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Extended Essay in Business and Management

Growth Strategy of MAC


Cosmetics
To what extent has the growth strategy of Mac Cosmetics
been successful to improve their financial performance?

Introduction
In this extended essay, the question To what extent has the growth strategy of M.A.C
cosmetics been successful to improve their financial performance? will be looked at in
detail. M.A.C is a leading beauty and cosmetic brand mainly targeting professional makeup
artists. The company was originally established in Toronto, Canada in 1984 when make-up
artist and photographer Frank Toskan and beauty salon owner Frank Angelo brainstormed a
make-up line1 mainly targeting the modeling and photography industry for professional
makeup artists. But how is it that in the time span of mere 30 years a small domestic
business2 grew into a leading cosmetic brand. From the most apparent steps like becoming
the subsidiary to a giant cosmetic manufacturer and marketer of high quality makeup, hair
care, skincare products and fragrances, Estee Lauder to the other unseen factors and steps
taken by MAC cosmetics, everything will be investigated to figure out their growth strategy. I
think it is worth the time and effort to inquire into the growth strategy of Mac cosmetics and
its journey from being domestically produced to becoming one of the most successful
cosmetic brands to ever exist!
I will be looking at Mac cosmetics primarily from the view point of the
1st unit of the DP Business and Management syllabus, Business organization and
environment. One of the very first things I realized during my research was that a
significant part of this essay will discuss the parent company, Estee Lauder Inc. And how
Mac cosmetics being a subsidiary of this cosmetic giant have helped it to grow and prosper
financially. Many other factors have contributed to their success and they will be discussed
in the essay ahead, however, the campaigns like Viva Glam will not be discussed in this
essay. Because they may have helped Mac cosmetics grow but not in financial terms
because all the profits earned from the Viva Glam campaign go directly to the MAC Aids
Fund3, thus it is irrelevant to my research question hence, it shall not be included in my
research.

Methodology
To appraise the effectiveness of Mac cosmetics growth strategy, the business was
researched predominantly through secondary sources. For example, the internet,
books, newspaper and magazine articles etc. These sources gave me the basic
information, however, to answer my question I had to keep the other factors in mind
that could cause the brand to grow but were not affecting the financial performance
of the company and other limitations. The relevant information was then analyzed
1Our History Mac cosmetics. n.p, n.d. Web. 29 Aug. 2015
2 Our History Mac cosmetics. n.p, n.d. Web. 29 Aug. 2015
3Felemin . Olivia The $270 million Lipstick Dailymail, Com Laude. 5 Dec 2012.
Web.29 Aug.2015

and put into context with the essay question to decipher the growth strategy of Mac
Cosmetics and its effects on their financial performance.

Theory Used
To investigate my topic, I will look at the growth of Mac cosmetics, predominantly in terms of
Unit 1 Business organization and envoirnment.I will first do a SWOT analysis of the business
for a detailed study of the company, mainly focusing on looking at the strengths and
weaknesses of the company and how they have impacted the growth of the business and
then my main tool used will be the Ansoff Matrix. This will lay down a foundation to
determine the growth strategy of the business. Lastly, the concept of efficiency ratio
analysis From unit 3 Finance and accounts of the IB Business Management Syllabus will help
me know the financial performance of the company at different time periods and their
comparison to discuss the effectiveness of the growth strategy in terms of finance and
profitability. All theory used is documented in Loykie Lomine, Martin Muchena and Robert A.
Pierces Business management course companion. 4

Body
Background
Mac cosmetic was founded by Frank Toskan, a makeup artist and photographer and a beauty
salon owner Frank Angelo. They collaborated their skills and knowledge from their respective
fields to come up with a makeup line with a range of vivid colors which suited the
photography and modeling industry. So they domestically made the products from their
kitchen and sold them to fellow makeup artists and photographers, soon the demand began
and the duo launched their first store in 1984 in Toronto, Canada. The brand first gained
recognition after their matte red lipstick was photographed on the pop sensation, Madonna.
Although, the brand was targeted for professional makeup artists, the company became so
popular that it was made available for general public soon after. However, after about a
decade, in 1995 the ever so popular and award winning makeup line sold its 51% share to
the Estee Lauder companies. This step helped the Mac Cosmetics to increase its distribution
throughout the world and so much that in 1998 Estee Lauder bought rest of the shares too.
Where, Mac cosmetics gained the advantage of distribution, Estee Lauder too gained
financial advantage as Mac cosmetics was a reason of a staggering 13% net makeup sales
increase which was worth $274.8 million.5
4Lomin, Loykie,

Martin Muchena, Rober A.Pierce. Business Management. Oxford: Oxford university, 2014. Print.

5 M.A.C Fast Company, n.p. Sept 1 2006. Web. 30th August 2015.

Application of Theory
SWOT Analysis
Strengths
World renowned
High quality products
Brand endorsements by
celebrities
Word of mouth endorsements
from makeup artists
Cruelty free products

Weaknesses
High prices
Limited advertisement
Legal issues

Opportunities
Expand Market
Start an affordable line of
products
Maintain Brand loyalty with
existing customers

Threats
Cheaper Brands seen as good
enough
Makeup not being a necessity
High end competitors

By doing a SWOT analysis, I have found out that the main element in Mac cosmetics growth
strategy has been the quality of their products. Solely on the basis of the quality of their
products was their first store opened and even to this day the quality of their products has
been the reason for their popularity, hence the high demand which leads to more sales and
opening of new stores worldwide causing the company to grow and be financially stronger.
Similarly, when it comes to weaknesses, the main element there is price. A high price
hinders a brands growth especially when there is so much competition in the market.
Domestic users or local public tends to go for cheaper options like Revlon, Maybelline
and newer brands like Benefit which offers an array of different kinds of fun and innovative
products with a suitable or good enough quality and an affordable price. Looking at
opportunities gives an idea of what possibly can be done in order for Mac cosmetics to grow

even more or what could have been, which is expanding their market by penetrating into
new markets. Also Mac Cosmetics should not just rely on the quality of their products for
Brand loyalty.