Estee Lauder Companies, Inc. 1. 0 Overview (Chronology) Estee Lauder, the founder of what is now a major cosmetics empire, started her business with a single jar of face cream that was mixed by her uncle, a chemist. Today, based in New York City, Estee Lauder is a manufacturer and marketer of four cosmetics product lines, like skin care, makeup, fragrances, and hair care products. These products are sold in over 130 countries and territories under different brand names, such as Estee Lauder, MAC, Bobbi Brown, Clinique, Aveda and so on.
The company has 26 brands and employs over 22,000 people worldwide.
A young entrepreneur named Estee Lauder founded that being young, beautiful and youthful are common thought and feel to everyone, man and woman. Due to that, she felt that she could provide a product that espoused those qualities. The company was founded in by Estee Lauder and her husband, Joseph Lauder with the help of her uncle, John Schotz. In the early year, Estee was unable to convince Madison Avenue to carry her product into the market.
So, facing this rejection, she began to market her product straightly to the customers. Her first products were sold to beauty salons and hotels.
The first department store account was established at New York. After 15 years, the company globalized their business all over the countries. Besides, in 1998, Estee Lauder began selling a variety of products over the Internet, so, ELC online- new division to manage the online activities. Estee focus on gender, men and women, so, additional brands like Aramis, is products for men which launched in 1964. Mrs. Estee Lauder was one of the ten Outstanding Women in Business in the United States, 1967. Then, she received an Achievement Award from Albert Einstein College of Medicine at Yeshiva University.
At the same time, the company expanded by opening Clinique laboratories, Inc. and in 1983, their products were introduced in the Soviet Union (Russia). Estee Lauder Companies, Inc. Finally, after a great achievement, Mrs. Estee Lauder passed away in April 2004. She established a small home operation into worldwide and wins the competition with the spirit of entrepreneurship and has an excellent business strategy. She developed a long-term strategy at the early stage. There are based on five imperatives: • Optimized if brand portfolio • Strengthening of product categories Strengthening and expansion of global markets • Diversification and strengthening of channels of distribution • operational and cost excellence She was proud that her company went public in 1995 and now is led by Estee and Joseph’s children and grandchildren. They were also maintaining Estee’s goal which is “to optimize, diversify, and grow the business over the long term”. Estee Lauder Companies, Inc. 2. 0 Strategy Formulation of Vision and Mission Vision is where we answers the question of ‘what we want to become’. It is the first step in strategic formulation and it is usually simple and in one sentence.
The vision for Estee Lauder is: “Bringing the best to everyone we touch” Mission are enduring statements of purpose that distinguish one business from other similar business. It identifies the scope of a firm’s operations in product and market terms. Mission statements basically answers the question of ‘What is Our Business? ’ There are nine components that have to be fulfill in a mission statement, which are: 1. Customer 2. Product & services 3. Market 4. Technology 5. Concern for survival, growth and profitability 6. Philosophy 7. Self concept 8. Concern for Public image 9. Concern for employees
Estee Lauders current mission The mission at Origins is to promote beauty and wellness through good-for-you products and feel-good experiences while celebrating the connection between Mother Nature and human nature. Origins are a brand that offers options for consumers. Origins are now a master brand with three distinct pillars all dedicated to offering healthy choices for every consumer. Origins was the first to market with a full line of prestige skin, body and hair care products certified under the United States Department of Agriculture (USDA) National Organic Program called Origins Organics.
Estee Lauder Companies, Inc. This collection of world-class names, the Group recently acquired several very innovative cosmetics companies that are targeting a new customer segment—five recently formed American companies and a French brand specializing in professional makeup products. Mission that are given: • Provide customers (1) with innovative (4) cosmetic products of the highest quality (2). • Deliver outstanding services by treating each individual as we ourselves would like to be treated (6). • Create an environment that fosters personal growth and well being (5). Build partnership with our suppliers, retailers and colleagues (9) based on fairness and trust (6). • Enhance our reputation of image, style and prestige (5). • Pursue profit, but never at the expenses of quality, service or reputation (5). • Eliminate waste and reduce inefficiencies in order to provide maximum value to our customers (8). • Be responsible citizens in every community we serve (8). This current mission is more to concern for survival, growth, and profitability. There are lack concern on the market, self concept and concern for employees. Mission should be clear and attractive.
It also gives a first image on the point of the company and its businesses. In this mission statement it shows that they are concern for the public image: Eliminate waste and reduce inefficiencies in order to provide maximum value to our customer’s and responsible citizens in every community they serve. Estee Lauder Companies, Inc. should emphasize on the markets, self concept and concern about public images. Estee Lauder Companies, Inc. Modified Mission: • Estee lauder’s mission is to become the world class leader in cosmetic (3, 2) by producing innovative and high quality product (4) targeting on new customer segment and loyalty (1).
We also concern about building partnership with genuine sense of responsibility to our suppliers, retailers and employees (9) based on fairness, honesty and trust (6), at the same time reward them with healthy financial soundness (5). Eliminate waste and reduce inefficiencies in order to provide maximum value to our customers (8). After some modification we have come up with a new mission statement that are wider in scope and contain all nine mission statement components. This mission statement also includes the firms market, self concept and concern for employees which is not in the previous mission statement.
Estee Lauder Companies, Inc. 3. 0 Situational Analysis: 3. 1 Internal Analysis 3. 1. 1: An Internal Factor Evaluation Matrix for Estee Lauder Company Inc. |Key Internal Factors |Rating |Weight |Weighted Score | |Strengths | | | | |Market product directly to customers | | | | | |0. 9 |4 |0. 36 | |Annual Revenues over $5 billion | | | | | |0. 05 |3 |0. 15 | |2006 sales increased 3% due to make up, skin care products | | | | | |0. 3 |3 |0. 09 | |Hair care net sales increased 16% cause Bumble & Bumble and Aveda| | | | | |0. 07 |4 |0. 28 | |Makeup, Hair care and fragrances increased sales in US up to 3% | | | | | |0. 3 |3 |0. 09 | |Net sales in Europe, the Middle | | | | |East and Africa increased 5% |0. 04 |3 |0. 12 | |Net sales in Asia Pacific increased 7% | | | | | |0. 5 |3 |0. 15 | |EL as first major prestige cosmetics firm offer Internet shopping| | | | | |0. 08 |4 |0. 32 | |Increased in perfumeries in Asia and Asian dominate it | | | | | |0. 3 |3 |0. 09 | |First cosmetics company offer free samples and gift-with-purchase| | | | | |0. 09 |4 |0. 36 | |Celebrities as endorsers in testimonial advertisement | | | | | |0. 06 |3 |0. 8 | |Prestige pricing strategy | | | | | |0. 09 |3 |0. 27 | | | | | | | |0. 71 | |2. 46 | Estee Lauder Companies, Inc. Weaknesses | | | | |Lower sales in fragrance product in 2006 | | | | | |0. 04 |2 |0. 08 | |Operating income decreased in 15% in 2006 | | | | | |0. 6 |2 |0. 12 | |Decreased in sales in Italy and Spain due to difficulty to retail| | | | |environment |0. 03 |1 |0. 03 | |Decreased in Japan and Australia due to strengthening US dollar | | | | |against Japan |0. 3 |2 |0. 06 | |The cosmetics did not tested | | | | | |0. 02 |1 |0. 02 | |Recent restrictions on products and uncertainty in the outlook | | | | | |0. 06 |2 |0. 2 | |Expensive price on the products | | | | | |0. 05 |2 |0. 1 | | TOTAL |1. 0 | |2. 99 | Based on the key Internal Factors listed in above matrix, the most critical factors in the strength part are market product directly to customers and first cosmetics company offer free samples and gift-with-purchase.
As for the biggest weakness that the company faces are operating income decreased in 15% in 2006 which due to the major amount of discontinued operations and recent restrictions on products and uncertainty in the outlook. Future formulation of Estee Lauder Companies, Inc strategy should somehow reduce the weakness by taking the advantage of its strength which could e made to enhance the company`s future improvement. Estee Lauder Companies, Inc. 3. 1. 2 Performance Analysis FINANCIAL RATIOS Ratio |2007 |2006 |2005 |2004 | |LIQUIDITY | | | | | |Current Ratio |1. 492x |1. 513x |1. 537x | | |Quick Ratio |0. 922x |0. 980x |1. 24x | | |LEVERAGE | | | | | |Debt to Asset Ratio |70. 9% |0 |0 | | |Debt to Equity Ratio |2. 440x |0 |0 | | |Long Term Debt to Equity Ratio |0. 857 |0. 266 |0. 266 | | |Times Interest Earned Ratio |18. 77x |25. 033x |51. 287x |22. 940x | |ACIVITY | | | | | |Inventory Turnover |8. 223% |8. 435% |2. 2727% |0 | |Fixed Asset Turnover |7. 989% |8. 527% |9. 046% |0 | |Total Asset Turnover |1. 705% |1. 708% |1. 16% |0 | |PROFITABILITY | | | | | |Gross Profit Margin |0. 747% |0. 739% |0. 744% |0. 744% | |Operating Profit Margin |0. 101% |0. 092% |0. 113% |0,108% | |Net Profit Margin |0. 063% |0. 037% |0. 064% |0. 59% | |Return on Total Asset (ROA) |0. 108% |0. 064% |0. 104% |0 | |Return on Stockholders Equity (ROE) |0. 374% |0. 150% |0. 239% |0 | |Earning Per Share (EPS) |0. 691 |0. 375 |0. 624 |0 | Estee Lauder Companies, Inc. LIQUIDITY The current position is deteriorating as measured by current and quick ratio. The inventory turnover was selling slightly slowed in 2007 compared to 2006.
The Estee Lauder Companies Inc. could be overstocked with inventory due to inventory management problems or sluggish sales. All of this indicates that the company may not be able to cover its entire short term obligation as they become due in the near future. The fact that the company is facing difficulty in inventory management also is not a good sign. LEVERAGE The leverage ratios show the increase in debt for the company. The debt-to-asset and debt-to-equity ratio has no value in the year of 2005 and 2006. But, in the year of 2007, the debt-to-asset ratio has zoom up to 70. 9% and 2. 4% for the debt-to-equity ratio. This shows that the company has borrowed or searched financing to develop the company. ACTIVITY For Estee Lauder Companies Inc fixed asset and total asset turnover has slipped slightly. This means that the company is not efficient in managing the company asset. Generally, the lower this ratio, the bigger is the investment required to generate sales and thus the less profitable is the company. PROFITABILTY Estee Lauder Company’s profitability ratio shows slight increase in the gross profit margin, operating profit margin and net profit margin.
Besides, it has increased its return on asset and return in equity. This shows the company has used and perform well with its assets and equity. The earning per share of the company has increased in large amount from 2006 to 2007 where it is 0. 691 from 0. 375. The price earning ratio, which is market price divided number of outstanding shares. P/E ratio for 2007 is Estee Lauder Companies, Inc. 3. 2 External Analysis 3. 2. 1: An External Factor Evaluation Matrix for Estee Lauder Company Inc. |Key External Factors |Weight Rating |Weight score | |Opportunities | | | | |Estee lauder announced in June 2007, |0. 02 |3 |0. 06 | |it might acquire skin care company | | | | |Markets more than 9000 quality product under portfolio brands. |0. 14 |4 |0. 56 | |Next 20 years estimates 70 Million people across global will reach |0. 6 |2 |0. 12 | |on income level that allow purchasing of cosmetic products. | | | | |Estimated year 2030 demand for aging product will be increased. |0. 06 |3 |0. 18 | |Teenagers will invest on cosmetic products that will give better |0. 02 |3 |0. 06 | |effect of aging. | | | | |Life expectancy of aging population will continue to improve |0. 5 |3 |0. 15 | |Continue to deliver innovative cutting |0. 02 |2 |0. 04 | |edge product and build strong global brand. | | | | Estee Lauder Companies, Inc. |Threats | | | | |L’Oreal (competitor) is one of the best worldwide leaders in the |0. |2 |0. 4 | |cosmetics and distributes | | | | |Concern about the use of aerosols and |0. 01 |2 |0. 02 | |Fluorocarbon with first emergent. | | | | |Revlon (competitor) is one of the best |0. 11 |2 |0. 2 | |known brand names in the world and the company excels at mass | | | | |marketing. | | | | |Recent restrictions on product that can be carried in flight |0. 02 |1 |0. 02 | |Consumer complain and inquiries into the use of animals testing. |0. 13 |3 |0. 39 | |Changes in the distributing policy and |0. 03 |1 |0. 3 | |difficult retail environment | | | | |Federal food and drug administration does not require testing of |0. 13 |3 |0. 39 | |cosmetic | | | | |TOTAL |1. 00 | |2. 64 | The table above shows the External Factors Evaluation(EFE) .
The table is comprised of two main lists, first, a list of the company’s opportunity and second, relates to company’s threats. These factors are key external factor that must be addressed by Estee Lauder in the near future. The future success of the company depends on it. Estee Lauder Companies, Inc. Weight is given to each key external factor to rank the factors according to its importance. The highest weight is assigned to the most importance factors or several very important factors. The most important factors may be threat or an opportunity. In this case it is a threat and they carry the weight of 0. 3 and the opportunity carry the weight is 0. 37. In other words, the factor which carries the most weight is the factors that must be addressed via Estee Lauder future strategic plan. Based on the key external factors listed above, the most critical factors is that federal food and drug administration does not federal food and drug administration does not require testing of cosmetic . As for the biggest opportunity is markets more than 9000 quality product under portfolio brands. Future formulations of Estee Lauder strategy must somehow take advantage of reduce threat possible plans could be made to opportunity.
Since the total weight score is 2. 64 lesser than the industry average which is 2. 9, generally Estee Lauder is not effective in addressing its critical success factors which exist in its current external environment. However, that is subject to further analysis of individual weighted score of opportunity (TWSO) and weight score of threats (TWST). Based on my calculation, TWSO =1. 17 and TWST=1. 47, it seems that Estee Lauder is more effective in addressing its opportunity but less effective in addressing in threats.
In this case, Estee Lauder must focus more in reducing its threats advantages of more future opportunity. Estee Lauder Companies, Inc. 3. 2. 2: Industry Analysis Competitive Advantages: Porter’s Five-Force Model. This approach is widely use for the developing strategies in many industries. The intensity of competition among firms varies across industry. The porter’s five forces includes: rivalry among competing firms, potential entry of new competitors,, potential development of substitute products, bargaining power of suppliers and bargaining power of customers.
Rivalry among Competing Firms In an industry there are always competitions. This is the largest component in an industry that must be taken an action if it occurs. Rivalry is a situation in which two people or groups are competing for the same things. In this case Estee Lauder has 7 major competitors that compete in a typical product line and different product line. In this case L’Oreal, Avon, and Revlon are competing in a typical product. There are untypical product lines where Estee Lauder is competing in such as, Procter &Gamble, Unilever, Colgate- Palmolive, and Alberto- culver.
Estee lauder are rank at number six when are compared with all the other seven competitors based on revenue earned. . The intensity of rivalry among competing firms tends to increase as number of competitors increase. When consumer can easily switch to other brands, there will be an increase in competing rivalry. In this case customer can choose any of all the companies’ products. This is because each of the companies basically sells the same type of product but is different in brands. A competition can also be interrupt with the existent of internet.
After the existing of internet customer can gain more information about the product they buy. Before customer buyers a product they can browser the internet and get some information about the product such as, the ingredient of the product, the price, the, market, popularity and also any news related to the product. Estee Lauder Companies, Inc. Estee Lauder is varying from product to product and from brand to brand, but their price tends to be in the mid-high to high range of the industry. Besides, the prestige pricing strength appears to be an effective strategy which is given in their target market.
Their target market is the people in the higher middle class to the high class people. To compete with a competitor Estee Lauder should change their strategy by lowering the price, adding new features, providing services, extending warranties and increase advertising, this is because the switch cost are basically low because there are many competitors and they are basically selling the same kind of products.. Potential Entry of new competitors. The entry of new competitors such as Sasa, Body Shop. Face Shop, Skin Foods, and Elianto, can threat the existing cosmetic business that already matured.
The entry of new competitors will lead to customers to try the new product, to see if there are any differences in the product compared to the existing product, and some customers who try the new product will continue using it rather then staying loyal to the old one. The reason why customers will buy new entry products is because the price of the products is way cheaper then the existing products. Sometimes new firms can compete better in the industry market compared to the existing company by producing in higher quality product, lower prices and substantial marketing resources.
For example the entry of new business like Elianto , entered in cosmetic industry with lower price, they are price competitive. There are also barriers to entry when there are customer loyalties. Colgate- Palmolive for example has already been in the market for the past 200years and has a number of increasing customer around the world. They markets variety of products in the oral, personal and home segment care. Estee Lauder Companies, Inc. When there are new entry to the market a company’s sales can be affected. Estee lauder have already been in there market since 1946 and still maintain as a top cosmetic seller.
Estee Lauder strategy to last in market is by acquiring more brands under the name of Estee Lauder. The other way that leads to the success of the business is the advertising strategy. Estee lauder uses celebrities as endorses in testimonial advertising for commercials on TV, as well in magazines. Elizabeth Hurley, Carolyn Murphy and few top celebrities are signed by Estee Lauder. Hillary Rhoda was name as the new face for Estee lauder in January 2007. Strategist of a company should have good understanding of the market.
Potential new firms should monitor new rival firm’s strategy to counterattack as needed and to capitalize on existing strengths and opportunities. When a new firms entering market, a company should lower the price, extending the warranties, adding new features and offering financial benefit such as discount. Potential Development of substitute products. Substitute is things that can be replaced with other things. The substitute product/ brand for Estee Lauder are Avon, L’Oreal, Revlon and other competitor that have produce or sell same product like Estee Lauder.
The other substitute product can also be the artificial product with the same name as Estee Lauder. Some customer will only buy the product that have a brand name, so for this type of people whether it is original or artificial is not an issue. The pressure will increase when consumer’s switching costs decrease. Estee Lauder Companies, Inc. Avon, L’Oreal and Revlon are some of substitute product for Estee Lauder. If customers are not satisfied with Estee Lauder’s product they can switch to the substitute product. The three substitute brand all have good quality and are much cheaper compare to Estee Lauder product.
This can be proven when L’Oreal become one of the leaders of cosmetic and distributes products. Usually these three brands don’t have artificial product using their name. Artificial products are usually 10 to 20 times cheaper then the original product. Some customers who have low ability to purchase the original product will instead buy the artificial ones because it looks alike. Estee lauder products are expensive for some people, and it also only can get in certain places that are high in class that are hard for some people to go.
The presence of substitute products put a ceiling price that can be charged before consumers will switch to substitute products. Ceiling price are when the price is set lower then other and at the same time the switch cost for customer are low. The magnitude of competitive pressure derived from development of substitute product is generally evidenced by rival plan for expanding production capacity, as well as by their sales and profit growth number. Competitive pressure a rise from the substitute product increase as the relative price of substitute product decline and as consumer switching cost is low.
Bargaining Power of Consumer Consumer is the main element of the success of a company. A company must always produce product that can satisfied customers needs and wants. Customers are concentrated or buying in volume can affects the intensity of competition. The intensity of competition are also high went to product being purchase by customer are indifferent and standard. Customer can negotiate selling price, warranty coverage and accessory packages to a greater extent. Estee Lauder Companies, Inc. In Estee Lauder the company has done research on the future of the customer that is going to buy their product.
By year 2030, Americans over the age of 65 are one fifth of the population and will demand for anti- aging products while younger consumer between the ages of 20 to 30 will demand for product that can prevent aging. Estee lauder are aware of this and are doing research to modify their product so that it can meet the future customer need and be more effective for future customers. This is because they want to be the market leader in the future. To win the customer Estee Lauder also can give extra / special service to their customer and potential customer by giving free sample to win their loyalty towards customer.
Estee Lauder also give consultation and free face scanning for customer and explain to them what problem customer are facing and recommend product that are suit with their skin and for them. Commonly rivalry firms may extend warranties or give special services to gain customer loyalty whenever the bargaining power of customer is substantial. Bargaining power of suppliers The bargaining power of the suppliers affects the intensity of competition in an industry, especially when there are large number of suppliers and only a few good substitute raw materials or when the cost of switching raw material is costly.
Suppliers that gives a reasonable price, an improved quality, development of new services, Just In Time delivery and reduced inventory cost. This will enhance long term profitability for all concerned. Estee Lauder have their own brands such as super rich all purpose creme, creme pack, cleansing oil and skin lotion also Fragrance such as Aramis. Actually there are no information on the suppliers of Estee Lauders, but we can do recommendation that do strategies such as by doing backward integration where Estee Lauder seek ownership or increase control of the Estee Lauder’s suppliers. Estee Lauder Companies, Inc. 3. 2. 3: CPM Matrix
CPM identifies a firm’s major competitors and its particular strength and weakness in relation to a Sample firm’s strategic position. The CPM includes both internal and external issues. THE COMPETITIVE PROFILE MATRIX (CPM) ESTEE LAUDER PORTER REVLON |Critical success factors |weight |Rating |Weigh-ted |Rating |Weigh-ted |Rating |Weigh-ted | | | | |score | |score | |score | |Advertising |0. 2 |4 |0. 8 |3 |0. |3 |0. 6 | |Product quality |0. 08 |4 |0. 32 |3 |0. 24 |3 |0. 24 | |Price competitiveness |0. 08 |2 |0. 16 |3 |0. 24 |4 |0. 32 | |Management |0. 08 |3 |0. 24 |2 |0. 16 |4 |0. 32 | |Financial position |0. 15 |3 |0. 45 |4 |0. 6 |1 |0. 15 | |Customer loyalty |0. 0 |2 |0. 2 |4 |0. 4 |3 |0. 3 | |Mass marketing |0. 10 |1 |0. 1 |1 |0. 1 |4 |0. 40 | |Global expansion |0. 15 |3 |0. 45 |4 |0. 6 |3 |0. 45 | |Market share |0. 06 |3 |0. 18 |3 |0. 18 |1 |0. 06 | |TOTAL |1. 00 | |2. 9 | |3. 12 | |3. 8 | Analysis of industry organization Estee Lauder’s major strength is in their advertising and their product quality as indicate by weights of 0. 20 but their major weaknesses is mass marketing. The Porter & Gamble,s major strength is their financial position, customer royalty and global expansion while their major weaknesses are also their mass marketing. The Revlon’s major strength is their mass marketing and management while their major weaknesses are financial position and market share. Estee Lauder Companies, Inc. The industry average stands at 3. 12. The total score for Estee Lauder is 2. compare to their competitors: Porter & Gamble’s total weighted score are 3. 12 and Revlon’s are 3. 38. Basically Estee lauder’s weighted score are lesser than the industry average which stands at 3. 12 , here we can conclude that Estee Lauder factor are less effective compared to the industry. But it doesn’t mean that that Revlon and Porter & Gamble are is better the Estee Lauder. This is because that it only indicates that it is the relative strength or weaknesses to the company and not a judgment that Porter & Gamble and Revlon are better then Estee Lauder. Estee Lauder Companies, Inc. 4. 0 Major Issues
Estee Lauder company, Inc. has the major strength in the marketing strategy, where Estee sold the product directly to the customers in the early stage, so buyers know well about Estee Lauder product. Besides, the company has prestige pricing strategy in its product and this shows the product quality of Estee Lauder. Due to that, it offers free samples and gift with purchase. Besides, it markets more than 9000 quality product under portfolio brands. Even Estee Lauder Company, Inc. has those advantages, but the company has some major issues or weaknesses and threats that have to be avoiding for the future profit of the company. The large amount of discontinued operations in 2007 • Due with decrease in 15% of operating income in the year of 2006 • The restriction on products and the uncertain outlook of the products • Consumer complain and inquiries into the use of animals testing. • Federal food and drug administration does not require testing of cosmetic Estee Lauder Companies, Inc. 5. 0 TOWS Matrix | |STRENGTHS |WEAKNESS | | |Strong Brand imagery around the world. Discontinued operations of $80. 3 Million. | | |Department stores remain the best venue for |Special charges related to cost saving | | |high services and great brand. |initiatives of $92. 1 Million. | | |First major prestige firm to offer shopping |EL struggle to continue their fragrance | | |via internet |product (decreased by $47. Million) | | |Sales growth in all geographic regions. |Cosmetics did not test on animal. | | |Market product directly to customer. |Expensive price on the product. | | |Talented employee base. | | | |EL has global licenses for fragrances and | | | |cosmetic sold under 26 brand names. | | |Increased in perfumeries in Asia and Asian | | | |dominate. | | | |First cosmetic company offer free samples and| | | |gift-with-purchase. | | | | | | | | | | |Celebrities as endorses in testimonial | | | |advertisement. | | | |Prestige pricing strategy. | |OPPORTUNITIES |SO STRATEGIES |WO STRATEGIES | |EL announced in June 2007, that it might |Continue to develop innovative cutting edge |Find alternative way to maintain quality of | |acquire Skin Care Company. |product to build upon brand. (S1,O7) |cosmetic product that not tested by using | |Market more than 9000 quality product under |Increase number of EL outlet around |portfolio brand. W4,O2) | |portfolio brands. |world. (S3,O3) |Expand offerings in low cost cosmetic | |Next 20 years estimates 70 Million people |Expand brand reputation thru increasing |product. (W5,O3,O5) | |across global will reach on income level |number of outlet for the future market. |Increase product quality that maximize | |that allow purchasing of cosmetic products. |(S1,O3,O5) |customer satisfaction. (W5,O7) | |Estimated year 2030 emand for aging product|Increase productivity in employee to achieve |Use quality product in the market to overcome| |will be increased. |target to produce quality product. (S4,O2) |problem faced by fragrance product. (W3,O2) | | |Continue offer gift-with-purchase strategy | | | |now to increase the demand for aging product | | | |in future. S7. O4) | | | | | | | |Ensure new content can be delivered across | | |Teenagers will invest on cosmetic products |multiple platforms. (S2.
S4,O5,O7) | | |that will give better effect of aging. | | | | | | | |Life expectancy of aging population will | | | |continue to improve. | | | | | | |Continue to deliver innovative cutting edge | | | |product and build strong global brand. | | |THREAT |ST STRATEGY |WT STRATEGY | |L’Oreal (competitor) is one of the best |Defend against competitors by using |Find alternative way to deliver product | |worldwide leaders in the cosmetics and |testimonial advertisement use |without animal testing. (W4,T5) | |distributes. |celebrities. (S8,T1,T3) |Use forward, backward, horizontal integration| |Concern about the use of erosols and |Increase EL branches to reduce distribution |strategies to control over suppliers, | |fluorocarbon with first emergent. |process. (S3,T6) |competitors and retailers or distributors. | |Revlon (competitor) is one of the best known| |(W5,T1,T3,T6) | |brand names in the world and the company | | | |excels at mass marketing. | | | | | | |Recent restrictions on product that can be | | | |carried in flight. | | |Consumer complain and inquiries into use of | | | |animal testing. | | | |Changes in the distributing policy and |Increase EL technology to reach customers in | | |difficult retail environment. easy and fast way(e. g. via internet and | | |Federal Food and Drug Administration does |mobile)to faced and compete with tough | | |not require testing of cosmetic |competitors. | | Estee Lauder Companies, Inc. 6. 0 Space Matrix • FS and IS dimensions : +1 (worst) to +6 (best) • CA and ES dimensions : -6 (worst) to -1 (best) INTERNAL SRTENGTH POSITION |EXTERNAL STRENGTH POSITION | |Financial Strength (FS) – (0-6) |Environment Stability (ES) – (0 to -6) | |Sales = +5 |Technology Changes = -3 | |Liquidity = +4 |Demand Variability = -5 | |Inventory Turnover = +3 |Price range of competing product = -3 | |Earnings per share = +5 |Barriers entry to the market =-2 | | |Competitive Advantages =-2 | |17/4 = +4. 25 |-15/5 = -3. 0 | |Competitive Advantage (CA) – (0 to -6) |Industry Strength (IS) – (0-6) | |Market Share = -3 |Growth Potential = +6 | |Product Quality = -1 |Profit Potential = +6 | |Customer Loyalty = -3 |Financial Stability = +4 | |Competition Utilization = -1 |Technology Know How = +3 | |Technology Know How = -3 |Productivity, Capacity, Utilization = +4 | |-11/5 = -2. 20 |23/5 = +4. 60 | Calculation of Coordinate: FS / ES= +4. 25 + (-3. 00) = +1. 25 CA / IS= -2. 20 + 4. 60 = +2. 40 Estee Lauder Companies, Inc. (X, Y) Coordinate Point = (1. 25, 2. 40) Y Conservative +6Aggressive +5 +4 +3 * +2 +1 X -6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6 -1 -2 -3 Defensive -4Competitive -5 -6 Based on Space Matrix, Estee lauder Companies, Inc. is at the Strong growth area which is the aggressive part.
The companies market penetration, divestiture, backward, forward, and horizontal integration, market development, product development strategies are well strategies and competitive. Estee Lauder Companies, Inc. 7. 0 Alternatives Price Estee Lauder is varying from product to product and from brand to brand, but their price tends to be in the mid-high to high range of the industry. Even though the prestige pricing appears to be an effective strategy, given in their target market who is people in the higher middle class to the high class people. Prestige price is one of the reasons Estee Lauder can’t expand their market segment to people who have less income but are interested to buy their products.
This will lead to other manufacture to produce Estee Lauder’s artificial products under the brand name of Estee Lauder that are priced much cheaper but lower in quality. If there is an artificial brands under the name of Estee lauder it will lead to people to buy the artificial product rather then buying the original one that are far more expensive. If there is an artificial product in the brand, the brand name spoils because of artificial product under the brand name. So we recommend Estee Lauder to lower their products price so that their product can enter in to larger market segment, and more people with a low income can purchase their products without buying the artificial brands. Indirectly it can reduce the existent of artificial products. Internet
Estee Lauder was the first major prestige cosmetic firm to offer shopping via the internet. Department stores remain the best venue for high service and great brand since $7. 6billion in beauty sales were generated in US department stores in 2006. customer usually are more prefer to buy cosmetic product in department sore because they can get more information on the products and can test the product before purchasing it. Estee Lauder Companies, Inc. Estee Lauder can also recommend their existing customer that use to purchase the same skin care product or fragrance product to order the product via-internet rather then traveling to the department store to purchase it.
If customer needs any information on the product they can just call Estee Lauder’s customer Service to ask questions. Estee Lauder should realize that internet are a very important tool in an business This is because most of the people nowadays prefer to consume goods via- internet rather then going to the mall and purchase goods that they are use to buy. For first time user they can go to the department store to purchase and to get information on the product, if they are going to buy the goods again they can just order it via internet and the product will be delivered to their footstep. Membership Estee Lauder should introduce a membership card to all their customers.
This is a way of showing to their customer that they are appreciated and are a part of the Estee Lauder’s family. By introducing a membership card they should be given some privileges such as given discount when they purchase above an amount. Customers who are member of Estee Lauder’s club will also get reward point when they purchase the products and can redeem them once it reaches maximum of points. This will encourage customer to purchase more to get the discount. Customer who join the club also should be given latest update on the products that Estee lauder introduce of if there is any sales and etc. this way Estee lauder customers can keep track of the companies performance. Estee Lauder Companies, Inc. 8. 0 Recommendation
Replacement of products. Some products of Estee Lauder’s are not popular in certain geographic region, so Estee Lauder show place the product in region that has demands of it. The products that are mention are the fragrance product in America which is less popular compared to Asian region. Estee Lauder should place their fragrance in Asia region more compare to America. This can increase the sales in the company and can increase their revenues. One of the reason the fragrance are not popular in America because there are many other brands of fragrances in America, while in Asia, consumer are dependent to the fragrances that are produce in America/ overseas.
The fragrances that are sold by Estee Lauders are having high demands in Malaysia, because there are less domestic fragrance producer. Product Development It is a recommendation that can seeks to increase sales by improving or modifying present products or services. Product such as skin care products should be modified based on the country they are selling. This is because the weather and environment in each country are different. There are different skin types in different region. Asian skins are different from American skin, because in Asian the country are more hotter compared to American where it is mare colder. So for Asian skin care can’t be 100 percent same like American skin care. They should be modified to match each skin.
The ingredient of the product should also be modified; this is because of the religion, example Muslims that can’t use certain product that have non-halal ingredient, because it is against their religion. Estee Lauder should be aware of these issues so that anyone can buy their products. Estee Lauder Companies, Inc. Market penetration Market penetration strategy seeks to increase market share for present products or services in present market through greater marketing effort. Estee lauder should do market penetration because their product have large demand in Europe, Middle East, Africa and Asia pacific region on their product. So by doing so Estee Lauder can increase their market share in their present geographical area.
Cite this Estee Lauder Companies Review
Estee Lauder Companies Review. (2018, Jan 30). Retrieved from https://graduateway.com/estee-lauder-companies-review/