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Importance of Business Strategy in Achieving Goals under Deadlines

476 Downloads1 I Published: 02 Nov ,2019

Introduction

Business strategy is all about the courses of actions and a set of decision which help in assisting an entrepreneur for achieving the targeted aims and objectives in specified time period. In addition to this it can be defined as the process of master plan which the management uses in order to secure the competitive position in the marketplace as well as in achieving the desired end of an organisation. Therefore the company which is being taken into consideration in order to carry out this assignment is L'Oreal which is one of the personal care company with its headquarter in France. In addition to this it is one of the world's leading providers of wide range of skin care and accessories products. This report mainly focuses on analysis of the impact and influence which the macro environment has on an organisation. Additionally, this file also focuses on the evaluation of the outcomes of an analysis by using Porter's Five Forces model. Lastly, in this assignment models, theories and concepts are also being applied so as to assist with the understanding and interpretation of strategic directions available to an organisation.

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Task 1

PESTLE and SWOT analysis of an organisation

Business strategy is the technique which render entrepreneur and a manager with a long range sketch of the desired image, direction and destination of an organisation. In addition to this it is all about the scheme of corporate action and intent which is flexibly designed and carefully planned by the manager of L'Oreal with the aim of achieving effectiveness, mobilising resources, meeting threats and challenges, perceiving and utilising opportunities. But in the way of achieving effective business strategy there are certain internal and external factors which greatly influence on organisation and its strategies. So in order to measure such factor influence manager of L'Oreal takes PESTLE and SWOT analysis into consideration which are explained below (Higgins, Omer and Phillips, 2015):

PESTLE analysis :

PESTLE here refers to the political, economic, social, technological, legal and environmental factors which are term to be the external factors which greatly influence the working of L'Oreal organisation and its strategies as they are not under the control of an organisation.

Political factors:

Thesefactor specifically include the rules and policies of the government related to tariffs, trade control, consumer protection, laws that regulate environmental pollution etc. All these factors greatly influence the business strategies of Loreal organisation, as if there take place any changes in government laws then accordingly manager of Loreal need to make strategies so as to sustain for long period of time in the marketplace. For example: As per government law Loreal is restricted to make use of certain chemical like Phthalates while producing their products, so accordingly manager of Loreal need to make business strategies in order to produce safe products taking into consideration that it doesn’t contain any harmful substances.

Economical factors:

These factors here refer to changes taking place in interest rate, exchange rate, recession, inflation, taxes, demand and supply etc. Therefore, changes in all these factors greatly influence the working of business strategies (Wheelen and et. al., 2017). For example: Loreal products are generally sold at high price, so if in case there take place deflation in a region where it sells its products them it greatly influences the business strategy as accordingly manager of Loreal need to set its pricing strategy by adopting penetration pricing strategy which will greatly affect the profitability ratio of an organisation as well.

Social factor:

These factors here refer to the technical trend in the society. As the preferences and demand of the customers as per the traditions and culture of society keeps on changing, so accordingly manager of Loreal need to make its business strategy in order to meet the demand of the customers (Veit and et. al., 2014). For example: If the targeted customers of Loreal is high class people, then accordingly manager of organisation need to produce its products strategies as high class people specifically shows more of eagerness to adopt the contemporary technical trends and which is always welcomed by the innovations of Loreal. In addition to this some people consider its products as holy sin, so it can be said that such ethical and social pressure greatly plays a prominent role in the development of business strategy of Loreal.

Technological factor:

These factors here refer to the changes taking place in the advancement of technology, as it has its ramifications in every sphere of life. Therefore changes in such technological advancement greatly influence the strategies of Loreal organisation. For example, mostly people prefer to use those skin products which does not harm their skin so taking this aspect into consideration manager of Loreal need to make strategies and that is of adopting such technology with the help of which company can produce such product which will not harm the skin of people.

Legal factor:

These factors here refer to the legal rules and regulation under which company needs to carry out is operational activity. Factors such as discrimination law, health and safety law, copyright law etc. therefore such legal aspects greatly influence the strategies of the Loreal organisation (Spender, 2014). For example As per health and safety law management of Loreal need to develop its strategies in order to produce products which does not harm the health and skin of people. This is because people have become much vigilant about the legal aspect of products. In addition to this company also need to follow the discrimination law as this law specify that no individual in an organisation should be discriminated on the basis of age, sex, religion, marital status etc. if the manager of L’Oréal will adopt such legal aspects into consideration then it will help in creating positive brand image of an organisation in the mind-set of customers.

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Environmental factor:

These factors encompass about the various global environmental safety laws which must be abide by the global standards. As the world has taken avow of making a clean and beautiful planet with pollution free into consideration (Spender, 2014). So taking this perspective into consideration most of the international brands plays their supportive role in keeping the environment clean and beautiful. Loreal also follows the norms of the world and plays a vital part by supporting such campaigns. In addition to this manager of Loreal also need to build up startegies taking environmental factors into consideration and this can be done by best understanding of internal and external factors which affect the company as a whole.

SWOT Analysis:

SWOT here refers to strength, weaknesses, opportunities and threats which the manager of L'Oreal takes into consideration so as to identify the strength and weakness of an organisation. So that if there exist any weaknesses then it can be overcome by analysing and implementing effective solutions to it. In addition to this it also helps in identifying the opportunities for an organisation which can prove to be beneficial for achieving a successful growth in future. Moreover, threats are also being identified with the help of SWOT analysis so that accordingly strategies and policies can be implemented. Therefore, SWOT analysis of L'Oreal is being explained below (Klettner, Clarke and Boersma, 2014):

Strength

The major strength of Loreal is that no other brand has a bigger share in the beauty and cosmetics products than L’Oréal. In addition to this it not only offer inexpensive products but also moved in rendering luxury brand by offering high quality products for those people who prefer to shop on a richer budget.

Weaknesses

The weakness of L’Oréal is that its profit margins get shrink and this is mainly because it heavily make their investment in research and in development but its massively seems to be expensive enough at least in comparison to its competitors.

Opportunity

One of the opportunity which can be availed by the L’Oréal company is that they can easily move into newer spaces in beauty industry specifically in personal care beauty sector. This is because people generally prefer for the best product for their body.

Threats

Whereas the major threat for L’Oréal is that it has tricky cash flow and this is because L’Oréal has countless products and profits are divided into several segments, but in case of something happens to an economy then the organisation will have to suffer from loss.

In order to analyse the organisation capabilities manager of Loreal can take VRIO modeinto consideration which is explained below:

VRIO Model:

VRIO here refers to Value, Rareness, Imitability and Organisation and all these four essential elements are term to be the best analytical technique to find the current position of an organisation. In context of L'OREAL, as they are one the biggest company in the world for manufacturing the cosmetics products, VRIO model will be the best choice to find accurate answers regarding their organisation. There are various resources with the firm such as skilled and talented Cosmetic Professionals, technological resources like Alliagel, which have ingredients with antinomic properties, equipments with automation and AI. All these resources have various aspects which could determine the present position of the firm in the industry. VRIO analysis of the company is mentioned below:

  • Valuable:It is essential for resources to be valuable for a company to help it exploit opportunities. Professionals working at L'OREAL are extremely valuable as they apply their competence and skills to enhance the production and cosmetic products of the company. In addition, technologies like Alliagel would enable the company to gain a competitive advantage over its competitors by providing high end value to its customers. Equipments with AI and latest technologies like Automation would enable the organisation to improve its cosmetic production and hence is valuable.
  • Rare:Finding talented professionals are very rare for a company as big as L'OREAL. These are very hard to find and employed to effectively produce world-class products. With effective copyright and intellectual property, technologies like Alliagel becomes rare for the company. However, each large-scale company is technologically advanced and have adopted various advanced equipments and thus, these equipments are not rare seeing their easy accessibility.
  • Imitable:It requires talent and effective practice of years to develop competence needed to sustain performance of a company as big as L'OREAL. Thus, it is hard to imitate the professionalism of the human resource of the company. The technologies like Alliagel are also not very much imitable seeing the process of its production is protected by the company and the firm could take legal actions for its usage without its consent. But the equipments could be created and developed to serve the standard quality of production as equipments of L'OREAL do and this enhances imitability of this resource with the firm.
  • Organisational:Each of these resource is organised in ways in which it could provide maximum value to its customers. The processes could include the high end equipments and Alliagel technology which would provide the customers products which are as per their skincare requirements. In addition, human resources of the firm could be utilised by the firm in ways which contributes to its growth and effective marketing position. Thus, all the resources could provide maximum output to the firm if organised well.

Analysis of competitive environment using Porter's Five Forces Model

In order to make an analysis of competitive environment manager of Loreal takes Porter's Five Forces of Model into consideration which is being explained below (Laudon and Traver, 2016):

Porter's five forces of model:

It is an analysis tool which is being used by the manager of Loreal as it explains about five industry forces which helps in determining the intensity of competition in an industry and upon its profitability ratio.

Illustration 1: Porter's five forces model

Source: Porter's five forces model, 2018

Threat of new entrant:

This force of model helps in determining how easy it is to enter into a specific industry,if in case an industry is running at profitable growth and there exist barrier of new entrant then in that case rivalry soon get identifies. In addition to this when more of business compete for same market share then in that case profitability level starts falling down. Whereas the main threat for Loreal is that their products term to be too luxury which can result in economic downturn as well as can affect their distribution system,

Bargaining power of buyer:

It refers to that force under which buyer possess strong barraging power to demand lower price or higher quality products from producer.Lower price demand will result in rendering lower revenue for producer and higher quality products leads in raising production cost of an industry.Bargaining power of buyer will term to be high if there exist large number of similar products in the market. For example, the product which the L’Oréal sell there exist large number of similar product in market of which the price term to be low as compared L’Oréal products then in that case bargaining power of buyer will be high for L’Oréal products.

Bargaining power of supplier:

This force refers to the bargaining power which the supplier possesses. If supplier of Loreal products seeks strong bargaining power then it will help them to sell products at higher price or law quality products to customers which would term to be specify that bargaining power of supplier is high Thus, it will positively affect the L’Oréalfirm in the form of achievement of greater ratio of profit.So it is very much essential for the manager of L’Oréalto keep the bargaining power of their supplier strong enough.

Threat of substitute:

This forces take place when there exists any substitute for L’Oréal products. If the price of its substitute products of L’Oréal like shampoo, other bath and body products get reduced than in that case people will shift towards in making purchase of its substitute products rather than L’Oréal products which would represent that threat of substitute is term to be high in this case. Thus, it will directly hamper the profitability ratio of an organisation, so it is very much essential for the manager of L’Oréal to make analysis of its substitute strategies so that accordingly effective strategies can be made.

Competitive rivalry:

This force of model refers to the competitors which exist in the market and it affect greatly on the profitability ratio of an organisation. There exist large number of competitors for L’Oréal product like Avon, Revlon etc. which result in specifying that threat of competitive rivalry term to be high. So it is very much essential for the manager of L’Oréal to make an analysis of its competitors strategies and policies like of Cover girls, Avon, Revlon etc. so that accordingly best strategies and policies can be developed which would result in achieving great competitive advantage in marketplace.

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Task 2

Evaluation of the different types of strategic directions available to the organisation.

Strategic direction is one of the most important forces in a business, as it helps in establishing the structure for internal responsibilities which each department and the workers must take on. Therefore it is very much essential for the manager of L’Oréal firm to set a perfect strategic direction and which can be established only if the firm establish clear cuts vision, mission, tactics, strategies etc. Thus, in order to evaluate the different types of strategic direction available in an organisation manager of Loreal takes Ansoff matrix into consideration which is explained below (Lawton, 2017):

Ansoff Matrix:

It can be termed as a marketing planning model which helps a business in determining it market and product growth strategy as well as help in setting effective strategic direction for an organisation. Therefore, this matrix consists of four core elements which are explained below (Lawton, 2017):

Illustration 2: Ansoff Matrix

Source: Ansoff Matrix, 2018

Market penetration:

This is one of the growth strategy which can be adopted to set strategic direction by the manager of Loreal. According to this strategy a business focuses on selling of existing products in the existing market itself so as to increase and to maintain its market share of its existing products. In addition if the Loreal company takes this strategy into consideration only when they want to restructure its mature market by driving out its competitors as well as when they want to increase usage by existing customers and this can be done by introducing loyalty schemes.

Market development:

It is another strategy which can be adopted by the manager of Loreal to set effective strategic direction. This strategy generally focuses on selling of existing products in new market segment. The company can prefer this strategy in case when their objectives will be to explore new geographical markets or in case of new product dimension or packaging etc.

Product development:

This is another strategy which can be adopted by the manager of L’Oréal when the business will aim to introduce its new products into its existing market segment. In addition to this it can be best suitable in case if the L’Oréal wants to differentiated its products from others so as to remain competitive in the marketplace.

Diversification:

This is another strategy which can be adopted by the manager of L’Oréal when the business will aim to market its new product in new market. In addition to this while adopting this strategy manager of L’Oréal must have clear idea about what it expects to gain from specific strategy as well as an honest assessment of the risk factors.

Justification and Recommendation of the most appropriate growth platform and strategies.

There are several growth strategies which can be adopted by the manager of L’Oréal company in order to set appropriate strategic direction for the organisation and for the workers. Strategies like diversification, market development, product development and market penetration etc. all this are the growth strategies which can be taken into consideration by L’Oréal organisation. Thus, it can be recommended that manager of L’Oréal company must take product development strategy into consideration as it is term to be most appropriate growth platforms and strategy for the company in order to earn maximum profit. As per this strategy manager must focuses on innovating new products so as to sell in existing market which would result in increasing of revenue for an organisation as well as would result in achieving greater competitive edge in marketplace (Peng, 2017). In addition to this product development strategy also be beneficial for L’Oréal in case of improving the existing products so as to stimulate an existing market. Thus, overall it can be said that it will result in achieving greater profitability ratio for an organisation by establishing long term relationship with existing customer which would result in achieving successful market growth as well.

Strategic management plan with strategies, objectives and tactics.

Strategic management plan is all about the process of organizational management activity which are being used to set priorities, resources and to strengthen operations so as to ensure that employees and stakeholders work towards achievement of common goal of an organisation. Therefore, strategic management plan of L’Oréal with its strategies, objectives and tactics are explained below (Scholes, 2015):

Aims:

The main aim of the L’Oréal is to enhance its business at an international level.

Objective:

The main objective of the Loreal is to increase its profitability margin by 20% within 2 year.

Vision:

The vision of L’Oréal is to achieve greater market share by establishing a sustainable business growth.

Mission:

The main mission of Loreal is to render better quality products to customers by taking skin conscious aspects into consideration, as People mostly prefer to use those skin care products which doesn't harm their skin in any way.

Organisational structure:

L’Oréal has segregated its organisational structure into two main parts namely division of labour and departmentalization (Scholes, 2015). In order to ensure its development manager of L’Oréal divides their labour into global innovation and research centres, distribution channels, geographical zone and in integrated industrial production centre. Secondly, L’Oréal has also segregated its departments into two main segments namely product departmentalization and geographical departmentalization.

Values:

Main value under which the L’Oréal function its operation activity is that it believes in having integrity, transparency, respect and courage by being ethical and recognized by all workforce.

Goals:

The main goal of L’Oréal is to win the confidence level and trust of potential and new customers by rendering effective value to each one. In addition to this other main goals are like to provide access to products which will help in enhancing well-being, developing innovation etc. Whereas the long term goal of Loreal is to render stiff competition to its competitors in marketplace and it can be achieved by developing effective collaboration with its local manufacturers.

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Strategies and tactics:

L’Oréal will consider product development strategy so as to enhance its product line and to improve its existing product in order to render differentiated product from its competitors. Thus, it will help in achieving greater market share and competitive advantage in marketplace. Therefore in order to achieve successful growth, product development tactic will term to be best suitable in which manager of L’Oréal need to come up with innovative and with some additional feature products so as to attract and to retain customers for long period of time in marketplace.

Budget plan of L’Oréal:

Marketing budget

 

Particulars

1st year

2nd year

3rd year

4th year

5th year

Initial money

70000

100000

120000

100000

100000

Investment

30000

180000

250000

350000

180000

Total

100000

280000

370000

450000

280000

Marketing outlay

         

Promotion

120000

40000

90000

100000

40000

sales publicity

40000

40000

40000

400000

40000

Direct selling

40000

150000

50000

40000

40000

Total

200000

230000

180000

180000

160000

Conclusion

From the above report it can be concluded that effective business strategy is must and in order to develop effective strategy manager and entrepreneur should play essential role so as to lead an organisation towards a long term sustainable goal. In addition to this it can also be concluded that manager has taken into consideration PESTLE and SWOT analysis in order to make effective analysis of internal and external factor which influences on an organisation. Moreover Porter's five forces model has also being explained in this report so as to evaluate the outcome of an analysis.

References

Books and Journals

  • Higgins, D., Omer, T.C. and Phillips, J.D., 2015. The influence of a firm's business strategy on its tax aggressiveness. Contemporary Accounting Research. 32(2), pp.674-702.
  • Klettner, A., Clarke, T. and Boersma, M., 2014. The governance of corporate sustainability: Empirical insights into the development, leadership and implementation of responsible business strategy. Journal of Business Ethics.122(1). pp.145-165.
  • Laudon, K. C. and Traver, C. G., 2016.E-commerce: business, technology, society.
  • Lawton, T. C., 2017. Cleared for take-off: structure and strategy in the low fare airline business. Routledge.
  • Lawton, T.C., 2017. Cleared for take-off: Structure and strategy in the low fare airline business. Routledge.
  • Peng, M. W., 2017. Cultures, institutions, and strategic choices: Toward an institutional perspective on business strategy.The Blackwell handbook of cross‐cultural management, pp.52-66.
  • Scholes, M. S., 2015. Taxes and business strategy. Prentice Hall.
  • Spender, J. C., 2014. Business strategy: Managing uncertainty, opportunity, and enterprise. Oxford University Press.
  • Veit, D. and et. al., 2014. Business models.Business & Information Systems Engineering.6(1). pp.45-53.
  • Wheelen, T. L. and et. al., 2017. Strategic management and business policy. Pearson.
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