Political Analysis
Political factors include tax policy, environmental law, trade restrictions, tariffs etc.

Political factors are inevitably entwined with Legal factors such as consumer law, employment law, health and safety standards.

These factors can affect how L’oreal operates, its costs, and the demand for its products.

However, L'Oreal should adapt not only to French government style but also to the various governments leadership ways in other countries.

For example:

1. According to the Rules Governing Cosmetic Products in the European Union L'Oreal is limited in use of carcinogenic and some types of chemicals, for instance Phthalates.

2. The European Union law expected ban on animal testing products and a total ban on animal testing of cosmetics raw materials. Since March 2013, the L’Oreal no longer tests on animal, anywhere in the world. And their product does not contain any harmful substances.

3. On the other hand, L'Oreal is getting affected by the legislation for advertising. For example, advertisements cannot be misleading that over-exaggerating the functions of a product.

4. Chinese government shows a warm welcome attitude on the MNE.

Economic Analysis

• U.S. and European middle class market decline has caused fewer profit margins.

• Exchange rates: Seeing as France is part of the European Union its currency is euro. During the previous year the exchange rate of euro has been reduced to 11.83%.

• Cost of Capital: Raising capital outside the firms' home country may not be possible most of the time, so multinationals like L'Oreal have to consider the cost of borrowing which may differ from country to country.

• Interest Rate: changes of the interest rate can influence to L'Oreal by price and putting of products on the market. A lot of companies will profit by the fall in interest rates.

• Inflation