H ISTORY Founded in 1932 by Charles and Joseph Revson, along with chemist Charles Lachman Products: Global color cosmetics, hair color, beauty tools, fragrances, skincare, anti-perspirant/deodorants and beauty care tools Net Sales 2010= $1.32 Billion U.S.= 55% International= 45% Vision: “Glamour, excitement, and innovation through high-quality products at affordable prices.” Target market = women of all ages worldwide Brands: Revlon Almay Age Defying ColorStay
H ISTORY C ONTINUED Headquartered in New York, NY CEO Alan Ennis as of May 2009 4,900 employees 17 manufacturing locations worldwide U.S., Canada, Europe, Latin America, and Asia Pacific
P OLITICAL FACTORS Strict FDA regulations in the U.S. and other countries
E CONOMIC F ACTORS Currency exchange rates Revlon would benefit from a weak U.S. dollar relative to the currencies of other countries. Growth in emerging markets Sales have grown immensely in the Asia Pacific region. Global economic conditions Higher unemployment levels Decreased consumer spending
S OCIAL F ACTORS Changes in consumer purchasing habits Increased customer awareness of permanent make-up options
T ECHNOLOGICAL F ACTORS E-Commerce Use of social media
PEST A NALYSIS FactorTrendEvaluationImpact (1=low,5=high) Rank Political Strict FDA regulations in the U.S. and other countries threat24 Economic currency exchange rates growth in emerging markets Global economic conditions opportunity/threat 452452 1 Social changes in consumer purchasing habits Increased customer awareness of permanent make-up options threat 3131 2 Technological E-Commerce Use of social media opportunity 2121 3
P ERSONAL PRODUCTS INDUSTRY BuyersSuppliers Large mass volume retailersRaw materials Chain drug and food storesPackaging Department and specialty stores CompetitorsSubstitutes Estee Lauder Companies Inc.Other cosmetic products not intended for the same use L'OrealPermanent make-up Procter & Gamble Co.Deciding not to purchase
T HREAT OF N EW E NTRANTS Barriers to entry Nature of BarrierExtent of Barrier Supply-side economies of scaleHigh Demand-side benefits of scaleHigh Capital RequirementsHigh Incumbency advantages independent of size High Customer-switching costsLow Unequal access to distribution channels High Restrictive Government PolicyMedium
P OWER OF SUPPLIERS Power Degree of PowerBargaining Power is strong if: Switching costsLowHigh Suppliers offer differentiated products LowHigh Number of substitutes available HighLow
P OWER OF BUYERS PowersDegree of PowerBargaining Power is strong when: Number of BuyersHigh Purchases volumeLowHigh Product DifferentiationHighLow Vendor Switching CostsLow Degree of backward integration LowHigh
P OWER OF SUBSTITUTES PowersDegree of PowerThreat is strong if: Substitute offers attractive price- performance trade-off LowHigh Switching CostsLow
I NTENSITY OF RIVALRY PowerDegree of PowerRivalry is strong if: Number of competitorsHigh Industry GrowthHighLow Exit BarriersHigh
N ATURE OF THE FORCES FactorEvaluation Intensity of Rivalry Strong : several major players with similar product offerings. Consumer Buyer Power Moderate: purchases volume, differentiation, and backward integration do not coincide with strong buyer power. Supplier Power Benign: other supplier options are available if needed. Threat of Substitute Products Benign: many customers are loyal to their personal product items. Threat of New Entrants Benign: barriers to entry are high with patents, research and development, and pricing strategies.
S UGGESTIONS FOR ADDRESSING KEY FORCES Intensity of Rivalry Continue producing quality products, anticipating and responding to changes in consumer demands, and educating product benefits.
Economic and social factors have the greatest affect on Revlon. Intensity of rivalry is the greatest force for Revlon. It is important for companies in the personal products industry to stay on top of changing consumer preferences and needs in order to stand out among the competition. Although the cosmetics and personal products industries have fierce competition, by continuing to spend more time on research and development to create differentiated and quality products, Revlon can increase their position in the personal products industry.
K EY C OMPETITORS "Bringing the Best to Everyone We Touch and Being the Best in Everything We Do."
“To help men and women around the world aspire to beauty and express their individual personalities to the full.” “We will provide branded products and services of superior quality and value that improve the lives of the world’s consumers, now and for generations to come.”
P RODUCTS RevlonL’OrealEstee LauderP&G Cosmetics (make-up) ХХХХ Skin care ХХХХ Hair care ХХХХ Deodorant ХХХХ Fragrance/cologne ХХХХ Hair color ХХХ
Revlon U.S. 57% Asia/Pacific/ 18% Africa Europe/Canada 15% Latin America 10% L’Oreal Western Europe 43% North America 23% Asia 13% Eastern Europe 8% Latin America 7% Africa/Orient/Pacific 6% Estee Lauder Americas 44% Europe/Middle 37% East/Africa Asia/Pacific 19% Procter & Gamble North America 42% Western Europe 21% Asia 15% Central & Eastern Europe, Middle East, 13% Africa Latin America 9%
Revlon Color Cosmetics 64% Women’s Hair Color 11% AP/DEO 8% Other Personal Care 7% Fragrances 6% Beauty Tools 4% L’Oreal Skin Care 27% Hair Care 23% Make-up 21% Hair Color 15% Perfumes 11% Other 3% Estee Lauder Skin Care 42% Make Up 21% Fragrance 16% Hair Care 5% Procter & Gamble Household Care 48% Beauty 34% Health + Well-Being 18%
T RENDS & F ORCES *Lack of research and development due to a history of losses caused by increased competition and decrease in sale of color cosmetics. *Large dependency on Wal-Mart for sales (23%) *Revlon is a lot smaller than its competition but has a more focused product offering. *Approximately 34% of sales came from emerging markets in 2009. This presents an opportunity to increase revenues from rising income growths in those markets. *Diverse brand names target different market niches. *Large presence in global market exposes currency fluctuation risks. More than half of their sales come from outside the U.S. *Different product price points provide some insulation against recession. *Rises in powerful low-priced retailers negatively affect consumer product companies. * Looking to expand presence in emerging markets. They have created products designed specifically to target developing nations.
Revlon Build their strong brands Develop their organizational capability Drive their company to act globally Increase operating profits and cash flow Improve capital structure L’Oreal Continue to improve products Find ways to promote business affordably Make products irresistible for distributors Take position early on evolving trends Take advantage of events Develop the ability to continue to create innovative products Estee Lauder Commitment to excellent personalized service and education Using diversified staff to create innovative products Philanthropy Minimize impact of products and operations on the environment Use the latest technological advancements to develop cosmetics that provide superior aesthetics Procter & Gamble Delight customers with sustainable innovations that improve the environmental profile of their products Improve the environmental profile of their own operations Improve children’s lives through social responsibility programs Engage and equip employees to build sustainability thinking and practices in their work Work with stakeholders to enable continued freedom to innovate in a responsible way Business Strategies
C OSMETIC INDUSTRY BCG M ATRIX StarsQuestion Marks Cash CowsDogs Relative Market Share Position High Low Market Growth Rate
Revlon has a vast amount of competition in the personal products industry. Being a lot smaller than the competition has caused them to fall behind in revenues and the amount of money they are able to spend on research and development. By continuing to develop unique products and investing more money in R&D, Revlon can work their way to becoming as big as the competition.
B USINESS M ODEL Sell to a large mass-marketCost SavingBrand BuildingCorporate Social ResponsibilityDeveloping Organizational CapabilityIncrease operating profit and cash flowImprove capital structureAnticipating and responding to changing consumer demands
P ERFORMANCE 201020092008200720062005 Net Sales (in millions) $1321.4$1295.9$1346.8$1367.1$1298.7$1303.5 Gross Profit (in millions) $866.1$821.2$855.9$861.4$771.0$810.5 Sales have fluctuated from 2005 on. The decline in consolidated net sales was driven by lower net sales of Revlon and Almay color cosmetics and certain beauty care products Profits have also fluctuated in past years due to: unfavorable foreign currency fluctuations higher pension expenses within cost of goods higher returns and allowances
C HANGE IN S ALES BY R EGION 200920082007 United States$747.9$782.6$804.2 Asia Pacific$266.7$265.0$255.6 Europe$172.4$200.8$211.1 Latin America$108.9$98.4$96.2 U.S. and Europe have observed a steady decrease in sales over the past few years while Asia Pacific and Latin America have experienced a steady increase in sales. While sales have increased in Asia Pacific and Latin America, they are not increasing at the rate in which they should, based on the growth rate of cosmetics in those regions.
C HANGE IN SALES BY REGION ( CONTINUED ) U.S. lower net sales of Revlon and Almay color cosmetics and Mitchum anti-perspirant deodorant. Europe lower shipments of Revlon and Almay color cosmetics in Canada higher allowances for Revlon color cosmetics in the U.K. lower shipments of certain beauty care products in France. Sales in the U.S. and Europe have decreased due to: Asia Pacific higher shipments of Revlon color cosmetics in Australia and China and of beauty care products in South Africa. Latin America the impact of inflation on selling prices in Venezuela. higher shipments of Revlon ColorSilk hair color in Venezuela, Argentina and certain distributor markets Sales in Asia Pacific and Latin America have increased due to:
U.S. S HARE % BY B RAND /P RODUCT 20092008 Revlon Color Cosmetics12.7 Almay5.45.9 Revlon ColorSilk Hair Color9.78.3 Mitchum AP/DEO4.65.0 Revlon Beauty Tools21.018.8
R ESOURCES Raw materials and components used to create their products. Most of their products are created at the company’s manufacturing facilities located around the world.
K EY A SSETS Cash & cash equivalents Trade receivables Inventories Prepaid expenses Property, plant, and equipment Goodwill
BCG M ATRIX Cash Cows Question MarksStars Dogs Relative Market Share Position Market Growth Rate High Low HighLow *Market Share: Increase in competition causes a decrease in market share for Revlon *Market Growth: A high growth rate is possible in global countries.
*Revlon works to expand their current products into new emerging markets where cosmetics sales are increasing.
V ALUE C HAIN Primary Activities: Inbound logisticsStoring inventory and scheduling transportation of products for distribution. OperationsPackaging and assembling products for distribution. Outbound logisticsDistribution of products through selected channels to customers. Marketing & SalesAdvertising and promotion of products using print, television, and internet. ServiceTips and services on company website
V ALUE C HAIN ( CONTINUED ) Support Activities: Human resource managementLook for energetic, success- oriented people who thrive in a dynamic environment. Technology developmentGlobal cross-functional product development process. ProcurementReceiving raw materials from vendors.
Overall Cost Leadership DifferentiationCost Focus Differentiation Focus Broad Narrow DifferentiationLow Cost Competitive Advantage Competitive Scope G ENERIC S TRATEGY
R EVLON ’ S G RAND S TRATEGY Quadrant II Quadrant I Product Development Product & Market Development Market Development Market penetration Market Penetration Backward integration Horizontal/Vertical integration Forward integration Liquidation/Divestiture Concentric diversification Quadrant III Quadrant IV Retrenchment Related/unrelated diversification Related/unrelated diversification Horizontal/Vertical diversification Conglomerate diversification Conglomerate diversification Liquidation/Divestiture Joint ventures Rapid Market Growth Strong Competitive Position Weak Competitive Position Slow Market Growth *Revlon needs to work to increase research and development in order to develop new products. *Sales can be increased by introducing their products into new markets.
SWOT A NALYSIS StrengthsWeaknesses Despite heavy debt and net losses in previous years, product development is the main focus Financial struggles due to the economy Strong relationship with retailersLimited funds for research and development Marketing strategies consistent with current local trends Higher prices than their competitors Strong brand recognition
S WOT A NALYSIS C ONTINUED OpportunitiesThreats E-commerce and use of social media Changes in consumer purchasing habits Growth in emerging marketsStrict regulations in U.S. and other countries Increase distributionPermanent make-up options
I NTERNAL AND SWOT A NALYSIS G ENERIC AND G RAND S TRATEGIES C ONCLUSIONS I NTERNAL AND SWOT A NALYSIS G ENERIC AND G RAND S TRATEGIES C ONCLUSIONS
Revlon’s sales and profits have fluctuated in the past 5 years. Increase in consumer spending from Asia Pacific and Latin America has presented Revlon with an opportunity to expand their product market. Increased spending on R&D will help Revlon to create better products and increase their market share against competitors. Revlon needs to focus on market development in emerging markets to help increase sales.