If I ask you to list the world’s top cosmetics brands, I am 100% sure your list will contain the name, Estee Lauder. Any individual, who uses cosmetics products, rates Estee Lauder very highly.
The cosmetics brand has made its place in the hearts of its consumers and the market by providing great quality products. Today’s article will be a treat for makeup and skincare product lovers because, in this article, we will discuss the operations of Estee Lauder.
Estee Lauder is one of the pioneers in the cosmetics industry. It has been operating for decades now. It excites us to see how the brand kept itself relevant over all these years. To get insight into the brand, we conducted Estee Lauder SWOT Analysis.
With the help of the SWOT analysis, we will be able to analyze the internal and external factors responsible for impacting Estee Lauder’s operations. However, before we proceed to the SWOT analysis, it is essential to know the brand’s history.
Today we see Estee Lauder spread all over the globe with beautiful stores and a huge workforce. However, the beginning of your favorite brand wasn’t much in line with this.
Estee Lauder had a rather simple beginning. In 1946, a woman named Estee Lauder and her husband started producing four simple cosmetics products: Cleansing Oil, Super Rich All-purpose Creme, Skin Lotion, and Creme Pack.
After a year, the brand got its first big order from a renowned departmental store. This created a pathway for the brand’s success. After that, the brand kept selling its products to different stores and kept making a profit.
In 1958, Estee Lauder sold products with a million dollars for the first time. This was a great milestone achieved by the brand. Following this achievement, the brand expanded its operation overseas by moving to London.
Soon the brand revolutionized the industry by launching a makeup kit with several products. However, the brand didn’t just stick to makeup products. In 1968, the brand diversified its operations and specialized in skin care.
The process of expansion didn’t really stop for Estee Lauder. The brand kept on growing and expanding its operations in different countries. Finally, in 1995, the cosmetics brand decided to go public. As a result, it got listed on the New York Stock Exchange.
This further boosted the company’s growth and helped it expand its operations. Currently, Estee Lauder is ranked as one of the top cosmetics brands in the world. In addition, the brand is doing very well financially.
In 2022, Estee Lauder generated revenue of $17.7 billion. The cosmetics brand currently operates in almost 150 countries. The company has almost 1,600 stores all over the world. However, to operate at such a huge level, it is also essential to have a vast workforce which is why Estee Lauder has employed 63,000 workers.
Now that we have discussed the history and present operations of Estee Lauder let’s discuss what SWOT analysis is so we can proceed to Estee Lauder SWOT analysis.
A SWOT analysis is a tool to investigate what strengths, weaknesses, opportunities, and threats an organization has to deal with. A SWOT template is responsible for highlighting the internal and external factors that impact an organization’s operations.
After discussing the purpose of SWOT analysis, let’s move to Estee Lauder’s SWOT analysis.
Every organization possesses some strengths. The strengths of any organization are its positive points, which make it different from other brands and help it achieve growth in the market. In this section, we will look at what strengths Estee Lauder possesses.
1. Strong Brand Recognition
Businesses always try to get brand recognition because it helps them in maximizing profits. However, recognition comes with time when customers start trusting a brand’s products. For example, Estee Lauder has been in the cosmetics industry for decades and has strong brand recognition.
Over the years, several magazines have recognized Estee Lauder as one of the top cosmetics brands. This makes it more credible and renowned. Moreover, Estee Lauder has also hired several celebrities to endorse its products, creating strong brand recognition.
2. International Presence
Brands are always looking for ways to expand internationally because doing so increases their customer base and revenue. Estee Lauder is one of the brands that already operates in more than 150 countries.
Such a widely spread international presence helps the brand generate huge revenue. Besides that, this helps Estee Lauder tap untapped international markets, which helps the brand increase its customer base.
3. Huge Number of Stores
The primary purpose of any business is to earn maximum profit. One way to do that is to spread a network of your outlets so that customers see it everywhere and visit it often. Estee Lauder operates on this philosophy which is why it has more than 1,600 stores.
Having too many stores benefits Estee Lauder since more customers visit these stores. As a result, greater revenue is generated. Besides the physical stores, Estee Lauder also has an online store through which it generates sales.
Weaknesses are an organization’s shortcomings that stop it from achieving future success. Every organization has some weaknesses that should be converted into strengths. This section highlights the weaknesses Estee Lauder possesses.
1. Huge Workforce
Brands need employees that can contribute to the success of a brand. However, having a vast number of employees increases the brand’s operational cost, due to which its profit margins shrink.
Estee Lauder is a brand that has a vast workforce. The cosmetics brand has hired approximately 63,000 workers. Such a huge workforce causes an increase in the brand’s expenditure due to its profits being compromised.
Controversies are always damaging for any brand since they damage the brand image and push the customers away. This is why brands always avoid controversies. However, Estee Lauder has been in several controversies multiple times.
The renowned cosmetics brand has been accused of racism recently, which devastated its customers all over the globe since people of every race use the products of Estee Lauder. Besides that, the brand was also accused of violating employees’ rights. Being involved in such controversies has been damaging for the brand since it negatively affected its reputation.
3. Low R&D Expense
Businesses are always looking for ways to innovate to stay ahead of their competitors. To do that, they invest a lot of money in R&D. In today’s world, any brand that would focus less on R&D would be pushed out of the industry in the future.
Like any other brand, Estee Lauder also invested in R&D. In 2020, Estee Lauder invested $220 million in R&D. Although it sounds like this is a lot of money, it’s not. In the same year, Estee Lauder’s competitor, L’oreal, spent $1.18 billion on R&D.
To compete with L’oreal and other brands, Estee Lauder has to increase its R&D budget, or it will be forced out of the industry.
Every organization gets an opportunity to achieve growth. Some businesses make the most out of these opportunities, while others fail to avail of them. In this section, we will look at some of the opportunities for Estee Lauder to grow.
1. Increase The R&D Expenditure
Innovation holds great significance since innovative brands tend to succeed in the future. Although Estee Lauder is currently investing in R&D, that’s not enough. Therefore, the cosmetics brand has an opportunity to increase its R&D expenditure and come up with some innovative products.
For example, L’oreal has created inclusive sun care products by innovating. Similarly, Estee Lauder can introduce innovative products too. This will increase the customer base of Estee Lauder and help the brand in generating more revenue.
2. Expanding Operations In Developing Economies
Brands often target developed economies because they perceive that more customers will buy their products in developed economies. However, brands have great opportunities to tap into developing economies.
Estee Lauder has widespread operations. However, most of its operations are directed toward the developed economies of Europe. Therefore, Estee Lauder has an opportunity to expand its operation in developing economies. By doing so, Estee Lauder can reduce its labor cost since cheap labor is available in developing economies.
3. Mergers and Acquisitions
Businesses look for ways to increase their market share. Although there are several ways to do that, most businesses form mergers or acquire smaller companies to increase their market share.
Estee Lauder has an opportunity to form mergers with big companies. This will help the brand to innovate and learn the latest business techniques. Moreover, the brand can also acquire smaller businesses to penetrate the market.
Every organization faces different threats from the external environment. However, brands need to counter these threats to succeed and grow the business. The last section of the SWOT analysis will discuss a few threats faced by Estee Lauder.
1. Tough Competition
Businesses feel threatened when competing in a highly competitive market because any brand can snatch its market share at any time. Moreover, businesses feel the pressure to constantly innovate, or they could be thrown out of the market.
Similar to many industries, the cosmetics industry also has tough competition. However, many brands are practicing in the industry, and more are joining the industry due to low barriers to entry.
Estee Lauder also feels threatened due to high competition. The cosmetics brand must compete with several brands, such as L’oreal and Claraline.
2. High Global Inflation
Inflation creates problems for everyone. However, due to inflation, businesses are the most affected because they are sandwiched between the increasing prices of the inputs and the reaction of customers.
It is challenging for businesses to transfer inflation to customers by increasing the prices of their products because this creates dissatisfaction among consumers. After the pandemic and the conflict between Russia and Ukraine, the entire world is experiencing inflation.
This high inflation worries Estee Lauder since it is increasing the operational cost of the brand. An increase in the operational cost means the profits of Estee Lauder are shrinking as inflation increases.
3. Counterfeit Products
You must have seen products with a logo of a renowned brand selling at almost half their original price. Such products are the perfect example of counterfeit products. Many local sellers copy the design of a famous brand and sell counterfeit products claiming they are original.
Estee Lauder feels threatened by counterfeit products because they can damage the reputation of Estee Lauder. Moreover, customers can even boycott the products of Estee Lauder, thinking it makes poor quality products after using a counterfeit product.
Estee Lauder is one of the most renowned cosmetics brands which operates across the globe. Today’s article shed light on the early beginning of the cosmetic brand. It then discussed how the brand evolved over the years and its current operations.
After getting some insight into the brand, we discussed what SWOT analysis is and the need for conducting a SWOT analysis. After knowing that SWOT analysis highlights the internal and external factors that impact the business operations, we decided to conduct Estee Lauder SWOT analysis.
This SWOT analysis told us the strengths, weaknesses, opportunities, and threats faced by Estee Lauder. Although we discussed these factors in the form of an essay. However, a SWOT Matrix or a SWOT table can be used to highlight the results of this analysis.
We hope reading this article would have been helpful for you since this article also makes us aware of how to conduct a SWOT analysis. However, to learn more about SWOT analysis, do look at some of its examples.