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Revlon, Inc-2007 Page |1

Introduction Revlon is an American cosmetics, skin care, fragrance, and Personal Care Company founded in 1932. Revlon operates as one of the world's leading cosmetics companies and markets its products in over 100 countries under such familiar brands as Revlon, Color Stay, Age Defying, Almay, and Skin-lights. History In 1932, Revlon was founded in the midst of the Great Depression. Two brothers named Charles and Joseph Revson, they had an idea to create nail polish using pigments instead of the normal dyes. They believed this would make the polish last longer and would allow for a larger variety of colors. To come up with their formula, they partnered with a local chemist named Charles Lachman. Using the Revson name, plus an "L" for Lachman, they named their new nail polish company "Revlon." Within 6 years, the 3 men had turned Revlon into a million-Dollar Company, selling only their special nail polish. In 1940, Revlon offered an entire manicure line, and added lipstick to the collection. In 1994, The Color-Stay line of long-lasting cosmetics was introduced with the debut of Color-Stay lipsticks, which soon captured the top spot in its category. As more women began working, they needed makeup that stayed on all day. This has led Revlon to develop its Color-Stay product lines. Growth and innovation led the way for Revlon. In 1985, Revlon was sold to a subsidiary of MacAndrews & Forbes Holdings. In the 1990's, Revlon revitalized its cosmetics business and strengthened its industry leadership role. Revlon introduced the first transfer resistant lip color which led to a full Color-Stay TM Collection of transfer-resistant products. The company closed the gap on its closest competitors and reached a dramatic goal - the #1 brand in mass color cosmetics. In 1996 Revlon again became a public company, listed on the New York Stock Exchange
Present Conditions: Revlon is struggling to recover and collect debt of almost $2.3 billion. The research and development department is also struggling to offer new products to the market. In recent years Revlon launched Vital Radiance, a cosmetic line for older women with 100 products and it was the largest launch since

Revlon, Inc-2007 Page |2 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 with rivals. 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. MacAndrews and Forbes Holdings agreed to purchase a portion of the stock and to purchase nay stock not purchased by current stockholders. MacAndrews also extend a line of credit of $87 million to Revlon which can help the Revlon in the recovery of losses. Competitors: The Revlons major competitors are Proctor and Gamble, Avon Products, Estee Lauder Companies, LOreal, and Unilever. Other competitors include samall companies such as Urban Decay, Specialty stores such as Bath and Body Works, Body Shop, and Victorias Secret.

Vision & Mission Statement Vision Statement To Provide Glamour, Excitement, Innovation Through Quality Products At Affordable Price Mission Statement

Revlon Is A World Leader In Cosmetics, Skin Care, Fragrance And Personal Care And Is A Leading Mass Market Cosmetics Brand To Emerge As Dominant Cosmetics And Personal Care Firm In The Twenty-First Century By Appealing To Young/Trendy Women, Health Conscious (Skin Care), And Elder Women With Its Variety Of Brand

SWOT Analysis Strengths $25 million was spent on CSR program Currently, $24.4 million on R&D

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Aggressive Advertising worth 120 million Great operating efficiency and use of capital assets Quality manufacturing standards and having ISO-9000 certification Strong Brand recognition The company tries to introduce new products Produces products for all type of women, young, trendy, health conscious and older women Strong Social Responsibility programs Large mass merchandisers Great operating efficiency use of capital assets Continues new product development Big share of share of sales in the foreign market (43% in 2006) Net sale in 2007 increased from 2.6% after suffering a loss in 2006 The baby boomer chunk of the population tends to be brand loyal Joint venture of Revlon and Pacific World Corporation into establishing a new line of nail and nail care products Sales of products through internet Weaknesses Long term debt 2.3 billion. In 2003 Mac Andrews and Frobes Holdings Inc gave out $150 million, later in 2006 an extension of $87million debt by Mac Andrews was made; High restricting cost that amounted up to $29 million when David Kennedy was in command . From the year 2006 2007. First there was a layoff of 15% before Kennedy in 2000 then another reduction of 8% when he took charge Higher prices than competitors Decrease in sales by 1 million (from 2005 - 2006) High net losses in 2006, which resulted because of the discontinuation of Vital Radiance and because of the long term debt Discontinued vital radiance in 2006. The brand was launched in 2006 but was discontinued as the customers didnt respond to it. Negative impact of this product line was estimated to be $110 million

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Employ layoff by 8% duing 2006 2007 Less diversified products compared with competitors Constant organizational restructuring Lack of financial resources Large amount of advertising expenses Decrease in current assets and increase current liabilities Revlon, Inc. is a holding company with no business operations of its own and is dependent on its subsidiaries to pay certain expenses and dividends Opportunities Increase in US teen market 20 million by 2010 Growth in Hispanic population by 2010 Asian markets still 60% uncovered by Revlon Increase in online retailing Women in China, India and middle East are rapidly growing interest in purchasing more cosmetics Sales of personal care products increased form 428 to 499.4 in 2006 which indicates a new trend Men also using the cosmetic products Expansion in Hair coloring market among youth The young migrants to America are increasing Personal care products usage is increasing Latin America represents a growth opportunity Older age women entering into the cosmetic industry Baby boomers have high levels of disposable incomes Globalization can enhance companys productivity if the constant restructuring stops Threats Racial and ethnic changes in US market

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Intense competition (so many brands offering the same stuff, even the competition for African American market has increased with the entry of brands like Fashion Fairs and cosmetics lines launched by Patti LaBelle) Some competitors of multinational companies are offering more than just skin care and makeup products Disposable income of Americans decreasing Consumers concerns about product safety and CSR activities Major retailers reducing inventory levels due to recession Decrease in the value of dollar Ageing US population Young age women are decreasing

Key internal Factors

Matrices Internal Factor Evaluation Matrix for Revlon Weight

Rating

Weighted Score 0.15 0.18 0.36 0.2 0.16 0.12 0.12 0.12 0.15 0.12 Weighted Score 0.03 0.14 0.09

Strengths 1. $25 million spend on CSR program 2. Spend $24.4 million on R&D 3. Aggressive Advertising worth 120 million 4. Great operating efficiency and use of capital assets 5. Quality manufacturing standards and having ISO-9000 certification 6. Strong Brand recognition 7. The company tries to introduce new products 8. Produces products for all type of women, young, trendy, health conscious and older women 9. Strong Social Responsibility programs 10. Continues new product development Weakness 1. Extension of 87million debt by Mac Andrews; high restricting cost 2. Long term debt 2.3 billion 3. High prices than competitors

0.05 0.06 0.09 0.05 0.04 0.06 0.04 0.04 0.05 0.03

3 3 4 4 4 2 3 3 3 4

Weight Rating 0.03 0.07 0.09 1 2 1

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4. Decrease in sales by I million 5. High net losses in 2006, which resulted because of the discontinuation of Vital Radiance and because of the long term debt 6. Discontinued Vital radiance in 2006. The brand was launched in 2006 but was discontinued as the customers didnt respond to it. Negative impact of this product line was estimated to be $110 million

0.04 0.04 0.05

1 2 2

0.04 0.08 0.1

0.02 2 0.04 7. Large amount of advertising expenses 0.05 1 0.05 8. Less diversified products compared with competitors 0.04 3 0.12 9. Constant organizational restructuring 0.06 1 0.06 10. Lack of financial resources Total 1 2.43 External Factor Evaluation Matrix for Revlon Key External Factors Weight Rating Weighted Score Opportunities 0.03 3 0.09 1. Increase in US teen market 20 million by 2010 0.07 4 0.28 2. Growth in Hispanic population by 2010 0.09 4 0.36 3. Asian markets still 60% uncovered by Revlon 0.03 3 0.09 4. Increase in online retailing 0.05 3 0.15 5. Women in China, India and middle East are rapidly growing interest in purchasing more cosmetics 0.07 3 0.21 6. Sales of personal care products increased from 428 to 499.4 in 2006 which indicates a new trend 0.04 3 0.12 7. Men also using the cosmetic products 0.02 3 0.06 8. Expansion in Hair coloring market among youth 0.03 4 0.12 9. The young migrants to America are increasing 0.04 3 0.12 10. Personal care products usage is increasing 0.05 3 0.15 11. Latin America represents a growth opportunity 0.07 4 0.28 12. Older age women entering into the cosmetic industry Threats 1. Racial and ethnic changes in US market 2. Intense competition 3. Disposable income of Americans decreasing 4. Consumers concerns about product safety and CSR activities 5. Major retailers reducing inventory levels due to recession 6. Decrease in the value of dollar 7. Ageing US population Weight 0.04 0.08 0.03 0.05 0.06 0.06 0.04 Rating 1 1 2 2 2 1 2 Weighted Score 0.04 0.16 0.06 0.1 0.06 0.06 0.08

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8. Young age women are decreasing Total

0.05 1

0.1 2.67

Recommendations As we saw in the case study of Revlon which was actually written in 2007 that the company is in great troubles. The financial position is also very weak and it generates losses in the recent years. After applying the tools and techniques of strategic management our conclusion is as follow. 1) The company should develop new markets, which is not tapped by the competitors. 2) The company should improve the quality of products as well as the price minimization Efforts should be taken. 3) The company also needs to increase sales through increasing marketing efforts. 4) The other strategy option is the integration it may be forward, backward or horizontal Integration. 5) The company should sell some unprofitable division. 6) The last option is liquidation. If the company fails to follow the above strategies then it Should liquidate the business.