Published by MBA Skool Team, Last Updated: April 21, 2020
PESTLE Analysis of L'Oréal analyses the brand on its business tactics. L'Oréal PESTLE Analysis examines the various external factors like political, economic, social, technological (PEST) which impacts its business along with legal & environmental factors. The PESTLE Analysis highlights the different extrinsic scenarios which impact the business of the brand.
PESTLE analysis is a framework which is imperative for companies such as L'Oréal, as it helps to understand market dynamics & improve its business continuously. PESTLE analysis is also referred to as PESTEL analysis.
The political factors in the L'Oréal PESTLE Analysis can be explained as follows:
L'Oréal is a leading cosmetic brand in the world having a global presence. The rules and policies of the government of the countries in which L'Oréal is working has huge impact on its functioning. European union changed its regulations governing medicines led to the decline in its dermatology products. Moreover, there is a clear policy regarding the advertising that the company has to follow. It cannot mislead the consumers by over exaggerating the benefits and functions of the product. Also, there are safety standard set by various governments which it has to follow. L'Oréal is not allowed to test its products on animals. In many Arab countries due to the conservative nature of people it cannot advertise its products openly. Even many Arab countries see the western products negatively and doesn’t allow it in its countries. This affected the company’s ambition to have presence in all the countries.
Below are the economic factors in the PESTLE Analysis of L'Oréal:
L'Oréal is working in a very dynamic environment where it needs to constantly adapt itself according to the changes.
The economic stability and people’s income are a big factor affecting the sales of the company. Developing countries like china and India which are the two fastest growing economies of the world presents a great opportunity for the company to expand its presence there. But recently the global slowdown and trade war between China and USA has significantly decreased the consumption of goods and services by the people so the L'Oréal and many companies are facing low demand situations.
Following are the social factors impacting L'Oréal PESTLE Analysis:
Todays generation love to show off. They love to beautify themselves and share it with world. This has open up a pandora of opportunity for L'Oréal. People today doesn’t want to go to salon for hair spa but want products so that they can spa at home only and L'Oréal is providing such products to its consumers. Todays generation has become very conscious about the environment, so it doesn’t purchase that product which has detrimental impact on the environment. Moreover, due to the pressure of people government has banned the testing of products on the animal.
The technological factors in the PESTLE Analysis of L'Oréal are mentioned below:
Technology has a huge impact on the functioning of the company. L'Oréal is always at the front, when it comes to innovation. It invests a lot money in research and development to develop state of art products and to gain the market share. New categories are introduced like dermo cosmetics and cosmeceuticals which focusses on antioxidants and anti-ageing properties. Through social media people are continuously interacting with its customers and getting feedback and suggestions of its products. The addition of value-added extras such as with built in SPF, trends are favouring more natural products incorporating plant-based ingredients.
The L'Oréal company uses a wide variety of ingredients and chemical including emollients, surfactants, fats and oils, fragrances, cleansing agents, minerals oils and waxes.
Following are the legal factors in the L'Oréal PESTLE Analysis:
L'Oréal was involved in many legal battles with different stakeholders at different point of time. The company had won a battle against the low cost “smell-like” imitators. Many third party were selling the product smell like it at a very low price. The European court of justice banned the imitators to advertise products smell-alike products of loreal. One issue was when lead was found in its lipsticks. After conducting extensive research that five out of ten most lead contaminated brands were of L’Oréal. Also, they are found guilty of making false claims about their product ‘Genifique’. They claim that product will affect the person genes and make it seem as if he slept an extra 2 hours. They are sued by FDA for making false claims.
In the L'Oréal PESTLE Analysis, the environmental elements affecting its business are as below:
The companies nowadays need to be very careful about their products not harming the environment as people are becoming more and more conscious about the environment. L'Oréal is making a great leap in sustainability. The us branch of L'Oréal has been named as top performing global company on sustainability in 2017. The company is focusing on making eco friendly products. It has a strict policy of forest certification of its packaging, which allows it to certify 99.85 of cardboard used for product boxes.
L'Oréal is also a member of carbon disclosure project with the objective to reduce its emission of greenhouse gases. On the Climate Disclosure Leadership Index, L'Oréal has been given the ranking ‘A’. The company has decided to achieve zero-deforestation by 2020 and started sourcing all its palm oil derivatives from sources certified by Roundtable on Sustainable Palm oil.
To conclude, the above L'Oréal PESTLE Analysis highlights the various elements which impact its business performance. This understanding helps to evaluate the criticality of external business factors for any brand.
This article has been researched & authored by the Content & Research Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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