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Define Business Strategy | According to Pestel And Swot Analysis

646 Downloads1 I Published: 26 Nov ,2019

Introduction

Business strategy refers to process by which a company can develop high level plans and strategies which help in attaining goal and objectives in appropriate manner. Along with this company is able to achieve various other factors like competitive advancement, growth of business, enhance in financial positions (Alsudiri, Al-Karaghouli and Eldabi, 2013). It is made by a company for a long term operations and functions that is approx. period of 3 to 5 years. Organisation taken for this assignment is L’Oréal which offer their products and services in personal care industry and its headquarter is in France.

It is founded by Eugène Schueller in year 1909 and they serve their products and services in worldwide market. Products offer by respective company are nail paints, lip sticks, micellar water, creams and many more. Subsidiaries brand of L’Oréal are Lancôme, Maybelline, NYX cosmetics and Garnier.  Topics which are covered in this assignment are evaluation of micro and macro environmental factors. Along with this it includes strategic plan which is based on environmental evaluations.

TASK 1

1.Analysis of PESTLE and SWOT of The Organisation and Analysis its Capabilities

L’Oréal is one of the famous and well know cosmetic and personal care brand which provide various type of products and services. Such as nail paint, lip sticks, micellar water, creams, shampoo, conditioners and many other. They also have several other subsidiaries like Maybelline, NYX cosmetics, Granier and many other. For analysing opportunities, treats and capabilities respective company conduct PESTLE and SWOT analysis which is explain below:-

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PESTEL-

It refers to macro environment factors which is use by a company in order to scan environment in order to identify opportunities and threats that help in making appropriate and effective strategies (Bharadwaj and et. al., 2013). By this manager of respective company can understand market growth or decline, position of business in market, ways of conducting operation with full potential and many more.

Political: 

This factor is related to government and policies made by them. It includes various factors like tax policies, labour law, trade barriers, environmental law, rules and regulations and many more.

  • Positive- With the help of political factor L’Oréalis able to conduct their business functions and operations in various other countries in effective manner. By this they are able to earn more profit and enhance customers base.  
  • Negative- Government made variety of laws, rules and regulations which affect operations and functions of respective company. Such as in this they  have to take care about quality of products, that it cannotcarry any harmful substances. Along with this they face various legislation regarding advertising.

Economical:

 It include various factors such as economic growth, inflation rate, exchange rate, interest rate and many other (Chang, 2016). These factors affect operations and functions of a business and according to change in these factors manager of a company develop decision and strategies.

  • Positive- Economical factor help L’Oréal in sustainingin different countries according to their economic conduction.
  • Negative-There are different economic condition and environment in different countries which is sometime difficult to understand and adapt. Due to this respective company face threat in marketplace.

Social:

Social factor include various aspects like population growth, age distribution, career attributes, culture and many other. Change in social factors may change in consumer demand and then company has to design products and services accordingly.

  • Positive- Change in social factors helpL’Oréal in introducing new and innovated products which attract more and more customers and this will also enhance customer base and profitability of respective company.
  • Negative- Change in social factors is consider as threat because they haveto develop strategies accordingly and also they have to train employees accordingly.

Technological:

It include various aspects like research and development activities, improvement in technology, innovation in technology and many more (Eaton and Kilby, 2015). By this company is able to enhance quality of production and work in appropriate manner.

  • Positive-  L’Oréal have various experts who have years of knowledge of skins and hair which help them in accepting innovation in appropriate manner. By this they can also make verity of products and services.
  • Negative- If respective company didn't adopt technology in appropriate manner it will come up as a threat because theywill not be able to satisfy customer in appropriate manner.

Environmental:

This element includes various section like weather, change in climate, ecological factors and many more (Iacob, Quartel and Jonkers, 2012). Companies has to take care of these so that they can make products and services accordingly and effectively.

  • Positive- It is opportunity for L’Oréal that they can develop eco-friendlyand herbal products which is environment and skin friendly.
  • Negative- If respective company use more harm full chemicals then they may face decline in sales which seems as threat for company.

Legal:

This include various factors like discrimination law, consumer law, employment law, health and safety law and many more. These factors help a company in conducting their operations and functions in appropriate and effective manner.

  • Positive- It is opportunities for  L’Oréal that they must conduct theirwork by following business ethics and rules which help them in conducting business in appropriate and effective manner.
  • Negative- If this company do not follow business ethics or legal factors theywill not be able to conduct work in proper manner which may harm their production process and it come up as a threat.

SWOT Analysis-

It refers to technique and guidelines which is use to evaluate competitive position and capabilities of a company. By conducting this method company is able to identify their strength, weakness, opportunities and threats. By knowing these factors company is able to conduct their work in appropriate manner (Jocovic and et. al., 2014). Along with this manager of a company is able to develop strategies and plans accordingly to grab opportunities and overcome weaknesses. This will help a company in gaining competitive advancement, enhancing profitability and customer base.

Strength:

It refers to characteristic and functions of a business by which they can gain advantage and benefits in a marketplace. 

Weakness:

These are those factors which affect and influence operations and functions of a company.

Opportunities:

This refer to factors which help an organisation in enhancing their business and profitability by grabbing it in effective and appropriate manner.

Threats: 

This refer to the factors which come up as a barriers or cause trouble in conducting business operations and function.

Explanation of SWOT analysis in context of respective company in order to identify their capabilities which help them in conducting business operations and function in appropriate and effective manner.

SWOT analysis

L’Oréal

Capabilities

Strength

· Product and services offer by L’Oréal are of good quality and make customers loyal.

· The respective company has research and development department.

· They are also offering wide variety of mature skin products (Lawton, 2017).

· Respective company has huge number of experiences in cosmetics industry.

· Mentioned strength is capabilities for respective company because by it they able to  attract and satisfy customers in appropriate manner. Along with this through there quality of products they able to conduct business in worldwide market in effective manner.

Weakness

· It is weakness for  L’Oréal that they are not well known in united states market place.

· L’Oréal are investing huge amount of money in advertising and promotions.

· The respective company not offering differentiation in cleansers and moisturisers.

· To overcome these all weakness respective company has effective employees and research and development team.

Opportunities

· L’Oréal can do enhance there business operations and functions in United State.

· They can also increase number of channels for distributions.

· By enhancing and maintaining effective and appropriate relationship with United State they can enhance there financial capabilities.  

Threats

· Products and services offer by  L’Oréal are come in expensive products ranges.

· The respective company has huge amount of competitors.

· Customers are more incline towards Olay and Ponds because they are offer their products at medium price.

· Range of  L’Oréal products are is rare but other company can imitate it which cab be consider as threat for capabilities of respective company.

Above mentioned and opportunities of L’Oréal is consider as there capabilities because by it they can earn more and more profit in marketplace and also able to enhance customers base. Such as quality of products which is offer by this company make customers loyal which help them in gaining more profit. By their wide variety of products company is able to attract more and more customer and there research and development is also very capable which identify new trends and design products accordingly (Li and Tan, 2013). If respective company enhance their business operations and function in US market they are able to cover more customers base and earn more profitability. By increase in distribution channel L’Oréal become more capable in order to serve customer in appropriate manner.

2. Prepare Analysis of The Competitive Environment by Using Porter’s Five Forces Model

Porter's five force model is use by an organisation in order to evaluate and analyse competitions at a marketplace. This help a manager in developing strategies and plans in appropriate and effective manner. Along with this company able to earn more profit and also enhance their customers base (McGrath, 2013). It is generally based on structure, operations, work conduct, products.  In this company will evaluate their business through five factors that are threat of new entry, threat of substitutes, bargaining power of customers and suppliers and competitive rivalry.  L’Oréal conduct market evaluation by using porter's five force model which explanation is given below:-

Threat of New Entry- 

It refers to factor which is related to how easy for a company is to enter into market. If particular industry or sector is profitable and there are few barriers, then more company or person who want to start business attract toward this industry. Along with this there are some other factors which make entry of business easy such as low amount of fund required, no rules and regulation of governments and many more. For respective company threat of new entry is medium because L’Oréal is a well-known and established brand so it is very difficult for new entry companies and take time to become same as respective company. It also required huge amount of money or investments.

Threat of Substitutes- 

This refers to conduction when there is availability of substitutes products and services in market place. In this situation buyers switch from one product to another. If buyer get best quality of products in less prices they will switch to that particular products and services (Murthy, 2012). For L’Oréal threat of substitutes is high because there are other various companies which are offering same variety of products but at the low price such as  Unilever, P & G, Nivea and many more.

Bargaining Power of Customers-  

It is a condition when buyer has a power to demand good quality of products and services in low price. In this case production of company get affected, if they produce products with low price it will affect customer’s expectation and loyalty. Whereas if they produce goods with quality products and sell it in low price then profit of company get affected. In both condition company get affected. In respect of L’Oréal bargaining power of customers or buyers is high because there are huge number of substitutes available in the market. If L’Oréal offer products at high price customers can switch to another companies which   is competitor of respective company such as Unilever, P & G, Nivea and many more.

Bargaining Power of Suppliers-

It refers to the situation when suppliers sell their products and services at high price but they offer low quality. This situation will affect buying firms profit because they have to pay more for good quality products and services (Oestreicher-Singer and Zalmanson, 2013). There are various situations when suppliers have more power such as there are few seller of particular products and services, availability of few substitutes of material, supplier is holding scarce resources. In context of respective company, it has low bargaining power of suppliers because L’Oréal is an established company and they manufacture there products in house (Essay on Marketing Report for L'Oreal, 2016).

Competitive Rivalry-  

It refers to situation or condition when there is high competition in a market place. In it company basically determine strength and weakness of their competitors and make strategies accordingly in order to gain advancement at a market place. Competitive rivalry is high for  L’Oréal because there are various companies which are offering cosmetics products at low price such as Nivea, Ponds and many others.

So when manager of company develops any decision and plans they need to consider all these factors so that they can make appropriate and effective plans and strategies.

TASK 2

1.Evaluation of The Different Types of Strategic Directions Available to The Organisation

Market penetration:-

it refers to strategy in which penetration of market is done in such  manner sit leads to more income with existing product and services in existing market segmentation. L’Oréal will develop specific strategies and plan which help them in  gaining more profit in existing market with existing products. For this they use attractive promotional and advertising technique which attract more and more customers. Promotional and advertising techniques which can be use by respective company are social and print media, digital media, poster and many more.

Product Development:-

To survive in marketplace innovation and creativity is necessary for every company or brand. According to this strategy  L’Oréal will work in diverse product classification to identify some innovative and unique inventions. For this company mainly focus on time profit model in which company launch new product within a specific time period and launch in market before any competitor will launch same product.

Market Development:-

This refers to strategy in which there is existing product and new market place. Here main aim is to cover more and more customers of different group.  L’Oréal can adopt  diverse components model to expand market with same product ranges. In this respective company get gain more profitability ratio because they can sell same product or exit product range at high or more price.

Diversification:-

It refers to those matrix in which market as well as product and services both are new. It must be those product which attract customers on wide ranges and by this company able to enhance there profitability ratio. If  L’Oréal do diversification in market and product, then company's profit get boosted in marketplace. For this company will adopt attractive promotional and advertising channel such as social media, digital media, posters and banners and many more. Along with this they can tie up with some famous faces so that customers get attracted on huge amount.

After analysing and evaluating all matrix of  Ansoff model manger of  L’Oréal can adopt product development strategy. In which they will develop and launch new range of product and services in existing market. They must decide those product which attract more and more customers.

2.Justify and Recommend the Most Appropriate Growth Platform and Strategies

L’Oréal use Ansoff Matrix for evaluating which step is more appropriate for them for enhancing their business in marketplace. By evaluating and analysing all steps of respective method L’Oréal management or manager decide to use product development technique which is more appropriate and effective for them (Schaltegger, Lüdeke-Freund and Hansen, 2012). It can be recommended for L’Oréal to expand their business in same market by manufacturing or producing unique and innovative product. This may help them in attracting more and more customers and also enhance profitability ratio of company. Such as they can manufacture or produce herbal or eco-friendly products which is demanded in market and attract more and more customers.

3.Produce a Strategic Management Plan with Strategies, Objectives and Tactics

Strategic development plan refers to  written document which is develop by a company to make communication with shareholder and other people. It includes various aspects like goal and objective of company, strength, resources, strategies and many other. By this L’Oréal able to make and develop strategies and plans in effective manner. Strategies, objectives and tactics which is develop by respective company is mentioned below:-

Strategies:-

It is developed by a company in order to conduct work and functions in appropriate manner so that they can attain goal and objective in effective ways. L’Oréal conduct STP analysis to make strategies which is given below-

  • Segmentation- L’Oréal conduct analysis through segmentation in which they done on the basis of demographic, behavioural and psycho-graphic factors (Verbeke, 2013). Respective company conduct segmentation on basis of age, income and feedback by which they able to attract right customers.  
  • Targeting- When respective company complete segmentation step they will conduct next step which is targeting.  L’Oréal is targeting all age group people and they divide their products ranges in three segments like baby creams, young age people cream, anti ageing cream. By this they able to attract all age group customer which help them  achieve goal in effective manner.
  • Positioning- By using thisL’Oréal is able to create brand image and name in mind of customers. For effective positioning respective company use channels like social media, online marketing, email marketing and many more. They can use digital and social media which help them in attracting more customers because in today's time most of the population are available at respective media.

Objectives: - SMART objective which is develop by respective company is

“To introduce herbal anti-ageing cream in UK within four months in order to maximise market share with 10% more benefits. ”

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Tactics:-

 L’Oréal made short term goal in order to achieve goal and objective in effective manner. Along with this manager of this company develop tactics for developing new products in existing market which is given below: -

  • For launching new products managerof L’Oréal company arrange funds so that they manufacture and promote their new products in appropriate manner (Alsudiri, Al-Karaghouli and Eldabi, 2013). For this they can borrow money from various sources investors, bank, financial institutional and many more.
  • Theymust also take care of their promotional channel so that they cover and attract more and more in  appropriate manner.

Conclusion

From the above discussed point it can be evaluated and conclude that for effective running of business an organisation has to develop appropriate business strategies in order to gain competitive advancement and increase market share. For market analysis and evaluation company can conduct PESTEL and SWOT analysis . Along with this by these analysis company is able to know their opportunities, threats and capabilities. To know competitive advancement in marketplace company can conduct Porter's five force model analysis. When a company want to expand their business they can do analysis and evaluation by using Ansoff Matrix. By this they are able to know whether they have to expand their business in current market or new and with current product or introduce new.

References

  • Alsudiri, T., Al-Karaghouli, W. and Eldabi, T., 2013. Alignment of large project management process to business strategy: A review and conceptual framework. Journal of Enterprise Information Management. 26(5). pp.596-615.
  • Bharadwaj, A. and et. al., 2013. Digital business strategy: toward a next generation of insights.
  • Chang, J. F., 2016. Business process management systems: strategy and implementation. Auerbach Publications.
  • Eaton, D. and Kilby, G., 2015. Does Your Organizational Culture Support Your Business Strategy?. The Journal for Quality and Participation. 37(4). p.4.
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