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Estée Lauder - a Comprehensive Business Policy and Strategic Management Case

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Estée Lauder

Case Abstract

Estée Laudee is a comprehensive business policy and strategic management case that includes the company’s fiscal year-end June 2007 financial statements, competitor information and more.  The case time setting is the year 2008.  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 City, Estée Lauder’s common stock is publicly traded on the New York Stock Exchange under the ticker symbol EL.

Estée Lauder produces a diverse line of shampoo, perfumes, lip gloss and other skin care products.  A small sampling of the brand names marketed by Estée Lauder include: Estée Lauder, Clinique, American Beauty, and Flirt.  The products are sold through various distribution channels, including specialty stores, department stores, pharmacies, the and Web.  Estée Lauder operates in the Americas, Europe, Middle East, Asia, and Africa.  The company has over 28,000 employees and is led by CEO William Lauder whose base pay was over $3.5M in 2007.   The firm’s two major competitors are conglomerate giant Procter & Gamble and L’Oreal.

                

CPM – Competitive Profile Matrix

 Estimates for Procter & Gamble focused on similar product lines they share with Estée    Lauder not the company as a whole.

          Estée Lauder                    

Revlon

Procter & Gamble

Critical Success Factors

Weight

Rating

Weighted Score

Rating

Weighted Score

Rating

Weighted Score

Market Share

Price

Financial Position

Product Quality

Product Lines

Consumer Loyalty

Employees

0.20

0.10

0.20

0.15

0.10

0.20

0.05

4

2

3

4

4

4

4

0.80

0.20

0.60

0.60

0.40

0.80

0.20

4

3

1

2

3

3

4

0.80

0.30

0.20

0.30

0.30

0.60

0.20

3

4

4

2

4

2

4

0.60

0.40

0.80

0.30

0.40

0.40

0.20

TOTAL

1.00

                   3.60

                          2.70

                            3.10

External Factor Evaluation (EFE) Matrix

Key External Factors

Weight

Rating

Weighted Score

Opportunities

  1. Weak US Dollar makes US based products more affordable to customers in Canada and Europe.

0.05

3

0.15

  1. Interest rates remain low in the US.

0.08

3

0.24

  1. Increasing numbers of people are buying products online for convenience, cost savings, and confidentiality.

0.12

3

0.36

  1. Men are increasing becoming more concerned with their looks and the stereotypes of men using skin care products are diminishing.

0.05

4

0.20

  1. In 2006, China experienced a 15 percent growth in professional skin care sales.

0.05

4

0.20

  1. Hispanic population in the US is rapidly growing.

0.05

3

0.15

  1. Customers are demanding products not tested on animals and which are environmentally friendly.

0.03

3

0.09

  1. Customers are becoming more interested in herbal products that are derived from natural sources.

0.03

4

0.12

  1. Aging US population opens new markets for developing skin care products for the elderly.

0.05

3

0.15

  1. Many new start up companies with specialty products are created each year.

0.05

2

0.10

Threats

  1. Consumer complaints and inquires into the use of animal testing for new products.

0.03

3

0.09

  1. FDA plans to enforce cosmetic corporations to add a label stating “the safety of this product has not been determined.”

0.02

1

0.02

  1. Many new start up companies with specialty products are created each year.

0.05

2

0.10

  1. Concerns about the use of aerosols, fluorocarbons and other chemicals in the production of cosmetic products.

0.03

4

0.12

  1. Top competitors in the cosmetics industry are diversified with many brand names and a wide range of products.

0.10

2

0.20

  1. Products can be purchased at significantly lower cost over the Internet cutting into revenues and harming traditional distributors.

0.12

1

0.12

  1. Growing trend among sections of the population for a more natural look and reduction in their use of make up and related products.

0.04

3

0.12

  1. Customers tend to be extremely brand loyal.

0.05

3

0.15

TOTAL

1.00

2.68

Internal Factor Evaluation (IFE) Matrix

Key Internal Factors

Weight

Rating

Weighted

Score

Strengths

  1. Wholly owned and operated offices in 43 countries and territories and sold in over 135 countries.

0.12

4

0.48

  1. Test products on animals only when required by law.

0.03

4

0.12

  1. Estée Lauder operates under numerous brand names including Clinique, Origins, Bobbi Brown, Flirt! among others.

0.10

4

0.40

  1. Detailed succession plan in place for Fabrizio Freda to take over as CEO in March of 2010.

0.05

4

0.20

  1. The company as global rights to products sold under several name brands including Tommy Hilfiger, Donna Karan, Missoni, and Sean John.

0.10

4

0.40

  1. Company continues to purchase interest in start up and established companies such as Bumble and Bumble Products LLC in June 30, 2007.

0.05

4

0.20

  1. Revenue has increased 40 percent from $5 billion to $7 billion in the five year period dating fiscal years 2003-2007.

0.15

4

0.60

  1. Company specializes in mid level and upper end cosmetics products; markets over 9,000 products.

0.05

4

0.20

Weaknesses

  1. In 1990, 75 nameplate department stores sold Estée Lauder; today that number is only 17.

0.10

2

0.20

  1. Stock price has been stuck between $25 and $50 trading range since 1996.

0.05

1

0.05

  1. Estée Lauder lacks clear mission and vision statements.

0.05

1

0.05

  1. Confusing organizational structure; it is unclear whether group presidents have control over product lines or geographic areas.

0.05

1

0.05

  1. Net sales of fragrance products decreased 4 percent to $1,213B; company continues to struggle in this segment.

0.05

1

0.05

  1. Company does not offer enough brand names tailored to lower budget consumers.

0.05

1

0.05

TOTAL

1.00

3.05

        SWOT Strategies

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