Mngt 475 Paper

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					 Estee Lauder
 Breanna Morosic, Ryan Myers,
Kyle Moline & Cory Montgomery
          Mngt 475
      8 December 2009
Table of Contents
Executive Summary………………………………………………………………………………………………………………1
Background and Description of Major Issues………………………………………………………………………
       Company Background & History…………………………………………………………………………….
       Organizational Structure……………………………………………………………………………………….
       Vision, Mission & Goals………………………………………………………………………………………….
External Analysis………………………………………………………………………………………………………………..
       Porter’s Five Forces Model………………………………………………………………………………………
       Industry Life Cycle……………………………………………………………………………………………………
       Environmental Issues………………………………………………………………………………………………..
Internal Analysis……………………………………………………………………………………………………………………..
       Analysis of Competitive Advantage………………………………………………………………………………
              Resources………………………………………………………………………………………………………..
              Core Competencies…………………………………………………………………………………………..
              Core & End Products……………………………………………………………………………………….
       Value Chain & Business Model…………………………………………………………………………………..
              Customer Profile & Market Segments…………………………………………………………….
              Major Revenue Streams & Cost Components……………………………………………………
              Major Operational Activities (Primary & Secondary Activities)…………………………
       VRIO Framework……………………………………………………………………………………………………….
Analysis of Current Strategies………………………………………………………………………………………………..
       Enterprise Level…………………………………………………………………………………………………………
       Inter-Organizational Level…………………………………………………………………………………………..
       Corporate Level………………………………………………………………………………………………………….
       Business Units Level…………………………………………………………………………………………………..
       Functional Level………………………………………………………………………………………………………..
Evaluation of Current Strategies…………………………………………………………………………………………….
Strategy Analysis- Blue Ocean Approach………………………………………………………………………………….
       Strategy Canvas of Industry………………………………………………………………………………………….
       Eliminate-Reduce-Raise-Create Grid……………………………………………………………………………
Implementation Plan- Balanced Scorecard Approach……………………………………………………………….
       Strategy Themes…………………………………………………………………………………………………………
       Strategy Maps…………………………………………………………………………………………………………….
       Balanced Scorecard……………………………………………………………………………………………………
Executive Summary




Background & Description of Major Issues

Over the past 64 years, Estee Lauder has transformed itself from a one-woman,

four-product company to an empire encompassing many different brands and even

more products. Now, Estee Lauder holds the greatest share of market in the makeup

and skincare industry and is continuing to grow each year.

Company Background & History

When Estee Lauder was founded in 1946, the company started with four products:

the Super Rich All Purpose Crème, the Crème Pack, Cleansing Oil, and Skin Lotion.

Today, Estee Lauder boasts thousands of products under 30 different brand names.

These brands include: Estee Lauder, Aramis, Clinique, Lab Series Skincare for Men,

Origins, Prescriptives, Tommy Hilfiger, M-A-C, Kiton, Good Skin, Grassroots, Sean

John, Mustang, Coach, Ojon, Eyes by Design, La Mer, Bobbi Brown, Donna Karan,

Aveda, Jo Malone, bumble and bumble, Michael Kors, Darphin, American Beauty,

Flirt!, Missoni, Daisy Fuentes, and Tom Ford.

There are four basic lines for products. The skin care line includes moisturizers,

creams, lotions, cleansers, sun screens, and self-tanning products. The makeup line

includes lipstick and lip gloss, mascara, foundation, blush, powder, eye shadow, nail

polish, and makeup tools. The fragrance line includes eau de parfum sprays,

colognes, lotions, powders, creams, and soaps, all of which are based on particular
fragrances. The fragrance line also includes aromatherapy and bath products. Lastly,

the hair care line includes shampoos, conditioners, styling gels and crèmes, hair

coloring products, and hairsprays.

Estee Lauder was founded on the belief that every woman can be beautiful and has

diligently worked to promote a positive self-image in women for 64 years. In 1962,

the company began using the “face” of Estee Lauder as a marketing tool. The “faces”

of Estee Lauder have been celebrities, mainly models or actresses. Women who have

been the “face” in recent years include: Elizabeth Hurley, Carolyn Murphy, Liya

Kebede, Gwyneth Paltrow, Anja Rubik, and Hillary Rhoda.

The company uses very selective distribution, selling its products mainly in high-

end department stores that compliment the image of the Estee Lauder brand. Estee

Lauder also sells their products in: specialty retail stores, upscale perfumeries and

pharmacies, professional hair salons, free-standing company stores, spas, direct

response television shows, stores on cruise ships, on airplanes and in duty-free

shops in airports, and of course, on-line. Up until the 1960s, Estee Lauder remained

a domestic brand, but in 1960, Estee Lauder went global by entering London. In

1961, they entered Central America and in 1963, they entered Australia. Now, Estee

Lauder products are sold in over 135 countries. Estee Lauder also has 14 factories in

six countries, business offices in 43 countries, and eight R & D labs with a staff of

over 450 scientists.

Organizational Structure
Estee Lauder was formed in 1946 by Mrs. Estee Lauder. Since then, she has retired,

but her family still has majority control of the company. Fabrizio Freda, the current

President and CEO, is the first non-family member to serve as CEO or President. Six

Lauder family members currently hold high-ranking positions within the company,

including three Vice Presidents and three Chairmen. The company went public in

November 1995, but the majority of the stock is held by Lauder family members,

with Leonard Lauder being the #1 stockholder in the company. Estee Lauder

employs over 32,000 full-time employees worldwide.

Vision, Mission & Goals

Estee Lauders mission statement is “Bringing the Best to Everyone We Touch.” By

the best, “we mean the best products, the best people, and the best ideas. These

three pillars have been the hallmark of our Company since it was founded.” Estee

Lauder also strives to continue expanding by continually moving brands into new

geographical territories, occupying the best retail locations, and offering customers

the latest must-have products. Another statement regularly quoted by Estee Lauder

employees is, “Imagine. Integrate. Innovate.” This encompasses the importance of

continual growth and development within the company.




External Analysis

By exploring Porter’s Five Forces Model, the industry life cycle, environmental

issues, and the strategic group analysis, we can determine where Estee Lauder
stands in comparison to their competitors, as well as where they are going as a

company.

Porter’s Five Forces Model

Power of Suppliers

The power of suppliers relative to Estee Lauder is almost completely obsolete. The

have very little bargaining power with the company mainly because of the

enormous size of the company and the brand image and brand awareness that they

have. Since Estee Lauder develops almost all of their products in-house through

intensive research and development, they only rely on outside suppliers for

packaging and basic chemicals found in all makeup. This severely limits any

bargaining power that suppliers may have.

Power of Buyers

The power of buyers is also minimal relative to Estee Lauder as a company. Since

Estee Lauder has gained such a huge share of market in the makeup industry, they

are able to charge higher than average prices. Customers are typically willing to pay

these higher prices, due to the fact that they know they are receiving good quality

products for a slightly higher price.

Threat of New Entrants

When Estee Lauder opened their doors in 1946, there were very few new entrants

into the market. Since then, this has drastically changed. There are constantly new

companies entering the market. However, these companies are very small and
therefore pose minimal threat to Estee Lauder. The highest competition from new

entrants comes from foreign competitors entering the American market.

Threat of Substitute Products

There are innumerable amounts of products that can be substitutes for the products

that Estee Lauder offers. Makeup, skin care, hair care, and fragrance comes in

thousands of brands and customers usually find a lot of these products in the same

stores that Estee Lauder uses to sell there products. However, the age of the

company has seriously helped them. Once a person finds a beauty product that they

like, it is almost impossible to get them to switch to another brand. This brand

loyalty helps Estee Lauder in retaining customers.

Rivalry among Existing Firms

The skin care market is currently a $24 billion industry with an annual growth rate

of 7%. The rivalry amongst existing firms is extremely fierce. Everyday, each

company tries to find a new product that will put them on top. However, Estee

Lauder does not have to worry too much about the threat of being overcome by

another company because they are the industry leader in the high-end makeup

market. Other companies in the high-end market include Mary Kay, Sephora, and

Arbonne. There is also a large low-end market for makeup products that includes

companies like L’Oreal and Proctor & Gamble. These companies pose little to no

threat to Estee Lauder. Even though they are both in the makeup industry, they

target completely different consumers and therefore do not compete directly

against one another.
Industry Life Cycle Analysis

INSERT CHART FROM POWER POINT 1

Estee Lauder is currently between the maturity and decline stages in the industry

life cycle. In order to bypass decline and continue to grow, it is imperative for Estee

Lauder to strategically restructure the company, as they have been doing in the past

few years.

Environmental Issues

Social Changes

Many social changes are currently transforming the skin care industry. Women no

longer want a “one crème does everything” type of product. They want something

that is specifically designed to fit their skin type and fix the exact problem. A 20

year-old woman is going to have completely different skin that a 40 year-old woman

and therefore requires completely different products. Obviously, 20 year-old

women have very little concern about wrinkles, while 40 year-old women have very

little concern for acne.

Another social change affecting Estee Lauder’s profitability is the emergence and

growth in popularity of makeup sold in chain drug stores and mass retail stores, like

Walgreens and Wal-Mart. Brands such as Olay and Neutrogena have marketed their

products with new technology to show women that cheaper products can produce

the same results as high-end products like Estee Lauder.

Political & Legal Changes
Since Estee Lauder has never done testing on animals, they were not affected by the

changing laws surrounding animal testing. Estee Lauder has always used human

volunteers to test their makeup on. They also practice fair trade with product

launches. This includes reducing waste, making the most efficient packaging, and

implementing sustainability.

Economic Changes

The world is in a recession. Every company is being affected by this, no matter how

large or small they are or what products or services they sell. Because of the

recession, women are buying cheaper makeup products, which is bad news for

Estee Lauder. They can remain a dominant player in the makeup industry by

creating value for people in order to make them realize that the extra money they

are spending is worth it.

Market Changes

The main change in the market is the addition of more competitors for Estee Lauder

to contend with. Companies, like Estee Lauder, are expanding globally and targeting

new groups of people. This shifts some customers towards Estee Lauder and others

away from the company. It is imperative for Estee Lauder to increase customer

retention in order to combat this problem and keep loyal customers happy.

Technology Changes

The largest technology within the past 20 years is the addition of advancement of

the internet as a marketing medium. This has increased and made easier research

and development as well as made it easier for customers to learn about products.
Estee Lauder has utilized this advancement by creating and maintaining a detailed

website where customers can research and order products or receive a Virtual

Makeover. This aids in creating customer satisfaction and loyalty.

				
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