A case study on L’Oreal and the body shop

and various aspects of acquisition

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Contents
Introduction......................................................................................................................................3

Discuss the Impact of social and ethical factors on the current situation faced by L’Oreal............3

Social factors...............................................................................................................................4

Ethical Factors.............................................................................................................................4

Overview of organizational culture, viewpoints on compatibility and arising benefits or

challenges........................................................................................................................................5

Organisational culture of “The body shop” its compatibility and benefits.................................5

Organisational culture of “L’Oreal” its compatibility and challenges........................................5

Discuss any factors that L’Oreal would have considered before deciding to acquire Body Shop. .6

Cultural alignment.......................................................................................................................6

Core value of each organisation..................................................................................................7

The synergy fact..........................................................................................................................7

Emphasis Immediate actions after acquisition............................................................................7

Effects of Factors behind the failure on the acquisition of the L’Oreal with Body Shop...............8

Poor Strategic fit..........................................................................................................................8

Misinterpretations of new Company’s Culture............................................................................8

Integration to focus on only one company’s interest...................................................................9

Lack of focus on customer issues and quality.............................................................................9

Reflection on experience in writing this report...............................................................................9

Conclusion.....................................................................................................................................10

Reference.......................................................................................................................................11

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Introduction

In the dynamic world of business the activity of any business organisation are now competing
each other for more profit. Profit is general by product of successful business operations. But to
acquire more profit business organisation are now being involved in socially unacceptable and
unethical business practices. This case study report illustrated the complex business context and
contains the highlight on the occurrence that has happened because of unethical and misleading
business practice by L’Oreal. This report is made with the purpose to cover all the aspects which
impacts and alters the business in current dynamic marketplace.

Discuss the Impact of social and ethical factors on the current situation
faced by L’Oreal

Macro environment of a business is very essential for the existence of any business. The macro
environmental impact in case of any organisation is determined by the impact of each element
that builds up the macro environment as a whole (Young,2017). In this case of L’Oreal the
macro environment of this organization is determined by the factors like political condition,
demographical aspects, ethical factors, social acceptance, technological compatibility and legal
assistance which it receives from any defined geographical territory or nation in which it
operates its business. The elements of macro environment are very dynamic and to cope with
business constantly need to keep its activity aligned to it. It is beyond control of any organization
but has the potential to affect any organization. In the case of L’Oreal we have seen in that it has
been accused with some unethical and socially unacceptable business practice. Since business
and environment is interrelated with each other the activity pursued by L’Oreal has significant
effect on the elements of macro environment with its surrounded. Simultaneously those elements
have an adverse effect on the operation of business. The social and ethical factor with which
L’Oreal is currently affected is illustrated below:

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Social factors
In the case study of L’Oreal we’ve found that, it is doing activity like airbrushing
advertisements, making claims which is misleading customers and testing their products on
various time of animals. They also have also promoted price fixing for their product. In a society
where any business operated its activity gets the enough supports to sustain its growth. Social
factors require the considerations of customer as a whole. Social factors include the lifestyle of
people, choices of people, and their cultural aspects (Martin and Siehl, 2019). The activity that
L’Oreal is currently accused of reduces the social acceptance of their product which creates
dissatisfied group of customer. For a leading cosmetics company like L’Oreal customer
dissatisfaction is detrimental. The badmouthing of customer and lack of social acceptance alters
the buying habits of customers. Health conscious customers now will not use the product as it
could not meet the quality expectations and the market value of L’Oreal will fall gradually. Thus
the socially unresponsive attempts can drive the company out of market.

Ethical Factors
Business leaders in worldwide now understand that the ethical practice in business is essential
for the growth of any business. The activity like airbrushing advertisements, misleading
information, promoting child labour conducting tests on animals are unethical according to the
culture of society (Needle and David, 2019). L’Oreal by airbrushing advertisements, are creating
a tendency of misconception among customer of their being inferior and usage of their product
can solve that inferiority and they can gain the confidence. Such way by making these
misleading claims they are hampering consumers’ rights. This unethical practice results in ban of
product, loss of goodwill and will jeopardize the profit earning ability. This increases employee
turnover and increasing business cost will reduce the capital fund of business. Unethical practice
like child labour and testing cosmetics on animals will affect the public sentiments and will bring
long run disaster in the operation of company.

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Overview of organizational culture, viewpoints on compatibility and
arising benefits or challenges

Organisational culture of an organisation includes the organisation’s inner operation its

expectations, policies, interaction with internal and external environments. It’s basically
admixture of the practices that sates the core objectivity of any organisation. Organisational
culture is a process by which all the task is done in any organisation. Organisational culture is a
great factor in determining clients and business inter-relationship, the viewpoints of the
stakeholder and the structured way of business practice. in the case of L’Oreal and the body shop
organisational culture also plays the same role. The compatibility or organisational culture with
long run goals and their benefits and challenges are illustrated below.

Organisational culture of “The body shop” its compatibility and benefits

In the case study we’ve found that the body shop is established its culture of supporting the
human right and conducted its activity to ensure environmental care. This organisation has also
taken proactive acts regarding some dangerous unethical practices like experimenting on animals
Needle, (Needle and David, 2019). This organisational culture helps them to communicate with
the larger portion of the customer segment. As in the case we found that day by day the emphasis
of customers demand growing on safe organic product, discouraging child labour and proactive
stand against price fixing the operation of body shop with according to the public expectation has
made it one of the favourite brand and such alignment of business operation with public
expectation has proven the organisation culture is compatible in the long run because it increases
the market value and positive public image which in turn also facilitates the stakeholders
interest.

Organisational culture of “L’Oreal” its compatibility and challenges

In the following case study we have found that L’Oreal afar being a global market leader in
cosmetics business it continued to conduct many unethical business practice like as The activity
airbrushing advertisements, misleading information, promoting child labour conducting tests on
animals et. These acts violate the consumer rights and create a bad impact on the public image.

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This activity in the long run is not compatible with the company’s long run goal of market
expansion. These activities can compel customers to ban the products and have the power to
force any company to be out of market. Profit provided the cost of a business to remain in a
marketplace (Martin and Siehl, 2019). But the organisational culture of L’Oreal which included
unreasonable and unethical business practices hinders the earning capability .So company will
not be able to sustain its goal of market expansion. This condition will arise some more
challenges like high employee turnover rate, less return on investment, customer bad mouthing
and impact the credit rating of the organisation. So the stakeholder and other strategic partner,
and the other aspects of external and internal impact will jeopardise the market position of
organisation. So the organisation culture practiced in the L’Oreal is not compatible and in turn
brings no benefits to the party concerned to the business. In the long run the market power of this
organisation will be lost and the changing business context will drive the company out of
market which is not expected by any organisation.

Discuss any factors that L’Oreal would have considered before deciding
to acquire Body Shop

Acquisition can bring both positive reputation and negative impacts on the long run goal of the
organisation. Compatibility with clear defined goals helps organisation to be benefited from the
acquisition. In the case of Loral’s acquisition with the body shop the basis was to regain the lost
reputation and get learning from the ethical operation of the activity. Many things weighted for
any acquisition. But there are some factors that L’Oreal would have considered before the
acquisition like:

Cultural alignment
Cultural fitness is a must factor for ensuring long ruin success of any organisation. Without
cultural fitness is very hard to operate an organisation successfully. In the acquisition of L’Oreal
and the body shop they needed to measure the cultural fitness for company one another because
without cultural alignment the two company can’t satisfy the common goal as there is lacking or
proper organisation structure (Ravasi and Schultz,2015).

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Core value of each organisation
The core values are important determinant of whether an acquisition will be worthy or not. Core
value means a specific set of defied goal on which company tends to organise its long term
activity (Dessler,2015). In the case of L’Oreal and the body shop we can see that the core value
of these two organisations differs from one another. Where the core value of L’Oreal is to get
higher rate of profit and grasp a larger portion of market share, recovering its market goodwill or
to gain a larger supply chain in the contrary the core value of the body shop is to promote the
implementation of human rights and environmental care as well as stand against animal testing.
So before acquisition it is also an important aspect that needs to be considered.

The synergy fact

The term synergy is used to reflect the joint profit or loss of any acquisition. Synergy can be
either gaining synergy or loosing synergy which is conducted between two companies. If he to
company with each other can match up its activity that can result in higher profit therefore gain
synergy (Young,2017). In the case of L’Oreal and the body shop if the two company work with a
grater motive together is show that the collaboration between the departments, employees
therefore the organisation is able to bring good return on investment. The lagers supply chain and
positive public goodwill of the body shop how can work as an implied form of synergy for
L’Oreal is also a great fact to be considered.

Emphasis Immediate actions after acquisition

A clear and distinct evaluation of the task which needs to be given immediate attention is very
interesting facts of the acquisition. The acquisition happens so that there can be trade of between
the special feature of the companies. As L’Oreal is has much capability and previous experience
in the acquisition it can facilitate the motive of the body shop of ensuring human rights,
protecting animals and eco-friendly CSR activity (Padgett, 2012). On the other hand because of
certain problems like customer dissatisfaction and some accuses of unethical business practice
the potential customer’s growth can be retained. Neglect of the things which needs to done
immediate after the acquisition facilitates the process of achieving long term goal.

So in case of acquisition L’Oreal would need to keep the above mentioned facts in consideration.

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Effects of Factors behind the failure on the acquisition of the L’Oreal
with Body Shop

As In the case study we saw that L’Oreal was involved in various king of unethical business
practice like airbrushing advertisement, animal testing, and promoting child labor. Because of
these unethical practices the changing customer perception has adverse affected the market
power of this organization. Potential customer and loyal buyers were refraining from purchasing
the product of L’Oreal. To gain the lost market segment and customers again this organization
proposes the acquisition with the body shop which resulted in failure. The factors which are
mainly the reasons of this acquisition failure are:

Poor Strategic fit

The strategy for which L’Oreal wanted the acquisition with body shop is mainly to reform the
strategy and in order to recover the damage of good will. The body shop was performing very
dynamically as it was a famous brand which was supporting the growing customer concern on
business and other aspects like ethical reasoning (Schein and Edgar,2018). This company was
working to promote the human right and also was discharging activity by implementing CSR on
environment. L’Oreal considered it as a medium of gaining the lost goodwill and getting access
to the vast supply chain of body shop. Thus because of different core principle of these business,
they failed to match for a good strategic fit.

Misinterpretations of new Company’s Culture

Two companies can’t adopt the same culture just because of acquisition. When L’Oreal proposed
for acquisition there was different culture in the two companies. The body shop was practicing
socially acceptable and ethical business on the other hand L’Oreal was accused of unethical
business practices and breach of consumer rights as the right of to choose, to be informed, to be
herd and to be informed was being hampered (Schrodt,2019). So the acquisition risen the
criticism by many critics that the company was acquitted not to reform the current operations but
to get higher goodwill and larger supply chain of the body shop which was by ethical business
practice. So such misinterpretation led to the acquisition failure. Which been very easy because
of higher customer dissatisfaction.

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Integration to focus on only one company’s interest
Integrations is not always beneficial for the interest of company interest. Company always
focused on the thing that is best match for satisfying its interest. In the case of L’Oreal, it only
focused on the fulfillment of its own interest (Tsai,2019). It didn’t focus on the core principle of
the other company. The main purpose of this acquisition is mainly to learn the operation system
of body shop which is a method to control the damage of reputation and will be medium to
attract he customer. But in this process the general purpose of the body shop company was not
satisfied moreover have been overlooked. So this integration brought failure of this acquisition as
the core principle of the both company was not prioritize.

Lack of focus on customer issues and quality

Customer issues and company’s assurance regarding the delivery of quality product is the most
essential element in any organisation. Satisfied customer brings in more profit therefore
increases the high earnings ratio. In the case study of L’Oreal we found that the company was
involved in unethical business practice and therefore the customer dissatisfaction on it grew
higher (Deal and Kennedy,2017). So to maintain the long run existence the company needed to
develop its produces, stop airbrushing advertisements, stop experimenting on elements and stop
price fixing. But after the acquisition the company was more concentrated on enlarging the
supply chain of the organisation and acquiring the large supply chain of the market. That resulted
in growing customer dissatisfaction and that led to the failure of acquisition.

Reflection on experience in writing this report

In writing the report based on the case study of L’Oreal and the body shop I have learned how
the changing public expectation and customer dissatisfaction can hinder any business’s growth.
In this case study we can see that the company L’Oreal is accused of socially unacceptable and
unethical practice in case of business which resulted in customer dissatisfaction. Loss of
potential customer segments and bad public imagers hampered the operation of business. On the
other hand we saw that the operation of the body shop is in accordance with the public
expectations. Therefore it is promoting the ethical business practice. Unethical business practices
hinder consumer rights. Consumers if they are misled it is not good for any organization if it

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wishes to exist in long run. This report also provided me with an insight of acquisition policy
between companies. This acquisition can result in both positive and negative. Acquisition if they
work in synergy their productivity can be raised by much percentage from the productivity rate
which they would have produced alone (Dessler,2015). But in the case we found that the lack of
socio economic factors’ alignments with customers changing life style and growing concern is
the cause of acquisition failure. the more emphasis on expansion of business and less customers
issues and unethical business practice is the main reason why L’Oreal failed in gaining the
revenue synergy. This report provides the key elements which helps business to be responsive of
their action. As a business student this case study report contributed in my achieving business
acumen.

Conclusion

Business and its context is very dynamic. It’s changing the current trends and shaping new one.
The current age of discontinuity is forcing the company to change or alter their activity. In this
era of changing business context the socially and ethically responsive baseness activity is
expected from any organisations. Customers’ expectations and its fulfilment can ensure the long
run existence of a business. So this fair business practice is expected from every organisation.
This case study also reflects the fact that fair business practices can make any company or
organisation able to achieve the resource which ensures long run successful operation.

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Reference

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Macmillan.

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Needle, David (2019). Business in Context: An Introduction to Business and Its Environment.

Ravasi, D.; Schultz, M. (2015). “Responding to organizational identity threats: Exploring the
role of organizational culture”. Academy of Management Journal, 49 (3): 433–458.

Schrodt, P (2019). “The relationship between organizational identification and organizational

culture: Employee perceptions of culture and identification in a retail sales
organization”. Communication Studies 53: 189–202.

Schein, Edgar H.(2018) Organizational Culture and Leadership. San Francisco: Jossey-Bass,

2010. Print.

Tsai, Y. (2019). “Relationship between Organizational Culture, Leadership Behavior and Job
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Dessler, G. (2015). Boundless. “Types of Organizational Culture.” Boundless Management.

Boundless, 21 Jul. 2015. Retrieved from boundless.com

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Martin, J., & Siehl (2019). Organizational culture and counterculture: An uneasy symbiosis.
Organizational Dynamics, 122: 52-6

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