Vous êtes sur la page 1sur 13

Revlon Inc.

2011
Forest David

A.

Case Abstract
Revlon is a comprehensive strategic management case that includes the companys year -end 2010 financial statements, organizational chart, competitor information and more. The case time setting is the year 2011. Sufficient internal and external data are provided to enable students to evaluate current strategies and recommend a three-year strategic plan for the company. Headquartered in New York, New York, Revlons common stock is publicly traded under the ticker symbol REV. Revlon is a global color cosmetics, hair color, beauty tools, fragrances, skincare, anti-perspirant deodorants and beauty care products company that produces and markets Almay and Revlon brand makeup and beauty tools, as well as Revlon ColorSilk hair color, Mitchum antiperspirants and deodorants, Charlie and Jean Nat fragrances, and Ultima II and Gatineau skincare products. Revlon beauty products are distributed in more than 100 countries, although the US is its largest market, generating about 55% of sales. Revlon products can be found in most mass merchandisers and drugstores such as CVS, Target, Shoppers Drug Mart, A.S. Watson, and Boots. Wal-Mart alone accounts for about 22 percent of Revlons sales. Revlon vision is Glamour, Excitement and Innovation through high-quality products at affordable prices. Revlon websites featuring current product and promotional information include www.revlon.com, www.almay.com and www.mitchum.com. Corporate and investor relations information about Revlon can be accessed at www.revloninc.com.

B.

Vision Statement (proposed)


To become the number one skin care and fragrance company in the world.

C.

Mission Statement (proposed)


Revlon Inc. mission is to emerge as leader in cosmetic and personal care (2) throughout the world (3). Revlon takes pride using current technology (4) in manufacturing e-co friendly (8) top skin care products (7) and strives to please young and older women (1). Revlon will provide career opportunities (9) for professional growth and stimulate their workers to achieve the highest returns for their shareholders (5). At Revlon, we believe good ethics is good business (6) and strive to serve the communities in which we operate. 1. 2. 3. 4. 5. 6. 7. Customers Products or services Markets Technology Concern for survival, growth, and profitability Philosophy Self-concept

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall.

8. 9.

Concern for public image Concern for employees

D.

External Audit
Opportunities 1. 2. Wealthy consumers were not as affected by the economic downturn. The beauty and cosmetics industry is expected to increase globally by 8.5 percent in 2014 according to recent research from Euro Monitor International. 3. Diversification of the distribution channels. 4. There is an endless possibility to `celebrities endorsing fragrances, these products are successful because many consumers are persuaded by fame of the celebrity. 5. Brazil provides a strategic opportunity for the brand to expand in the third-largest beauty market in the world. 6. Men are increasingly concerned with their appearance. 7. Increase in online purchasing, average monthly visits in the U.S. to beauty-related websites topped 60 million and grew 94 percent over past three years. 8. Consumers are interested in products that are made with all natural products. 9. Research shows that by 2015, global womens purchasing power is expected to increase by $5 trillion and beauty is the category these consumers are most likely to spend money. 10. Customers are increasingly shopping with green companies. Threats 1. 2. 3. 4. 5. 6. 7. 8. Intense competition in cosmetics has increased and market initiators with quality providers. New entrants, even though the market has considerably mature in the sense that it has captured customer loyalty, but there is always room for improvement in this field. Premium cosmetics are a prime target for counterfeiters. 9%, according to the Global Congress on combating counterfeiting, of all the world trade comprises counterfeit goods. Regulations are increasing due to the voicing of different groups about harmful chemical ingredients in cosmetic products. External challenges beyond companies control. (i.e. different weather types and natural disasters). Recession is causing people to spend less on makeup products. Discounting premium cosmetics can damage the products image. Avon increased advertising in the quarter to $97 million, up 19% from the prior year quarter. The company increased advertising mainly in Latin America.

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall.

Competitive Profile Matrix


Estee Lauder Critical Success Factors Advertising Product Quality E-commerce Consumer Loyalty Price Competitive Global Expansion Financial Position Operating Locations Management Production Capacity Technological Advances Sales Distribution Totals Weight 0.10 0.07 0.10 0.08 0.02 0.12 0.10 0.09 0.06 0.08 0.08 0.10 1.00 Rating 4 4 4 3 2 4 4 3 3 4 4 3 Score 0.40 0.28 0.40 0.24 0.04 0.48 0.40 0.27 0.18 0.32 0.32 0.30 3.63 Revlon Rating 3 2 2 2 3 3 3 2 4 3 2 4 Score 0.30 0.14 0.20 0.16 0.06 0.36 0.30 0.18 0.24 0.24 0.16 0.40 2.74 Avon Rating 2 3 3 4 4 2 1 4 2 2 3 2 Score 0.20 0.21 0.30 0.32 0.08 0.24 0.10 0.36 0.12 0.16 0.24 0.20 2.53

EFE Matrix
Weight Rating Weighted Score Opportunities Wealthy consumers were not as affected by the economic 0.06 3 0.18 downturn. The beauty and cosmetics industry is expected to increase globally by 8.5 percent in 2014 according to recent research from 0.10 3 0.30 Euro Monitor International. Diversification of the distribution channels. 0.04 3 0.12 There is an endless possibility to `celebrities endorsing fragrances, these products are successful because many 0.05 3 0.15 consumers are persuaded by fame of the celebrity. Brazil provides a strategic opportunity for the brand to expand in 0.06 4 0.24 the third-largest beauty market in the world. Men are increasingly concerned with their appearance. 0.06 3 0.18 Increase in online purchasing, average monthly visits in the U.S. to beauty-related websites topped 60 million and grew 94 percent 0.06 2 0.12 over past three years. Consumers are interested in products that are made with all 0.05 2 0.10 natural products. Research shows that by 2015, global womens purchasing power is expected to increase by $5 trillion and beauty is the category 0.05 3 0.15 these consumers are most likely to spend money. Customers are increasingly shopping with green companies. 0.04 2 0.08

1. 2.

3. 4.

5. 6. 7.

8. 9.

10.

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall.

1. 2.

3.

4.

Weight Rating Weighted Score Threats Intense competition in cosmetics has increased and market 0.09 2 0.18 initiators with quality providers. New entrants, even though the market has considerably mature in the sense that it has captured customer loyalty, but there is 0.09 2 0.18 always room for improvement in this field. Premium cosmetics are a prime target for counterfeiters. 9%, according to the Global Congress on combating counterfeiting, 0.09 2 0.18 of all the world trade comprises counterfeit goods. Regulations are increasing due to the voicing of different groups 0.02 3 0.06 about harmful chemical ingredients in cosmetic products. 0.01 0.06 0.04 0.03 1.00 4 4 3 3 0.04 0.24 0.12 0.09 2.71

5. External challenges beyond companies control. (i.e. different weather types and natural disasters). 6. Recession is causing people to spend less on makeup products. 7. Discounting premium cosmetics can damage the products image. 8. Avon increased advertising in the quarter to $97 million, up 19% from the prior year quarter. The company increased advertising mainly in Latin America. TOTALS

E.

Internal Audit
Strengths 1. Revlon manufacturers cosmetics, hair color, skin care, fragrances, deodorants and other beauty products. 2. Products are sold in more than 100 countries around the world with sales outside the US accounting for 55% of all revenue. 3. Top brands include: Mitchum, Gatineau, ColorSilk, ColorStay, and Ultima II. 4. Sales in 2nd quarter of 2011 were $351 million for an increase of 4% versus second quarter 2010. 5. Revlon supports womens health programs and many other community efforts investing over $65 million in medical research programs in 2010. 6. Under the direction of new CEO Alan Ennis 400 jobs were eliminated and a restricting of the organizational structure saved the company $30 million in 2009. 7. Revlon spent $24 million on R&D in 2010 employing 140 people on these tasks. 8. Wal-Mart accounts for 22 percent of Revlon sales in 2010. 9. Products can be found in Wal-Mart, Kmart, Target, Walgreens, and CVS. 10. Employee spokespersons such as Halle Berry, Jessica Alba and Jessica Biel. Weaknesses 1. 2. 3. 4. 5. 6. Inventory turnover of 3.5 versus the industry average of 4.9. Global market share declined from 4% in 2009 to 3% in 2010. Mission statement is not well developed. $1.2 billion in long term debt on year end 2010 balance sheet. Mitchums market share decreased by 9.1% in the anti -perspirant deodorants category. Many of Revlons top brands in the US are not marketed outside the US.

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall.

Financial Ratio Analysis Growth Rate Percent Sales (Qtr vs year ago qtr) Net Income (YTD vs YTD) Net Income (Qtr vs year ago qtr) Sales (5-Year Annual Avg.) Net Income (5-Year Annual Avg.) Dividends (5-Year Annual Avg.) Profit Margin Percent Gross Margin Pre-Tax Margin Net Profit Margin 5Yr Gross Margin (5-Year Avg.) Liquidity Ratios Debt/Equity Ratio Current Ratio Quick Ratio Profitability Ratios Return On Equity Return On Assets Return On Capital Return On Equity (5-Year Avg.) Return On Assets (5-Year Avg.) Return On Capital (5-Year Avg.) Efficiency Ratios Income/Employee Revenue/Employee Receivable Turnover Inventory Turnover Net Worth Analysis (in millions)
Stockholders Equity Net Income x 5 (Share Price/EPS) x Net Income Number of Shares Outstanding x Share Price Method Average $ (696) $ 1,635 $ 795 $ 846 $ 645

Revlon 5.70 NA -99.20 -0.16 NA NA

Industry 10.40 NA 4.00 5.47 7.90 10.67

S&P 500 14.50 NA 47.20 8.31 8.76 5.70

64.9 6.4 22.5 63.0

53.3 16.3 12.4 53.7

39.8 18.2 13.2 39.8

NA 1.5 1.0

0.80 1.0 0.7

1.00 1.3 0.9

NA 33.3 50.6 NA 2.6 4.3

32.6 11.1 15.4 32.2 10.0 13.9

26.0 8.9 11.8 23.8 8.0 10.8

63,796 283,837 7.8 3.5

70,194 537,057 12.5 4.9

126,905 1 Mil 15.4 12.5

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall.

IFE Matrix
Weight Rating Weighted Score Strengths 1. Revlon manufacturers cosmetics, hair color, skin care, 0.08 4 0.32 fragrances, deodorants and other beauty products. 2. Products are sold in more than 100 countries around the world 0.08 4 0.32 with sales outside the US accounting for 55% of all revenue. 3. Top brands include: Mitchum, Gatineau, ColorSilk, ColorStay, 0.08 4 0.32 and Ultima II. 4. Sales in 2nd quarter of 2011 were $351 million for an increase of 0.05 3 0.15 4% versus second quarter 2010. 5. Revlon supports womens health programs and many other community efforts investing over $65 million in medical research 0.05 3 0.15 programs in 2010. 6. Under the direction of new CEO Alan Ennis 400 jobs were eliminated and a restricting of the organizational structure saved 0.05 3 0.15 the company $30 million in 2009. 7. Revlon spent $24 million on R&D in 2010 employing 140 people 0.06 3 0.18 on these tasks. 8. Wal-Mart accounts for 22 percent of Revlon sales in 2010. 0.09 4 0.36 9. Products can be found in Wal-Mart, Kmart, Target, Walgreens, 0.09 4 0.36 and CVS. 10. Employee spokespersons such as Halle Berry, Jessica Alba and 0.06 3 0.18 Jessica Biel.
Weight Rating Weighted Score Weaknesses Inventory turnover of 3.5 versus the industry average of 4.9. 0.05 2 0.10 Global market share declined from 4% in 2009 to 3% in 2010. 0.06 1 0.06 Mission statement is not well developed. 0.03 1 0.03 $1.2 billion in long term debt on year end 2010 balance sheet. 0.06 1 0.06 Mitchums market share decreased by 9.1% in the anti-perspirant 0.05 1 0.05 deodorants category. 6. Many of Revlons top brands in the US are not marketed outside 0.06 1 0.06 the US. 1. 2. 3. 4. 5. TOTALS 1.00 2.85

F.

SWOT
SO Strategies 1. 2. Hire 2 more celebrity spokespersons in 2012 and 2013 (S4, O10). Increase R&D by $100M on developing a product line for men (S7, O6).

WO Strategies 1. 2. Invest in business analytics to better predict product demand (W1, O7, O9). Increase marketing and presence in Brazil by $200M (W6, O5).

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall.

ST Strategies 1. 2. Increase advertising by $100M in Latin America (S2, S3, T8). Increase shelf space in Wal-Mart for Revlon products by 20% (S8, T6).

WT Strategies 1. Redevelop vision and mission statements. (W3, T1, T6).

G.

SPACE Matrix
FP 7 6 5 4 3 2 1

Conservative

Aggressive

CP

-7

-6

-5

-4

-3

-2

-1 -1 -2 -3 -4 -5 -6 -7

IP

Defensive

SP

Competitive

Internal Analysis: Financial Position (FP) Gross Margin Current Ratio ROA Income/Employee Net Profit Margin Financial Position (FP) Average

6 6 7 4 6 5.8

External Analysis: Stability Position (SP) Rate of Inflation Technological Changes Price Elasticity of Demand Competitive Pressure Barriers to Entry into Market Stability Position (SP) Average

-2 -2 -2 -6 -3 -3.0

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall.

Internal Analysis: Competitive Position (CP) Market Share Product Quality Customer Loyalty Inventory Turnover Control over Suppliers and Distributors Competitive Position (CP) Average

-4 -4 -4 -5 -4 -4.2

External Analysis: Industry Position (IP) Growth Potential Financial Stability Ease of Entry into Market Resource Utilization Profit Potential Industry Position (IP) Average

5 3 4 4 7 4.6

H.

Grand Strategy Matrix


Rapid Market Growth Quadrant II Quadrant I

Revlon

Weak Competitive Position

Strong Competitive Position

Quadrant III Slow Market Growth

Quadrant IV

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall.

I.

The Internal-External (IE) Matrix


The Total IFE Weighted Scores
Strong 4.0 to 3.0 4.0 I Average 2.99 to 2.0 II Weak 1.99 to 1.0 III

High

3.0

IV

VI

The EFE Total Medium Weighted Scores

Revlon

2.0

VII

VIII

IX

Low

1.0

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall.

J.

QSPM
Increase R&D Increase Advertising
AS 0 3 0 4 4 3 3 2 3 0
AS 2 3

Weight Opportunities 1. Wealthy consumers were not as affected by the economic 0.06 downturn. 2. The beauty and cosmetics industry is expected to increase globally by 8.5 percent in 2014 according to recent research from 0.10 Euro Monitor International. 3. Diversification of the distribution channels. 0.04 4. There is an endless possibility to `celebrities endorsing fragrances, these products are successful because many 0.05 consumers are persuaded by fame of the celebrity. 5. Brazil provides a strategic opportunity for the brand to expand in 0.06 the third-largest beauty market in the world. 6. Men are increasingly concerned with their appearance. 0.06 7. Increase in online purchasing, average monthly visits in the U.S. to beauty-related websites topped 60 million and grew 94 percent 0.06 over past three years. 8. Consumers are interested in products that are made with all 0.05 natural products. 9. Research shows that by 2015, global womens purchasing power is expected to increase by $5 trillion and beauty is the category 0.05 these consumers are most likely to spend money. 10. Customers are increasingly shopping with green companies. 0.04
Weight Threats Intense competition in cosmetics has increased and market 0.09 initiators with quality providers. New entrants, even though the market has considerably mature in the sense that it has captured customer loyalty, but there is 0.09 always room for improvement in this field. Premium cosmetics are a prime target for counterfeiters. 9%, according to the Global Congress on combating counterfeiting, 0.09 of all the world trade comprises counterfeit goods. Regulations are increasing due to the voicing of different groups 0.02 about harmful chemical ingredients in cosmetic products. 0.01 0.06 0.04 0.03

AS 0 2 0 2 2 4 2 4 1 0
AS 3 2

TAS 0.00 0.20 0.00 0.10 0.12 0.24 0.12 0.20 0.05 0.00
TAS 0.27 0.18

TAS 0.00 0.30 0.00 0.20 0.24 0.18 0.18 0.10 0.15 0.00
TAS 0.18 0.27

1. 2.

3.

4 4 0 0 0 2

0.36 0.08 0.00 0.00 0.00 0.06

2 1 0 0 0 3

0.18 0.02 0.00 0.00 0.00 0.09

4.

5. External challenges beyond companies control. (i.e. different weather types and natural disasters). 6. Recession is causing people to spend less on makeup products. 7. Discounting premium cosmetics can damage the products image. 8. Avon increased advertising in the quarter to $97 million, up 19% from the prior year quarter. The company increased advertising mainly in Latin America.

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall.

Increase R&D
Weight Strengths 1. Revlon manufacturers cosmetics, hair color, skin care, 0.08 fragrances, deodorants and other beauty products. 2. Products are sold in more than 100 countries around the world 0.08 with sales outside the US accounting for 55% of all revenue. 3. Top brands include: Mitchum, Gatineau, ColorSilk, ColorStay, 0.08 and Ultima II. 4. Sales in 2nd quarter of 2011 were $351 million for an increase of 0.05 4% versus second quarter 2010. 5. Revlon supports womens health programs and many other community efforts investing over $65 million in medical research 0.05 programs in 2010. 6. Under the direction of new CEO Alan Ennis 400 jobs were eliminated and a restricting of the organizational structure saved 0.05 the company $30 million in 2009. 7. Revlon spent $24 million on R&D in 2010 employing 140 people 0.06 on these tasks. 8. Wal-Mart accounts for 22 percent of Revlon sales in 2010. 0.09 9. Products can be found in Wal-Mart, Kmart, Target, Walgreens, 0.09 and CVS. 10. Employee spokespersons such as Halle Berry, Jessica Alba and 0.06 Jessica Biel.
Weight Weaknesses Inventory turnover of 3.5 versus the industry average of 4.9. 0.05 Global market share declined from 4% in 2009 to 3% in 2010. 0.06 Mission statement is not well developed. 0.03 $1.2 billion in long term debt on year end 2010 balance sheet. 0.06 Mitchums market share decreased by 9.1% in the anti-perspirant 0.05 deodorants category. Many of Revlons top brands in the US are not marketed outside 0.06 the US.

Increase Advertising
AS 2 3 3 3 0 TAS 0.16 0.24 0.24 0.15 0.00

AS 3 1 1 2 0

TAS 0.24 0.08 0.08 0.10 0.00

0 4 0 0 1
AS 0 1 0 0 1 1

0.00 0.24 0.00 0.00 0.06


TAS 0.00 0.06 0.00 0.00 0.05 0.06

0 1 0 0 4
AS 0 3 0 0 3 4

0.00 0.06 0.00 0.00 0.24


TAS 0.00 0.18 0.00 0.00 0.15 0.24

1. 2. 3. 4. 5. 6.

TOTALS

2.95

3.75

K.

Recommendations
1. 2. 3. Hire 2 more celebrity spokespersons in 2012 and 2013 for $20M Increase R&D by $100M on developing a product line for men. Expand advertising in Latin America by $100M.

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall.

L.

EPS/EBIT Analysis (in millions)


Amount Needed: $220M Stock Price: $15.45 Shares Outstanding: 58 Interest Rate: 5% Tax Rate: 30%
Common Stock Financing Recession Normal Boom $100 $200 $300 0 0 0 100 200 300 30 60 90 70 140 210 72 72 72 0.97 1.94 2.91 Debt Financing Normal $200 11 189 57 132 58 2.28

EBIT Interest EBT Taxes EAT # Shares EPS

Recession $100 11 89 27 62 58 1.07

Boom $300 11 289 87 202 58 3.49

EBIT Interest EBT Taxes EAT # Shares EPS

20 Percent Stock Recession Normal $100 $200 9 9 91 191 27 57 64 134 61 61 1.05 2.20

Boom $300 9 291 87 204 61 3.35

80 Percent Stock Recession Normal $100 $200 2 2 98 198 29 59 68 138 69 69 0.99 2.00

Boom $300 2 298 89 208 69 3.00

M.

Epilogue
For Q3 of 2011, Revlons income fell 99 percent, mainly because of an income tax expense but the companys revenue rose during the period. Net income fell to $0.1 million in Q3 that ended Sept. 30, 2011, compared with net income of $12.5 million in the same quarter last year. Revlon had a $22.1 million income tax expense in Q3 of 2011 compared with a $0.6 million benefit a year ago. However, Revlons revenue rose 5.7 percent to $337.2 million from $319 million last year. Revlons sales of makeup, hair color and Sinful Colors, a nail polish company it acquired in March 2011, helped results. Also in Q3 2011, Revlons U.S. revenue rose 10.8 percent to $184.7 million. The increase was primarily driven by the inclusion of the net sales of Sinful Colors and higher net sales of Revlon color cosmetics and Revlon ColorSilk hair color. In Asia Pacific, Revlons sales in Q3 of 2011 were $58.0 million, an increase of $3.5 million, or 6.4 percent, compared to $54.5 million in the same period last year. But in that Q3, sales of Revlon color cosmetics in Japan and Australia, partially offset by higher net sales of Revlon color cosmetics in China. Revlons sales for the first nine months of 2011 increased 7.3 percent to $1,021.6 million compared to sales of $952.2 million in the first nine months of 2010. In the United States for the first nine months of 2011, sales increased 7.1 percent to $565.8 million in the first nine months of 2011, compared to net sales of $528.1 million in the first nine months of 2010. In Asia P acific, the companys sales in the first nine

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall.

months of 2011 were $169.6 million, an increase of $20.5 million, or 13.7 percent, compared to $149.1 million in the same period last year. In Europe, Middle East and Africa, Revlons sales in the first nine months of 2011 were $152.8 million, an increase of $9.1 million, or 6.3%, compared to $143.7 million in the same period last year. In Latin America, Revlons sales in the first nine months of 2011 were $78.9 million, an increase of $0.9 million, or 1.2 percent, compared to $78.0 million in the same period last year. Throughout Canada, Revlons sales in the first nine months of 2011 were $54.5 million, an increase of $1.2 million, or 2.3 percent.

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall.