Strategic Management for Incorporation of PESTLE and VRIO Framework

Introduction

The report focuses on conducting a strategy analysis of L’Oreal based on the incorporation of PESTLE and VRIO Framework. Further, it generates both empirical and case study based discussion of many strategic management terms product and service portfolio and product and business lines. The case study based discussion is carried out based on L’Oreal. The strategic competitiveness of L’Oreal is conducted through use of VRIO while an analysis is carried out of the business strategies of L’Oreal to generate needed recommendations thereof. 

Corporation Identification

About L’Oreal

L’Oreal based in France operates as the global leader in the production and marketing of cosmetic and beauty products. The company conducts its business through diverse branches based along 130 different nations along five continents. L’Oreal focuses on innovating effective cosmetic products that would meet the beautifying needs of different consumer groups belonging to diverse communities and nationalities (L’Oreal , 2016).

Definition of Corporation

A Corporation is identified as a legal entity which can be segregated and distinguished from the owners or proprietors. The corporations tend to enjoy a set of diverse rights and also needs to fulfil distinct set of responsibilities like an individual. A corporation thus bears the right for entering into a legal contract and also can loan or borrow money from financial institutions. Further, the corporation also has the right to sue another person or entity or also can be sued for its conducts. It also has the right of hiring employees and tends to own both financial and non-financial assets and pay for taxes and also meet other liabilities. Based on the above features a Corporation is often identified to be a ‘legal person’ (BUCHANAN et al., 2014). L’Oreal being a corporation requires an individual desiring to use contents and information generated in its website to gain prior permission from the department of consumer affairs through emailing or by telephonic contact. The company also requires individuals to comply with regulations and conducts pertaining to regions for using and accessing information available in the company website. It also requires individuals to abide by terms and regulations generated in the company website (L’Oreal Paris, 2013).

Definition of Product and Service Portfolio

Product Portfolio

Product Portfolio is defined as the holistic set of diverse product lines and categories manufactured and marketed by an institution. Apart from product categories and lines the product portfolio also tends to encompass the physical product itself. Management is required to be carried out at the individual product level, management of product lines and finally the management of the product portfolio as a whole (Tolonen et al., 2014). The product portfolio of L’Oreal essentially encompasses products falling under broad categories like make-up, skincare, hair colour, hair care and style. The different categories are further constituted by different products and concerns (L’OREAL PARIS, 2016).

Service Portfolio

Service Portfolio encompasses the different types of services that essentially constitute the service life cycle of a company. Further, services portfolio also reflects on the potential investments and also commitments generated by the service provider to different consumers along diverse consumer spheres and markets (Sarno & Herdiyanti, 2010). Effective professional services in the form of L’Oreal Salon and Spa are offered to customers by specialists and experts at L’Oreal (L’Oreal, 2016).

Corporate Research

Business Unit

Definition

Business Units are identified as segments or logical elements of a specific business institution. The different business or functional segments like finance, operations, marketing and sales and human resources are effectively reflected along different parts in the organisational chart and is essentially governed by a manager. The business units of a company are also known as departments, business divisions and also as functional areas (Aspara et al., 2011).

Business Units in L’Oreal

The business units of L’Oreal are essentially identified like Consumer Products Division, L’Oreal Luxe, Active Cosmetics Division and the Body Shop. The Consumer Products Division of L’Oreal generates cosmetic products for diverse consumer categories. L’Oreal Luxe promotes premium and luxury cosmetic and fragrance brands for unisex categories. Active Cosmetic Division contributes in the generation of medicated cosmetic products for the consumers. Finally, Body Shop is reflected as an innovative division of the cosmetic company that essentially generates cosmetic products for aptly meeting the sensory needs of customers (L’Oreal , 2016).  

Product and Service Lines

Product Lines

Product line is essentially identified as a group of different products marketed by a company under a product or company brand name. Different types of product lines are marketed by the company under different brand names. Additions made in the different product lines ideally contribute in enhancing the product offerings of the company (Roos-Frantz et al., 2012).

Service Lines

Service lines are identified as effective organisational structures that contribute in meeting the objectives of resource planning. Service line organisational structure ideally helps in generating a horizontal organisational structure such that the different departments are managed in a differentiated fashion and focus on enhancing on the parameter of customer satisfaction through meeting of diverse consumer needs (Esztergár-Kiss & Csiszár, 2015).

Product and Service Lines in L’Oreal

Product Lines in L’Oreal

The product lines in L’Oreal are essentially segmented along divisions like make-up, skin care, hair colour, hair style and hair care. The different product lines are further constituted by different product categories and branded products (L’OREAL PARIS, 2016).

Service Lines in L’Oreal

The service lines of L’Oreal are effectively distinguished in terms of its hair colour, hair care, hair styling, hair advice, looks and magazine sections. Hair colour segment potentially reflects on the different types of hair colours that the company offers tom its customers. Hair care and styling segments reflect on the new and best selling trends of products and tools to the customers. The hair advice section potentially focuses on generating expert advice to the customers regarding generation of hair styles and make-ups. The look and magazine segment provide needed information to the customers for helping them choose products and salon services of L’Oreal (L’Oreal, 2016).

Corporation Revenue Centres

The financial highlights for the 2015 period reflect that for L’Oreal the consumer product division contributed by 48.7 percent to the total sales revenues for the company. L’Oreal Luxe contributed 29.8 percent to sales revenues of the company followed by professional and active product lines by around 14 and 7.5 percent respectively. The same is reflected in the following illustration.

(L’Oreal , 2015)

External Environment Analysis

PESTLE Analysis of L’Oreal

Political Factors

Legislative changes regarding the generation of advertisements govern L’Oreal’s advertising activities while regulatory governance focus on the generation of safe cosmetic products.

Economic Factors

Changes in exchange rates along the global economies affect the business revenues for L’Oreal. Similarly, changes in the level of interest rates affect the cost of capital of the firm.

Social Factors

The changes in the demographic factors of consumers like age and income parameters while existence of multicultural base of customers demand the generation of customised and differentiated product offerings (BUCHANAN et al., 2014).

Technological Factors

L’Oreal continually focuses on development of its research and development infrastructures for development of innovative product and service offerings that would match the skin types of different customers.

Legal Factors

L’Oreal is required to effectively abide by the norms of employment, health and safety legislations and other consumer laws to operate in a continual fashion.

Environmental Factors

L’Oreal focuses on the use of recyclable materials and packaging products for production and marketing its products along a global consumer base (STAUDACHER et al., 2013).

The PESTLE Analysis

Political

The analysis of the political factors contributes in understanding the impacts of the government policies on the functioning of the business institution.

Economic

The analysis of the economic factors reflects the impact of the changes of the economic systems and situations on the operation of the firm.

Social

Analysis of the social factors reflects on the changes in consumer demands and aspirations on the market demands of the products and services generated by a firm (Abdullah & Shamsher, 2011).

Technological

The evaluation of the technological framework essentially reflects the impact of incorporation of new technological systems on the operational process and paradigms of the business institution.

Legal

The legal paradigm essentially analyses the impact of changes in the legislative and regulatory frameworks on the operation of the firm.

Environmental

The analysis of the environmental factors effectively focuses on understanding the impacts of the firm’s operation on the natural environment and vice versa (RASTOGI & TRIVEDI, 2016).

Operating Environment

Operating Environment of a business institution relates to the impact of the micro environmental factors and paradigms like suppliers, customers, competitor firms, other intermediaries and the larger society on the performance of the firm (Khan & Khalique, 2014).

Source of Sustainable Competitive Advantage

The source of sustainable competitive advantage for L’Oreal is its capacity to continually innovate and generate differentiated product and service offerings at reduced costs. The company focuses on anticipating the needs and aspirations of its customers for generation of innovation at a faster rate that makes its hard for other companies to imitate. Moreover, the company adds value to the product offerings in making them eco-friendly in nature. The use of recyclable packaging and reduction of greenhouse gas emission programs along with its continual focus on modifying its cosmetic and skin products also make its business approach rare in nature. L’Oreal also focuses on generation of cosmetic products to meet the diversified needs of its multicultural consumer base. L’Oreal also operates based on a matrix organisational structure that contributes in generation of work specialisation among the different functional units and thereby helps in effective management of the business operations (Hong & Doz, 2013).

Business Level Strategy

The different business level strategies employed by L’Oreal are identified as broad differentiation, proliferation of product lines, development of an online store and finally through implementation of a low-cost production structure for its multinational manufacturing and marketing bases. The above strategies are conducted by L’Oreal to enhance the level of market competitiveness of its products while also in customising its product and service offerings for enhancing customer satisfaction (Fournier & Lee, 2009).

The business units of L’Oreal can effectively focus on the employment of multichannel marketing and distribution networks like e-commerce, social media marketing, mobile commerce and also the designing of applications for Smartphones along with use of kiosk based marketing for reaching a larger target audience.

Conclusions

The analysis reflects on the product and service portfolio of L’Oreal while also analysing on the different product and service lines of the firm. The report also conducts the PESTLE and VRIO Analysis of L’Oreal while also generates needed recommendation on the business level strategy of the firm. The use of the strategic tools reflects the different levels of competitive advantages gained by L’Oreal in the global cosmetic market. Further, manufacturing of products in a low-cost fashion and also the incorporation of needed innovation through the generation of online stores potentially help in enhancing the competitiveness of L’Oreal in the world market.

References

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