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case study about revlon

case study about revlon

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Published by: muhammadamad8930 on Aug 03, 2010
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05/02/2013

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Introduction:Revlon has been a giant in cosmetics, skin care, fragrance and related products for over sevendecades. Its products are sold in more than 100 countries around the world with sales outsideUnited States comprising 43 % of sales in 2006. The company’s long term mission is to emergeas the dominant cosmetics and personal care firm in the 21
st
century by appealing to young andtrendy women, health conscious women, and older women with a variety of brands.But recently Revlon is doing too well and is in trouble. Revlon is struggling to recover andcollect debt of almost $2.3 billion. The research and development department is also strugglingto offer new products to the market. In recent years Revlon launched Vital Radiance, a cosmeticline for older women with 100 products and it was the largest launch since ColorStay in 1994.However the product was not well received by the market because other competitors already provide the products and the prices of the Revlon product was also very high as compare withrivals. Revlon discontinued the brand in September 2006. Revlon planned to launch a new prestige fragrance called Flair in 2006, but delayed the launch until debt could be restructured.The company issued $185 million in stock in 2006 to raise money to reduce debt. MacAndrewsand Forbes Holdings agreed to purchase a portion of the stock and to purchase any stock not purchased by current stockholders. MacAndrews also extend a line of credit of $87 million toRevlon which can help the Revlon in the recovery of losses.The cosmetics and personal care industry is impacted by two major changes s in demographicsof the United States: The aging population and the change in proportions of ethnic and racial populations. Older people tend to spend less on cosmetics and this is a growing problem for theindustry. The ethnic racial composition of American population is shifting. While AfricanAmericans represent the largest minority segment, the Hispanic American segment is the fastestgrowing segment and is expected to be the largest minority segment in the United states by theyear 2010 with approximately 40.5 million individuals. The result is that non Hispanic whiteshare of the US population is expected to decline to 68% by the year 2010.Revlon is facing intense competition in the cosmetics and skin care industry. The global industryis $200 billion. Today large number of women prefer purchasing these items at drugstores,supermarkets and mass retail stores such as K-Mart and Wal-Mart etc. The Revlon’s major 
 
competitors are Proctor and Gamble, Avon Products, Estee Lauder Companies, L’Oreal, andUnilever. Other competitors include small companies such as Urban Decay, Specialty stores suchas Bath and Body Works, Body Shop, and Victoria’s Secret.Analysis:Revlon recently is facing some major problems and have brought changes in some sales andmarketing functions to reduce operating costs. The company also eliminated some senior  positions and reduced staff by about 8 percent of their US workforce to save approximately $33million a year. Net sales for 2006 decreased by $1 million to $1331 billion and net losses in 2006were $251 million following a loss of $84 million in 2005. The company has shown losses for eight consecutive years and has struggled with debt since 1985, so Revlon is a company introuble and following matrices will further elaborate the company’s current position.
Internal Factors Evaluation (IFE) Matrix:
Key Internal Factors. Weight Rating Weighted ScoreStrengths
1.
$25 million spend on CSR programs .104.40
2.
Spend $24.4million on R & D .103.30
3.
Aggressive advertising worth $120 million .053.15
4.
Great operating efficiency and use of capital assets
.051.05
5.
Quality manufacturing standards and havingISO-9000 certification .102.40
6.
Strong brand recognition .051.05
7.
Rapid new product development .051.05
 
Weaknesses
1.
Long term debt nearly $2.3billion .103.30
2.
High restructuring costs ($17.9 million, 2006) .052.10
3.
High prices than competitors .052.10
4.
Decrease in net sales for 2006 by $1 million .053.15
5.
High net losses in 2006 i.e. $251 million .103.30
6.
Employee layoff by 8 % .051.05
7.
Less diversified products compared with competitors .051.05
8.
Constant organizational restructuring .052.10-------- -----------
1 2.55
 Since total weighted score for Revlon is equal to 2.55 which is not impressive and is just .05above the average IFE score of 2.5. So this score indicates that there is room for improvement and Revlon has to work on its internal factors so as to capitalize on strengths and improve onweaknesses.

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