The SWOT analysis is also called internal environmental analysis that examines and reviews the internal environments of an organization that influences on business operations and profitability as well. It is a powerful strategic analytical tool that facilitates in the process of strategy development for the business.
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The SWOT framework stands for strengths, weaknesses, opportunities, and threats of a business firm. Thus, every organization needs to take care about these issues as each of these elements has strong influence on operations of the business firms.
The SWOT analysis of L'Oréal Paris is as follows:-
Strengths of L'Oréal
Innovation: The brand L'Oréal has a good reputation about offering and launching innovative products to customers across the world. The company has well established Research & Development (R&D) team which takes care about continuous focus on the new product development and innovation in order to meet customer demands and beat competition in market.
L'Oréal has strong presence in all major markets in the world and therefore this would be an excellent opportunity for the company to attract new customer and thus gain new market share which is very significant for achieving outlined objectives and goals in business.
Diversified range of products: The Company is well known for its diversified range of items that facilitates attracting more customers rather than other brand because of its variation of products. For example, they have around 20 variations only in the category of the shampoo, conditioners and treatments and thus it easily helps making loyal customers and hence customers usually stay loyal to L'Oréal brand.
This will have a significant impact on the company and profitability as well since consumers typically will have greater alternative of options for purchasing L'Oréal branded products from the market and therefore the company will lead to achieve their defined goals and objectives in business.
Weaknesses of L'Oréal
Dynamic nature of cosmetic industry: The cosmetic market is so dynamic in nature and products are changed within a short span of time due to changes in consumer preferences. Thus, L'Oréal branded products will have to change its color, fragrance, and other essential features of the products in order to meet greater customer demand and keep updated customer so that they are not able to switch to other brands which may enhance competition for L'Oréal.
In addition, the Company also has to fulfill customer preference for survive within a competitive business environment where lots of players are ready to divert customers to their brands.
Severe competition in cosmetics industry: There are several companies in the field of cosmetics and beauty care industry in the world and thus L'Oréal has to face severe competition from the part of major competitors both the local and international companies.
Furthermore, L'Oréal brand has to depend on the third party sales agent who may also sale other branded products. So, overall a severe competition has to encounter despite having strong brand name and brand identity among the consumers across the world.
Opportunities of L'Oréal
Strong demand in organic products: L'Oréal is pioneer in launching organic based beauty and cosmetics items and these have strong demand all over the world as people are now more conscious about health and they want to stay out of any kind of danger from the usage of beauty care products.
Thus, L'Oréal has excellent business gap and lucrative opportunity for attracting more and more customers who love natural blended products for their day to day usage.
Global brand recognition: L'Oréal is one of the luxurious beauty care products in the world and has strong brand identity among consumers throughout the world. The company exercises very emotional brand positioning strategy through their branding slogan for example "Because you're worth it." This provides an emotional feeling in consumer mind and they want to loyal to the L'Oréal brand.
Threats of L'Oréal
Global economic crisis: Cosmetics are typically considered as luxurious items as it is exchanged for more price than other essential item that regularly have been purchased by consumer in meeting basic requirement.
During financial crisis, people generally do not go for high price products and services rather than going with lower price so that they can overcome financial crisis time. Thus, any kind of change in the financial environment in the world market would difficult to make revenues from global market due to reluctance of buying high priced product and service during economic crisis period.
Changes in consumer demands and preferences: Cosmetics industry is volatile and it changes consumer preferences and demands very frequently. So, companies need to make change products very frequently which are costly and take time to launch the new products which are demanded by the consumers across the world.
Hence, it would mean L'Oreal had to completely change their products designs, which would take up a lot of time and investment. However, would also create business opportunity and beat competition in cosmetics and beauty care industry which will allow achieving defined goals and objectives in business.
Recommendations
From the above internal environment analysis it can be demonstrated that L'Oreal has a good position in global cosmetics and beauty care market due to strong brand image and innovation of the company. However, they have to compete with other major players within the cosmetics industry throughout the world and this could pressure on operations of L'Oreal business.
So, L'Oreal should pay close attention regarding the internal environmental forces that influence on regular operations of business and profitability of L'Oreal as well. Continuous monitor of internal forces and research on market demand could help significantly to create a long-term profitable relationship with customers throughout the world and create sustainability in business.
References
- Entrepreneur, (2013). The Art of Positioning Your Brand and Why You Can't Afford to Screw It Up. [Online]. Available at: http://www.entrepreneur.com/article/227445 [Accessed 4 April 2015].
- Euromonitor, (2012). Passport: L’Oréal Company Profile- SWOT Analysis. London: Euromonitor International Limited.
- Fred, R., D. (2010). Strategic Management: Concepts. 13th ed. Upper Saddle River, New Jersey: Prentice Hall Inc.
- L'Oréal, (2015). Brands: Discover Our Brands. [Online]. Available at: http://www.loreal.com/brands/brands-homepage.aspx [Accessed 4 April 2015].
- Market Research, (2014). L'Oreal USA, Inc: Strategic SWOT Analysis Review. [Online]. Available at: http://www.marketresearch.com/GlobalData-v3648/Oreal-USA-Strategic-SWOT-Review-7807835/ [Accessed 4 April 2015].
- The Economist, (2013). The origins of the financial crisis. [Online]. Available at: http://www.economist.com/news/schoolsbrief/21584534-effects-financial-crisis-are-still-being-felt-five-years-article [Accessed 4 April 2015].
- Thomson, N., & Baden-Fuller, C. (2010). Basic strategy in context European text and cases. Chichester: Wiley-Blackwell.
SWOT Analysis of Loreal and Recommendations
4/29/2015
SWOT Analysis Example
