Revlon Inc. Case Study: 1). Introduction History: Revlon is a universal company that sells products for skin care, cosmetics, personal care,
fragrance and professional products. It was founded in 1932 and began in the nail polish market, market, soon after expanding into lipstick. lipstick. Over the past six years, Revlon has consistent consistently ly lost revenue and struggled with debt. Even though they have eliminated executive positions, reduced staffing and consolidated sales and marketing functions to save an approximate $33 million, the company is still in serious trouble.
Revlon was founded in 1932, by Charles Revson and his brother Joseph, along with a chemist, Charles Lachman, who contributed the "L" in the REVLON name. Starting with a single product nail enamel unlike any before it - the three founders pooled their meager resources and developed a unique manufacturing process. The company began its success with opaque long-lasting long-lasting nail enamel sold to beauty salons. salons. Revlon sold its nail enamel through department stores and selected drugstores. Revlon contributed directly to the war effort, by manufacturing first aid kits and dye markers for the navy. At war's end, Revlon began to produce manicure and pedicure instruments. Following the war, Revlon launched twice-yearly nail enamel and lipstick promotions tied to seasonal clothing fashions. Revlon also turned to television sponsorship to boost sales. In December 1955, Revlon first offered stock to the public. At the end of the following year, Revlon was listed on the New York Stock Exchange. Revlon laid the ground work for its highly successful international presence in the 60's, bringing the "American Look" to the rest of the world through advertising featuring U.S. models. Growth and innovation innovation led the way for Revlon. In 1985, Revlon was sold to a subsidiary subsidiary of MacAndrews & Forbes Holdings. In 1987 Almay joined the Revlon lineup In the 1990's, 1990's, Revlon Revlon revita revitali lized zed its cosmet cosmetics ics busine business ss and strengt strengthene hened d its indust industry ry leadership role. Revlon introduced the first transfer resistant lipcolor which led to a full ColorStayTM Collection of transfer-resistant products. The company closed the gap on its
closest competitors and reached a dramatic goal - the #1 brand in mass color cosmetics. Revlon again became a public company in 1996, listed on the New York Stock Exchange (NYSE).
Present Conditions:
Revlon is struggling to recover and collect debt of almost $2.3 billion. The research and development department is also struggling to offer new products to the market. In recent years Revlon launched Vital Radiance, a cosmetic line for older women with 100 products and it was the largest launch since ColorStay in 1994. However the product was not well received by the market because other competitors already provide the products and the prices of the Revlon product was also very high as compare with rivals. Revlon discontinued the brand in September 2006. 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 stock in 2006 to raise money to reduce debt. MacAndrews and Forbes Holdings agreed to purchase a portion of the stock and to purchase nay stock not purchased by current stockholders. MacAndrews also extend a line of credit of $87 million to Revlon which can help the Revlon in the recovery of losses. Competitors:
The Revlon’s major competitors are Proctor and Gamble, Avon Products, Estee Lauder Companies, L’Oreal, and Unilever. Other competitors include samall companies such as Urban Decay, Specialty stores such as Bath and Body Works, Body Shop, and Victoria’s Secret.
2). Analysis: After studying the case of Revlon Inc’ now we are going to analyze an alyze it that what type of strategy they need to follow in the coming years. The Revlon is in troubles in these days and a nd therefore we are going to analyze an alyze the external and internal environments en vironments of Revlon first then we will suggest with the help of different d ifferent tools and techniques an appropriate strategy for them.
EFE Matrix for Revlon: Key External Factors.
Weight
Weighted Rating Score
Opportunities:
1. The young migrants to America are increasing.
0 .15
4
0.60
2. Personal Care products usage is increasing.
0 .10
3
0.30
3. Men also using the cosmetic products.
0.07
2
0.14
4. Latin America represents a growth opportunity.
0 .09
2
0.18
5. The older age women entering to the cosmetic industry.
0.08
3
0.24
0 .06
1
0.06
6. Women Women in China, China, India India and and Middle Middle East East are rapi rapidly dly growing Interested in purchasing more cosmetics
Threats:
1. The young age women are decreasing.
0.10
4
0.40
2. The racial and ethnic issues.
0.09
3
0.27
3. Consumers’ concerns about product safety.
0.08
2
0.16
4. The competition is increasing day by day.
0.07
2
0.14
5. Strong competitors are entering to industry.
0.05
1
0.05
6. Disposable income of Americans decreasing.
0.06 1.0
3
0.18 2.72
From the above analysis we can conclude that the company position is not too much bad not too much good but only .22 points are high than the average score.
Internal Factors Evaluation (IFE) Matrix :
Key Internal Factors.
Weight
Weighted Rating Score
Strengths
1. Strong social responsibility programs.
0 .08
3
0.24
2. Minimum management expenses.
0 .0 9
3
0.27
3. Strong marketing program.
0 .10
4
0.40
4. Strong research and development program.
0 .1 0
4
0.40
5. Large mass merchandisers and chain drug stores.
0 .07
3
0.21
6. Great operating efficiency and use of capital assets.
0 .06
3
0.18
7. Continues new product development.
0 .08
3
0.24
1. A huge amount of long term debts.
0 .10
2
0.20
2. High prices than competitors.
0 .09
1
0.09
3. Lack of financial resources.
0 .05
1
0.05
4. Minimum diversified products compared with competitors. 0.08
2
0.16
5. Large amount of advertising expenses.
0.05
2
0.10
6. Decrease in current assets and increase in current liabilities. 0.05
1
0.05
Weaknesses
1.0
2.59
From the above analysis we can conclude that the company internal position is only .09 is not too much strong because the minimum score is 2.50 and it got only .09 points more than the average score.
The Strategic Position and Action Evaluation (SPACE) Matrix.
FS +6 +5
Conservative. Market penetration. Market development. Product development. Related diversification.
Aggressive
+4
Vertical integrations. Market penetration Market development Diversification.
+3 +2 +1
CA
IS -6
-5
-4
-3
-2
Defensive
Retrenchment Divestures Liquidation
-1 0 -1 -2
+1
+2
+3
+4
-3
Competitive
-4
Vertical integrations Market penetration. Product development.
+5
+6
-5 -6
ES
The SPACE Matrix for Revlon Financial Strengths (FS)
Operating income Net income Working capital Leverage Inventory turn over Earning per share
Ratings
1.0 1.0 1.0 1.0 2.0 1.0 7.0
Industry Strengths Strengths (IS)
Growth potential Profit potential Ease of entry into the market Resource utilization
4.0 3.0 3.0 4.0 14.0
Environmental Stability (ES)
Ratings
Price elasticity of demand
-5.0
Competitive pressure
-4.0
Demand variability
-4.0
Price range of competing firms
-5.0
Risk involved in business
-2.0 -20.0
Competitive Advantage (CA)
Control over supplier and distributors
-3.0
Market share
-4.0
Customer loyalty
-3.0
Product life cycle
-4.0
Product price
-3.0 -17.0
Conclusion
ES averag averagee is -20/ -20/ 5 = -4.00 -4.00 IS avera average ge is +14/ +14/ 4 = +3.50 +3.50 CA average is -17/5 = -3.40 FS average is +7/ 6 = +1.17
x-axes : -3.40 + (+3.50 = +0.10 y-axes : -4.00 + (+1.17)= -2.83
From the above analysis and diagram we can conclude that the best strategy for Revlon is competitive strategy which contains backward, forward and horizontal integrations, market penetration, market development, and product development.
The Grand Strategy Matrix for Revlon
In the case study of Revlon we saw that the market is growing world wide even in America the young migrants increasing year by year but the competitive position of Revlon is not strong because the competitors are Proctor & Gamble, Unilever, Avon Products, Inc’ which is very strong and have popular brand names. Therefore according to Grand Strategy Matrix the Revlon lies in quadrant quadrant II. According to this quadrant the Revlon needs strategies like Mark Market et
deve develo lopm pmen ent, t,
Mark Market et
pene penetr trat atio ion, n,
Prod Produc uctt
deve develo lopm pmen ent, t,
Hori Horizo zont ntal al
integration, Divestiture, and Liquidation . One of these strategy is important for Revlon.
The Grand Strategy Matrix for Revlon Inc’. Rapid market growth Quadrant II
Quadrant I
Market development Market penetration Product development Horizontal integration Divestiture Liquidation
Market development Market penetration product development Forward integration Backward integration Horizontal integration Related diversification
Weak Competitive Position
Strong Competitive Position Quadrant III
Quadrant IV
Retrenchment Related diversification Unrelated diversification Divestiture Liquidation
Slow market growth
Related diversification Unrelated diversification Joint ventures
3). Conclusion
As we saw in the case study of Revlon which was actually written in 2007 200 7 that the company is in great troubles. The financial position is also very weak and it generates generates losses in the recent years. After applying the tools and techniques of strategic management our conclusion is as follow.
1). The company should develop new markets, which is not tapped by the competitors.
2). The company should improve the quality of products as well as the price minimization
efforts should be taken.
3). The company also need to increase sales through increasing marketing efforts.
b e forward, backward or horizontal 4). The other strategy option is the integration it may be integration.
5). The company should sell some unprofitable division.
6). The last option is liquidation. If the company fails to follow the above strategies then it
should liquidate the business.
END
Strategic Management Assignment
“Case Study of Revlon Inc’ 2007”
SUBMITTED TO:
Dr. Muhammad Mohsin Khan SUBMITTED BY:
Muhammad Amad Shahid Rafiq Riaz Noor
MBA (3 semesters) Group “B” Date: June 28, 2010
Institute of Management Sciences Peshawar
