PESTEL ANALYSIS OF HINDUSTAN UNILEVER LIMITED

PESTEL Analysis is a tool that is used to study the external environment of any business or industry. The
factors studied under this analysis are Political, Economic, Social, Technological, Environmental and Legal.
This analysis helps the company in gaining valuable insights into the factors affecting its operations and
devising strategies in future accordingly.

“It may be so that the importance of each of these factors may be different to different types of industries,
but it is imperious to any strategy that a company wants to develop that they conduct the PESTLE analysis
as it forms a much more comprehensive version of the SWOT analysis.”

Hindustan Unilever Limited is one of the most well established FMCG companies in India. 2 out of 3
Indians use the products of HUL every day. Even though the company is performing extremely well in the
personal care segment, such as hair care, skin care, oral care etc., it faces stiff competition from other FMCG
giants and several local players as well.

In order to study the external factors affecting the business, we perform the PESTEL Analysis for Hindustan
Unilever Limited as follows –

POLITICAL FACTORS –

The very first element of the PESTLE analysis is the study of Political factors affecting the business or
industry. The political factors can play a huge emphasis on the way a business functions as political factors
create various opportunities as well as obligations for a business.

The multiples taxes and levies are employed on the products which impacts the prices of the commodities.
Moreover, trade agreements which occur between countries leads to the imposition of certain tariffs and
regulations as well. These political factors collectively operating in the external environment impact HUL
and alter its strategies.

ECONOMIC FACTORS –
The study of the economic factors also plays a significant role in the smooth functioning of any business.
Both national and international economic markets determine the economic conditions affecting a business.
These economic conditions dictate how consumers, producers and suppliers operate within the society.
The economic slowdown that the Indian and global economic market is facing at present has affected the
sales and growth rate of Hindustan Unilever Limited. Also, the prices of raw materials used in the
manufacture of the commodities keep fluctuating. This impacts the profitability levels of HUL. Economic
factors, as a matter of fact, has the most impact on the running of any business.

SOCIAL FACTORS –
Social factors refer to those factors operating within the society which influence a person’s attitude,
behaviors, preferences etc. The consumers preferences decide which products they buy or cater to. The
changes in population pattern also affect the purchasing trends of the consumers.Due to the growing
awareness about sustainable products among the Indian population, HUL implemented a ‘GO GREEN’
policy in the year 2010 and reduced its carbon emissions by approximately 15000 tons per year. High
population in both the rural and urban areas has increased the sale of FMCG products in the country. Growth
in the disposable income of people has also increased the sales of HUL. Moreover, the growing health
awareness and consciousness has led to demand for more natural and chemical free products. Big companies
like HUL must market their products accordingly in such a competitive and cut-throat market.

TECHNOLOGICAL FACTORS –
The next important element we are going to talk about is technology. The rapid advancement in technology
has been impacting all businesses, big or small. These advancements have changed the way in which these
businesses operate. The technological revolution has led to quicker responses and faster action-taking
abilities for the businesses. They must react to consumer demands much quicker than before.HUL has also
adapted itself to the market trends. It has employed the latest IT technology and implementation of the best
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software services across its offices. Innovation in its product line and commodities is also possible only due
to the rapid evolvement of the technology used by HUL. This has dramatically enhanced the quality of
products provided by HUL and has helped HUL create a trust in the eyes of its consumer base.

ENVIRONMENTAL FACTORS –
The impact which the environment causes on any business come under the purview of environmental
factors. The location of a business impacts the trade. So does the climatic conditions prevailing in the area.
The waste disposal laws, and energy consumption practices are also studied under the environmental factors.
Hindustan Unilever Limited promotes the usage of sustainable and renewable resources. The products are
designed such as to make them safe for the consumers. The company tries to use eco-friendly materials right
from the packaging to design. The company wishes to be an environment friendly business and they have
been working since decades in the same direction. This has helped the company to grow and cater to its
customers in the most apt manner.

LEGAL FACTORS –
There are certain laws and regulations which affect the business environment substantially. No business can
function without complying with these legal regulations. There are also certain policies which every
company must maintain. Legal factors basically refer to how the laws affect the way a business functions
and the way in which the consumer responds to the business.
Consumer laws and various safety standards are some of the measures which Hindustan Unilever Limited
must comply with. Certain labor laws must be met as well. Moreover, HUL is a consumer goods company.
More than 400 brands are owned by the company in various segments. Every brand has various locations
and stores as well. This makes them subject to follow product safety laws, copyright, tax laws – both
national and international, laws relating to the health and safety of employees, etc.

Hindustan Unilever’s Five Forces Analysis

The following are the intensities of the five forces in affecting Unilever:

1.COMPETITVE RIVALRY OR COMPETITION

Competition is a significant power in Unilever's industry condition. This segment of the Five Forces
examination distinguishes the outside elements that present the effect of firms on one another. The solid
power of serious contention against Unilever depends on the accompanying outer components and their
powers:

• High number of firms (strong force)

• Low exchanging costs (strong force)
There are numerous organizations working in the personal care industry. This outside factor forces a solid
power on Unilever For instance, it is simple for buyers to change starting with one firm then onto the next.
Therefore, a significant level of rivalry is appeared right now Unilever's Five Forces examination, featuring
the need to consider serious competition as a high-need power in the organization's business condition.

2.CUSTOMER’S BARGAINING POWER

Unilever's industry condition relies upon the reaction of shoppers to its items. The impact of purchasers on
business execution is considered right now the Five Forces investigation. Unilever must address the
accompanying outside variables that lead to the solid power of the dealing intensity of clients:
• Low exchanging costs (strong force)
• High value of data (strong force)
• Small magnitude of distinct consumers (weak force)
The low exchanging costs make it simple for buyers to move from Unilever's items to other organizations'
items. This outside factor adds to the solid force of the negotiating intensity of purchasers. What's more,
customers approach high calibre of data about buyer merchandise, making it significantly simpler for them
to choose while moving from Unilever to different suppliers. For instance, purchasers can look at items
dependent on online data. The little size of an individual purchaser's buys has negligible effect on Unilever's
benefits.
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3.SUPPLIERS’S BARGAINING POWER

Suppliers sway Unilever's industry condition by influencing the degree of supply accessible to firms. This
area of the Five Forces investigation shows the impact of suppliers on organizations. Below mention are the
outer variables that add to the moderate power of the dealing intensity of providers on Unilever:
• Reasonable size of individual suppliers (moderate force)
• Judicious overall supply (moderate force)
While Unilever has enormous providers like outside firms that supply paper and oil, the normal provider is
moderate in size. This outside factor forces a moderate power on the shopper products industry condition.
Essentially, the moderate degree of the general stockpile adds to such huge however constrained impact of
providers. Different firms in the business are comparably influenced. As appeared right now the Five Forces
investigation of Unilever, the dealing intensity of providers is a critical however moderate thought in the
shopper merchandise industry condition.

4.THREAT DUE TO SUBSTITUTE

Substitutes can diminish Unilever's incomes and the quality of firms in the personal care industry condition.
The effect of substitution is resolved right now with the Five Forces investigation. For Unilever's situation,
the accompanying outer variables are answerable for the frail power of the danger of substitution:
• Short switching costs (strong force)
• Little substitute availability (weak force)
• Small performance to price ratio of substitutes (weak force)
The low changing costs empower buyers to handily utilize substitutes to Unilever's items. This outside factor
forces a solid power on the organization In any case, the general effect of substitution is debilitated on
account of the low accessibility of substitutes. In connection, most substitutes have low execution with
negligible or unimportant cost contrast when contrasted with purchaser merchandise promptly accessible in
the market. This condition makes Unilever's items more appealing than substitutes, in this manner further
debilitating the power of the risk of substitution. This area of Unilever's Five Forces examination shows that
the danger of substitutes is a minor issue in the business.

5.THREAT TO NEW FIRMS

Unilever rivals built up firms just as new firms in the customer products showcase. This area of the Five
Forces investigation thinks about the impact of new firms on the business condition. The accompanying
outer components make the feeble power of the danger of new participants against Unilever:
• Small switching costs (strong force)
• High cost of product development (weak force)
The low changing costs empower new participants to force a solid power against Unilever. For instance,
buyers can without much of a stretch choose to attempt new items from new firms. Nonetheless, it is
expensive to manufacture solid brands like Unilever's. This outer factor debilitates the power of the risk of
new participants against the organization.

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