Introduction Revlon Inc. is a United State company started for providing high-quality products at affordable prices to women. Revlon products are sold in more than 100 countries around the world with sales outside the United States comprising 43% of sales in 2006. Revlon’s products include skin care, cosmetics, personal care, fragrance and professional products. Some of the company’s most recognized brand names are Revlon Ultima 2, ColorStay, Almay, Charlie, Flex, Mitchum, Jean Nate, and ColorSlike. The company continues to introduce new products.
History The origins of Revlon Inc.
date back to1931, when Charles Revson and his older brother, Joseph Revson, distributed Elka nail polish as Revson Brothers. Within a year, Charles decided to open his own nail polish company, going into partnership with Joseph and a nail polish supplier named Charles R. Lachman, who contributed the “L” to the Revlon name. Revlon was established in 1932. Starting with a single product — a new type of nail enamel — the three founders pooled their resources and developed a unique manufacturing process.
Using pigments instead of dyes, Revlon developed a variety of new shades of opaque nail enamel Charles noticed that the permanent-wave boom was making beauty salons more popular, and that demand for manicures was rising at the same time. He therefore targeted beauty salons as a market niche. Within its first nine months, the company boasted sales of $4,055. In 1933 there was a sharp rise to $11,246. That same year, the company incorporated as Revlon Products Corporation. 1940s By 1940, Revlon offered an entire manicure line, and added lipstick to the collection.
During World War II Revlon created makeup and related products for the U. S. Army, which was honored in 1944 with the Army-Navy ‘E’ Award for Excellence. By the end of the war, Revlon listed itself as one of America’s top five cosmetic houses. Expanding its capabilities, the company bought Graef & Schmidt, a cutlery manufacturer seized by the government in 1943 because of German business ties. This acquisition made it possible for Revlon to produce its own manicure and pedicure instruments, instead of buying them from outside supply sources. Up until the 1940s, Revlon’s magazine ads were drawn by hand and mostly in black and white.
Beginning in 1945, Revlon began launching full-color photographic advertisements in major magazines and stores across the country. Revlon introduced matching nail polish and lipsticks with exotic and unique names. These ads were taken by the top fashion photographers of the day including Richard Avedon, Cecil Beaton, and John Rawlings. Some of these ads were for “Paint the Town Pink” and 1945’s “Fatal Apple” with Dorian Leigh. In 1947 Revlon introduced “Bachelor’s Carnation” and in 1948, “Sweet Talk”. 1950s In 1950, Revlon introduced a red lipstick and nail enamel called “Where’s the Fire? Revlon used the word “fire” again later in their “Fire and Ice” ads. One of the world’s first supermodels, Dorian Leigh, starred in some of Revlon’s most memorable advertisements of all time. Revlon’s 1952 Fire and Ice campaign was one of its most successful, raising that year’s net sales to almost $25. 5 million. In 1955 the company again scored an advertising success when it became the sole sponsor of the CBS television show, “The $64,000 Question. ” Net sales for 1955 grew to $51. 6 million, from $33. 6 million the previous year. That year, an allegation of wiretapping was filed against Revlon by Hazel Bishop.
The charge was denied by Revlon controller William Heller, who nevertheless admitted “monitoring” employee’s telephones for training purposes. Revlon reorganized as Revlon, Inc. , in November of that year. The company went public one month later and was listed on the New York Stock Exchange a year later. The IPO price was $12 per share, but it reached $30 per share within 8 weeks. 1960s During the early 1960s Charles Revson became aware that his company was in danger of locking itself into a narrow, upper-middle-class image that could restrict sales.
Charles Revson segmented Revlon Inc into different divisions each focusing on a different market. He borrowed this strategy from “General Motors”. Each division had its own target customer: Princess Marcella Borghese was an upscale, international line; Ultima II was the premium line; Revlon was the largest and most popular-priced brand; Natural Wonder was aimed at the junior customer; Moon Drops was aimed at dry skins; and Etherea was a hypo-allergenic brand. In 1957, Revlon acquired Knomark, a shoe-polish company, and sold its shoe-polish line Esquire Shoe Polish in 1969.
Other poorly chosen acquisitions, such as Ty-D-Bol, the maker of toiler cleansers, and a 27 percent interest in the Schick electric shaver company were also soon discarded. Evan Picone, a women’s sportswear manufacturer which came with a price tag of $12 million in 1962, was sold back to one of the original partners four years later for $1 million. However, the 1967 acquisition of U. S. Vitamin and Pharmaceutical Corporation did make Revlon, for a while, a leader in diabetes drugs. By 1962, when Revlon debuted in Japan, there were subsidiaries in France, Italy, Argentina, Mexico, and Asia.
Revlon’s entrance into the Japanese market was typical of its international sales strategy. Instead of adapting its ads and using Japanese models, Revlon chose to use its basic U. S. advertising and models. Japanese women loved the American look, and the success of this bold approach was reflected in the 1962 sales figures, which were almost $164 million. In 1968, Revlon introduced Eterna27, the first cosmetic cream with an estrogen precursor called Progenitin (pregenolone acetate), as well as introducing the world’s first American fashion designer fragrance, Norman Norell.
Later, Revlon launched Braggi and Pub for men, and a line of wig maintenance products called Wig Wonder. 1970s In 1970 Revlon acquired the Mitchum line of deodorants. In 1973, Revlon introduced Charlie, a fragrance designed for the working woman’s budget. Charlie was an instant success, helping to raise Revlon’s net sales figures to $506 million for 1973 and to almost $606 million the following year. In 1975, Charles Revson died. Michel Bergerac, who Revson had hired as President of the company, continued to grow the organization.
Revlon acquired Coburn Optical Industries, an Oklahoma-based manufacturer of ophthalmic and optical processing equipment and supplies. Barnes-Hind, the largest U. S. marketer of hard contact lens solutions, was bought in 1976 and strengthened Revlon’s share of the eye-care market. Revlon purchased Armour Pharmaceutical Company, a division of Armour and Company, from The Greyhound Corporation in 1977. Other acquisitions included the Lewis-Howe Company, makers of Tums antacid in 1978. These health-care operations helped sales figures to pass the $1 billion mark in 1977, bringing total sales to $1. 7 billion in 1979. 980s By the mid-1980s, Revlon’s health-care companies rather than Revlon’s beauty concerns were innovating and expanding. Reluctant to initiate beauty-product development, Revlon lost ground to Estee Lauder. Lauder was a privately held company whose marketing strategy of high prices with accompanying gifts, were featured in upscale department stores, not drugstores where Revlon was found. In 1983 the company attempted an unsuccessful hostile takeover of Gillette On November 5, 1985, at a price of $58 per share, totaling $2. 7 billion, Revlon was sold to Pantry Pride (later renamed to Revlon Group, Inc. , a subsidiary of Ronald Perelman’s MacAndrews & Forbes Holdings. The highly leveraged buyout–engineered with the help of junk bond king Michael P. Milken–saddled Revlon with a huge $2. 9 billion debt load, which became a load around the company’s neck for years to come. Pantry Pride Inc. offered to buy any or all of Revlon’s 38. 2 million outstanding shares for $47. 5 a share when its street price stood at $45 a share. Initially rejected, he repeatedly raised his offer until it reached $53 a share while fighting Revlon’s management every step of the way.
Forstmann Little & Company swooped in at $56 a share, a brief public bidding war ensued, and Perelman triumphed with an offer of $58 a share. Perelman paid $1. 8 billion to Revlon’s shareholders, but he also paid $900 million of other costs associated with the purchase. Perelman had Revlon sell four divisions: two for $1 billion, the vision care division for $574 million, and the National Health Laboratories division which became a publicly owned corporation in 1988. Additional make-up lines were purchased for Revlon: Max Factor in 1987 and Betrix in 1989 later sold to Procter & Gamble in 1991. 2000s
In an effort to reduce expenses, the company’s worldwide professional products line was sold for $315 million in March 2000 and two months late, the Argentina brand Plusbelle was sold for $46 million. In November 2000, the company closed three manufacturing plants and reduced their workforce by 1,115 employees (14% of workforce) in an effort to improve efficiency. Additional cost reductions were made in 2001 when warehouse and manufacturing space was reduced by55%. The company closed its in-house advertising division in the same year. The Colorama brand of cosmetics was sold in 2001 for $50 million to L’Oreal.
Managers reviewed the strengths and weaknesses of Revlon in 2002 in an attempt to evaluate the company’s business so improvements could be planned. Despite financial struggles, Revlon continued to launch or reintroduce new product lines. The 33-year-old Ultima 2brand was reintroduced in 2001, and Charlie Perfume was reintroduced in 2002. Revlon and Pacific World Corporation agreed in October 2002 to jointly manufacture a line of nail and nail care products: Moisturous Lipcolor (24 shades of hydrating lipstick) was sold beginning in 2002 and the Moonlit Mauve color collection and Almay Bright Eyes products were introduced in fall 2003.
In February 2003, the company received cash in the amount of $150 million from MacAndrews & Forbes Holdings, Inc. to implement some of its growth and stabilizations plans. Present Conditions Revlon has struggled in recent years and has amassed debt of almost $2. 3 billion. After two years of research and development, Revlon launched Vital Radiance, a cosmetic line for older women in January 2006, with 100 products; it was the largest launch since ColorStay in 1994. The Vital Radiance line offered special color palette products, subdued Eye shadows and hydrating formula products designed to appeal to older women and baby boomers.
The products were priced from $12 to $19 each. However the new product was not well received by the market. Other companies already provide competing products, and the prices for the Vital Radiance line were more expensive than products a typically sold by the major retailers such as Wal-Mart and Walgreens that sell other Revlon products. Revlon discontinued the Vital Radiance brand in September 2006. Expectations are that the negative impact of the vital Radiance brand on Revlon, Inc. will be approximately $110million.
Revlon planned to launch a new prestige fragrance called flair in 2006, but delayed the launch until debt could be restructured. The company issued $185 million in stocks in 2006 to raise money to reduce debt. MacAndrews & Forbes holdings agreed to purchase any stock not purchased by current stock holders after the offering. MacAndrews also extended a line of credit of $87 million to Revlon. These dollars should help Revlon recover from losses due to the Vital Radiance line. Vision & Mission Statements Vision statement According to the company website,
Our vision is to provide glamour, excitement and innovation through quality products at affordable prices. Alternative Vision statement Our vision is to be the world’s leader in cosmetics, skin care, Fragrance, & personal care and to be a leading mass-market cosmetic brand. We want to provide glamour, excitement and innovation through quality products at affordable prices. Mission Statement The company’s long term mission is to emerge as the dominant cosmetics and personal care firm in the twenty first century by appealing to young/trendy women, health conscious women (skin care),and older women with its variety of brands.
Alternative Mission Statement We want to be the dominant firm in skincare, personal care, cosmetics, & fragrance for all-globally. We strive to deliver innovative solutions to our customer, consistently outperform our peers, produce predictable earnings for our shareholder, try to reflect the highest ethical standards, and provide a dynamic & challenging environment for our employees. The External Audit The purpose of external audit is to develop a finite list of opportunities that could benefit a firm and threats should be avoided.
As the term finite suggests, the external audit is not aimed at developing an exhaustive list of every possible factor that could influence the business; rather, it is aimed at identifying key variables that offer actionable responses. Economic Forces ? Propensity of people to spend ? Inflation rate ? Consumption pattern ? Foreign Countries’ economic conditions ? Income differences by region and consumer groups ? Demand shifts for different category of goods & services ? Level of disposable income ? GDP trend Social, cultural, demographic & environmental variables Lifestyle ? Buying habits ? Racial equality ? Attitude towards product quality ? Ozone depletion ? Number of women & minority workers ? Number of high school & college graduates by geographic area ? Ethical concerns ? Air/Water pollution Political, governmental, & legal forces ? Environmental protection laws ? American Russian relations ? American European relations ? American Asian relations ? American African relations ? Import Export regulations ? Location & severity of terrorist activities ? Political conditions ? Change in tax laws ? Number of patents
The company Key opportunities and threats Opportunities ? Ethical & racial makeup ? Increasing number of skin conscious working women ? The decrease in dollar value ? New fashion trends in teenaged groups ? Still potential for personal care & skin care products around the world especially for men ? Rapid increase in fashion trend in Arab & Asian countries Q: Why the above points are opportunities for the firm? Starting from the first one the ethical and racial groups are increasing in the USA like Hispanic American, the Asian American, & the African American.
These different kinds of people have different choices and needs and can cause the firm to increase its product lines and attract more and more customers. Now a day the world’s working trend has changed. Women are working shoulder by shoulder with men to add value not only for their homes but for the betterment of the economy. This increases their desire to look smart and young thus increases the firm’s potential for more product development. Dollar is used as an international currency. If there is devaluation in dollar there are many advantages for developing countries.
Imports will be more competitive. The countries who import heavy machinery, oil or the other necessary things will take the advantage of cheap prices. Therefore, increase in demand for imports people will start investing in mega projects by importing machinery and goods. Consumers will start purchasing household things to increase their living standard like cars, houses etc. so the fall in dollar value will benefit cosmetic firms that do considerable global business, such as Revlon in china, India, and the Middle East are rapidly growing interested in purchasing more cosmetics and fragrance.
Another market of interest to Revlon is the US as well as the whole world teen market (ages 12-19) since females in this age group will number almost 20 million in 2010. Since the majority of personal care products are currently sold in Us, Japan, Canada, and European countries (less than 20% of the world’s population), the potential for sale of personal care products around the world is excellent. The trend for fashion in Arab and Asian countries are increasing. Threats ? The decrease in dollar value ? Foreign currency fluctuations Inflation ? Old ladies less expenditure on cosmetics ? Competitive strategies of rival firms Q: Why the above points are threats for the firm? Devaluation may lead to Increase in exports causes demand pull inflation. Imported goods will be more expensive. American consumers would definitely experience a rise in price for many imported manufactured goods and imports of raw materials could increase costs of business. It is argued devaluation reduces the incentive, for manufacturers and exporters, to cut costs and become more efficient.
So the devaluation of dollar may cause Revlon to face losses in its native country USA. The foreign currency fluctuations have many reasons but one of them is the political conditions in different part of the world which creates a challenging environment for the firm to operate in these countries. Inflation has become among the biggest problem world wide. In America gas prices are high and rising leaving most Americans with less disposable income for purchasing cosmetics. Same above problem is with Asian, African countries etc. ost of the people in these countries live below poverty line and rest are being tortured by increasing rate of inflation so buying cosmetics and even skincare products are difficult for them. Older people trend to spend less on cosmetics is a growing problem for the firm and industry its working in. Before Revlon could do any thing the other competitors already provide competing products at the reasonable prices. Industry Analysis: the external Factor Evaluation (EFE) Matrix An external factor evaluation (EFE) Matrix allows us to summarize and evaluate economic, social, cultural, and demographic, and competitive information.
The EFE process is briefly defined as; 1. List key external factors. List the opportunities first and then the threats. 2. Assign to each factor weight that ranges from 0. 0 (not important) to 1. 0 (very important) the weight indicates the relative importance of that factor to being successful in the firm’s industry. 3. Assign a rating between 1 and 4 to each key external factor to indicate how effectively the firm’s current strategies respond to the factor, where 4= the response is superior, 3= the response is above average, 2= the response is average and 1= the response is poor. . Multiple each factor’s weight by its rating to determine a weighted score. 5. Sum the weighted scores for each variable to determine the total weighted score for the organization. Regardless of the number of key opportunities and threats in an EFE Matrix, the highest possible total weighted score for an organization is responding in an outstanding way to existing opportunities and threats in its industry. In other words, the firm’s strategies effectively take advantage of existing opportunities and minimize the potential adverse effects of external threats.
A total score of 1. 0 indicates that the firm’s strategies are not capitalizing on opportunities or avoiding external threats. References Atlas, Riva. “Revlon Running near Empty,” http://www. NYtimes. com (August 28, 2003). Davis, Ricardo. “Revlon to Shut Plant, Ax 900 jobs in Valley,” The Arizona Republic (November 2, 2000), p. A1. Brookman, Faye. “Revlon’s Exec shuffle raises Question,” Woman’s Wear Daily, September 22, 2006. www. revlon. com
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