Managing Strategic Issues Within an Organisation: A Case Study of L’oreal (Case Study Sample)

Managing Strategic Issues Within an Organisation: A Case Study of L’oreal Student’s Name Institutional Affiliation Course Instructor Date Abstract This report examines the operations of L’Oreal, a global leader in the beauty industry, focusing on the strategic business issues it has faced over the years and their strategic implications. The reports begin with an introduction to the strategic issue, showing its overall impact on the global economy. It provides a brief overview of the company’s history and growth. It gives an overview of the strategic issues the company has faced in the past three years, examining their implications for the company and its various stakeholders. The reports undertake a literature review to explore the subject matter, informing the evaluation of strategic issues and their strategic implications. The report gives an overview of the general strategic management theories and how they have been incorporated into the decision-making process. Table of Contents TOC \h \u \z \t "Heading 1,1,Heading 2,2,Heading 3,3,"Abstract2Introduction5Methods6Brief Introduction To The Organisation and Sector It Operates In6L’Oreal Company Background6Revenue and Operating Profit7General Overview of Operational Activities8Strategic Business Issue10Overview of the Strategic Issue11Relevant Strategic Decisions11Key Aspects of L’Oreal’s Sustainable Practices12Investments and Acquisitions13Current Position14Critical Analysis of the Strategic Issues and its Implication15Market Differentiation and Competitiveness15HYPERLINK \l "_1ksv4uv" \hImpact On Stakeholders17Conclusion18References21 Introduction Over the years, the cosmetics industry has experienced an unprecedented shift towards sustainability. The government and legal corporations have set stringent laws and regulations that have shifted companies’ focus to sustainability and environmental preservation practices. Pawar and Pawar (2023) acknowledge that the significant shift within the industry stems from the increased awareness of the impacts of environmental degradation. Beauty and cosmetics consumers aim to play a role in environmental conservation by making environmentally conscious purchases. Similarly, Dube and Dube (2023) noted that market trends revealed a shift in consumer preferences towards sustainable brands. They observed an increased willingness to pay more for eco-friendly products. This shift has led to a re-evaluation of company practices and product portfolios, prompting a change in product formulation. Companies are increasingly taking more initiatives to reduce their carbon footprint and greenhouse gas emissions. This paper will examine how the changes in market trends and consumer preferences impact an organisation and its stakeholders. It will critically analyse this strategic issue, its implications, and its impact on various stakeholders. The paper undertakes literature analysis to delve into the subject matter and gain insights into how organisations have responded to these changes, adding depth and context to the findings. However, the research was limited to a single focus, using L’Oreal as the case study of the subject matter. Nevertheless, focusing on one company enables a comprehensive analysis of the competitive positioning and strategic decisions made to address the inherent strategic issue. Methods This study undertakes a literature review approach to investigate the subject matter and accomplish the report’s objectives. The information is sourced from secondary sources such as peer-reviewed articles, journals, reports, corporate websites, and books that analyse the shift towards environmentally conscious brands. In addition to these articles, this report also utilizes literature that analyses L’Oreal’s response to the shifting preferences. The secondary sources are retrieved from reliable search engines such as Google Scholar and ProQuest. Reliable and credible sites such as L’Oreal’s website have been used to provide insights on specific company information. The report only includes recently published articles, excluding any sources that are older than five years. Brief Introduction to the Organisation and Industry of Operation L’Oreal Company Background L’Oreal, a French multinational headquartered in Clichy, France, operates in the cosmetics and beauty industry. The company was founded in 1909 by Eugene Paul, a chemist who formulated his own products that he sold to Parisian hairstylists. Over the years, the company has grown to become a global conglomerate, boosting 36 brands. The management of L’Oreal has undertaken various strategic partnerships and acquisitions, expanding its global reach to 150 countries (L’Oréal, 2020). The company aims to be the world leader in the beauty space by offering quality and highly innovative products that are safe for the consumer. The company’s huge investment in research and development explains its ability to create innovative products. L’Oréal has commendable strategic business acumen that enables it to compete effectively and emerge as an industry leader. Its product portfolio spans haircare, skin care, makeup up, and fragrances. This diverse product portfolio has been achieved through strategic acquisitions and global expansion, which began in 1930 through the exportation of its products into the European market. Over time, L’Oréal has expanded its business through acquisitions. In 1964, after World War II, the company acquired Lancôme and Helena Rubinstein, establishing its presence in the American market. It went on to acquire more companies within the beauty space, cementing its position in the global market. In 2023, it acquired Aesop, an Australian brand that produces cruelty-free products (Murphy, 2022). This recent acquisition sought to position L’Oreal strategically in the clean beauty market segment. Other strategic acquisitions include Cadum, Neily Cosmetics, Maybelline New York, Kerastase, and La Roche-Posay, among other companies. The numerous acquisitions enabled L’Oreal to increase its global market share, diversify its product portfolio, and increase revenue (Kim and Chang, 2021). As evidenced by its commitment to expanding business, L’Oreal uses the growth strategy to strengthen its competitive position through the acquisition of companies that might disrupt the industry through innovative or niche products (L’Oréal, 2020). The strategy provides L’Oreal with a highly distinguished market positioning, strengthening its presence in the market. L’Oreal ensures that the products of the acquired companies offer complementary products, making it a one-stop shop for consumers. Revenue and Operating Profit In the last three years, L’Oreal has maintained a steady rise in revenue and profit generation despite various challenges, such as the COVID-19 pandemic and its aftereffects. In 2023, the company reported sales revenue of $44.45 billion, while in 2022, its sales revenue was at $40.311 billion, a 5.5% increase from 2021 (L’Oréal, 2023). In 2020, the company’s sales revenue dropped to $31.75 billion. This decline can be attributed to the negative impact of COVID-19, which led to a temporary lockdown, disrupting the supply chain systems of global brands (Kim and Chang, 2021). Companies operating in international markets were unable to export their products, hence the decline in sales. In 2023, the company reported an operating profit of 8,143.3 million euros, an increment from the 7,456.9 million that was reported in 2022. In 2021, they reported 6,160.3 million euros, an increment from the decline it had experienced during the pandemic period in 2020 (L’Oréal, 2023). This data reveals an upward trend within the organisation, showcasing effective leadership and strategic management. The tremendous financial success is directly correlated to the huge investments towards the development of high-quality products, a strong brand portfolio, and intense marketing. Additionally, the company has made significant strides toward adopting more sustainable programs, increasing its appeal to investors and consumers. These initiatives allow the company to form a competitive edge over other competitors. General Overview of Operational Activities To meet the diverse needs and expectations of its global market, L’Oréal has divided its brand portfolio into four major divisions. These include professional products, consumer products, loreal luxe, and active cosmetics (L’Oréal, 2024a). Each division has a specific vision to cater to the different consumer categories and distribution channels. The professional products division caters to consumers in the salon space and hairstylists who need professional products. This division controls nine brands offering sustainable professional haircare experiences and services (L’Oréal, 2023). The consumer products division caters to the larger market, offering ready-to-use haircare, skincare, and makeup products to the consumers. This division controls brands such as Maybelline New York, L’Oreal Paris, and Garnier, among others. The L’Oreal Luxe division controls luxury brands that cater to the high-end consumer market, and it controls the largest percentage within the company, boosting 26 brands (Kim and Chang, 2021). Lastly, the Active Cosmetics division specialises in niche products and brands that offer dermatological solutions to help treat various skincare problems. The company adopted a multi-level supply chain model where the strategic aspects are centralised while the operations are decentralised. It ensures that suppliers are responsive and responsible, supporting them through technological and sustainable transformations (L’Oréal, 2020). The company has adopted a unique strategy, universalisation, to ensure it caters to all consumers regardless of their hair or skin type. It focuses solely on the production of high-quality products th...