Revlon

Segmental analysis + BCG (product portfolio)

Corporate name: Revlon Inc.

industry: Cosmetics

Products: Cosmetics, skin care, fragrance and personal care

Branding: Revlon, Ultima, ColorStay, Almay, Charlie, Flex, Mitchum, Jean

Nate, and ColorSilk

Divisions: Finance, R&D, HR, Marketing, North American sales, European

sales, and Latin American sales.

geographical domain: inside USA and international

Customers: B2B (Chain Drugs Stores) and B2C (customers)

Main competitors: P&G, Loreal, Unilever, Avon, Estee Lauder, small

companies (Urban Decay), specialty stores (Bath and Body Works, Body

Shop, Sephora), retailers (Gap, Banana Republic, Victoria Secret)

Competitive advantage: high quality products at affordable prices.

Main strategies: differentiation, forward integration, market penetration,

market development and retrenchment.

Main Challenge: facing intensive competition, decreasing sales and net

income

Financial ratio analysis

1- Liquidity ratios:a- current ratio 2005 = 1.26 current ratio 2006 = 1.29 The current ratio in 2006 is going higher than the previous year, which means a high ability for the company to meet its short term obligations.

b- quick ratio 2005 = 0.79quick ratio 2006 = 0.80

The quick ratio in 2006 is going higher than the previous year, which means a high ability for the firm to pay off short-term obligations without relying on the sale of inventories. But it is lower than the industry average.

2- Assets (Activity) ratios:a- Inventory turnover 2005 = 6.04

Inventory turnover 2006 = 7.14

inventory turnover ratio in 2006 is higher than the previous year, which means how effectively the firm is managing its inventories in a good way, turn it to money and don't hold excess an unproductive asset (inventory).

b- fixed assets turnover 2005 = 2.59fixed assets turnover 2006 = 3.00

fixed turnover ratios in 2006 is higher than 2005, which means the company is uses its fixed assets effectively and in a proper way.

c- total asset turnover 2005 = 1.28total asset turnover 2006 = 1.34

total assets turnover in 2006 is higher than 2005, which means the turnover of all the firm's assets is good and it generates a sufficient volume of business given its total asset investment.

3- Debt management:

a- total debt ratio 2005 = 2.05total debt ratio 2006 = 2.32

total debt ratio in 2006 is higher than the previous year, which means increasing the percentage of fund provided to the firm from creditors compared from the stockholders. Creditors prefer low debt ratios because the lower the ratio, the greater their losses in the event of liquidation.

b- debt to equity ratio 2005 = - 1.95debt to equity ratio 2006 = - 1.76

debt to equity in 2006 is decrease than the previous year 2005, which means decreasing the percentage of fund provided to the firm from stockholders compared from the creditors and at the same time the debts and net loss are increasing which gives us a signal that the company's financial position is going worse and there is potential risk associated with using borrowed funds.

4- profitability ratios:a- return on assets (ROA) 2005 = - 0.08

return on assets (ROA) 2006 = - 0.27

return on assets in 2006 is lower than in 2005 and achieves loss, which means a low rate of return on the total assets utilized in the company and the company don't utilize its assets in an inadequate way.

b- return on equity (ROE) 2005 = 0.08return on equity (ROE) 2006 = 0.20

return on equity in 2006 is higher than in 2005 but it is still low and achieve a very low profit to equity, which means they don't gain enough profit from investing their money in the firm.

c- profit margin 2005 = - 0.06profit margin 2006 = - 0.19

profit margin in 2006 is lower than 2005 and continues to achieve loss , which means the profitability of sales is gaining loss and the firm is not effective in doing its operations at all.

External Assessment (environmental scanning) (PEST)

Economic forces

- many baby boomers have high levels of disposable income. (O)

- consumption patterns and rates have not changed for baby boomers as they have aged in addition to they are brand loyal customers. (O)

- many of the mature market (55 and older) are wealthier and more willing to spend than ever before. (O)

- gas prices are rising and decreasing the disposable income for purchasing cosmetics. (T)

- the value of the dollar has dropped which benefits cosmetics firms that going globally. (O)

Social, cultural, demographic and natural environmental forces

- 75 million Americans born between 1946 and 1964 are a significant market for the cosmetics/personal care. (O)

- increasing the number of people in the mature market (55 and older). (O)

- women in the mature age group remain active in the workforce for longer periods of time than in the past. (O)

- females ages 12-19 will number almost 20 million by 2010. (O)

- African Americans represent the largest minority segment in US, Hispanic American segment is the fastest growing and is expected to be the largest minority segment (40.5 million by 2010), while the non Hispanic white is expected to decline to 68 percent by 2010 and the Asian American growing rapidly. (O)

- the potential for sales of personal care products around the world is excellent as they are products which impacted by ethical/racial issues. (O)

- Significant opportunities for companies in Asian countries which houses 60 percent of world's population. (O)

- the youthful increasingly affluent Latin American countries also represent a growth opportunity. (O)

- cosmetics industry is not for women only but for men also. (O)

- women in china, India and middle east are rapidly growing interested in purchasing cosmetics. (O)

- older people tend to spend less on cosmetics. (T)

- consumers' concerns about product safety and the use of animal testing by cosmetic companies may impact the industry. (T)

Political, governmental and legal forces

Technological forces

Task Environment (Porter’s five forces model)

Rivalry among competing firm

- competition is intensive in the cosmetics/skin care industry. (T)

- many large competitors who are well diversified. (T)

Potential entry of new competitors

Potential development of substitute products

- competition for the African American market is increasing with brands such as fashion fair and cosmetics lines launched by iman and patti labelle. (T)

Bargaining power of suppliers

Bargaining power of consumers

- many major retailers including wal mart reduced inventory levels. (T)

- large number of women prefer purchasing these items at drugstores, supermarkets and mass volume retailers (wal mart and kmart), from door to door sellers and on the internet. (T)

Internal Assessment

Company Structure

- following a divisional structure by process (function) and by geographical areas:

- allowing for local control over work and operations. (S)

- allows new businesses and products to be added easily. (S)

- May lead to costly duplication of functions and increasing cost. (W)

- limiting sharing of ideas and resources among different departments. (W)

Corporate Culture

Internal Resources /factors

1- Marketing Factors: - high quality product at affordable price. (S)

- Revlon products sold in more than 100 countries around the world. (S)

- increasing sales outside US around 43 percent in 2007 compared in 2006. (S)

- sales and net sales inside and outside US in first 6 months in 2007 higher than first 6 months in 2006. (S)

- diversity and variety in products and brands. (S)

- revlon discontinued the new brand Vital Radiance after 9 months in 2006 from its launching and expected to lose about $110 million. (W)

- high CSR in Revlon . (S)

- primary customers for revlon products are large mass merchandisers and chain drug stores (wal mart…..). (S)

- provide its' primary customers with point of sales displays and samples. (S)

- wal mart sales were 23 percent of Revlon sales in 2006. (S)

- has a web site and sells its products through it. (S)

- new product development is always a primary objective even in bad financial times. (S)

- advertising in always one of the primary areas of promotion spending by Revlon and has its own celebrities (like Sheryl Crow) . (S)

2- Financial Factors - decreasing net sales and increasing net loss in 2006 than 2005. (W)

- issuing $158 million in stock in 2006 to raise money to reduce debt. (S)

- better use of capital assts. (S)

- long term debt in 2006 ($2.3 billion). (W)

- current assets and total assets decreased while current liabilities and total liabilities increased from 2005 to 2006. (W)

3- Manufacturing /Operation factors

- consolidation of production and distribution facilities has increased operating efficiency. (S)

- commitment to quality manufacturing standards. (S)

- good warehousing and handling in for components and raw materials as well as finished goods in main distribution center. (S)

4- HR /Management

- CEO was a financial control for Revlon before. (S)

- cost cutting by restructuring and consolidating the company's functions and

eliminating two Vice Presidents were eliminated which will save the company $34

million a year in reduce expense. (S)

5- Information / R&D - high spending and care of R&D. (S)

SWAT Analysis

EFE

N

o

.

Opportunities W

ei

g

h

t

R

a

t

e

Weighte

d Score

O

1

many baby boomers have high levels of disposable income.

0.

0

5

3 0.15

O

2

consumption patterns and rates have not changed for baby boomers as they have aged in addition to they are brand loyal customers.

0.

0

5

3 0.15

O

3

many of the mature market (55 and older) are wealthier and more willing to spend than ever before.

0.

0

5

3 0.15

O

4

the value of the dollar has dropped which benefits cosmetics firms that going globally.

0.

0

5

3 0.15

O

5

75 million Americans born between 1946 and 1964 are a significant market for the cosmetics/personal care.

0.

0

4

3 0.12

O

6

increasing the number of people in the mature market (55 and older).

0.

0

4

3 0.12

O

7

women in the mature age group remain active in the workforce for longer periods of time than in the past.

0.

0

4

3 0.12

O

8

females ages 12-19 will number almost 20 million by 2010.

0.

0

4

3 0.12

O African Americans represent the largest minority segment in US, Hispanic

0. 3 0.12

9 American segment is the fastest growing and is expected to be the largest minority segment (40.5 million by 2010), while the non Hispanic white is expected to decline to 68 percent by 2010 and the Asian American growing rapidly.

0

4

O

1

0

the potential for sales of personal care products around the world is excellent as they are products which impacted by ethical/racial issues.

0.

0

4

3 0.12

O

1

1

Significant opportunities for companies in Asian countries which houses 60 percent of world's population.

0.

0

4

4 0.16

O

1

2

the youthful increasingly affluent Latin American countries also represent a growth opportunity.

0.

0

4

4 0.16

O

1

3

cosmetics industry is not for women only but for men also.

0.

0

4

4 0.16

O

1

4

women in china, India and middle east are rapidly growing interested in purchasing cosmetics.

0.

0

4

4 0.16

Threats W

ei

g

h

R

a

t

Weighte

d Score

t e

T

1

gas prices are rising and decreasing the disposable income for purchasing cosmetics.

0.

0

6

2 0.12

T

2

older people tend to spend less on cosmetics.

0.

0

4

2 0.08

T

3

consumers' concerns about product safety and the use of animal testing by cosmetic companies may impact the industry.

0.

0

4

3 0.12

T

4

competition is intensive in the cosmetics/skin care industry.

0.

0

8

1 0.08

T

5

many large competitors who are well diversified.

0.

0

8

1 0.08

T

6

competition for the african American market is increasing with brands such as fashion fair and cosmetics lines launched by iman and patti labelle.

0.

0

2

2 0.04

T

7

many major retailers including wal mart reduced inventory levels.

0.

0

6

1 0.06

T

8

large number of women prefer purchasing these items at drugstores, supermarkets and mass volume retailers (wal mart and kmart), from door to door sellers and on the internet.

0.

0

2

1 0.02

T

o

t

a

l

1.

0

0

2.56

IFE

N

o

.

Strengths Weig

ht

R

a

t

e

Weighte

d Score

S

1

allowing for local control over work and operations.

0.03 4 0.12

S

2

allows new businesses and products to be added easily.

0.03 4 0.12

S

3

high quality product at affordable price.

0.03 4 0.12

S

4

Revlon products sold in more than 100 countries around the world.

0.03 4 0.12

S

5

increasing sales outside US around 43 percent in 2007 compared in 2006.

0.03 4 0.12

S

6

sales and net sales inside and outside US in first 6 months in 2007 higher than first 6 months in 2006.

0.03 3 0.09

S

7

high CSR in Revlon. 0.03 4 0.12

S

8

primary customers for revlon products are large mass merchandisers and chain drug stores (wal mart…..).

0.03 2 0.06

S

9

provide its' primary customers with point of sales displays and samples.

0.03 4 0.12

S

1

0

wal mart sales were 23 percent of Revlon sales in 2006.

0.03 2 0.06

S

1

1

has a web site and sells its products through it.

0.03 3 0.09

S

1

2

new product development is always a primary objective even in bad financial times.

0.03 4 0.12

S

1

3

advertising in always one of the primary areas of promotion spending by Revlon and has its own celebrities (like Sheryl Crow) .

0.03 4 0.12

S

1

4

issuing $158 million in stock in 2006 to raise money to reduce debt.

0.03 3 0.09

S

1

5

better use of capital assts. 0.03 4 0.12

S

1

6

consolidation of production and distribution facilities has increased operating efficiency.

0.03 4 0.12

S

1

7

commitment to quality manufacturing standards.

0.03 4 0.12

S

1

8

good warehousing and handling in for components and raw materials as well as finished goods in main distribution center.

0.03 4 0.12

S

1

9

CEO was a financial control for Revlon before.

0.03 1 0.03

S

2

0

cost cutting by restructuring and consolidating the company's functions and eliminating two Vice Presidents were eliminated which will save the company $34 million a year in reduce expense.

0.03 4 0.12

S high spending and care of R&D. 0.05 4 0.20

2

1

S

2

2

diversity and variety in products and brands.

0.05 4 0.20

Weaknesses Weig

ht

R

a

t

e

Weighte

d Score

W

1

Structure may limiting sharing of ideas and resources among different departments.

0.02 2 0.04

W

2

Structure may lead to costly duplication of functions and increasing cost.

0.02 2 0.04

W

3

revlon discontinued the new brand Vital Radiance after 9 months in 2006 from its launching and expected to lose about $110 million.

0.08 1 0.08

W

4

decreasing net sales and increasing net loss in 2006 than 2005.

0.06 1 0.06

W

5

long term debt in 2006 ($2.3 billion). 0.06 1 0.06

W

6

current assets and total assets decreased while current liabilities and total liabilities increased from 2005 to 2006.

0.06 1 0.06

T

o

t

a

l

1.00 2.84

TWOS Matrix

Strengths – Opportunities (SO)

Weakness – Opportunities (WO)

Strengths – Threats (ST)

Weaknesses – Threats (WT)

IFE & EFE & IE matrix

EFE_IFE_SPACE_IE_Calculations.xlsx

IE Matrix

EFE = 2.56

IFE = 2.84

IE = quadrant No. 5 (hold and maintain)

Recommendations

Since IE Matrix matching lies in quadrant number 5, that means Revlon should hold and maintain by continuing on following intensive strategies: product development, market development and market penetration for the big opportunities inside US and outside US especially in Middle East, Asia, Latin America.

should reach to customers with medium income level especially in Middle East, Asia and Latin America who can't afford to buy this substantial product with many substitutes by developing cheap products (cost leadership) and at the same time developing some differentiated product that could compete well with the other competitors who are well diversified.

it should continue and increase its depending on advertising and promotion and using celebrities like other large competitors. Should increase it distribution especially in the well known retailers (Wal Mart)

Revlon could also continue in penetrating the existing market internally and externally in order to be able to compete with the existing and potential rivals and to be able to increase its market share especially the industry growth rate is increasing.

Marketing Plan

1- Marketing Goals & Objectives

To increase sales locally and internationally to build large customer base by providing well differentiated brands that meets customer satisfaction.

By:• Establish offers and promotions tailored to meet the needs of different customer tastes.• Development of new cosmetics products cosmetics, skin care, fragrance and personal care.• Constant expansion and enhancement of network quality and coverage.• Committed to the highest level of customer satisfaction by meeting customers’ needs.• Offering a great customer service experience.

2- Marketing Strategy

Following to the above analysis and SWOT, we will be following two strategies to fulfill the Marketing objectives as follows:

1. Product development strategy for existing Market (domestic and global) Business aims to introduce new products into existing markets for high healthy

personal care and cosmetics for women and men.

2. Market development for international Markets (Middle East, Asia and Latin America) To sell its existing products into new markets. To develop new products that suits the taste and ethnic preferences in the new

areas. Business seeks many possible ways of approaching this strategy, including:

o New geographical markets; for example exporting the product to the new promising countries.

o New product dimensions or packaging: For example: New distribution channels (physical and online). Different pricing policies to attract different customers and create

new different market segments.

3- Market Segmentation

We will tend to use geographic, demographic psychographic as well as behavioral segmentation.

Geographic SegmentationUSA, North America, Australia European Countries, Middle East, Asia, Latin America

Demographic SegmentationWomen in work force, young girls, and men, mid and high income level, Asian, Arab, and Hispanic American.

Psychographic Segmentation

Mid and high social class whose life style is luxurious and their personality toward loving beauty and personal care.

Behavioral SegmentationOccasions: daily, at home, at work, when outingBenefits sought: skin and personal care, beautyUser status: singles and marriedUsage rate is high and continuous from the youth till getting olderLoyal customers

So Segments to be working on will be:

Men, women, youth, singles, married, house wives, working women

Market Targeting

We will proceed with Mass and segment marketing along with undifferentiated markets for giant retailer stores, mass drug stores

Differentiation and Positioning

Have unforgettable memories with Revlon cosmetics and a good experience with personal care.

Dimensions of product differentiation:

Form: develop new shapes and sizes that are portable with different categories as small, medium, large

Dressings: cosmetics with different tastes, colors, and smells as per customer requests and don't stick with the skin.

Value: size related to price (more value for the same price) Image: beauty and care

4- The Marketing Mix

• Product: "Chantian" is a highly effective skin care lotion product with healthy ingredients and has no side effect can be presented with different packages.

• Price: range between just $2 and $10 for different sizes.

• Promotion: giving one small package for free on every package of our shampoo, giving samples and testers in the malls and drug stores, distributing flyers and pamphlets with the newspapers, giving coupons and free tickets to two persons to the resort in the summer.

• Place (distribution channels): our owned stores, big retailers, shopping malls, sales representatives, mass drug stores. Also we can distribute online through web sites.

5- Marketing Implementation

Specific marketing activities will be undertaken, moving on with direct marketing campaign in giant shopping malls with full width testers and mass personal care competition.

These activities be performed, while walk through, events sponsoring These activities be performed within weekends, summer holidays, winter time,

ceremonies, any special gathering Marketing teams responsible of each geographic area to assure the delivery of the

message Monitoring will be through questionnaires and one to one interviews

6- Marketing Budget

7- Marketing Evaluation & Control

Measurements need to be put into place to determine whether the investment yielded the intended results.

Typical measurements might consider:

Did the marketing program generate the number of sales leads? Were the numbers of sales leads sufficient to create proposals which led to new

business? Did the advertisement generate more visits to the website? Did the new product generate higher levels of customer satisfaction?