Estee Lauder PESTLE Analysis

Published by MBA Skool Team, Last Updated: January 26, 2020

PESTLE Analysis of Estee Lauder analyses the brand on its business tactics. Estee Lauder 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 Estee Lauder, as it helps to understand market dynamics & improve its business continuously. PESTLE analysis is also referred to as PESTEL analysis.

Let us start the Estee Lauder PESTLE Analysis:

Political Factors:

The political factors in the Estee Lauder PESTLE Analysis can be explained as follows:

Estee Lauder operates across various continents and needs to maintain compliance of the various local as well as global regulations, related to import and export. The company needs to follow the various regulations related to labor, compensation and taxes that have been set by the local governments. If the company fails to do so, the amount that is spent in the lawsuits will be tremendous, with loss of reputation aligned. The tax reforms that have brought in the United states has given the company an opportunity to increase its profitability. Estee Lauder also gets affected by the political stability in various countries. With Brexit causing a low market, and China- US trade war creating a rift for export of the products to the Chinese markets. These factors have a major role to play when in=t comes to foreign investments. The major investors are skeptical and have held back their investments, due to these reasons in Britain and China. The reduction in corporate tax in India has led to various companies establishing their production units in the country. This will make sourcing of the beauty products cheaper for Estee Lauder which may lead to a higher profitability for the company.


Image: Wikimedia


Economic Factors:

Below are the economic factors in the PESTLE Analysis of Estee Lauder:

Estee Lauder sells products across various countries and thus needs to follow the financial trends that exist in these countries. The increase in the dollar value, affects the sale of the products. The company’s products vary between common regular products to premium segment products. The cost of these products may vary from a few dollars to a few 100 dollars. Since Estee Lauder products form a part of luxury goods, disposable income of an individual plays and important role. With rise in cost, higher than the rise in disposable income will lead to reduced sale of the products. The premium segment is less affected by the change in income, since the client base for the segment is usually the affluent upper class. Another factor that affects the sale of the products is the change in the tax rates. When tax policies across countries change, the sale gets affected. If the new policies increase the tax amounts on the retail of luxury products the sale gets affected.


Social Factors:

Following are the social factors impacting Estee Lauder PESTLE Analysis:

The society today tries to associate its personality with the various brands, and this is and advantage for Estee Lauder. With the upcoming generations becoming more conscious about the brands, the ingredients and the type of make up they use, Estee Lauder has a good scope for expansion. The emotional attachment that the consumer has, is another trend that the company can leverage to have a competitive advantage. The need for new organic products is on the rise, and the company can use this fact to research and develop new product lines that are completely organic. The cosmetics markets have diversified to include various protective and anti-aging products that have been in high demand over the past decade. The company can utilize its new technologies and massive staff, to provide for personalized and custom beauty care to its customers. Fragrances by the brand, have been associated by the consumers on a personal level, and these products associate with themselves a unique value, that is very different form the rest of the fragrances produced by the various other companies. With fragrances generating high revenues, the company can further work on enhancing and expanding its line of fragrances.


Technological Factors:

The technological factors in the PESTLE Analysis of Estee Lauder are mentioned below:

The changing trends of marketing have made the task of promotion both easier and competitive for all the companies operating in the beauty segment. The technology that was once restricted to advertisements over the radio or the TV, has now transformed into a completely different game. The advent of new social media apps every day, has led to increased competition in the market. With all the competitors promoting similar products to multi dimension of customers, it has become tough for companies to capture the target audience. In the plethora of marketing strategies that prevail, Estee Lauder has been working on various new technological advancements, to stay relevant and competitive in the market. The company is considering the use of Artificial intelligence and data analytics to predict the market conditions and the direction in which the trends are moving. 3D printing is another area that the company has been trying to work out, so that it can build on nontraditional products to capture the market. The various e-commerce models have helped the company trade across continents with ease. The advancement in banking technology has also helped influence the ease of cross border business.


Legal Factors:

Following are the legal factors in the Estee Lauder PESTLE Analysis:

Since Estee Lauder operates over multiple regions in the world, complying to the local as well as global guidelines for the various ingredients used, is a mandate. The use of various ingredients is banned in the Arab-countries, and this needs to be taken care of. These ingredients that are used in the various products may or may not be FDA approved. The product safety laws in and around the United States and Europe are much more stringent than the ones, in Asia(except the Arabic countries).Various laws, such as the Federal food, drug, and cosmetic act and the fair packaging and labelling act are one of the most dominant policies in the beauty care segment. These laws regulate the content being used based on the effect of the product and monitor that there is no misinformation on the labels of these products. The selling of second quality product is more common in the under-developed and developing state, which is being worked on by the various government officials in these countries. Apart from these laws related to products, Estee Lauder also needs to keep abreast with the latest updates on various employment acts, and the benefits that these acts provide. A recent example is when the company had to pay a sum of $11,00,000 as a compensation to all the new father’s who were denied paternity leave equal to that of women.


Environmental Factors:

In the Estee Lauder PESTLE Analysis, the environmental elements affecting its business are as below:

Estee Lauder believes in managing beauty in a sustainable manner. The need to work on sustainable sourcing and make conscious decisions regarding the various activities that affect the supply chain is of at most importance to them. They believe in working towards understanding in detail the effect of various economic, environmental and social impacts of each of their decisions related to their value chain. In order to address these issues related to sustainability, the company talks about collaborating with the various government agencies, local communities and private enterprises. The company is RSPO certified (all the palm-based ingredients) and boasts water intensity reduction by 30.6%, throughout its value chain. In order to create a better environment and sustainable environment, the company has undertaken various goals, that it wishes to attain over the next 10 years. They have pledged to reduce carbon emissions over the next 2 years and reach a stage of zero carbon emission by 2020. By 2020, they also wish to enter the zero waste to landfill zone, throughout its distribution and manufacturing sites. By 2025, they wish to convert all types of packaging material, to recyclable ones or if not recyclable, at least reusable, and recoverable. The company is working towards switching to using 100% sustainably sourced paper. Apart from increasing the recyclability of the packaging material, it will also helot h company understand its impact on the environment, and help it achieve its goal, of sustainability.

To conclude, the above Estee Lauder 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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