STRATEGIC AUDIT OF
ESTÉE LAUDER
COMPANIES, Inc
THE OUTLINE PLAN
SER SUBJECT PRESENTED BY
1. Introduction Vision &
Mission Statements
Athula Marasinghe
2. External Assess...
AIM
To conduct a Strategic Audit on Estée Lauder
Companies, Inc.
INTRODUCTION
PRODUCTION DIVISIONS
 Makeup
 Skin Care
 Fragrances
 Hair Care
 HQ - New York.
 Operates over 150 countries & territories in
the Americas, Europe, Middle East, Africa &
Asia Pacific.
...
ESTÉE LAUDER BRANDS
 More than 9000 Products
 28 Brands
Aramis - 1964
Estée Lauder - 1946
Clinique - 1968
Prescriptives - 1979
Lab Series Skin Care for Men - 1987
Origins - 1990
Tommy Hilfiger - 1993
M-A-C - 1994
Lar Mer - 1995
Bobbi Brown - 1995
Kiton - 1995
Donna Karan - 1997
Aveda - 1997
Jo Malone - 1999
Bumble and bumble - 2000
Michael Kors - 2003
Darphin - 2003
Rodan + Fields - 2003
American Beauty - 2004
Good Skin - 2004
Flirt - 2004
Donald Trump - 2004
Grassroots - 2005
Sean John Fragrances - 2005
MISSONI - 2005
Daisy Fuentes - 2006
Ojon - 2007
Smashbox - 2010
ACHIEVEMENTS OF ESTÉE LAUDER
1940 Estée and Joseph Lauder began making their own products.
1946 Officially launched the Es...
Mrs Estée Lauder
(Died in April, 2004)
COMPETITORS
 Avon Products
 Colgate – Palmolive
 L’ Oreal
 Procter & Gamble (P&G)
 Revlon
 Mary Kay Cosmetics
VISION AND MISSION STATEMENTS
“ What do we want to be come ” - Vision
“ What is our business ” - Mission
Estée Lauder Companies, inc
VISION STATEMENT
Existing Vision Statement
"Bringing the best to everyone we touch" and being ...
COMPARISON WITH A COMPETITOR’S VISION
STATEMENT
Estée Lauder Revlon
"Bringing the world's best
experience and excitement t...
Estée Lauder Companies, Inc
Mission Statement
Developed Mission Statement
" Estée Lauder believes in providing branded sup...
COMPARISON WITH A COMPETITOR’S
MISSION STATEMENT
Estée Lauder Revlon
"Estée Lauder believes in providing
branded superior ...
The Internal Analysis of strengths and
weaknesses focuses on internal factors that give
an organization certain advantages...
Weaknesses refer to any limitations a
company faces in developing or implementing
a strategy.
A comprehensive strategic pl...
The company consists of four main business segments;
Skin Care, Make Up, Fragrance, and Hair Care.
The fiscal year 2011 Sk...
FINANCIAL RATIO
ANALYSIS
An initial review demonstrates that The Estée
Lauder Companies are a financially strong
organization with clear growth ove...
RATIO 2009 2010 %
Liquidity Ratios
Current Ratio 2.00 1. 00 50.00%
Quick Ratio 1.18 1.19 0.84%
Leverage Ratios
Debt to Tot...
RATIO 2009 2010
Activity Ratios
Inventory Turnover 2.11 2.26 0.15%
FA Turnover 7.133 7.616 0.483%
Total Assets Turnover 1....
RATIO 2009 2010 %
Profitability Ratios
Gross Profit Margin 74.31% 76.53% 2.22%
Operating Profit Margin 5.71% 10.13% 4.42%
...
RATIO 2009 2010
Growth Ratios
Sales/Revenue% - 7.42 6.44 13.86%
Net Income % - 53.9 119 172.9%
Earning Per Share (EPS) % -...
The company recorded revenues of $7795.8
million in the financial year ended June 2010
(FY2010), an increase of 6% over FY...
The company recorded Net earning per
Common Share of f $2.38 in the financial year
ended June 2010 (FY2010), an it is a re...
ORGANIZATIONAL
STRUCTURE ANALYSIS
Bringing the Best to Everyone Touch………
William Lauder
Chairman of the Board
Amy DiGeso
Executive VP
Global HR
Harvey Gedeon
Executive VP, Global R &
D, Corporate...
Organization structure is a business unit type
structure.
Detailed succession plan in place for Fabrizio Freda
to take ove...
POINTS
Indistinguishable organizational structure.
Most of the power/authority in the company is vested in
family members ...
IMPROVED
ORGANIZATIONAL
STRUCTURE
William Lauder
Chairman of the Board
Amy DiGeso
Executive VP
Global HR
Harvey Gedeon
Executive VP, Global R &
D, Corporate...
REASONS FOR IMPROVEMENTS
 More space for strategy planning process
 Delegated power will ease the regional operations
an...
ANALYSIS OF
MARKETING POSITION
COMPANY MARKET SHARE (US $ Billions)
Procter & Gambel 26.3
L’Oreal 25.8
Unilever 16
Avon 7.6
Beiersdorf 7.5
Estee Lauder 7...
COMPETITIVE ANALYSIS
Largely consolidated, however many small players
exist.
Estimated to exceed $600 Billion USD Globally...
Single greatest expense for the company.
Marketing departments part of Brand Business Unit.
Regional marketing groups in U...
As of 2010 Estee Lauder sells its products in
department stores across the world and has a chain
of freestanding retail ou...
All brand business units consist of marketing, sales
administration, creative, finance, accounting and
product development...
SUPPLY CHAIN
 The Estée Lauder Companies corporate structure
places all supply chain activities outside of the brand
busi...
 The largest cost for products is packaging, and
the package development division of the company
works with a global netw...
VALUE CHAIN ANALYSIS
CHART
VALUE CHAIN ANALYSIS
CULTURE
• All EL employees committed to the highest standard of professional and personnel conduct. All
employees of the c...
VALUE OF THE FIRM
ANALYSIS
 Estée Lauder Companies’ long term strategy is
achieving higher levels of sustainable and profitable
growth that will all...
Creativity and Innovation They are focused on
creating fewer, but more successful products. They are
motivated to be “crea...
Local Relevance - Estée lauder strives to be locally
relevant to consumers everywhere they live. They do this
by creating ...
STRENGTHS AND
WEAKNESSES OF EL
Estee Lauder currently has 26 brands selling in over
130 countries.
Each brand has a single global image which is
promoted...
 Defined/numerous/wide channels of distribution.
 Manufacturing operations match ISO 14001
standards.
 Early/effective ...
Innovation:
First dermatologist : guided, allergy tested,
fragrance : free cosmetics brand.
First major prestige cosmetic ...
Indistinguishable organizational structure
Lower sales in Fragrance product category. As a
result of this, the company is ...
INTERNAL FACTOR
EVALUATION (IFE)
MATRIX
KEY INTERNAL FACTORS WEIGHT RATING
WEIGHT
SCORE
STRENGTHS
Wholly owned and operated offices in 43
countries and territorie...
KEY INTERNAL FACTORS WEIGHT RATING
WEIGHT
SCORE
STRENGTHS
Acquisitions including Jo Malone, Stila
Cosmetics, Gloss.com…The...
KEY INTERNAL FACTORS WEIGHT RATING
WEIGHT
SCORE
WEAKNESSES
In 1990, 75 nameplate department stores
sold Estée Lauder; toda...
Why external assessment ?
 The purpose of the External assessment is to develop
a predetermined opportunities that could ...
Este’e Lauder Companies, Inc
Key Industry Trends
Main External forces
1. Economic forces
2. Social, cultural, demographic,...
Este’e Lauder Companies, Inc
Key Economical variables
 Unemployment rate in the U.S. in 2010 around 9 %
which leads the j...
Este’e Lauder Companies, Inc
Key Social, cultural, geographic, demographic, &
environment variables
 Global women’s purch...
Este’e Lauder Companies, Inc
 Political, governmental, and legal variables
 Whole continent of Africa is coming online
...
External Factor Evaluation (EFE) Matrix
Ser NoOPPORTUNITIES WEIGHT RATING
WEIGHTED
SCORE
1
Increase international market s...
External Factor Evaluation (EFE) Matrix
Ser
No THREATS WEIGHT RATING
WEIGHTED
SCORE
1
Japan Tsunami will hamper company sa...
Este’e Lauder Companies, Inc
Current Environment & Industry Trends
 Cosmetics and personal care industry is one of the wo...
Este’e Lauder Companies, Inc
Main competitors to Estee Lauder
 Procter & Gamble (P&G) 127,000 employees working
in over 8...
 Colgate –Palmolive which marked its 200th year in 2006.
Palmolive and soft soap brands Irish Spring and Protex ,
Speed s...
Este’e Lauder Companies, Inc
-
10,000.00
20,000.00
30,000.00
40,000.00
50,000.00
60,000.00
70,000.00
80,000.00
90,000.00
I...
Competitive Profile Matrix
ESTEE LAUDER L'Oreal Procter & Gamble
Critical Success Factors Weight Rating Score Rating Score...
STRATEGY FORMULATION
A Retrospective……..
 Estee Lauder began to market products directly to let
customers samples the products before they bou...
 Introduced R & D in 1960…..Product Development.
 Acquiring more brand License(28 at present) from 1946
till 2010 and it...
Estee Lauder Strategies were basically
based on:
 Integration Strategies.
 Intensive Strategies.
 Diversification Strat...
 Estee Lauder’s performance objective include
generation of 60 percent of sales for beauty market
from international mark...
 Raised full year diluted earnings estimate from $3.55 to $3.65.
 Net sales grew 16.0%.
 Added $42 Million to the quart...
Estee Lauder is a globally recognized manufacturer
and marketer of makeup, skin care, fragrances and
hair care products. T...
SWOT ANALYSIS
1. Large geographical
footprint diversifies
revenue stream.
2. Strong brand portfolio
well positioned to
par...
1. Limited distribution
strategy increases
dependency on specific
channels.
WEAKNESSES
SO1. Forward integration by moving ...
SWOT MATRIX ANALYSIS
SUGGESTED STRATEGIES
SO ST
 Market Development
 Market Penetration
 Product Development
 Unrelate...
Strong
3.0 to 4.0
Average
2.0 to 2.99
Weak
1.0 to 1.99
High
3.0 to 4.0
Medium
2.0 to 2.99
Low
1.0 to 1.99
1.0
3.0
2.03.0
4...
QUANTITATIVE STRATEGIC PLANNING
MATRIX(QSPM)
STRATEGIC ALTERNATIVES
Key Internal Factors Weight Introduce
New
Products for...
STRATEGIC ALTERNATIVES
Key Internal Factors Weight Introduce
New
Products for
Non
Traditional
Customers
Continue
to expand...
STRATEGIC ALTERNATIVES
Key Internal Factors Weight Introduce
New
Products for
Non
Traditional
Customers
Continue
to expand...
STRATEGIC ALTERNATIVES
Key Internal Factors Weight Introduce
New
Products for
Non
Traditional
Customers
Continue
to expand...
STRATEGIC ALTERNATIVES
Key Internal Factors Weight Introduce
New
Products for
Non
Traditional
Customers
Continue
to expand...
STRATEGIC ALTERNATIVES
Key Internal Factors Weight Introduce
New
Products for
Non
Traditional
Customers
Continue
to expand...
STRATEGIC ALTERNATIVES
Key Internal Factors Weight Introduce
New
Products for
Non
Traditional
Customers
Continue
to expand...
SWOT matrix and IE matrix results, shows that Estee
Lauder should Grow and Build its position. This means
intensive and ag...
 Estee Lauder brand to develop a clear brand image and provide its
customers with something that is unique.
 Possibility...
 No doubt that THE ESTEE LAUDER has a very vast and diversified
product assortment but still it has to keep in mind about...
STRATEGY IMPLEMENTATION
MANAGEMENT AND OTHER ISSUES
RELATED TO IMPLEMENTATION
The following are the Management and other issues
that need to be co...
 Minimize resistance to change.
 Match Managers with strategies.
 Develop a strategy supportive culture.
 Adapt produc...
OTHER ISSUES
The other important issues are as follows:
 Current Marketing Issues.
 Market Segmentation.
 Product Posit...
In order to implement strategies the
following actions are required:
 Altering sales territories.
 Adding New Department...
LIMITATIONS
The presentation by the group will cover only a few
recommendations made above in respect of Estee
Lauder due ...
MARKET SEGMENTATION
Subdividing of a market into distinct subsets
of customers according to needs and buying
habits.
Widel...
MARKET SEGMENTATION
Strategies such as market development, product
development, market penetration, and
diversification re...
MARKET SEGMENTATION
 GEOGRAPHIC
 DEMOGRAPHIC
 PSYCHOGRAPHIC
 BEHAVIOURAL
As per the portfolio of Estee Lauder it is capable
of producing a brand in China, India and Brazil in
line with the Geogra...
PRODUCT POSITIONING
Entails developing schematic representations
that reflect how your products or services
compare to com...
Select key criteria that effectively differentiate
products or services in the industry.
Diagram a two-dimensional product...
PRODUCT POSITIONING MAP
An effective product positioning strategy meets two
criteria:
It uniquely distinguishes a company from the
competition.
It...
Estee Lauder will be product B in the Product
Position Map.
The product of Estee Lauder will be high in price
and quality ...
CURRENT MARKETING ISSUES
How to make advertisements more interactive to be
more effective
How to best take advantage of Fa...
To offer a complete or limited warranty.
To reward salespeople based on straight salary,
straight commission, or a combina...
Estee Lauder places high value in consumer
communication and awareness.
Systems are in place to provide customer service a...
Shopping via Internet.
Live chats with consumers and using Twitter as an
effective means to provide service to customers.
...
To summarize the strategy implementation of
Estee Lauder taking onto consideration Market
Segmentation, Product Positionin...
The growth rate of Estee Lauder over the last two
years has improved. Hence expenses related to R&
D of the new product, e...
Strategy Evaluation
 The process of determining the effectiveness of a given strategy in
achieving the organizational obj...
Techniques of Strategic Evaluation
1)Gap Analysis
strategic evaluation technique used to measure the gap between the
organ...
Strategy Evaluation Framework
Examining the underlying bases of strategy
Comparing expected results with actual results
Ta...
Strategy Evaluation Assessment Matrix
Changers/
Activity
Have Major
changers Occurred
in the Firm’s
Internal Strategic
Position ?
Have Major
changers
Occurred i...
Changers/
Activity
Have Major
changers Occurred
in the Firm’s
Internal Strategic
Position ?
Have Major
changers
Occurred i...
Strategy Evaluation Framework
Activity : Acquisition of Smash box Beauty Cosmetics in
2010(Great Strategic Decision)
Do Significant Differences
occur?
N...
No
Continue till 2014
Note
Here I’m taking One example to describe Strategy
Evaluation Framework.
Abstraction:-
In 2010 Es...
Strategic plan By Company Strategic Plan by Presentation Group
Estee Lauder brand to develop a clear brand
image and provi...
 The Estée Lauder Companies face many challenges
Environmental law as it pertains to the waste stream, primarily a result...
The Estée Lauder Companies can do,
 Include packaging risks, instrument manufacturing,
infrastructure costs, merchandise,...
Estee lauder Strategic  Management ppt
Estee lauder Strategic  Management ppt
Estee lauder Strategic  Management ppt
Estee lauder Strategic  Management ppt
Estee lauder Strategic  Management ppt
Estee lauder Strategic  Management ppt
Estee lauder Strategic  Management ppt
Estee lauder Strategic  Management ppt
Estee lauder Strategic  Management ppt
Estee lauder Strategic  Management ppt
Estee lauder Strategic  Management ppt
Estee lauder Strategic  Management ppt
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Estee lauder Strategic Management ppt

  1. 1. STRATEGIC AUDIT OF ESTÉE LAUDER COMPANIES, Inc
  2. 2. THE OUTLINE PLAN SER SUBJECT PRESENTED BY 1. Introduction Vision & Mission Statements Athula Marasinghe 2. External Assessment Piyal Pushpakumara 3. Internal Assessment Priyantha Perera 4. Strategy Formulation Bandula Kodippili 5. Strategy Implementation Shiraz Jjaldin 6. Strategy Evaluation and Conclusion Dhanush K. Kannangara
  3. 3. AIM To conduct a Strategic Audit on Estée Lauder Companies, Inc.
  4. 4. INTRODUCTION
  5. 5. PRODUCTION DIVISIONS  Makeup  Skin Care  Fragrances  Hair Care
  6. 6.  HQ - New York.  Operates over 150 countries & territories in the Americas, Europe, Middle East, Africa & Asia Pacific.  Employees - Over 31,200  Annual revenue - More than $ 7.8 billion.
  7. 7. ESTÉE LAUDER BRANDS  More than 9000 Products  28 Brands
  8. 8. Aramis - 1964 Estée Lauder - 1946
  9. 9. Clinique - 1968
  10. 10. Prescriptives - 1979
  11. 11. Lab Series Skin Care for Men - 1987
  12. 12. Origins - 1990
  13. 13. Tommy Hilfiger - 1993
  14. 14. M-A-C - 1994
  15. 15. Lar Mer - 1995
  16. 16. Bobbi Brown - 1995
  17. 17. Kiton - 1995
  18. 18. Donna Karan - 1997
  19. 19. Aveda - 1997
  20. 20. Jo Malone - 1999
  21. 21. Bumble and bumble - 2000
  22. 22. Michael Kors - 2003
  23. 23. Darphin - 2003
  24. 24. Rodan + Fields - 2003
  25. 25. American Beauty - 2004
  26. 26. Good Skin - 2004
  27. 27. Flirt - 2004
  28. 28. Donald Trump - 2004
  29. 29. Grassroots - 2005
  30. 30. Sean John Fragrances - 2005
  31. 31. MISSONI - 2005
  32. 32. Daisy Fuentes - 2006
  33. 33. Ojon - 2007
  34. 34. Smashbox - 2010
  35. 35. ACHIEVEMENTS OF ESTÉE LAUDER 1940 Estée and Joseph Lauder began making their own products. 1946 Officially launched the Estée Lauder Company. 1948 Established its first department store account in New York. 1960 Globalized its operations introducing products at Harrods in London. 1967 Estée Lauder was named one of 10 Outstanding Women in Business in the US by business & financial editors. 1968 Received the Spirit of Achievement Award from Albert Einstein College of Medicine at Yeshiva University. 1974 Hired Irving Penn to shoot Clinique Ads. 1992 Launched the annual Breast Cancer Awareness Campaign. 1993 Company begins licensing fragrances. 1994 Company begins practice of acquisitions. 1995 The company went public. 1998 Online shopping was introduced and ELC Online was created to manage all online strategies & activities.
  36. 36. Mrs Estée Lauder (Died in April, 2004)
  37. 37. COMPETITORS  Avon Products  Colgate – Palmolive  L’ Oreal  Procter & Gamble (P&G)  Revlon  Mary Kay Cosmetics
  38. 38. VISION AND MISSION STATEMENTS “ What do we want to be come ” - Vision “ What is our business ” - Mission
  39. 39. Estée Lauder Companies, inc VISION STATEMENT Existing Vision Statement "Bringing the best to everyone we touch" and being the best in everything we do. By 'the best' we mean the best products, the best people and the beat ideas." Improved Vision Statement "Bringing the world's best experience and excitement to everyone we touch with superior quality products and services."
  40. 40. COMPARISON WITH A COMPETITOR’S VISION STATEMENT Estée Lauder Revlon "Bringing the world's best experience and excitement to everyone we touch with superior quality products and services." " Glamour, Excitement and Innovation through High- quality Products at Affordable Prices."
  41. 41. Estée Lauder Companies, Inc Mission Statement Developed Mission Statement " Estée Lauder believes in providing branded superior quality products & services in skin care, make up, fragrance and hair care to endure passionate feelings of worldwide customers in all the age groups and sexes even through our ELC Online Shopping. Our everlasting business success in sales, profits and values are built upon ethical standards & integrity which guide growth with a genuine sense of responsibility to our employees, customers, community and environment in which we operate. We strongly advocate with corporate social responsibility to our customers and communities in which we operate by undertaking corporate philanthropic programs and community involvement initiatives."
  42. 42. COMPARISON WITH A COMPETITOR’S MISSION STATEMENT Estée Lauder Revlon "Estée Lauder believes in providing branded superior quality products & services in skin care, make up, fragrance and hair care to endure passionate feelings of worldwide customers in all the age groups and sexes even through our ELC Online Shopping. Our everlasting business success in sales, profits and values are built upon ethical standards & integrity which guide growth with a genuine sense of responsibility to our employees, customers, community and environment in which we operate. We strongly advocate with corporate social responsibility to our customers and communities in which we operate by undertaking corporate philanthropic programs and community involvement initiatives." " Revlon’s mission is to emerge as the leader in cosmetic and personal care throughout the world. Revlon takes pride in manufacturing the top skin care products and strives to please young and older woman alike."
  43. 43. The Internal Analysis of strengths and weaknesses focuses on internal factors that give an organization certain advantages and disadvantages in meeting the needs of its target market. Strengths refer to core competencies that give the firm an advantage in meeting the needs of its target markets. Any analysis of company strengths should be market oriented/customer focused because strengths are only meaningful when they assist the firm in meeting customer needs.
  44. 44. Weaknesses refer to any limitations a company faces in developing or implementing a strategy. A comprehensive strategic plan includes a situational analysis that considers internal strengths and weaknesses. Analyzing a company's current strengths and weaknesses provides a wealth of insight helpful in accomplishing internal goals and internal analyses can provide advantages for achieving external goals, as well.
  45. 45. The company consists of four main business segments; Skin Care, Make Up, Fragrance, and Hair Care. The fiscal year 2011 Skin Care accounted for 42% of net sales, Make Up accounting for 38%, Fragrance 14%, and Hair Care representing 5% of net sales. Furthermore, the company spans a geographic presence in 150 countries around the world. The Americas is the largest market representing 47% of net sales in 2010. Europe, Middle East, and Africa accounted for 39% of net sales, and Asia/Pacific captured 14% of sales. BUSINESS MODEL
  46. 46. FINANCIAL RATIO ANALYSIS
  47. 47. An initial review demonstrates that The Estée Lauder Companies are a financially strong organization with clear growth over the last two years. Actual revenue, gross margin, net income and diluted EPS increased year-over-year, while COGS and operating expenses as a percentage of revenue decreased. Current ratio and ROE are very strong in comparison to industry competitors.
  48. 48. RATIO 2009 2010 % Liquidity Ratios Current Ratio 2.00 1. 00 50.00% Quick Ratio 1.18 1.19 0.84% Leverage Ratios Debt to Total Assets Ratio 0.274 0.230 16.05% Debt to Equity Ratio 0.62 0.85 37.1 Long Term Debt to Equity Ratio 0.846 0.607 28.25% Times-interest- Earned Ratio 4.527 6.775 50%
  49. 49. RATIO 2009 2010 Activity Ratios Inventory Turnover 2.11 2.26 0.15% FA Turnover 7.133 7.616 0.483% Total Assets Turnover 1.415 1.461 0.046% Account Receivable Turnover 7.74 9.75 2.01% Average Collection Period 67.07 75.32 8.25
  50. 50. RATIO 2009 2010 % Profitability Ratios Gross Profit Margin 74.31% 76.53% 2.22% Operating Profit Margin 5.71% 10.13% 4.42% Net Profit Margin 2.98% 6.14% 3.16% Return on Total Assets (ROA) 4.29% 9.10% 4.81% Return on Stockholder’s Equity (ROE) 13.32% 26.66% 13.34% Earning per Share (EPS) 0.55 $ 1.19 $ 0.64 $ Price Earning Ratio 0.00 17.41 17.41
  51. 51. RATIO 2009 2010 Growth Ratios Sales/Revenue% - 7.42 6.44 13.86% Net Income % - 53.9 119 172.9% Earning Per Share (EPS) % - 54.17 116.36 170.53% Dividends per Share 0.28 0.28 -
  52. 52. The company recorded revenues of $7795.8 million in the financial year ended June 2010 (FY2010), an increase of 6% over FY2009. The operating profit of Estee Lauder was $789.8 million in FY2010, an increase of 89% over FY2009. The net profit was $ 478.3 million in FY2010, an increase of 100% growth over FY2009. KEY NOTES
  53. 53. The company recorded Net earning per Common Share of f $2.38 in the financial year ended June 2010 (FY2010), an it is a recorded increase of 100% over FY2009. The Total Assets of Estee Lauder was $ 5335.6 million in FY2010, an increase of 3% over FY2009. The Stock Holder’s Equity was $ 1948.4 million in FY2010, an increase of 19 % growth over FY2009.
  54. 54. ORGANIZATIONAL STRUCTURE ANALYSIS
  55. 55. Bringing the Best to Everyone Touch………
  56. 56. William Lauder Chairman of the Board Amy DiGeso Executive VP Global HR Harvey Gedeon Executive VP, Global R & D, Corporate Product Innovation and Package Development Evelyn Lauder Senior Corporate VP Fabrizio Freda CEO and President John Demsey Group President of Domestic Operations Cedric Prouv Group President of International Operations Sara Moss Executive VP and General Counsel Gregory Polcer Executive VP Global Supply Chain Aleandra Trower Executive VP Global Communications Richard Kunes Executive VP and CPO Leonard Lauder Chairman Emeritus
  57. 57. Organization structure is a business unit type structure. Detailed succession plan in place for Fabrizio Freda to take over as CEO in March of 2010. Primarily managed by the Lauder Family members. The company has manufacturing plants, R & D facilities and business offices on nearly covering every continent.  13 Manufacturing Plants – USA, UK, Canada, Belgium, Switzerland  R & D Operations – 475 Scientists  Business offices – 43 World wide
  58. 58. POINTS Indistinguishable organizational structure. Most of the power/authority in the company is vested in family members and those high ranking managers focused on family ownership. It is not clear whether the four presidents have authority over the four product lines or four geographic regions thus a questionable line of command exists. Less focus on emerging high income groups in China, India and SE Asian countries.
  59. 59. IMPROVED ORGANIZATIONAL STRUCTURE
  60. 60. William Lauder Chairman of the Board Amy DiGeso Executive VP Global HR Harvey Gedeon Executive VP, Global R & D, Corporate Product Innovation and Package Development Evelyn Lauder Senior Corporate VP Fabrizio Freda CEO and President John Demsey Group President of Domestic Operations Cedric Prouv Group President of International Operations Sara Moss Executive VP and General Counsel Gregory Polcer Executive VP Global Supply Chain Aleandra Trower Executive VP Global Communications Richard Kunes Executive VP and CFO Leonard Lauder Chairman Emeritus Executive VP Global Strategy Assistant VP American Region Assistant VP Asia/Middle East Region Assistant VP China/ SE Asia Assistant VP Europe Region
  61. 61. REASONS FOR IMPROVEMENTS  More space for strategy planning process  Delegated power will ease the regional operations and will pave the way to dive through the emerging markets  Simplifications of global marketing process  Added delegation of power to reduce authoritative structure  More opportunities to elite business minds to join hands with.
  62. 62. ANALYSIS OF MARKETING POSITION
  63. 63. COMPANY MARKET SHARE (US $ Billions) Procter & Gambel 26.3 L’Oreal 25.8 Unilever 16 Avon 7.6 Beiersdorf 7.5 Estee Lauder 7.3 Shiseido 6.9 Kao 5.9 Johnson & Johnson 5.6 Henkel 4.4
  64. 64. COMPETITIVE ANALYSIS Largely consolidated, however many small players exist. Estimated to exceed $600 Billion USD Globally. Cosmetic/Beauty sector $57 Billion USD in United States. USA Cosmetics/Beauty industry employs more than 56,000 people. L’Oréal is the largest horizontally integrated player at €23 Billion. Loosely regulated in USA. EU and Canada regulations much stricter.
  65. 65. Single greatest expense for the company. Marketing departments part of Brand Business Unit. Regional marketing groups in USA. Domestic Marketing teams report into Brand Business Unit. Regional Marketing groups service subsidiaries. All Global Marketing teams report into Brand Business Unit. In house creative teams report into Brand leadership. MARKETING STRATEGY
  66. 66. As of 2010 Estee Lauder sells its products in department stores across the world and has a chain of freestanding retail outlets. On July 2010, the company acquired Smash Box Beauty Cosmetics Inc, a brand created in Smash Box Studios in Culver City, California by brothers Dean and Davis Factor.
  67. 67. All brand business units consist of marketing, sales administration, creative, finance, accounting and product development. Other brand functions including packaging, legal, R&D, corporate communications, travel retail, quality, manufacturing and distribution are managed by corporate divisions that do not report directly into the brand business units. In this manner The Estée Lauder Companies corporate divisions function as agencies servicing their clients.
  68. 68. SUPPLY CHAIN  The Estée Lauder Companies corporate structure places all supply chain activities outside of the brand business units, and therefore all Supply Chain operations are corporate functions.  Multiple production facilities are positioned strategically around the globe and allow for final product assembly to occur on the same continent as the target market.  Major production operations for the company are in Long Island, NY, Pennsylvania, Canada, Belgium and Japan.
  69. 69.  The largest cost for products is packaging, and the package development division of the company works with a global network of suppliers, many of whom have operations in the New York/New Jersey region.  Global Package Development is a corporate division dedicated to the cost effective and quality production of packaging for all 28 brands.  The global Supply Chain faces many challenges from a plethora of regulations on product and packaging that vary significantly by country.
  70. 70. VALUE CHAIN ANALYSIS CHART
  71. 71. VALUE CHAIN ANALYSIS
  72. 72. CULTURE • All EL employees committed to the highest standard of professional and personnel conduct. All employees of the company are expected to conduct themselves at all times within the letter and spirit of the Code. MANAGEMENT • Bumble and Bumble had expanded to all stand alone Sephora doors in the U.S. Launched its first ever print and campaign for its new texture cream in North America. EL also gained share in South Africa . In Rusia EL sales –every-day remains strong rising more than 20 percent which is about double the overall Prestige beauty growth Continue to acquire more brand licensing FINANCE • EL releases its fourth quarter and fiscal year financial result in mid-August of each year. Sales of skin care products account for 41 percent or 44 billion of net sales. PRODUCTION • The company has manufacturing facilities…nearly every continent, see exhibit 2 (Page30, Para8) Estee Lauder manufacturing operations are certified by an independent third party to conform to the ISO14001 standard-safely initiatives R & D • The company expanded again by opening Clinique Laboratories, Inc. Launched multiple product lines including Grassroots Research Labs. The company has R&D operation nearly every continent. A new division called ELC Online was created to manage all online strategies and activities for all of its brands
  73. 73. VALUE OF THE FIRM ANALYSIS
  74. 74.  Estée Lauder Companies’ long term strategy is achieving higher levels of sustainable and profitable growth that will allow them to remain a leader in global prestige beauty.  They are committed to continuing to innovate in all aspects of their business. They put a greater focus on consumer insights and they integrate their brands, regions and functions to leverage scale and efficiencies. EL Committed to Growth
  75. 75. Creativity and Innovation They are focused on creating fewer, but more successful products. They are motivated to be “creativity driven and consumer inspired.” Their muse is the consumer, who is used to create beauty products that they couldn’t have imagined needing. High Touch Their High Touch personal service allows the company to create an emotional connection with the consumer and inspire more brand loyalty. They implement a customized educational approach that comes from beauty advisors and makeup artists. They have also adapted it for online use, using direct response television and self assisted formats as well. Key Initiatives
  76. 76. Local Relevance - Estée lauder strives to be locally relevant to consumers everywhere they live. They do this by creating certain products for specific markets and altering their Estee Lauder Strategic marketing depending on the region, this allows them to speak to consumers in a more culturally relevant way. Enhancing Digital Capabilities - They are immersed in the online world and continue to invest resources in everything digital. Many of their brands interact with consumers via Facebook, Twitter, and YouTube. They have also established global ecommerce sites that create powerful viral marketing campaigns.
  77. 77. STRENGTHS AND WEAKNESSES OF EL
  78. 78. Estee Lauder currently has 26 brands selling in over 130 countries. Each brand has a single global image which is promoted with consistent logos, packaging, and advertising designed to differentiate it from other brands. Estee Lauder was awarded/included in Ten Outstanding Women in Business in the U.S by business and financial editors in 1967 which contributed largely towards brand :building of the company. Global licenses and globalized operations. STRENGTHS
  79. 79.  Defined/numerous/wide channels of distribution.  Manufacturing operations match ISO 14001 standards.  Early/effective use of internet/technology in 1998 added strength to their sales.  Excellent promotional strategies: Discounts, gifts and free samples with purchases, Celebrities endorsements.  Advertisements which differentiates their products from others.
  80. 80. Innovation: First dermatologist : guided, allergy tested, fragrance : free cosmetics brand. First major prestige cosmetic firm to offer shopping via internet. First to introduce consistent brand imagery around the world. Advertisements which differentiates their products from others. Global expansion as a result of strengthening of the U.S dollar.
  81. 81. Indistinguishable organizational structure Lower sales in Fragrance product category. As a result of this, the company is struggling particularly in American region. Most of the power/authority in the company is vested in family members. It is not clear whether the four presidents have authority over the four product lines or four geographic regions thus a questionable line of command exists.
  82. 82. INTERNAL FACTOR EVALUATION (IFE) MATRIX
  83. 83. KEY INTERNAL FACTORS WEIGHT RATING WEIGHT SCORE STRENGTHS Wholly owned and operated offices in 43 countries and territories and sold in over 135 countries. 0.12 4 0.48 Test products on animals only when required by law. 0.03 4 0.12 EL markets more than 9,000 products under many brands names such as Estee Lauder, Aranis, Clinique, Prescriptive, M.A.C, Bumble and its new acquisition Smashbox. 0.10 4 0.40 Detailed succession plan in place for Fabrizio Freda to take over as CEO in March of 2010. 0.05 4 0.20
  84. 84. KEY INTERNAL FACTORS WEIGHT RATING WEIGHT SCORE STRENGTHS Acquisitions including Jo Malone, Stila Cosmetics, Gloss.com…The same year also license agreements with Sean John, Missoni, and Donald Trump. 0.10 4 0.40 Company continues to purchase interest in start up and established companies such as Bumble and Bumble Products LLC. 0.05 4 0.20 Strong increases in all regions, recent technologically-advanced innovations include Clinique,Estee Lauder. 0.15 4 0.60 Company specializes in mid level and upper end cosmetics products; markets over 9,000 products. 0.05 4 0.20
  85. 85. KEY INTERNAL FACTORS WEIGHT RATING WEIGHT SCORE WEAKNESSES In 1990, 75 nameplate department stores sold Estée Lauder; today that number is only 17. 0.10 2 0.20 Stock price has been stuck between $25 and $50 trading range since 1996. 0.05 1 0.05 Estée Lauder lacks clear mission and vision statements. 0.05 1 0.05 Confusing organizational structure; it is unclear whether group presidents have control over product lines or geographic areas. 0.05 1 0.05 Net sales of fragrance products decreased 4 percent to $1,213B; company continues to struggle in this segment. 0.05 1 0.05 Company does not offer enough brand names tailored to lower budget consumers. 0.05 1 0.05 Total 1 3.05
  86. 86. Why external assessment ?  The purpose of the External assessment is to develop a predetermined opportunities that could benefit and threats that should be avoided.  Firms should be able to respond either offensively or defensively to the factors by formulating strategies that take advantage of external opportunities or to minimize the impact of potential threats. Este’e Lauder Companies, Inc
  87. 87. Este’e Lauder Companies, Inc Key Industry Trends Main External forces 1. Economic forces 2. Social, cultural, demographic, & environment forces 3. Political, governmental, and legal forces 4. Technological forces 5. Competitive forces Changes in above forces translate into changes in consumer demand that can affect the products developed , nature of positioning and market segmentation strategies.
  88. 88. Este’e Lauder Companies, Inc Key Economical variables  Unemployment rate in the U.S. in 2010 around 9 % which leads the job insecurity  Standard & Poor’s projection an inflation adjusted growth of 2.6 % for 2011.  Depreciation of US Dollar against international currencies  Technological variables  Innovation in product development has rapidly gone up in the industry
  89. 89. Este’e Lauder Companies, Inc Key Social, cultural, geographic, demographic, & environment variables  Global women’s purchasing power is expected to increased by $5 trillion and beauty is the category those consumers most likely to spend money after food and clothing  U.S. Census Bureau predicts that by the year 2030, Americans over aged of 65 will represent 1:5 of the population  All geographic regions will impact by over aged population specially countries like China & India  Tendency of younger consumers spending money over beauty products  Demand for Organic products favorably increased
  90. 90. Este’e Lauder Companies, Inc  Political, governmental, and legal variables  Whole continent of Africa is coming online  Consumer complains and inquiries into use of animals for testing purposes which leads industry to move humane and creative testing techniques  Federal Drug Agency’s involvement on safety warnings Competitive variable  Increase producing green products in the personal care industry
  91. 91. External Factor Evaluation (EFE) Matrix Ser NoOPPORTUNITIES WEIGHT RATING WEIGHTED SCORE 1 Increase international market share more than 60 % Sales growth from acquisitions over nest three years & increasing operating mergers from 13% to 14% 0.40 4 1.60 0.04 2 0.08 2 Reinvestment of $50 million to increase market share 0.06 2 0.12 3 $42 million was added to the quarters net sales owing additional orders from Europe 0.04 2 0.08 5 Getting certified to ISO 14001 standard 0.10 3 0.30 4 First major prestige cosmetics firm to offer shopping via the internet 0.10 2 0.20 5 Research shows that by 2015, global women's purchasing power is expected to increase by $5 Trillion 0.02 1 0.02 6 Demand for natural and organic products and tendency of customers to spend on beauty after food and clothing 0.02 1 0.02 Este’e Lauder Companies, Inc
  92. 92. External Factor Evaluation (EFE) Matrix Ser No THREATS WEIGHT RATING WEIGHTED SCORE 1 Japan Tsunami will hamper company sales by half a presentation point 0.05 3 0.15 2 About 31 million was contributed by the company's long term marketing strategy adopted in the Europe, Middle East, and Africa regions. 0.03 2 0.06 3 Spending on consumer products may be down in many parts of the world 0.01 1 0.01 4 US market suffering from high unemployment 9% which leading of job insecurity among the working population 0.02 3 0.06 5 Stock market dropped more than1000 points in Aug 2011 0.02 3 0.06 6 High gas prices impact transportation cost in production and packaging 0.06 4 0.24 7 Consumer complains of using animal of testing on new products Safety warning on the products has been enforce by the local agency 0.02 3 0.06 8 Companies interest on spending some profits to the research and development of new appealing products 0.01 2 0.02 Total 1.00 3.08 Este’e Lauder Companies, Inc
  93. 93. Este’e Lauder Companies, Inc Current Environment & Industry Trends  Cosmetics and personal care industry is one of the world’s largest industries expected a growth of 70 million customers across the globe in the next 20 years.  Due to intense advertising and brand name recognition the industry has a relatively high profit margin compared to other industries.  All top competitors in the filed are diversified with many brand names and a wide range of products.  Customer service is expected with the sale of prestige cosmetics and rewarded with high level of customer loyalty.  The industry is now turned to look for innovative products with natural herbal and organic products due to customers interest in purchasing such products
  94. 94. Este’e Lauder Companies, Inc Main competitors to Estee Lauder  Procter & Gamble (P&G) 127,000 employees working in over 80 countries. Many P&G products compete directly with Estee Lauder products.  L’oreal is one of the world wide leaders of cosmetics distributes products over 130 countries having 66,619 employees and offices in 58 countries
  95. 95.  Colgate –Palmolive which marked its 200th year in 2006. Palmolive and soft soap brands Irish Spring and Protex , Speed stick and lady speed stick deodorants antiperspirants are the competitive products to Estee.  Avon products sells beauty and related products consisting of cosmetics. They are the world largest direct seller of personal products mainly the cosmetics  Revlon is one of the best known brand names in the world which excels at mass marketing. Revlon offers a variety of cosmetics and beauty products under many brand names. All of which complete with Estee Lauder’s product line. Este’e Lauder Companies, Inc
  96. 96. Este’e Lauder Companies, Inc - 10,000.00 20,000.00 30,000.00 40,000.00 50,000.00 60,000.00 70,000.00 80,000.00 90,000.00 Intensity of competition in the Industry - 2010 (IN MILLIONS US$) REVENUE
  97. 97. Competitive Profile Matrix ESTEE LAUDER L'Oreal Procter & Gamble Critical Success Factors Weight Rating Score Rating Score Rating Score Advertising 0.15 3 0.45 3 0.45 3 0.45 Product Quality 0.15 4 0.60 4 0.60 4 0.60 Price Competitiveness 0.10 3 0.30 4 0.40 4 0.40 Management 0.10 1 0.10 3 0.30 3 0.30 Financial Position 0.15 2 0.30 4 0.60 4 0.60 Customer Loyalty 0.10 2 0.20 3 0.30 4 0.40 Global expansion 0.15 3 0.45 3 0.45 4 0.60 Market share 0.10 3 0.30 4 0.40 4 0.40 Total 1.00 2.7 3.5 3.75 Este’e Lauder Companies, Inc
  98. 98. STRATEGY FORMULATION
  99. 99. A Retrospective……..  Estee Lauder began to market products directly to let customers samples the products before they bought.… Earning trust and confidence by Market Penetration.  Target High Class customers…… Dominating the industry and wining trust and confidence of reliable customers by Market Penetration.  Selling products exclusively through boutiques and department stores and selectively distributing in better stores …..Confidence and strength to exploit the market through Forward Integration.  Went on globalization 1st in 1960 London followed by Hong Kong and later expanding it to USSR in 1983… accepting risk and Market Development.
  100. 100.  Introduced R & D in 1960…..Product Development.  Acquiring more brand License(28 at present) from 1946 till 2010 and it continues….Horizontal Integration and Related Diversification.  Exploiting Inter Net( E Trading Strategy) way back in 1998 the one among the 1st to do so …Market Penetration.  Business office in nearly every continent….. Market Development.  Manufacturing facilities R&D and 31200 employees… Facilitate to Grown and Build whilst adopting to maintain an aggressive business strategy. A Retrospective……..
  101. 101. Estee Lauder Strategies were basically based on:  Integration Strategies.  Intensive Strategies.  Diversification Strategies. Aggressive policy to grow and build from the inception of the company up to date…..?
  102. 102.  Estee Lauder’s performance objective include generation of 60 percent of sales for beauty market from international market.  1 % of sales growth from acquisitions.  Increase operating margins from 13% to 14%.  Increase rate of inventory turnover.  Reduction of costs.  Reinvestment of $50 million to increase global market share.  Estee lauder reported 3rd quarter of fiscal 2011 with quarterly earnings of 71 cents per share. Estee Lauder Companies, Inc Strategy Towards Key Industry Trends
  103. 103.  Raised full year diluted earnings estimate from $3.55 to $3.65.  Net sales grew 16.0%.  Added $42 Million to the quarters net sales owing additional order from Europe.  Net sales are expected to grow 10.5%.  Skin care products sales increased by 14%.  Make up sales increased by 24%.  Hair care products increased by 14%.  America sales by 12%.  Europe ,Middle East and Africa sales surged 20%.  Asia /Pacific region rose up to 19%. Estee Lauder Companies, Inc Strategy Towards Key Industry Trends cont…
  104. 104. Estee Lauder is a globally recognized manufacturer and marketer of makeup, skin care, fragrances and hair care products. The company's wide geographical presence reduces the business risk due to diversified revenue stream and enables participation in fast growing developing markets. However, intense competition in the beauty market may adversely affect the company's market share. SWOT ANALYSIS
  105. 105. SWOT ANALYSIS 1. Large geographical footprint diversifies revenue stream. 2. Strong brand portfolio well positioned to participate in the revival of consumer Spending. 3. In-house research and development facilitates high consumer acceptance and quick market penetration. 4. Strategic modernization initiative program. 1. Positive outlook for the cosmetics market in China, India and Brazil. 2. Growing popularity of online retail channel and social networking media offers growth opportunities. 3. Retail environment in emerging economies provides strong growth potential. 4. Men's personal care products segment offers fast growing and large potential Market. 1. Highly competitive market. 2. Increase in the counterfeit products may hurt the brand image. 3. Increasing labor cost in the US and Europe OPPORTUNITIES STRENGTH THREATS SO MATCHES ST MATCHES SO1. Market development strategy to maintain presence in emerging markets. SO2. Market penetration by E Marketing Strategy to be maintain to gain competitive advantage. SO3. Well positioned R & D programmes could meet the growing market demands thus keeping in abreast with the retail environment to penetrate new markets. SO4. Modernization programme with the aim of Product development strategy thus Unrelated or Related Diversification to meet the men’ demand. ST1. Horizontal Integration using Brand portfolio and geographical footprint to diminish the competition in the emerging as well as traditional new markets . ST2. Exploit provisions in the Intellectual Property Rights (IPR) Seizure by Customs and Border Protection, (CBP) Office of International Trade, strong R&D facilities, strategic modernization initiatives could address the counterfeit products to safeguard the brand name. ST3. Market Development by expanding in to new geographical area with cheap labour.
  106. 106. 1. Limited distribution strategy increases dependency on specific channels. WEAKNESSES SO1. Forward integration by moving in to new markets, exploitation of retail market environment in emerging economics to address the issues of limited distribution in order to maintain completive advantage in the emerging markets. ST1. Planning for Forward Integration and Backward Integration for a sound distribution network is a urgent requirement to maintain the competitive advantage over many geographical regions and new markets in China, India and Brazil. 1. Positive outlook for the cosmetics market in China, India and Brazil. 2. Growing popularity of online retail channel and social networking media offers growth opportunities. 3. Retail environment in emerging economies provides strong growth potential. 4. Men's personal care products segment offers fast growing and large potential Market. 1. Highly competitive market. 2. Increase in the counterfeit products may hurt the brand image. 3.Increasing labor cost in the US and Europe. OPPORTUNITIES THREATS WT MATCHESWO MATCHES SWOT analysis cont….
  107. 107. SWOT MATRIX ANALYSIS SUGGESTED STRATEGIES SO ST  Market Development  Market Penetration  Product Development  Unrelated Diversification  Related Diversification  Horizontal Integration  Market Development WO WT  Forward Integration  Forward Integration  Backward Integration SWOT analysis recommend to adopt Integration Strategies, Intensive Strategies and Diversification Strategies facilitating Estee Lauder to Grow and Build aggressively.
  108. 108. Strong 3.0 to 4.0 Average 2.0 to 2.99 Weak 1.0 to 1.99 High 3.0 to 4.0 Medium 2.0 to 2.99 Low 1.0 to 1.99 1.0 3.0 2.03.0 4.0 2.0 1.0 EFE IFE 3.08 3.05 The IFE Total Weighted Score TheEFETotalWeightedScore GROW AND BUILD IE MATRIX
  109. 109. QUANTITATIVE STRATEGIC PLANNING MATRIX(QSPM) STRATEGIC ALTERNATIVES Key Internal Factors Weight Introduce New Products for Non Traditional Customers Continue to expand in to new geographic markets Ser No Strength AS TAS AS TAS 1. Wholly owned and operated offices in 43 countries and territories and sold in over 135 countries. 0.12 2 0.42 4 0.48 2. Test products on animals only when required by law. 0.03 - - - - 3. EL markets more than 9,000 products under many brands names such as Estee Lauder, Aranis, Clinique, Prescriptive, M.A.C, Bumble and its new acquisition Smashbox. 0.10 3 0.30 4 0.40 4. Detailed succession plan in place for Fabrizio Freda to take over as CEO in March of 2010. 0.05 -- -- -- --
  110. 110. STRATEGIC ALTERNATIVES Key Internal Factors Weight Introduce New Products for Non Traditional Customers Continue to expand in to new geographic markets Ser No Strength AS TAS AS TAS 5. Acquisitions including Jo Malone, Stila Cosmetics, Gloss.com…The same year also license agreements with Sean John, Missoni, and Donald Trump. 0.10 2 0.20 3 0.30 6. Company continues to purchase interest in start up and established companies such as Bumble and Bumble Products LLC. 0.05 4 0.20 4 0.20 7. Strong increases in all regions, recent technologically-advanced innovations include Clinique,Estee Lauder. 0.15 4 0.60 4 0.60 8. Company specializes in mid level and upper end cosmetics products; markets over 9,000 products. 0.05 2 0.10 4 0.20 Quantitative strategic planning matrix(QSPM) cont…
  111. 111. STRATEGIC ALTERNATIVES Key Internal Factors Weight Introduce New Products for Non Traditional Customers Continue to expand in to new geographic markets Ser No Weakness AS TAS AS TAS 9. In 1990, 75 nameplate department stores sold Estée Lauder; today that number is only 17. 0.10 2 0.20 1 0.10 10. Stock price has been stuck between $25 and $50 trading range since 1996. 0.05 1 0.05 1 0.05 11. Estée Lauder lacks clear mission and vision statements. 0.05 1 0.05 1 0.05 12. Confusing organizational structure; it is unclear whether group presidents have control over product lines or geographic areas. 0.05 1 0.05 1 0.05 13. Sub Total 1.0 2.17 2.43 Quantitative strategic planning matrix(QSPM) cont…
  112. 112. STRATEGIC ALTERNATIVES Key Internal Factors Weight Introduce New Products for Non Traditional Customers Continue to expand in to new geographic markets Ser No Opportunities AS TAS AS TAS 1 Increase international market share more than 60 % Sales growth from acquisitions over next three years & increasing operating mergers from 13% to 14% 0.04 4 0.16 4 0.16 2 Reinvestment of $50 million to increase market share 0.06 4 0.24 4 0.24 3 $42 million was added to the quarters net sales owing additional orders from Europe 0.04 2 0.08 2 0.08 4. Getting certified to ISO 14001 standard 0.10 2 0.20 3 0.30 5. First major prestige cosmetics firm to offer shopping via the internet 0.10 3 0.30 4 0.40 Quantitative strategic planning matrix(QSPM) cont…
  113. 113. STRATEGIC ALTERNATIVES Key Internal Factors Weight Introduce New Products for Non Traditional Customers Continue to expand in to new geographic markets Ser No Opportunities AS TAS AS TAS 6. Research shows that by 2015, global women's purchasing power is expected to increase by $5 Trillion 0.02 4 0.08 4 0.08 7. Demand for natural and organic products and tendency of customers to spend on beauty after food and clothing 0.02 3 0.06 2 0.04 Threats 8. Japan Tsunami will hamper company sales by half a presentation point 0.05 3 0.15 3 0.15 9. About 31 million was contributed by the company's long term marketing strategy adopted in the Europe, Middle East, and Africa regions. 0.03 2 0.06 3 0.09 10. Spending on consumer products may be down in many parts of the world 0.01 1 0.01 1 0.01 Quantitative strategic planning matrix(QSPM) cont…
  114. 114. STRATEGIC ALTERNATIVES Key Internal Factors Weight Introduce New Products for Non Traditional Customers Continue to expand in to new geographic markets Ser No Threats AS TAS AS TAS 11. Research shows that by 2015, global women's purchasing power is expected to increase by $5 Trillion 0.02 4 0.08 4 0.08 12. Demand for natural and organic products and tendency of customers to spend on beauty after food and clothing 0.02 3 0.06 2 0.04 13. Japan Tsunami will hamper company sales by half a presentation point 0.05 3 0.15 3 0.15 14. About 31 million was contributed by the company's long term marketing strategy adopted in the Europe, Middle East, and Africa regions. 0.03 2 0.06 3 0.09 15. Spending on consumer products may be down in many parts of the world 0.01 1 0.01 1 0.01 Quantitative strategic planning matrix(QSPM) cont…
  115. 115. STRATEGIC ALTERNATIVES Key Internal Factors Weight Introduce New Products for Non Traditional Customers Continue to expand in to new geographic markets Ser No Threats AS TAS AS TAS 16. Spending on consumer products may be down in many parts of the world 0.01 1 0.01 1 0.01 17. Sub Total 1.00 1.48 1.92 18. Grand Total 3.65 4.35 Quantitative strategic planning matrix(QSPM) cont…
  116. 116. SWOT matrix and IE matrix results, shows that Estee Lauder should Grow and Build its position. This means intensive and aggressive tactical strategies should be adopted. Quantitative strategic planning matrix(QSPM) suggest that Estee Lauder has better opportunities in Introducing New Products for Non Traditional Customers and Continue to expand in to new geographic markets. Therefore, following are the best chosen strategies for Estee Lauder as they are positioned in aggressive area: a. Integration Strategies. b. Intensive Strategies. c. Diversification Strategies. STRATEGY FORMULATION CONCLUSION
  117. 117.  Estee Lauder brand to develop a clear brand image and provide its customers with something that is unique.  Possibility for Estee Lauder would be to create a new brand image through the release of a Sub brand especially in China, India and Brazil considering and incorporating traditional beauty culture methods.  The company should take measures to stop product counterfeiting as it will harm their business as well as their brand image. Besides it may result in customer dissatisfaction leading to low customer concentration, that finally would lead to business drooping.  Estee Lauder could introduce sub brands customized for different markets, which provide the flexibility to enjoy multiple brand images without diluting each other. RECOMMENDATIONS FOR STRATEGY IMPLEMENTATIONS
  118. 118.  No doubt that THE ESTEE LAUDER has a very vast and diversified product assortment but still it has to keep in mind about the increasing competition which can provide a strong hindrance to its smooth and calm operation of business.  Market segmentation policy in the emerging new markets in China, India and Brazil considering cultural, ethnic and religious sensitivity.  The world’s aging population will multiple by 2.5 times in the next 40 year including in high growth countries such as China and India. Therefore developing products to meet the aging population will place Estee Lauder in Competitive Advantage position.  Since ESTEE LAUDER is a global name, so it must provide the same concentration on all its markets to bring in global stability in its business as a whole. Recommendations for strategy implementations cont…
  119. 119. STRATEGY IMPLEMENTATION
  120. 120. MANAGEMENT AND OTHER ISSUES RELATED TO IMPLEMENTATION The following are the Management and other issues that need to be considered prior to implementing the Strategies Formulated:  Establish Annual Objectives.  Devise Policies.  Allocate Resources.  Alter an existing organizational structure.  Restructure and Reengineer.  Revise Reward and Incentive Plans.
  121. 121.  Minimize resistance to change.  Match Managers with strategies.  Develop a strategy supportive culture.  Adapt production/operation processes.  Develop an effective human resources function.  Downsize and furlough as needed.  Link performance and pay to strategies. management and other issues related to implementation cont…
  122. 122. OTHER ISSUES The other important issues are as follows:  Current Marketing Issues.  Market Segmentation.  Product Position.  Finance/Accounting Issues.  R & D Issues.  MIS Issues.
  123. 123. In order to implement strategies the following actions are required:  Altering sales territories.  Adding New Departments.  Closing Facilities.  Hiring New Employees.  Changing the pricing strategy.  Developing Financial Budgets.  Developing New Employees Benefits.  Establishing cost control procedures.  Changing Advertising Strategies.  Building New Facilities.  Training new employees.  Transferring managers among divisions.  Building a better Management Information System.
  124. 124. LIMITATIONS The presentation by the group will cover only a few recommendations made above in respect of Estee Lauder due to time constraints. The recommendations made in respect of Emerging Markets in India, China and Brazil will be analyzed with Market Segmentation Product Positioning and Current Marketing Issues.
  125. 125. MARKET SEGMENTATION Subdividing of a market into distinct subsets of customers according to needs and buying habits. Widely used in implementing strategies.
  126. 126. MARKET SEGMENTATION Strategies such as market development, product development, market penetration, and diversification require increased sales through new markets and products. Market segmentation allows a firm to operate with limited resources because mass production, mass distribution, and mass advertising are not required. Market segmentation decisions directly affect marketing mix variables: product, place, promotion, and price.
  127. 127. MARKET SEGMENTATION  GEOGRAPHIC  DEMOGRAPHIC  PSYCHOGRAPHIC  BEHAVIOURAL
  128. 128. As per the portfolio of Estee Lauder it is capable of producing a brand in China, India and Brazil in line with the Geographic requirement of Market Segmentation. In terms of Demographic requirement to support Market Segmentation it should cater for the aging population in this region. The upper class in the region needs to be targeted. The quality and regularity of use is important in Behavioural aspect of market Segmentation.
  129. 129. PRODUCT POSITIONING Entails developing schematic representations that reflect how your products or services compare to competitors’ on dimensions most important to success in the industry.
  130. 130. Select key criteria that effectively differentiate products or services in the industry. Diagram a two-dimensional product-positioning map with specified criteria on each axis. Plot major competitors’ products or services in the resultant four-quadrant matrix. Identify areas in the positioning map where the company’s products or services could be most competitive in the given target market. Look for vacant areas (niches). Develop a marketing plan to position the company’s products or services appropriately..
  131. 131. PRODUCT POSITIONING MAP
  132. 132. An effective product positioning strategy meets two criteria: It uniquely distinguishes a company from the competition. It leads customers to expect slightly less service than a company can deliver.
  133. 133. Estee Lauder will be product B in the Product Position Map. The product of Estee Lauder will be high in price and quality and that segment or market has not be targeted by the competitors. The product to the emerging markets in China, India and Brazil will be an Anti Wrinkle product for the aging population with a touch of traditional beauty culture method incorporated.
  134. 134. CURRENT MARKETING ISSUES How to make advertisements more interactive to be more effective How to best take advantage of Facebook and Twitter conservations about the company and industry. To use exclusive dealerships or multiple channels of distribution. To use heavy, light, or no TV advertising versus online advertising. To limit (or not) the share of business done with a single customer. To be a price leader or a price follower.
  135. 135. To offer a complete or limited warranty. To reward salespeople based on straight salary, straight commission, or a combination salary/commission. Firms should provide incentives to consumers to share their thoughts, opinions, and experiences on the company website. The company website must not be all about the company—it must be all about the customer too.
  136. 136. Estee Lauder places high value in consumer communication and awareness. Systems are in place to provide customer service and open dialogue on behalf of the company and its brands. Service and individualized attention is offered via brand websites, toll free phone numbers and Global Consumer Care Centres. Estee Lauder sells products through selective distribution channels to complement the images associated with its brands.
  137. 137. Shopping via Internet. Live chats with consumers and using Twitter as an effective means to provide service to customers. Estee Lauder offers free samples with gift. EL also uses celebrities to market their products. Prestige pricing in target markets.
  138. 138. To summarize the strategy implementation of Estee Lauder taking onto consideration Market Segmentation, Product Positioning, Current Marketing and other issues relevant will be as follows. EL will target the aging population in China, India and Brazil with a Anti Wrinkle product that will cater to a age group of 38 to 45. This product will have a traditional touch in order to attract the upper middle class customers keeping in mind the brand image and quality of EL.
  139. 139. The growth rate of Estee Lauder over the last two years has improved. Hence expenses related to R& D of the new product, expenses for structural changes required in the new market, expenses for training of employees in relation to the new product, infrastructure expenses, Marketing expenses to promote the product can be initiated. EL also plans to reinvest $50 Million to increase global growth and market share. This will be possible through reduction in operating cost which is $5176.5 Million in year 2010.
  140. 140. Strategy Evaluation  The process of determining the effectiveness of a given strategy in achieving the organizational objectives and taking corrective action wherever required.  The final step of strategy management process.  strategy evaluation activities appraising internal and external factors present strategies, measuring performance Evaluation makes sure that the organizational strategy as well as it’s implementation meets the organizational objectives
  141. 141. Techniques of Strategic Evaluation 1)Gap Analysis strategic evaluation technique used to measure the gap between the organization’s current position and its desired position. 2) SWOT Analysis common strategic evaluation technique used as a part of the strategic management process. The SWOT analysis evaluates the organization’s strengths, weaknesses, opportunities and threats. 3) PEST Analysis The political, economic, social and technological factors that may impact the organization’s ability to achieve its objectives. 4) Benchmarking This often used to evaluate how close the organization has come to its final objectives, as well as how far it has left to go. 5) Balance Scorecard
  142. 142. Strategy Evaluation Framework Examining the underlying bases of strategy Comparing expected results with actual results Taking corrective actions to ensure that performance conforms to plans
  143. 143. Strategy Evaluation Assessment Matrix
  144. 144. Changers/ Activity Have Major changers Occurred in the Firm’s Internal Strategic Position ? Have Major changers Occurred in the Firm’s External Strategic Position ? Has the Firm Progressed Satisfactorily Toward Achieving its Stated Objectives ? Result 50’s The Creation of High Tough (Person to Person Contac) No No Yes Continue Strategies 60’s Go to International Market(British London) No No No Take Corrective Action 70’s Scent Galore(New Fragrances) No No yes Continue Strategies
  145. 145. Changers/ Activity Have Major changers Occurred in the Firm’s Internal Strategic Position ? Have Major changers Occurred in the Firm’s External Strategic Position ? Has the Firm Progressed Satisfactorily Toward Achieving its Stated Objectives ? Result 80’s Serious Skin Care(Night Repair cream ) No No No Take Corrective Action 90’s Designing wellness brine(Proof of Science) No No yes Continue Strategies 00’s Dreaming up the next Brand(Beauty No No No Continue Strategies
  146. 146. Strategy Evaluation Framework
  147. 147. Activity : Acquisition of Smash box Beauty Cosmetics in 2010(Great Strategic Decision) Do Significant Differences occur? No Net Earning $ 478.3 Cont Do significant difference occur? Take Corrective Action
  148. 148. No Continue till 2014 Note Here I’m taking One example to describe Strategy Evaluation Framework. Abstraction:- In 2010 Estee Lauder announced the acquisition of Smash Box Beauty Cosmetics from the Factor Brothers, great grandsons of the Legendry Max Factors
  149. 149. Strategic plan By Company Strategic Plan by Presentation Group Estee Lauder brand to develop a clear brand image and provide its customers with something that is unique. Same Same brand introduce to the China, India and Brazil create a new brand image through the release of a Sub brand especially in China, India and Brazil No Action measures to stop product counterfeiting as it will harm their business as well as their brand image Gross margin performance has a direct impact on operating profit, (Same) Cost reduction, Effectiveness, Efficiency Direct impact on Operation Profit (Same)
  150. 150.  The Estée Lauder Companies face many challenges Environmental law as it pertains to the waste stream, primarily a result of product packaging and shippers.  Exchange rates pose another challenge as foreign markets become increasing vital.  Currently 26% (2011) of all sales occur in international department stores.  Cultural views of cosmetic products and animal testing continue to have an effect on the company  Increasingly health conscious and wellness focused consumers that reject The
  151. 151. The Estée Lauder Companies can do,  Include packaging risks, instrument manufacturing, infrastructure costs, merchandise, a portion of payments to customers, license agreements and royalties based on net sales.  Company must become vertically integrated through the acquisition of new business units in holistic beauty such as yoga/wellness and products that support a lifestyle luxury furniture, boutique fashion/apparel, wine & spirits jewelry.

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