The Challenges For Cosmetics Industry Marketing Essay

Cosmetic industry has gained important command in the global market since the last few decades. The industry has become quite lucrative since then. One of the world-renowned companies in the industry is Revlon. It is among the biggest companies of the industry all across the world, to produce, market and sell the products, which range from personal caring products to fragrance products. It sells products for caring skin and various kinds of cosmetics. The head office of the industry is located at New York giving employment to 5600 people worldwide (David, 2008).

The company leads in the market due to its mass sales for variety of products such as personal care products, fragrance, skin care products, and other cosmetics too. Their strategic approach is to produce the glamour for people at quite cheaper rates using innovative ideas full of excitement (Datamonitor, 2008). In order to attain it, the team operates with its creative approach, along with the sales and marketing teams. It is the brand name earned by Revlon with their quality of products, and the experience. The quality of its products, the recognition all across the world, and the strong brand value across the world, helps the company sell its products to 100 counties all around (David, 2008).

The company depends a lot on the market of US for gaining revenues. Two fifth of the retail colour cosmetic sales in US is done by Revlon (ACNielsen, 2008). In the year 2007, the sales of Revlon in US were 57% of the total; however, 23% of the total was contributed equally by UK, Brazil, Australia, Canada and South Africa (Datamonitor, 2008). In the year 2008, US economy had suffered slowdown. This affected the consumption pattern of the US people. The high degree of dependency of Revlon on US market further made the situation tough for the business of Revlon.

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Cosmetic Industry

Introduction

Cosmetic industry is noted to emerge at the rate of 5.5% for the year 2006, especially due to developing markets (Suggitt, 2007). The willingness to look beautiful is for all. Women regularly purchase cosmetic products for them. It is not only for women, but men too are keen to use these cosmetic products. However, men do not purchase some of the cosmetic products due to the reasons such as packaging used as feminine, or the smell is not adequate for men (Solomon et al., 1998). In fact, men want to look good to be self confident in them (Christopher, 2006). Self-image is the image one has about himself/ herself based on the past experience (Rogers et al., 1977).

Niche market represents as just the small segment, from which one or two companies try to grab the business (Kotler & Dubois, 2004). This market is separate for both men and women, without any competition between the two (Blanchin et al., 2009).

Challenges for Cosmetics Industry

More options for the customer

Stress on the quality

Price plays important role in mass market

Need for cost effectiveness

Innovative packaging

Revlon

Company overview

Revlon is among the companies of the world in a leading position. It is involved in selling products related to cosmetic industry, with its operations in more than 100 countries all around the world (David, 2008). It is the leader in its industry.

History of Revlon

Revlon came into existence in the year 1932 by the combined efforts of the two brothers, Charles Revson and Joseph, and Charles Lachman who was a chemist (Revlon Website). The company then introduced a product into the market, of nail enamel. Thereon, the 3 partners worked towards making the process of manufacturing of unique nature. Innovatively, the company bought Revlon nail enamels of different shades for women. With successful operations all around the world, it came into the list of multi-million dollars of organization in just the 6 years period. This success laid on the successful sales of their nail enamel across drugstores and the department stores (Revlon Website, 2010). The company has always been aggressive in its operations. In the year 1987, the company offered to acquire Gillette (New York Magazine, 1987).

The following describes about the present scenario of Revlon (Datamonitor, 2007):-

Revlon is continuously working towards the introduction of new products in the market

Had debt of around $2billion in the year ending 2008

Merger took place between Revlon and Pacific World Cooperation in the year 2002.

However, the cosmetic industry is affected by the aging of people and the changing ratio of ethnics and racial.

Scope for Revlon

It is seen that the time is gone when the women were only interested towards cosmetic products. Thus, today men are also involved in these products for personal care (Christopher, 2006).

There is also the good scope of extension to the market segment aged between 12 and 19 (Christopher, 2006).

The baby boomers will make noticeable quantity of people thus raising the opportunity to grab the segment.

These baby boomers are expected to be loyal towards their brand and with good income to dispose.

These baby boomers would be expected to behave with similar consumption habits.

The report here uses different analysis methods such as SWOT analysis, Porter Five Forces Model Analysis, PEST Analysis, and BCG Analysis as these are considered important for analysis by Fred (2002).

Competitors Analysis

As we have seen many competitors of Revlon such as Procter & gamble, Nivea, Clarins (Blanchin et al., 2009). Let’s discuss some of them:

P&G

Source (P&G Website)

P & G offers products ranging from personal care products, to skin and hair care.

The brands such as Pantene, Vidal sasson have grabbed a lot of market share.

Clairol, Noxzema and Olay are the products quite famous in skin care products list.

Famous fragrances such as Helmut Lang, Old Spice, Hugo Boss etc are threat to Revlon.

L’Oreal

Source (L’Oreal Website)

It is the largest company in the cosmetic industry all across the world

Follows aggressive approach for an example Maybe Line was their major competitor. L’Oreal acquired it in 1996.

Strong hold over US market, on which Revlon depends.

Furthermore, Revlon’s competitors in the following areas are

Hair Care: Redken and L’Oreal

Cosmetics: Helena Rubenstein, Biotherm, L’Oreal

Fragrance: Ralph Lauren Perfume, Giorgio Armani

Internal factor Analysis

Organizational management

Source (Datamonitor, 2008)

In the year 1990, Mr. Levin, the Chairperson of Revlon recruited a talented team of managers with the aim to become a leader in the cosmetic industry.

Revlon opened its training centres to train the staff and make them aware with the strategies and plans.

In the year 1994, company started awarding leading performers with ‘Charlie Award’

The organization spends around $25m on R&D activities

Organization gives value to its staff at personal level

Restructuring of the company

In the year 1998, Revlon restructured by layoff for 720 staff members. The same did happen for the next 2 years consecutively. The company had to close its 3 factories too in the year 2000. Then the company merged the operations of sales team for both its beauty care and cosmetic products.

COSMETICS INDUSTRY- SWOT ANALYSIS

Strength

The cosmetic industry has grown since the last few decades. The per capita consumption has increased for it.

The price of the product must be correlated to the value that consumer perceives (Kotler & Dubois., 2004).

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Weaknesses

The consumption pattern depends on per capita income of individuals

The demand-price ratio acts as setback for the industry

Companies are forced to lower their prices for products, on the other hand the increased competition demands for rising budget on promotions for their products.

Opportunities

It can be a good idea for the industry to focus on market in a segment wise manner

Differentiation strategy can prove fruitful

Still huge market potential of men to capture

Senior citizen population can be targeted too.

Men are still a good segment unexplored yet by Revlon, as these men want to look and feel good (Simon et al, 2003).

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Threats

Great competition within the industry

More then 700 growing companies in the cosmetic industry raising competition

Market leaders act as threat to others in the industry

High degree of competition within the industry

Conclusion and Recommendations

As stated above, the configuration makes it clear enough for the company on where to focus its strategy. That is, the focal point of such strategy should be on the opportunities keeping in mind the threats. The strengths of the industry should also be maintained through the awareness of its weaknesses.

SWOT ANALYSIS – REVLON

Strengths

Leadership in the market

Strong Brand Image earned

Due focus on Research and Development

Sound financial Performance

Weaknesses

Dependency on the US market

Accountable debts taken from Products Corporation

Customer base is quite limited

Opportunities

Demographic opportunity present in US

The emerging cosmetic industry in developing countries

The regular launches of new products

Restructuring demand

Threats

Increased use of cosmetic surgery

Stiff competitive environment

L’Oreal is a major threat to Revlon

PEST ANALYSIS

Political:

Political stability:

For Revlon, it is important to have its established base geographically all across the countries under operations. Additionally, it should focus on strong downstream operations to be independent.

Trade regulations:

It is important for Revlon to study the trade regulations before entering into any market. It should also keep itself updated with the changes in trade regulations in the countries where it is presently operating.

Tax policies:

It can be a great benefit for the company to study tax policies and act accordingly in different markets. Furthermore, Revlon can take advantage by operating its factories in countries offering several tax benefits.

Industrial safety:

This is of supreme importance for Revlon. It shall take due care while operating the manufacturing process.

Environmental regulations:

Revlon shall ensure that its operations are not going against environmental regulations in the countries where it operates.

Employment laws:

There are several countries demanding fixed percentage of employment to locals/ minorities. Revlon shall not ignore this point.

Economic Analysis

Economic growth:

It would be best for Revlon to operate in countries offering better growth opportunities such as those located in Asian and Africa continents.

Inflation rate

The higher the inflation goes, the more is the risk for Revlon. Thus, Revlon shall minimize its risk by operating more in countries with low/nominal inflation rate.

Interest rates

The local governments sometimes offer low interest rates to encourage industrial growth. Revlon shall take advantage of these policies and take financial support from those sources.

Exchange rates

Either this further can act as beneficial, or make Revlon suffer losses. Thus, the company shall take due care for analysing the future prospects associated with different currencies.

Labour costs

Countries such as China and India have talented pool of people at economic rates. Thus, the decision to operate in these countries for production department work could be a good practice for Revlon.

Government expenditure

The government expenditure on countries such as US is quite high. Thus, Revlon needs to invest a lot on the government expenses in these sorts of countries.

Consumer spending

The higher the consumer spending for the country, the higher is expected buying capacity of an individual. Thus, Revlon shall focus on countries with good consumer spending strength.

Social Analysis

Demographics:

There are various factors such as age, gender, income etc., on which the sales pattern depends. A country with higher ratio of females, higher per capita income, is more likely to consume cosmetic products of Revlon.

Consumer behaviour:

The sales pattern depends on consumer buying behaviour. Thus, Revlon shall take this too into account.

Leisure interests:

The youth is keener for leisure hours in their life. Thus, Revlon shall consider this while designing promotional plans for its products.

Income distribution

If the income is well distributed among the population of the country, it is a good choice for Revlon to generate revenues from the country.

Living standards:

For countries with higher standard of living of its people, the sales is expected to be high for cosmetic industry products.

Besides these, the health, life style pattern, and fashion are important parameters to determine the success of Revlon.

Technological

Stronger command:

Revlon can take an advantage of its Kinetin anti aging technology and produce revenues from this product.

Innovative Ideas:

Continuous R&D has helped Revlon to establish strong roots in the market. However, the company shall keep working in the field to produce more and more innovative products before any problem condition arises.

Economies of scale:

As Revlon has been into operation since the year 1932, and operates in 100 countries (David, 2008) with strong customer base, it gains advantage against new entrants in the industry. Thus, Company achieves good economy of scales.

However, Revlon shall not underestimate the importance of IT and invest on this for better management activities. This is the reason Body Shop invested one-third of the part of its capital spending to improve its IT in the year 2004 (Barry et al., 2005).

Porter’s Five Forces Analysis- Revlon

It is important to understand the factors, which play crucial role to generate profits for the industry. Porter’s Five Forces model helps in determining it. There are certain forces that a firm faces, which affects its profits (David & Garry, 2009). Thus, the section here uses Porter’s Five Forces Model to analyse Revlon’s strategic position.

Medium Potential Threat of new entrants

The cosmetic industry saturates with large number of firms operating, ranging from small ones, to big giants such as L’Oreal are operating all around the world. For the already established firms such as Nivea, L’Oreal, and P&G, it is possible to lead ahead using economies of scale, and control over cost; however, for a firm to enter in this industry, it demands for huge capital investment, and the switching costs; which all acts as barrier for new entrants. On the other side, the new entrant may use the already prepared products as the base to launch their own products without much R&D (Roddick, 2000).

Low Bargaining power of buyers

The cosmetic industry is among those of customer driven industries. The buyers in this industry purchase a small share of what the sellers sell. There is quite low switching cost for the buyers. However, the consumers in this industry usually follow brand loyalty. Thus, Revlon shall take an advantage of it and retain its customer base.

Low Bargaining power of suppliers

A good supplier helps the organization to maintain its supply chain in a better way (The Economist, 2006). It is noted that large number of small-scale suppliers are emerging in the cosmetic industry. These suppliers have high bargaining power though at some cases, but this power is quite low against big players such as Revlon. Revlon makes bulk purchase of these raw products and has higher bargaining power as compared to that of its suppliers.

High Threat of substitute products and services

Revlon faces problem of increasing market for natural products. It is one of the most interesting things that, we can see in the cosmetic industry (Falk, 2007). These natural products may cause the danger to Revlon’s products. Such as one who wants to take care of his skin, may opt for spa in place of Revlon’s products. Thus, there is risk against such substitutes. Thus, Revlon shall maintain brand loyalty for its customers by using strong strategic approaches.

Medium Intensity of rivalry among competitors

Cosmetic industry suggests the name of big giants in the field such as L’Oreal, Nivea etc. in addition to Revlon. Thus, the company continuously faces competition against its rivals. Additionally, there is low switching cost for the products in the industry. These all factors raise risk against the Revlon. However, the brand loyalty may lead all these problems and the company can sustain for long.

BCG analysis of Revlon

Boston Consulting Group (BCG) Matrix

The BCG Matrix is useful in determining the framework for performance, marketers and the strategic business units (David et al., 2009). The analysis of products/ services individually, can help Revlon predetermine the most suited business strategy for that particular product/ service. This is against the generalized strategy, designed for the industry as a whole. However, this BCG matrix, also known as growth share matrix is only concerned with the market growth, and the market share, irrespective the other market factors.

Source: Carl and George (1998)

Revlon is good in the niche segment. It is doing well with its products for women. Thus, the organization is doing well at present for the Star position. However, these are likely to migrate towards the Cash Cows position. Some of the products include those of fragrance, nail enamels, and skin care products such as mascara etc. However, these are the products with good potential further, thus the organization shall fund considerable portion of their revenues for these product’s research and development.

As at present, Revlon does not target men for their products, it might be the wrong step. The organization shall focus on this wide segment of market to consume products, as men now a day take interest in using products for their beauty and health. Thus, these products, which are expected to be launched, fall in the category of Question Mark group.

As the size of baby boomers is increasing considerably, it could be a good sign for cosmetic industry. These baby boomers are aging with time and there will be increased demand of products to look younger. Thus, the segment has quite high potential but for short span only. The products in this category come under Cash Cows. Although, these cash cows are going to last for short period and then will become Dogs category of products, Revlon can make huge profits of these cash cows before that. As the consumers always make use of cosmetic products, even during recession conditions; there is a long time left before maturation. Thus, Revlon at present does not have any Dogs category of product.

Conclusion

We can conclude that there is still a huge market available for Cosmetic products. The potential areas include Asian, Latin Amerian places. Revlon can take an advantage of its experience and brand value earned since its inception, to grab these markets using economies of scale. Additionally, grabbing men segment can also be a good choice for the company. The company shall also reinvigorate its already existing products.

Revlon shall continue working with its suppliers and retailers using the same supply chain. However, exploring opportunities in low cost involvement countries to produce the products is also recommended for the company. The company will thus not be dependent on US only and will have greater opportunities for expansion. These all steps can lead the organization ahead of its competitors.