Loral Body Shop Case Study

Task 1

Impact of macro environment

L’Oréal is a huge cosmetic brand which has great influence of the external environment like the change in political, social, economical and ethical factors. While operating business in the market it has to ensure that it fulfils the criteria of all these elements. The impact of these on the current working of L’Oréal are as follows:

Political factors –

The selected brand is operating at global level and therefore is highly influenced by the various laws and regulations that are imposed by the different governments.  It makes it difficult for L’Oréal to operate as to adopt the different working style in distinct countries demand much effective work force. It has to fulfil all the criteria of FDA i.e. Food and Drug Administration which influences the availability of brand products in the market. Getting the process, labelling, documentation approved by this authority is a time consuming process making it difficult to maintain the regular supply.

Economic factors –

These are the factors having an immense impact on the total business of L’Oréal. The recession element has a major significance for L’Oréal or cosmetic business as whole. It is required that he total gross domestic product is good in a country as it is essential for having a good business for premium products like that of L’Oréal. It is earning good revenues in areas where buying capacity of customers is high. L’Oréal followed the price fixing practice which developed negative image about brand among the product users (Ditlev-Simonsen, 2017).

Social factors –

All the promotion and advertisements of the L’Oréal brand are carried out by the celebrities. This creates a huge issue in the target customer relationship of this brand as it makes it difficult for ordinary customer to relate with the product. Also now people are aware about their rights and does deep research before taking their buying decision. L’Oréal had done many misleading promotions in their past which has huge influence on its present operations also as people have trust issues.

Ethical issues –

L’Oréal was involved in many of the practices which are not fair on the ethical grounds. For instance, it was doing child labour which are against the CSR and hence it has affected much on the brand reputation.  It also practiced the testing of its products on animals which is against the ethics. It ruined the face of L’Oréal brand and its total revenue decreased to a significant amount. It has created a great pressure on the marketing team of L’Oréal to first redevelop the goodwill and also to manage it sales to maximum

Technological factors –

It consist of modifications that are associated with the change. Every day a new application is launched which has the capacity to produce better than before. It has benefited L’Oréal to produce such products which lasts for longer and high popularity can be gained. Accordingly, in this way technological factors have assisted the referred to brand in getting out of the different problems in which it was involved in (Postmus, 2017).

Environmental factors –

These are those factors that are associated with the natural surroundings. It creates pressure on the business operation to operate in a way that it does not affect the environment. L’Oréal has made excessive use of natural ingredients which has resulted into concern by those customers who are positive about their green surroundings.

Task 2

Organisation culture of L’Oréal and body Shop

Organisation culture is the combination of values, norms, views and how human resource work in at professional work. It has great influence on the final outcomes of business. The corporate culture of both Body Shop and L’Oréal is discussed below in detail:

Organization culture at Body Shop

Body shop is a known brand operating at international level and delivering the quality cosmetic products. It values to the human rights and has adopted fare trade practice. This way the employees are satisfied with the general practices of the company and hence it is continuously developing. It further adds more satisfaction to the customers as they are well treated by the motivated employees which reflects that human resource is friendly with the clients.  It motivates the work force to maintain the overall standards and keep close monitoring on same. Culture aspects of this organisations are against the concept of animal testing and do not indulge in activities which are not ethical like promoting child labour.

Apart from this green theme is followed in all over the body shop store reflecting that it is influenced by the nature which further gives a positive aroma to the costumers (Lindström, 2018). Every employee in the store wears a common uniform and assist the customer in choosing products for themselves which is a positive professional culture followed in the firm. They also have their own charity foundations which supports the concept of saving the planet from unethical business practices.

Organization culture at L’Oréal

A developing culture of business is followed by L’Oréal. It is operating at global level and is capable of giving close rivalry o other brands in the same field. Their vison is to make the customer feel that they belong to the brand and for same friendly connections are developed by the marketing team. Employees are motivated to give their opinion in the business practices and are encouraged by applying their ideas if approved by all. It creates a positive work culture where the work force gets the recognition. Delegation of authority is done easily if someone has a good idea which creates a challenging working atmosphere which is productive and coming up with something new every day. Profit maximisation is their primary goal which has led to some unethical code of conduct in business like testing on animals, creating attractive advertisements which are sometimes misleading too.

After analysing the corporate culture of both body shop and L’Oréal it is found that they are poles apart and their visions do not match with one another. It is due to the fact that body shop gives equal weightage to profit ad society and do not harm the environment for the sake of raising more revenues. Business practices are distinct and are planned because of the variation in the values, beliefs, norms (Lassila, 2018).

Challenges arising out of compatibility of culture

1. Grievance among the customer– Loyal clients of Body Shop felt bad when their preferred brand which was known for its ethical behaviour was purchased by one whose image is already ruined because of unethical practices.
2. Position of business become week – When there is difference in the image of two brands in the market and they collaborate, one which has effective goodwill face the challenge of getting affected by the other brand spoiled name. in case of L’Oréal and body shop there where many allegations against the business practices of L’Oréal which affected the revenues of Body shop too as then customer consider them as one.
3. Loss of core values – When compatibility of culture among two companies having different grounds of operations issues related to the core values arise. It is because no company wants to give up on them and hence the conflicts arise. Even if there is prior agreement made still values are hard to discontinue (Ashraf and et.al., 2015.).
4. Tough choices to make – As discussed in the above case there is huge difference in the way both body shop a L’Oréal continues its business. if it is tried to establish compatibility among them both the brands have to make hard choices. In case of the selected brands one focus on mass selling and other supports sales which are also justified on social and environment grounds. Both the situations cannot be achieved if mission of no organisation is ignored.

Task 3

Factors considered by L’Oréal before acquiring Body Shop

Whenever a new business strategy is planned it is for the benefit of the company. complete market analysis is done well in advance so that the desired results are achieved. L’Oréal acquired body shop and there were range of factors that were considered before taking this particular decision. Some of the most common are discussed below:

Got access to the supply chain –

When acquisition of already established brand is done in business it further adds more capacities to the organisation and same is the case with L’Oréal. Though it already had a good supply chain management but working together with Body shop will add more value to its supply chain and it will raise to a great extent. After purchasing body shop, it can get access to more suppliers which will increase the availability of L’Oréal products in the market without making much arrangements for its establishments.

Access to outlets –

Body shop has its outlets in different parts of the world and location for each is selected on premium basis which has maximum footfall of the target buyers. When L’Oréal acquire this brand it can display its own product also at the outlets of body shop. This way it can also capture the market of another brand also and in long run a new customer base can be formed. Body shop has very good brand image in the market and people who trust it will also develop their faith in L’Oréal considering it to be a part of the same brand.

International expansion –

Though L’Oréal is globally operating but acquiring but acquiring an established brand like Body shop will add another level to the business. It is spread widely and doing business together will have led to the expansion of business at global level. If it is done alone than more human resource and effective strategic planning is required which further add more cost to business. As L’Oréal was already suffering in business because of its negative image it was risky and difficult for this company to expand without assistance of another brand.

Use the goodwill –

In the present competitive world products are sold with the goodwill. Organisations having a good image in the market need not to invest much on advertisements and promotions. This way much cost is saved which can be further utilise in adding more quality and standards to the product. Body shop has created its name in the cosmetic industry and do not need much campaigning. It could be a major factor behind L’Oréal to acquire body shop as it can make use of its goodwill and can increase its sales in the market (Lindström, 2018).

Task 4

Factors affecting L’Oréal acquisition of Body shop resulting into failure

There were many reasons behind why the purchase of body shop by L’Oréal was failed. Some of the most common reasons were as follows:

Body shop lost its popularity –

L’Oréal was criticised for most of its unethical practices like use of unhealthy ingredients, animal testing etc. when it purchased body shop business of both the products were done together. It greatly affected the goodwill of body shop which was known to be ethically conscious. The loyal customers of this brand start doubting the business deal as why Body shop joined hands with the firm which is already having a negative image and is indulge in many practice which are against the social welfare.

Total sales of Body shop reduced –

After the acquisition both L’Oréal and body shop were considered one. Brand image of L’Oréal was bad among the customers and when it was found with body shop the image of same was also at stake. It was believed that now this brand is also deviating from its prime quality of being ethical and focusing on profit maximisation. It ultimately resulted into loss of many potential buyers of body shop which brought he sales graph low.

Large share competitor grab share –

Multinational companies took the advantages of issues that were faced by body shop after the acquisition. As people were doubting that body shop has lost its grounds and also its products are expensive it created an opportunity for the other business. Unilever for instance started capturing more market which further raised issues for the purchase made between two brands. (Ashraf and et.l., 2015.)

Implementation and change factors –

L’Oréal was involved in may practices which were not possible to be stopped over a night. Animal testing, use of different inappropriate ingredients are some of them. Due to this both brands body shop and L’Oréal started losing their market which made the question a wrong choice.

Task 5

Reflection

In order to complete my report, I went into details of the business acquisition that took place in between two most significant brand of cosmetic industry i.e. Body shop an d L’Oréal. It was an interesting experience as I analysed the details of the operations of these two brands which added much to my knowledge of how as a customer evaluates the products before taking the buying decision. I was very happy to know that now people are more aware for the environment and not just focus on their own priorities. As it was an important commercial case, data regarding same was easily available and I did not found any difficulty in resolving the different quarries related to the case study.

This unit also enhanced my understanding of how important customer is to the market as all the planning and strategies are formulated keeping them in mind and if it is not appreciated by the ultimate user than all the labour goes in vain. My overall research skills are developed as in order to deliver most appropriate solution I went through different articles that were present on net regarding the case study.

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Conclusion

From the above report this has been summarized that the culture of different organisation is distinct from one another. It is influenced by the core values of the entrepreneur and reflects throughout the life span of business. Both L’Oréal and body shop deals in eth same industry but are very much different from one another as they have spate priorities and accordingly have different brand image in the market.

You may also like to read: End-Users Perception Of Selective Medical Equipments

References

• Chun, R., 2016. What holds ethical consumers to a cosmetics brand: The Body Shop case. Business & Society. 55(4). pp.528-549.
• Ashraf, I. And et. al., 2015. The Case Analysis of L’Oréal Corp. as Market Leader. International Journal of Academic Research in Business and Social Sciences. 5(8). pp.131-148.
• Ditlev-Simonsen, C.D., 2017. Beyond sponsorship-exploring the impact of cooperation between corporations and NGOs. International Journal of Corporate Social Responsibility. 2(1). p.6.
• Postmus, J.K., 2017. Influence of Corporate Green Reputation on Sustainable Consumer Buying Behaviour. Wageningen UR: Wageningen, Holland, pp.1-41.

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