necessary to be able to switch easily from one production run to another in response to shifting trends (L’Oreal, 2018). Customization is another major trend in the cosmetic industry today. Technology may enable a company to produce more personalized products such as letting customers manufacture their cosmetic products and having their names engraved on their fragrance bottle.
L’Oreal Competitor discussion
The cosmetic market is huge since it comprises many products ranging from face creams, soaps, hair care, make-up and perfumes among others. L’Oreal faces severe competition in the market from other major players such as Dior, a French-based company which focuses on producing commodities which range from makeup products, skin care, and jewelry among others. Another major competitor is Chanel a French private company headquartered in Paris, and it produces luxury brands like makeup, ready to wear clothes and fashion accessories. Other competitors include Nivea, and Maybelline which produce products such body washes, lotion, eyeliner, mascara and concealers among others.
L’Oreal Five Forces Analysis
Porter's Five Forces is a simple but powerful tool that helps in examining and comprehending the competitiveness of a company's business environment, and it also helps in understanding the profitability of a given strategy. The five distinct categories of this framework include:
Bargaining power of suppliers
This assesses how easy it is for a supplier to drive up the prices of products in the market. This force is affected by factors such as the number of suppliers and the uniqueness of the products supplied to the market. L’Oreal has higher supplier power than its competitors because the company is recognized for producing products that match with the frequently changing trends thus meeting the needs of its customers.
Bargaining power of buyers
This force assesses the ability of the buyers to drive prices of commodities down. It may be affected by the number of buyers in the market, the number of substitutes and the cost of witching the supplier (Wu, Tseng & Chiu, 2012). For L’Oreal brand, the customers may dictate the terms and decide the prices because the company is more focused on producing customized products that suit the needs of specific customers. This is different from the company's competitors because most of their products are homogeneous, so customers may not dictate the terms since they can easily switch from one supplier to another.
Intensity of competition
The main factor, in this case, is the number and the capabilities of the present competitors in the market. The availability of many competitors providing undifferentiated products may reduce market attractiveness. The cosmetic industry has many competitors, but L’Oreal has remained competitive because it provides unique products courtesy of its research and innovation.
Threat of substitutes
This threat occurs when there exist competitors' substitutes that may be used in place of another company's products (Wu, Tseng & Chiu, 2012). L’Oreal faces severe competition from its close competitors such as Dior, Nivea, and Maybelline. There is a huge threat since these competitors are providing products that are almost similar to L’Oreal brand in nature and functionalities.
The threat of new entrants
The cosmetic industry is profitable, and it attracts many entrants, and this may erode the market profitability. However, since players in this industry require huge capital to start, L’Oreal is safe from the dangers posed by these new companies.
L’Oreal PESTLE Analysis
PESTLE analysis is a framework used in evaluating and examining external forces which influence the business operation of a particular organization. According to Gupta (2013), emphasize that PEST analysis is a convenient tool for scanning macro-environmental factors for strategic management purposes.
Political Factors
Some of the political factors that are likely to affect L’Oreal operations include rules and government policies. The company is based headquartered in France, therefore, its operations are mostly affected by the guidelines provided by the French government. Additionally, L’Oreal is required to conform to all the different government leadership styles in the various countries it operates. The policies provided by the government may involve tax issues and the use of particular chemicals. Unfavorable policies may affect L’Oreal business operations.
Economic Factors
Khanna, Srivastava & Medury (2015, p.968) explain that factors such as Gross Domestic Product (GDP), exchange rates and inflation may affect the business operation of a company in a given country. Since the company operates it different countries across the world, L’Oreal brand is likely to be impacted by factors such as the Gross Domestic Product of the specific countries. Countries with high GDP favors the business of luxury products since consumers will be interested in such products. Countries with low GDP do not provide a good market for luxury products and the L’Oreal Company be forced to close its market in such countries.
Social Factors
The social aspects that are likely to affect business activities include factors such as emerging trends, where people are more interested in fashion trends. Customers in societies with a higher sense of the latest technology will be eager to adopt the contemporary technical trends. L’Oreal should, therefore, continue improving its products through innovation and research. Other factors such as changes in lifestyles may encourage or discourage L’Oreal business operations in different parts of the world.
Technological Factors
Technology has its consequences in different aspects of life. For L’Oreal, technology has played a major role in enabling innovation and this has made it possible for the company to match with the contemporary trends of their customers (L’Oreal, 2018). Improvement of technology in the company is key since luxury products are highly dependent on the technological capability of the company.
Legal Factors
For L’Oreal to be successful in its operation in different countries, it should ensure that it has fulfilled all the legalities of the country where it is operating. Consumers are vigilant about the legal aspects of the products they buy and the company should, therefore, ensure total compliance with the set standards.
Environmental Factors
These factors are determined by the surrounding environment and they include issues such as pollution and waste disposal. It is, therefore, necessary for L’Oreal to show its support to the environment by reducing the amount of carbon released to the environment and provided better disposal of waste materials.
* Internal Competitive Advantage
Organizational Culture Awareness
The firm’s culture is build up from a group of values and determined approaches of performing activities which are establishing a feeling of identity and pride. Also, spreading the culture to the company workers especially the newly employed ones enables the company to communicate its experiences, and it may also aid in facilitating integration (L’Oreal, 2017). Additionally, communicating the organizational culture encourages the workers to become active contributors in the company as they spread its culture and as they add it to evolve. This experience of an appropriation of the company’s shared set of values playing a major role in attracting and retaining talent in L’Oreal.
Human relations play a major role as the guardian or L’Oreal’s culture, and it is also responsible for ensuring that the employee’s daily experiences are in line with the values that the company upholds. To make sure that these values are reflected in the workers’ actions the company has created a document that communicates the firm’s culture to new employees in a range of instructive formats (L’Oreal, 2017). The company’s chief executive officer plays an essential role in influencing the culture as they work as facilitators and they also help the employees grow and realize their potential. Seminars are also conducted to share the company’s culture with executives and managers
Human Resource practices
In an international environment which is significantly competitive, human resource plays a crucial role in helping L’Oreal to grow by enticing and growing talent. An organization is not an end in itself but a means of generating conditions that are meant to be favorable to the growth of talent. By remaining loyal to this idea, L’Oreal’s human resource team has to reunite and coordinate two major elements which are helping the workers select the correct career path while helping the firm attain its business goals. The mission of the human resource team is to entice, distinguish, choose, develop and compensate the best talents in all the company’s business units and divisions.
Most, importantly, L’Oreal’s human resource team has generated a Fit Culture App, a mobile phone application which aids new employees in interpreting, comprehending and learning the firm’s culture (Ganesan, 2017). This makes the giant cosmetic firm the first in the beauty industry to build a mobile phone application which helps its workers to comprehend and live the firm’s culture. The company uses texts, photos, and videos in communicating its culture to the employees.
Costs
Since the company operates its business in many countries from different continents, exchange rates often affect its costs of exporting goods, the supply and the price of imported goods in an economy. Most importantly, the company has significantly invested in research, development, and innovation because the beauty industry is dynamic and consumer preference keeps on changing.
* Internal analysis
Core competency
One of the main core competency associated with L’Oreal Company is its product innovation. The company is determined by examining and introducing extra features of its products that are unavailable in its competitors’ products. To attain this, the company has set enough resources to conduct research aimed at helping in the product development. It is also important to note that this has significantly differentiated the company’s products from those of other players in the cosmetic industry.
L’Oreal SWOT Analysis
SWOT analysis is a tool that companies use for strategic planning and management. Güre & Tat (2017, p.995), explain that when used effectively SWOT analysis may help a company develop a competitive organizational strategy. It helps in analyzing both internal and external factors which may affect the operations of the organization.
Strengths of L’Oreal
L’Oreal has a good reputation for launching and providing innovative products which satisfy consumers from different parts of the world. The company has digitalized its laboratories to intensify and open new horizons. L’Oreal has also established research and development teams to help in providing new data processing techniques that use artificial intelligence to foster discoveries.
Additionally, the company has a strong presence in almost all major markets in different continents. This provides an excellent opportunity to the company to attract more new customers thus gaining dominance of the cosmetic industry. L’Oreal also provides a diversified range of products that other competitors such as Dior and Nivea and this makes it possible for the company to attract more customers than its closest competitors.
The commitment of the company has facilitated the good reputation of the L’Oreal is evaluating the requirements of its different consumers through research and using its technological capability to produce products that are in line with users expectations. This is not common in many companies. Besides, the company has also established itself in several countries all over the world. This has been made possible by the fact that the company offers products that suit the needs of a wide range of demographics.
Weaknesses of L’Oreal
Too many subdivisions: Ordinarily, managing and controlling a large e...