Muhammad Saad Chaudhry (L1S17BBAM0158)

Syed Hamdan Ahmed (L1S17BBAM0144)

Talmeez Ahmed (L1S17NNAM0136)
Rida ijaz (L1F17BBAM0457)
Danish Javed (L1F18BBAM0097)

Business Strategy and Planning

(G)
Introduction:
L'Oréal is a French personal care company headquartered in Clichy, Hauts-de-Seine with a registered
office in Paris. It is the world's largest cosmetics company and has developed activities in the field
concentrating on hair color, skin care, sun protection, make-up, perfume, and hair care. L'Oréal is a
multinational company and it was started in Pakistan in 2009. L'Oréal Pakistan Private Limited is a
wholly-owned subsidiary of the L'Oréal Group.

How They Work:

The Company’s business presently is divided into two divisions.
1. CPD (Consumer Product Division).
2. PPD (Personal Product Division).

CPD (Consumer Product Division):

The CPD (Consumer Product Division) business is made up of three brands:
 L'Oréal Paris
 Garnier
 Maybelline New York
These three master brands, each have several differentiated franchises, such as Excellence, Dermo
Expertise, Color Naturals, Studio Line, Skin Naturals and Elvive, which cater to diverse beauty and
personal care needs.

PPD (Personal Product Division):

The PPD (Personal Product Division) is only for salons and focuses on hair products and services.
“From hair color to care, cleansing, serums and treatment, we are unique for providing such a vast
range of products that deliver instant and significant results. These are the two divisions in which
L'Oréal work.

Market Share:
L'Oréal is a marketing base company and now L'Oréal Pakistan Private Limited worth is $5 Billion.
Afghanistan sector is also operate from Pakistan. L'Oréal majority products are import in Afghanistan via
Pakistan. L'Oréal majority product are imported also in Pakistan. L'Oréal production plant is in
Sheikhupura. Their share is double within two years.

Competitors:
Although L'Oréal is one of the best personal care company in Pakistan. In Pakistan L'Oréal product was
top leading products in market. Like in coloration and Garnier men they are market leader, in shampoos
L'Oréal is most penetrated company in Pakistan.
But there are a lot of local and international competitors of L'Oréal in market. Like in coloration they
have.
 Keune
 Revlon
 Clairol
 Wella
 Naturtint
 Olivia
 Dupas
 Masarrat Misbah

In shampoos and conditioners there major competitors are.

 Dove
 Sunsilk
 Pantene
 Clean and clear
 Pears
 Vatika
 Himalaya Shampoo

In make-up major competitors are.

 MAC
 Revlon
 Clinque
 Clinique
 Etude
 Oriflamme
 Urban Decay

Organization Structure:
In top management of L’Oréal is Managing Director and Director of each department. Both divisions
have same hierarchy with different employees, specialist except MD and Directors of departments.
CPD is further divided into two different domains.

 Mass portfolio (shampoos, hair color, hair care, make-up and skin care)
 Make-up portfolio (Maybelline, L’Oréal make-up)

CPD was further divided into three parts of core sales.

 GT business (local markets, small outlets, etc. of all regions like Karachi, Lahore, Sahiwal,
Gujranwala, etc.)
 Model Trade (big stores like Al-Fatah, Rahim Store, Imtiaz Super Market, Rahim Store etc.)
 IMT (International Modern Trade) (Metro, Carrefour, etc.)

PPD didn’t has any domain.

Managing
Director

Director Director
Drector Director Director
Supply Commertia
Finance HR Marketing
Chain l

Manager Manager
Assistant National General
Finance Assistant Chief HR Supply Supply Brand
Brand Sales Brand
Manager Manager Officer Chain Chain Manager
Manager Manager Manager
Logistics Operations

Key Ware Brand Head of Category Regional

HR HR Operationa Marketing
Accounts House Marketing Trade Trade Sales NSMs RSMs
Generalist Manager l Managers Manager
Manager Managers Manager Marketing Manager Manager

Area
manager

Some activities are divide in distributers and company. Both have their own NSMs, RSMs and Area
Managers. Under RSMs more than 36 employees are work L’Oréal. L’Oréal have more than 82,000
employees all across the Pakistan. And in Pakistan there are more than 250 employees work in L’Oréal.

Current Vision and Mission Statement:

Beauty is a language
For more than a century, we have devoted our energy and our competencies solely to one business:
beauty (2). It is a business rich in meaning, as it enables all individuals (1) to express their personalities,
gain self-confidence and open up to others (7).
Beauty is universal (6)
L'Oréal has set itself the mission of offering all women and men worldwide (3) the best of cosmetics (2)
innovation (4) in terms of quality, efficacy and safety (8). By meeting the infinite diversity of beauty
needs and desires all over the world (3).
Beauty is a science (6)
Since its creation by a researcher (4), the group has been pushing back the frontiers (7) of knowledge (4).
Its unique Research arm enables it to continually explore new territories and invent the products of the
future, while drawing inspiration from beauty rituals the world over (6).
Beauty is a commitment (6)
Providing access to products that enhance well-being, mobilizing its innovative strength (4) to preserve
the beauty of the planet and supporting local communities (8). These are exacting challenges, which are a
source of inspiration and creativity for L'Oréal.
L’Oréal, offering beauty for all (6)
By drawing on the diversity of its teams (9), and the richness and the complementarity of its brand
portfolio (2), L'Oréal has made the universalization of beauty its project for the years to come.

Improved Vision and Mission Statement:

At L'Oréal we believed beauty is a language, science, commitment, universal, and permeates all (6). Our
mission is to be empower our highly creative team of researchers to design innovative (4, 7) healthy
products (2), and our alternatives employees (9) to remain responsive to the diverse taste of our radiant
customers (1) who confidently express their outer beauty in our continuously expanding markets around
the world (3,5). Our shareholder can take pride in their investment knowing they contribute to one of the
most socially responsible (8) and profitable (5) provider of magnificence (7). Beauty for all

Mission Statement Analysis:

A mission statement is the reason that a company exists for. It explains what a company is doing or what
purpose it stands to solve. A mission statement is also like a yardstick that the managers can use to
measure their actions and decisions in day to day scenarios and if they suit the organization and align with
its mission. Several companies have separate mission and vision statements. A vision statement explains
the future of the brand and where it wishes to be in future. Several companies have the same statement for
mission and vision both. L’Oréal does not have a separate vision statement but it does have a strategy
statement which explains its strategy for future and which I will discuss in later parts of this article. The
mission of L’Oréal is Beauty for all. It offers innovative beauty products that are safe and efficient and
which satisfy diverse beauty needs of a diverse customer group. The mission statement is mainly focused
on the products. While it does not discuss things like the brands under L’Oréal or their target customers,
it mainly highlights how it is trying to satisfy its customers’ needs. So, it does not get very precise about
either its products or its customers but only highlights that its products which are good in quality,
produced through innovation are meant to satisfy the needs of both the sexes. Its mission statement can be
more specific or precise and can discuss things like competition, financial strength, target customers etc.
However, these things are not included in the mission statement, which are important with regards to
resource allocation and decision making.

PESTLE Analysis:
1. Political
The political challenge is that L’Oréal should conform to all the different government leader ship
style in various countries.
L’Oréal is obligated to produce safe products that do not contain any harmful substances.
L’Oréal has followed the rules set by advertising Standard Authority.
2. Economical
L’Oréal main customer products categories are highly sensitive to global economics of scale and
scope.
L’Oréal should adapt to all the different economic environment and problem in all countries.
3. Social
L’Oréal recognize by foundation for social change as a ‘’ Leader of change ‘’
The culture of a country consists of values, attitudes and beliefs of its people. With the modern
standard of livings continues to improve and the level of education higher and higher.
People are increasingly focusing on the image appearance the demand of quality.
4. Technology
Scientific knowledge of the skin and hair accumulated by L’Oréal over a century
Evaluation technology, active ingredients and formulation procedures.
L’Oréal is going to set strong research and development (R&D) capability in Pakistan, According
to new technology development, the company registered 529 patents related to cosmetics and
dermatology.
5. Legal
L’Oréal legal team makes a vital contribution and experts make legal decision.
Their mission consists mainly in making L’Oréal business operation legally secure.
6. Environment
L’Oréal use natural ingredients mostly which is environment friendly.
L’Oréal manage a programmed of internal audit and establish indicators for measuring and
reporting on group performance in term of the environment.

Porter’s Five Forces:

Competitive Rivalry:
The competition in the cosmetics industry is of the highest level because of the strength of the
competitors in the industry. The cosmetics industry is expected to increase more than 7% till
2023. The major internal brands of cosmetics industry L’Oréal, MAC, Revlon, Sunsilk, Nivea,
etc. L’Oréal is a leading market with a highest market share due to its range of products and
brand reliability. The other local and international brands have also presence and acceptance
which is the reason for fierce rivalry in cosmetics industry. Although the competition is high but
completion is not negatively impacting the current state due to massive growth of industry.
Despite the number of buyers is also increases which is neutralizing the negative impact of high
competition.

Bargaining Power of Supplier:

The suppliers have low bargaining power because the raw material used in cosmetics industry are
not rare and suppliers are also available in abundance which makes it easy for the companies to
negotiate. Due to such massive growth and sales of the cosmetics industry, the suppliers focus on
giving the highest value to get the contract of international brands. The value of companies for
the suppliers in the cosmetic industry is the reason that company negotiate through a dominant
approach. Therefore the bargaining power of the supplier is low due to their high dependence on
the companies.

Bargaining Power of Buyer:

In Pakistan there are multiple international and local brands available for the buyers to buy from.
The switching cost is also not high from the one cosmetic brand to another cosmetic brand
although there is a factor of brand loyalty due to skin sensitivity. But the overall factor are not so
impactful that it restrict the buyers to a particular brand so closely. The availability of the same
quality brand with the same or even competitive pricing has increased the bargaining power of
the buyers. The cosmetics companies have to keep in mind the bargaining power buyers while
developing the product and setting the price for the products.

Threats of New Entrants:

The hurdles of the new entrants in this industry are there but some of them are neglected due to
exceptional growth of cosmetics industry. The expertise is required to manufacture the cosmetics
products and the testing of the different product is a complex process requiring skills and capital.
The issue of animal testing in the cosmetic industry has further intensified the complexity of the
operation in the cosmetic industry which is the hurdle for new entrants. The fast market growth
neutralize the negative intensity of the hurdles which is the reason that threat of the new entrant in
the global cosmetics industry is moderate.

Threats of Substitute:
The skin and beauty care products has become a need and there is no chance that people would
not be concerned about beauty, skin and personal care. This need require the beauty, skin and
personal care products in the industry which keeps the threats of substitutes low. It is important to
note that the way and products have changed and evolved but the need of beauty care product is
there and it will remain there with radical or incremental innovations in the products and
processing of the cosmetics.

EFE Analysis
Opportunities Wei Rating Score
ght
1 Pakistan’s cosmetics market grew 7% in 2018 0.02 2 0.04
2 BCG reports the Pakistan’s middle class is expected to increase +15 0.06 2 0.12
million over next 10 year.
3 Direct retail sales in Pakistan increased in 2018 of which 78% women 0.06 1 0.06
and 89% worked part time.
4 Google offers, Living Social and Groupon have launched apps for 0.04 4 0.16
Android phones to alert customers to deal through mobile devices.
5 91% of new products leaders were brand extensions that either expanded 0.05 4 0.24
effectiveness, new technologies, improved processes, new or unique
formulas, varieties, designs or patterns.
6 Pakistan’s population is expected to nearly double or triple in 0.08 4 0.32
consumption of personal care products.
7 29% of consumers made at least one consumer package good purchase 0.05 2 0.10
online in 12 months OTC drugs and health &beauty supplies ranked
highest in respondents buying the brand they want the most.
8 To reduce currency volatility, companies can hedge their exposure with 0.07 3 0.21
futures contracts.
9 There are several million middle class inhabitants and are projected to 0.08 2 0.12
account for 5 of the 10 largest economies by GDP by 2025
10 L’Oréal reverse pricing/ marketing strategy to increase consumer appeal. 0.06 4 0.24
Sub-total for Opportunities 0.57 1.61
Threats Weight Rating Score
1 Vipera sales increased 57.4% due to direct sales in 2018. 0.07 1 0.07
2 Due to weak economic environment and higher pricing of imported 0.04 2 0.08
products consumers may be deterred from buying green products.
3 Nivea, Revlon and other offer perfume products in their portfolio. 0.02 1 0.02
4 Domestic products more widely known like Musarrat Misbah makeup, 0.03 4 0.12
Nabila’s Makeup.
5 54% of the female respondents In 2014 said that they would buy a 0.04 3 0.06
brand they want the most (own to 45% in 2018 and 43% in 2019)
6 Consumption to cosmetic products per in habitants is 10 to 20 times 0.05 2 0.10
lower in immature areas then in mature areas.
7 China’s GDP growth target is 6.1% which is well below the range 0.05 2 0.10
recorded in 5 years; Pakistan slowed growing 3.3% in 2019.
8 Avon and Olivia products to (30 to 50 years); Johnsons and Johnsons 0.03 2 0.06
and Vaseline launched a line of E-Pulse, Skin-Electro-Stimulation
technology (anti-aging).
9 MAC cosmetics is a leader in personal and beauty care products 20% in 0.06 2 0.12
market result in restructuring, cost reduction , and marketing reduction
over next five years.
1 Clinique (American cosmetics) acquire bare essentials; MAC agreed to 0.04 2 0.12
0 acquire OPI products (nail saloon products).
Sub-total for Threats 0.43 0.85
Total EFE Score 1 2.41
IFE Analysis
Strengths Weigh Rating Score
t
1 3 top class international brands distributed all over the country 0.04 3 0.12
2 The body shop total sales were approximately 2 billion dollars which 0.05 3 0.15
is 50% of their sales. The body shops has 2 brands.
3 L’Oréal is going to start R and D in Pakistan at the end of this year. 0.06 3 0.24
4 L’Oréal achieved 9.5% sales growth in new markets ($1 billion in 0.14 4 0.56
sales; 35% total sales; $700 million ops profit) including Afghanistan
sector.
5 L’Oréal achieved 0.6% sales growth in Afghanistan ($ 1.8 million; 0.06 3 0.18
36% of total sales; $5 million ops profit).
6 L’Oréal has 1 production across the country those product which is 0.08 4 0.32
supply in Afghanistan they also manufactured in Pakistani production
plant.
7 L’Oréal achieved 5.5% sales growth in Maybelline New York with in 0.07 3 0.21
one year.
8 L’Oréal reconstruct some units of biological tissues for predictive 0.03 4 0.12
evaluation of integrands and products. 9 constructive skin and cornea
models developed. Reduces time market.
9 The dermatology branch total sales were $700 million and in new 0.04 3 0.12
markets $400 million.
1 L’Oréal conducts in house packing of products at their plants through 0.02 3 0.06
0 the wall to wall program reduces transportation cost and waste
generation.
Sub-total for Strengths 0.59 2.08

Weaknesses Weight Rating Score

1 L’Oréal suffer -2.8% loss due to strikes in 2019 despite a 3.9% 0.08 2 0.16
market growth. (OPS profit: -$200.79 million)
2 L’Oréal hacks a beauty tool division which its chief competitor, 0.05 2 0.10
Vipera.
3 L’Oréal organization structure limits its ability to create integrated 0.03 1 0.03
brand promotion strategies for its distinctive SBU’s.
4 L’Oréal has a limited number of perfumes, bath and has no baby 0.02 1 0.02
products in his portfolio.
5 L’Oréal lacks energy efficient production facility. 0.02 1 0.02
6 L’Oréal does not practice direct selling strategies in their marketing 0.06 2 0.12
initiatives as compare to competitors (Olivia, Sunsilk).
7 L’Oréal has consolidated key market segmentations under “New 0.06 2 0.12
Markets”; limits managerial response changes in major geographic
SBU’s.
8 L’Oréal’s total asserts turnover ratio (1%) lower than its chief 0.02 1 0.02
competitor, Vipera (3%).
9 L’Oréal’s cost of operation is higher than its chief competitor Vipera. 0.03 1 0.03
1 While selecting different market option, L’Oréal’s website has 0.04 2 0.08
0 defective or nonexistent navigation and translation capabilities.
Sub-total for Weaknesses 0.41 0.70
Total IFE score 1.00 2.78

Long Term Non-Financial Strategic Objectives of the company

Strategic management in any organization can be financial and non-financial related. Financial
related advantages can be measure as far as volume of sales, benefit and profitability. Any ideal
strategic management can accomplish the objective of the organization can be strengthened
through appropriate strategic management where the benefits will be its sensible succession

The non-financial related advantages likewise help association to achieve supportability. These
advantages can help in the accompanying manner

Giving improved understanding of competitors’ strategies. Assisting with lessening protection

from change. The procedure can misuse an ever increasing number of advantages. Distinguishing
the administrative issues objectively Giving movement coordination structure and control
system. Improvement of communication among the representatives’ employees and clients.

L’Oreal is marketing leader selling their products in different segments such as:

Skincare 29.7%

Makeup 21.7%

Hair care20.7%

Hair color 13.8%

Other 14.1%

It is using different types of strategies in different areas and entering in new market by using
penetration strategy and has been observed with the huge growth in the product in new market by
increasing more than 8.4% growth of the consumer product in the new markets.
Increasing Expense in Research & Development and Promotion & Advertising
The company started to actively increase R&D. This contributes invaluably to the innovation
efficacy, quality and safety of the products, which in return gives the company a competitive
advantage. L’Oréal supports its sales growth by increasing expenses in promotions and
advertising. “We intend to maintain a high level of investment in P&A, at the same time as
undertaking an in depth analysis of our operations in this area to ensure that every euro generate
maximum additional growth, “Jean-Paul Agon, the CEO of the company, stated in their 2010
financial presentation.

Long Term Financial Strategic Objectives of Company:

Net Profit Margin:
Growth in Pakistan came out at +24.1% like-for-like and +20.4% reported. All divisions are
winning market share. The dynamism of Chinese products consumers, combined with the good
performance of premium brands and rapid growth in new markets as well as in Travel Retail,
were the Zone's main growth drivers. Divisions posted robust fourth-quarter figures, thanks to
the success of Singles' Day (11/11) sales in new market. The acquisition of L’Oréal in June
strengthened the Group's position in the Zone.
Gross Profit Margin:

 L’Oréal Annual Data
100
90
80 73
71.21 71.63 71.72 72.78
70
60
Percentage

50
40
30
20
10
0
2015 2016 2017 2018 2019
Years

Space Matrix
Financial Position (FP) Stability Position (SP)
Return on investment 7 Technological Changes -5
Leverage 4 Rate of Inflation -3
Liquidity 3 Demand Variability -4
Working Capital 6 Price Range of Competing Product -5
Net Profit Margin 4 Barriers to Entry in Market -2
Inventory Turnover 5 Competitive Pressure -6
Return on Assets 6 Ease of Exit from Market -6
Price-Earing Ratio 4 Price Elasticity of Demand -2
4.875 -4.125
Competitive Position (CP) Industry Position (IP)
Market Share -3 Growth Potential 5
Product Quality -4 Profit Potential 4
Product Life Cycle -3 Financial Stability 3
Customer Loyalty -6 External Leveraged 3
SPACE Matrix Graph
0.8
0.7
0.6
Capacity Utilization -2 0.5 Resources Utilization 4
Control Over Suppliers& Distributors -3 0.4 Productivity, Capacity, Utilization 4
-2.8570.3 3.428
0.2
0.1
0
-0.8 -0.7 -0.6 -0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8
-0.1
-0.2
-0.3
-0.4
-0.5
-0.6
-0.7
-0.8

SP
Conservative
Aggressive

Defensive Competitive
SWOT Matrix
SO Strategies WO Strategies
1 Increase sales by 15% over 3 years through Decentralize by establishing separate
IBP, direct selling, and e/marketing by geographic profit centers to achieve 20%
targeting the growing population of growth over 3 years in New Markets.
Pakistan.
2 Increase sale of Body Shop, Dermatology Develop IBP marketing campaign with direct
Branch products 12% over 3 years through selling to achieve 10% sales growth in
m/marketing and global travel retail outlets. Afghanistan, and 20% in Pakistan.
Improve Web site design and e/mCommerce
as part of IPB marketing campaign to increase
online sales 25% over 3 years.

ST Strategies WT Strategies
1 Body Shop will increase sales 9% over 3 Planned to develop 5 perfume, increase
years in its global travel retail outlets brand portfolio of affordable bath and body
extensions of existing products. products to introduce into all markets.
2 Achieve 20% sales growth in New Markets Invest $20 million to improve its Website
by increasing production to 100% in existing design and eCommerce capabilities to
plant and 1 new plant planned to build and increase online sales 25% over 3 years
incorporating direct sales methods and
acquiring/JV’s with distributors.
3 Increase sales of current products 15% over
3 years by increasing production and
distribution to 100%.
4 Increase sales 15% over 3 years of more
affordable green and specialty products in all
markets using its efficiencies in R&D,
production, packaging to control costs.
Internal – External (IE) Matrix

IFE Total Weighted Score

Strong Average Weak
4.0 3.0 2.0 1.0
High 4.0
I II III
3.0
EFE Total Weighted
Medium
Score IV V VI
2.0
Low
1.0 VII VIII IX