Estee Lauder SWOT and PESTLE Analysis

Strength

1. Strong brand equity: Estee Lauder has been a leading American brand ever since 1946 when it was started by the Lauder couple in Manhattan. Once started as a brand with only 4 products has expanded into various product lines wherein Estee Lauder has established itself as the gold standard of cosmetics in America. Additionally Estee Lauder has roped in brand influencers like Gwyneth Paltrow, Elizabeth Hurley, leading names in the industry of showbiz for long times, who have ended up as brand influencers and faces of the brand, giving Estee Lauder a wider appeal in the minds of the masses as a brand of premium cosmetics. In addition to that the brand has taken part in various movements of a widespread social dimension like the Breast Cancer campaigns ever since 1992 , accumulating a huge fund as off date , which have endeared it all the more creating a strong brand legacy and corresponding recall factor.

2. Growth reflected through financial parameters: The bygone year, that is 2017, was one of the best in the history of Estee Lauder as it saw a major surge in the prices of its stocks. It generated sales of almost 13 billion over its huge portfolio over the year. Accompanying that, the stock prices grew by about 80% over the course of the entire year. In fact it was not just an overall growth but even the rate of growth increased in every quarter. By expanding their operating margins, the earnings per share furthermore increased significantly throughout the entire period beating various expectations of market analysts and experts. The main factors that have promoted this growth has been identified as increased appeal to millennial by roping in celebrities with a heightened social media presence like Kendall Jenner, who is highly popular with that particular age group. Additionally, the demographic factor has also helped the company.

3. Distribution Channels: Estee Lauder has distribution channels spread all over the world through retail stores and their growing ecommerce channel. Asia is one of their biggest markets, which houses more than 60% of the entire world population. In fact this geographical region itself accounted for approximately 21% of the sales of the company in 2017. Hong Kong in this regard is a very strong market and so is Australia. Another notable success story in this context has been in China where operations were first established in 1993 and further on Estee Lauder was able to establish itself as a market leader in China by 2002. One of the reasons why distribution has been their strength is their ability to understand the pulse of the local markets. For instance so as to customize their products better for the Asian market Estee Lauder introduced a R&D team in Shanghai in 2005 and further established a centre exclusively for R&D to cater products for Asia specific needs and demands.

4. Product Quality & Superior Marketing Techniques: As a part of the basic brand essence, product quality has been the driving factor for Estee Lauder. In fact the brand founder herself, started the brand based on her obsession for well groomed skin and shining eyes and always emphasized on the best quality. In fact at a time when sampling of a new brand was unheard of Estee Lauder employed this technique to test out the brand during its inception days to acquire customers for the long term instead of short term acquisitions through wide spread advertising. The brand, also introduced during its run like endorsements by celebrities, bundling, promotional bills, gift products with purchases, use of avenues like department stores and most importantly educating the customer through product demonstrations. These demonstrations were through makeovers, done in single sessions, instant makeovers that contributed to widespread brand visibility. These techniques were all revolutionary in their time, and this legacy of innovative marketing coupled with high level product quality has continuously kept this brand at the top.

Weakness

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Opportunity

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Threat

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Political

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Economic

1. Emergence of new markets: While sales of cosmetics has seen a somewhat decline in developed markets, as per a report by Deloitte the major growth sector for beauty products and cosmetics lies in emerging markets. In fact the fast growing regions and emerging markets herein have been identified as and Latin America touted to grow at about 9.8 %, Eastern Asia at about 10%, Eastern Europe approximately at 5.1% and the African market, specifically the middle and eastern portions at about 10.5%. However , the magic of these markets not only lie in them being major sources of sales and revenues but also as zones of widespread innovation with South Korea leading the pack , having acquired the reputation of being highly innovative in the domain of skincare. However, in spite of this opportunity, the developed markets with all their low rate of growth still provides the customers with more premium spending power, which is not that much prevalent in the emerging economies.

2. Surging economic growth of Estee Lauder: The bygone year, that is 2017, was one of the best in the history of Estee Lauder as it saw a major surge in the prices of its stocks. It generated sales of almost 13 billion over its huge portfolio over the year. Accompanying that, w the stock prices grew by about 80% over the course of the entire year. In fact it was not just an overall growth but even the rate of growth increased in every quarter. By expanding their operating margins, the earnings per share furthermore increased significantly throughout the entire period beating various expectations of market analysts and experts. The main factors that have promoted this growth has been identified as increased appeal to millennial by roping in celebrities with a heightened social media presence like Kendall Jenner, who is highly popular with that particular age group. Additionally, the demographic factor has also helped the company.

3. Challenge faced from independent brands gaining foothold online: Such is the scenario of brands these days that even small independent brands have the power to gain all the big bucks thanks to the online retail channels. In fact successful independent brands today are considered as major opportunities by companies as big as Estee Lauder for successful acquisitions which can open avenues in various directions for these large brands by capitalizing on the market created by the individual brands without investing much effort and money for R&D or customer acquisition. Additionally even investors have eyed these brands as major prospects for economic expansion. While it provides a major opportunity for Estee Lauder there is also a big challenge with respect to individual brands because of online channels. Owing to online channels and viral marketing the entry barriers have reduced considerably which is why no market or no product is indispensable today, and continued innovation is required to keep competition at stake.

Social

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Technological

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Legal

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Environmental

1. Eco friendly packaging: With increasing environmental regulations and conversations regarding creating a healthier environment, the efforts to go green and create more sustainable packaging have become a major need for most companies in the beauty industry. However, creating eco friendly packaging without using plastics is a major challenge for most companies in cosmetics. This is because most of the cosmetic products are delicate and require compact packaging wherein the product quality isn’t spoilt over its given shelf life. Air tight packaging is required as these products may get spoilt if the packaging is not effective and additionally the size of packaging also has constraints given that retailers prefer certain kind of SKU’s in their shelves. At the same time, while brands can invest largely on creating effective eco friendly packaging as per the size demands of retailers it would shoot up the cost of production and the consequent product cost. This would ultimately have an adverse effect on the demand for the product. Hence, eco friendly packaging without comprising on cost and quality is a major environmental challenge.