PESTEL ANALYSIS

A PESTEL analysis is a framework or tool used by marketers to analyse and monitor the macro-
environmental (external marketing environment) factors that have an impact on an organisation. The
result of which is used to identify threats and weaknesses which is used in SWOT analysis .

POLITICAL FACTORS
The political elements that may affect the gainfulness or odds of survival of the organization are quite
diverse. The political risks vary from sudden changes in existing political regimes to civil unrest to
major decisions taken by the government.
1) POLITICAL FACTORS
Tax policy:
Cosmetics may become marginally cheaper for consumers following the 2% reduction in excise duty.
• However, a large part of FMCG product manufacturing is based in excise free zones like Uttaranchal
and Himachal Pradesh. The final impact of the excise duty reduction on product prices will depend on
the ratio of manufacturing in excise-free zones to that in non-excise free zones.
• Companies like Hindustan Unilever (HUL), Procter & Gamble (P&G), Godrej Consumer Products
(GCPL), Colgate, Dabur and Marico have production facilities at excise-free zones.
• The categories on which excise duty has come down from 10% to 8% include soaps, skin-care,
shampoos, hair oils, hair colours and cosmetics among others.

2) ECONOMIC FACTORS
India has the world’s second largest population behind China, and is poised to see strong growth in
disposable incomes in the coming years.
GST rate on cosmetics:
Under the GST regime, GST rate are mapped to HSN code to enable standardization of tax rates across
India.
HSN chapter 33 pertains to essential oils and resinoids perfumery, cosmetic or toilet preparations.
Under this chapter, only kumkum, bindi, sindur and alta is not taxed under GST.
Preparations for use on the hair such as Shampoos, Hair lacquers, Hair cream, Hair dyes (natural,
herbal or synthetic) are taxed at 28% under GST.

3) SOCIAL FACTORS
The social factors that ought to be incorporated into the social part of the PESTEL examination
incorporate the following:
• The Demographics of the population, meaning their respective ages and genders, vastly impact
whether or not a certain product may be marketed to them.
For example: Young women are constantly checking their phones to stay abreast of the latest trends as
they are happening. For the beauty and cosmetics industry this translates to a ready audience of savvy
consumers that the major cosmetics players are particularly eager to tap into.
• The class distribution among the populace is of vital significance: For instance our product would
be unable to promote a premium product to the general public if the majority of the population is lower
class.
• Income distribution
Today increasing numbers of women, especially from the middle-class population, have more
disposable income leading to a change in cosmetic and skin care product consumption.

4)TECHNOLOGICAL FACTORS
Technological factors affect marketing and the management thereof in three distinct ways:
•New ways of producing goods and services
a)Nanotechnology in the beauty industry involves making products with nanoparticles that can go
deeper below the skin’s surface to give better results. It is believed that as new products developed
nanotechnology may be used to prevent graying hair and combat hair loss in some cases.
•b)Shampoo surfactant technology is changing rapidly at present, as the result of consumer needs
for more environmentally sustainable products.

•New ways of distributing goods and services and communicating with target markets
Organizations has started to adopt e-business to improve brand correspondence and market.
Rising social media network enables the organizations to communicate better to the customers by
improved marketing campaigns.

5)ENVIRONMENTAL FACTORS
The beauty industry is focusing more than ever to try and go “green.” Their packaging is trying to
become increasingly eco-friendly for less stress on the environment. But there’s still a growing issue
with heavy plastic usage within the cosmetic and skin care segments.
An ingredient called “microbeads” has been sweeping headlines for a while. These beads exfoliated
dead skin cells from the face. But, they’re made of plastic and horrid for the environment.Outside of
skin care, the type of ingredients used in everything from shampoo to spray deodorants can have a
nasty effect on the environment. Shampoo surfactant technology is changing rapidly, as the result of
consumer needs for more environmentally sustainable products.
6) LEGAL FACTORS
At present the following Acts and Rules govern the manufacture, sale, import, export and clinical
research of drugs and cosmetics in India.
• The Drugs and Cosmetics Act, 1940
•The Pharmacy Act, 1948
•The Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954
•The Narcotic Drugs and Psychotropic Substances Act, 1985
• The Medicinal and Toilet Preparations (Excise Duties) Act, 1956
If there are issues, the product may not reach shelves.
Example: The Central Drugs Laboratory in Kolkata conducted tests on two different lots of the J&J
baby shampoo after the company contested a finding of the Rajasthan Drugs Control Organization
(RDCO) that claimed to have found formaldehyde in the shampoo. As per the experts,
formaldehyde can cause cancer in humans. The outcome reaffirms the company's own testing and
the longstanding assurance it gave that its baby shampoo does not contain formaldehyde or any
formaldehyde-releasing ingredients .

PORTER’S FIVE FORCES ANALYSIS

Porter’s five forces model is an analysis tool that uses five industry forces to determine the intensity
of competition in an industry and its profitability level.

The shampoo market in India was estimated at Rs. 21.41 billion per annum as of February 2008,
growing annually at a rate of 14.5 percent. The market was dominated by India's largest fast moving
consumer goods company, Hindustan Unilever Ltd. (HUL), and one of the world's largest consumer
goods companies, Procter & Gamble Company (P&G).
Threats of New Entrants
Moderate
•The shampoo industry is segmented on benefit platforms:
Cosmetic (shine, health and strength), anti dandruff (AD) and herbal. 20% of the total shampoo market
is accounted by the AD shampoos. The AD segment is the fastest growing segment, growing at 10% to
12 % every year
• New entrants face moderate cost disadvantage over the already existing firms.The moderate
cost of doing business could pose a financial challenge to the new entrants in this industry
• Shampoo market is already dominated by well known brands .Hence to enter into this market
consumers desires must be met and for this lot of Research and Development work is needed
so is the capital hence its hard to settle in this market.
• A low switching cost indicate that the consumer can transfer easily from already existing
product to the new ones but not only the cost but also the quality and other criterias matters.
Hence overall threat of new entrants is a moderate force.
Bargaining Power Of Supplier
•Low
•So many products are available in the market hence so many suppliers compete in the market .This
limits the influence of suppliers on the firms.
•Almost all the companies in the Personal Products industry buy their raw material from numerous
suppliers. Suppliers in dominant position can decrease the margins of the Company can earn in the
market. Powerful suppliers in Consumer Goods sector use their negotiating power to extract higher
prices from the firms in Personal Products field. The overall impact of higher supplier bargaining
power is that it lowers the overall profitability of Personal Product
Bargaining Power of Buyer
•High
•Too many choices are available for them hence they can easily shift from one brand to another making
them strong force.
•Demand of buyers keeps changing if their needs are not met The move to the next best alternative. So
in order to maintain the profitability of a company buyers demands are to be fulfilled hence high
bargaining power of buyers.
Threat of substitute Product
•High
•When a new product or service meets a similar customer needs in different ways, industry profitability
suffers. For example services like Dropbox and Google Drive are substitute to storage hardware drives.
The threat of a substitute product or service is high if it offers a value proposition that is uniquely
different from present offerings of the industry. So if a product offers different and satisfactory
performance in terms of quality, quantity and other criteria makes threat of substitute a strong force in
this market.
Competitive Rivalry in Industry
• High
 • Many competitors players like Unilever, Pantene, L'OREAL’ etc already exists in the market

• Unilever is one of the top competitors in this industry. It is a British Dutch consumer goods
company. It is Europe’s seventh most valuable company. Its products like dove, Clinic plus,
Sunsilk are well established products in the Indian market.

• Price Competition Continues leading to high rivalry. Most Indian population is lower or lower
middle classes so most of them make choices according to their pocket size also. Unilever
maintains wide variety of price ranges according to the market demand. In order to keep up
with the price competition our product must also keep pricing strategy in way that people don’t
move to other products because of low switching cost.

COMPETITORS AND SUBSTITUTES

The shampoo industry in India has evolved extensively since the 1960’s, which was then considered a
lifestyle product in urban India. Until 2005, the market was dominated by flagship companies such as
Hindustan Lever Ltd. and Procter and Gamble.But since then the competition has broadened to include
many more multi-national companies and domestic companies such as Garnier and ITC Ltd.

The characteristics of shampoos and its market in India

• The frequency of shampoo consumption in India is low. Most consumers shampoo once or
twice a week, as opposed to everyday in western countries.

• Consumers relate formation of lather to the act of cleansing.

• Shampoo consumers are not very loyal to their brand. They constantly seek changes, mainly so
in fragrance.
• The per wash consumption of shampoo of Indians is higher than most western countries: 6 ml
as compared to an average 4 ml per person. This is mainly attributed to hair length of Indian
women.
• Southern India is predominantly a sachet market, as opposed to North India where bottles are
more popular.
• The penetration level of shampoos in rural India is estimated at 32% (2005). Sachets make upto
40% of the total shampoo sales in the country.
Major players of the Indian shampoo market
Hindustan Unilever Ltd. dominates the shampoo market in the country with brands like Clinic All
Clear, Sunsilk and Clinic Plus. P&G follows closely with its highly successful brand, Pantene, along
with Head & Shoulders, the leading Anti-Dandruff brand in India.
Hindustan Unilever (HUL) now controls nearly half the hair care market in India.

Proctor and Gamble

From beauty and health to home and beyond, P&G's brands make every day just a little better for its
consumers. Head and Shoulders started with Proctor and Gamble scientists spending 10 years finding
the magic formula to solve the widespread problem of dandruff. Post the research, they started using
Zinc Pyrithine in their formula. It was very effective against dandruff due to its anti-fungal properties.
Head and shoulders has gained the trust of consumers by providing quality products. The product
promises to remove dandruff and give clean, healthy hair to users.
INDUSTRY ANALYSIS

TARGET MARKET
The target market of head & shoulders are the middle class people who are brand conscious,early
adaptors and who care about overall health of their hair.