Knorr PESTLE Analysis

Published in Companies category by MBA Skool Team, Last Updated: February 21, 2021

Here is a detailed PESTLE analysis of Knorr which examines political, economic, social, technological, legal & environmental factors.

Political Factors:

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

Knorr is a Unilever-owned brand, which has presence in nearly 80 countries. However, it has to ensure high compliance related to food processing. For instance, Hindustan Unilever Ltd. decided to withdraw a related product from the market. This was because the Chinese range of instant noodles Knorr’s application was pending with the Food Safety and Standards Authority of India (FSSAI). Also, the brand has to ensure compliance with national and regional regulations in several areas like product safety, trademarks, copyrights, employee health and safety, data privacy, environmental laws, taxes, etc.

Also, any changes in the regulatory environment could have severe financial impact on the business of Knorr. Another factor is political stability in the respective countries the brand has its business in. Any changes in the tax environment could also affect the financial performance of the company, due to increase in taxes. Already, the Organization for Economic Cooperation and Development’s Base Erosion and Profit Shifting project may make it more difficult to take any advantage due to legal loopholes related to tax in various countries.

Image: company website

Economic Factors:

Below are the economic factors in the PESTLE Analysis of Knorr:

Knorr is present in close to 80 countries. Any deterioration in economic countries of those countries could also affect the demand for the brand, leading to decline in sales and profits.

Hence, difficult economic conditions in one country also have the potential to affect other countries. Apart from this, any governmental action like foreign exchange or price control can lead to decline in the growth of Knorr’s business. Another risk is the impact of Brexit on Knorr business in UK. This could adversely affect the import, export of raw materials. It’s parent company Unilever has also admitted to the possible impact on jobs after Brexit. This is because the costs of imports could rise in the future. Another potential risk is the in the business operations of its parent company, Unilever. Unilever works on several initiatives to digitize its brands, including Knorr. Any failure to execute such initiatives could result in underperformance of the company and the brand.

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Social Factors:

Following are the social factors impacting Knorr PESTLE Analysis:

Knorr is an international brand and makes products like stock cubes, soups, sauce, recipe kits and has a 170-years history. The brand started a marketing campaign to allow consumers to develop their own ‘flavour profile’ online. The campaign also used a video advertisement called “Love at First Taste”. This ad showed how couples were paired according to preference they showed for the food profiles. The objectives of the campaign were as follows: create emotional connection with millennials, improve brand equity among millennials and to make sure that more people have conversations about Knorr. The campaign resulted in rise in brand appeal, increase in brand favorability, and increase in purchasing intent. Such campaigns are important as they enable the brand to find newer ways to connect with the young population. Also, the campaign led to a significant increase in global market share. Thus, engaging with younger demographics is important for the continued growth of Knorr’s business.

Technological Factors:

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

The systems of the business are getting increasingly dependent on information technology. Thus, there is always the risk of cyber-attack on illegal data access and misuse of such data to damage company reputation. Any such cyber-attack could also adversely affect the financial performance of the brand, due to decline in sales and profits. Also, as digitization becomes the norm with suppliers, consumers, distributors, there is a great need for better IT systems. Apart from this, the company is also working in blockchain technologies improve its supply chain. Such projects would help reduce time required to track the products from production to supply. However, Knorr does use technology to leverage its brand. The “Love at First Taste” advertisement is a great example of how the company used social media to its advantage. It also achieved great results. These included 8% increase in brand appeal, 10 percentage points rise in favourability of the brands, 15% rise in purchasing intent, etc.

Such technology-led campaigns can increase revenue of the brands in the future, too.

Following are the legal factors in the Knorr PESTLE Analysis:

Knorr has to follow several national and international laws regarding product, trademarks, competition, health of employees, privacy, environment, etc. If laws and rules turn unfavourable, they can cause financial damage to the business performance of the brand. This program would help companies’ close legal loopholes in matters related to global taxation. Thus, used to be exploited by companies, to pay less taxes and do corporate inversions. Apart from this, the brand faces the threat of inadequate legal protection to intellectual property rights. Thus, the company may have to pay more to protect its legal rights or lose revenue.

Environmental Factors:

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

Knorr brand tries a lot to do a lot for protecting the environment. However, the use of plastic may cause a negative perception in the eyes of the consumer, regulatory agencies and other stakeholders. Many governments across the world are banning plastics or restricting its use by imposing taxes. The company is also reliant on the operations and delivery of better recycling technologies. Yet, there is a risk of not being able to find appropriate replacement materials. One reason for this is that, in the future, the cost of recyclable plastic may increase in the future. This could again hurt the profitability of the company.

Also, higher taxes on plastics can also reduce the profits of the business. The brand also faces the risk of natural disasters like earthquakes, floods, cyclones, or even catastrophic events like pandemics can affect the financial performance of the brand. The recent case of Covid-19 is an example of how infectious diseases can impact the business performance of the brands.

To conclude, the above Knorr 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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