Strategic Management Procter and Gamble
Summary
TLDRThis video script offers an in-depth analysis of Procter & Gamble and Revlon within the color cosmetics industry. It covers a Five Forces Industry Analysis, highlighting the bargaining power of buyers and suppliers, the threat of substitutes and new entrants, and the intensity of rivalry. The script delves into each company's core competencies, business strategies, and corporate strategies, emphasizing innovation, market positioning, and growth through acquisitions. It also discusses point-of-purchase tactics and suggests strategic moves for market expansion, such as targeting niche markets and leveraging celebrity endorsements.
Takeaways
- đ The color cosmetic industry is characterized by a few major manufacturers dominating the market, leading to moderate buyer power.
- đïž Major buyers include drug stores, specialty stores, and big-box retailers, which have moderate power due to the presence of large manufacturers like Procter & Gamble and Revlon.
- 𧱠Suppliers, such as chemical, mineral, and packaging companies, have moderate bargaining power due to the size and market dominance of cosmetic manufacturers.
- đ The threat of substitutes is weak in the color cosmetics industry, as there are few products that can satisfy the need to improve self-image as effectively as cosmetics.
- đ§ High barriers to entry exist in the color cosmetics market due to economies of scale, established distribution channels, and the potential for aggressive retaliation from existing players.
- đ Intense rivalry within the industry is driven by high advertising, promotion, and price wars, although slowed by slow growth and lack of differentiation.
- đ Revlon's core competency lies in its efficient inbound logistics, just-in-time inventory, and integrated business planning, reducing inventory and forecast errors.
- đŹ Revlon's R&D center in New Jersey is a strong asset, with innovations in products and packaging, and a competitive advantage in technology and data management.
- đ Procter & Gamble's core competency is its consumer-driven supply network and collaborative planning, which allows for responsive and accurate demand forecasting.
- đïž Procter & Gamble's business strategy includes horizontal integration, targeting different markets with acquired brands, and a focus on cost savings and innovation.
- đ Revlon's corporate strategy is based on related diversification through acquisitions, aiming to grow by acquiring companies in the cosmetics and related industries.
- đĄ Both Revlon and Procter & Gamble utilize celebrity endorsements and effective point-of-purchase displays to attract customers and boost sales.
Q & A
What is the main focus of the analysis presented in the script?
-The main focus of the analysis is the comparison of Procter & Gamble and Revlon within the color cosmetics industry, using the Five Forces Industry Analysis framework, and examining their core competencies, business strategies, and point-of-purchase tactics.
What is the time frame for the Five Forces Industry Analysis mentioned in the script?
-The time frame for the Five Forces Industry Analysis is the past year from 2011 to 2013.
Who are the major buyers in the color cosmetics industry according to the script?
-The major buyers in the color cosmetics industry are retailers such as drug stores, specialty stores, and big-box retailers.
What is the buyer power in the color cosmetics industry as described in the script?
-The buyer power is moderate. Major retailers like Walmart can negotiate good prices with manufacturers, increasing their power, but the dominance of large manufacturers and the lack of high switching costs for makeup decrease the buyer power.
How does the script describe the power of suppliers in the color cosmetics industry?
-The power of suppliers is moderate. Suppliers, which include chemical, mineral, and packaging companies, are smaller compared to large manufacturers like Revlon or Procter & Gamble, but they still have some power due to the ability to substitute raw materials and the fact that makeup manufacturers are not their only customers.
What is the threat of substitutes in the color cosmetics industry as per the script?
-The threat of substitutes is weak. While there are a few products like self-tanning products or Botox that could be considered substitutes, the high demand for cosmetics makes them not a serious threat.
What are the barriers to entry in the color cosmetics industry according to the script?
-The barriers to entry are high due to factors such as economies of scale, established distribution channels, and the expected retaliation from large companies if a new company enters the market.
What is Revlon's core competency as discussed in the script?
-Revlon's core competency lies in its inbound logistics, including a just-in-time inventory system, a private iCloud for data storage, and an integrated business planning model that has reduced inventory and forecast errors.
What is Procter & Gamble's core competency in the color cosmetics industry as per the script?
-Procter & Gamble's core competency is its consumer-driven supply network and collaborative planning, forecast, and replenishment system, which allows for real-time tracking of daily demand and a more responsive supply chain.
What is the business strategy of Covergirl, a brand of Procter & Gamble, as described in the script?
-Covergirl's business strategy is focused on a low-cost strategy targeting the twelve to sixteen-year-old market, with an emotional bond with consumers, positioning itself as fun, sassy, and fresh.
What is Revlon's corporate strategy as outlined in the script?
-Revlon's corporate strategy is related diversification through acquisitions, starting from the Great Depression and continuing to the present day, with a focus on acquiring companies to fuel growth.
How do both Revlon and Procter & Gamble use celebrity endorsements in their marketing, according to the script?
-Both Revlon and Procter & Gamble use celebrity endorsements to sell their products, with Covergirl choosing younger celebrities to appeal to its younger target market, while Revlon selects older celebrities to align with its more mature market.
What is the proposed new line of nail polishes for Covergirl as suggested in the script?
-The proposed new line of nail polishes for Covergirl includes nail polish strips, at-home gel nail polishes, color-changing polishes, and magnetic polishes, targeting both younger and older markets with a range of colors and price points.
What is the recommended corporate strategy adjustment for Revlon as per the script?
-The script recommends that Revlon switch from a growth to a stability corporate strategy, focusing on smaller niche markets, particularly Hispanics, and repositioning the brand with darker shade palettes and Hispanic celebrity spokespeople.
What is the estimated cost of the advertising campaign for Revlon's repositioning strategy as suggested in the script?
-The estimated cost of the advertising campaign for Revlon's repositioning strategy is 15 million dollars, which includes hiring Hispanic celebrity endorsements, Spanish-language commercials, print advertisements in Spanish, and a social media campaign.
Outlines
đ Market Analysis of Cosmetic Industry
The first paragraph delves into a Five Forces analysis of the color cosmetics industry, highlighting the roles of buyers and suppliers, the lack of substitutes, barriers to entry, and the intensity of rivalry among existing competitors. It emphasizes the dominance of major manufacturers like Revlon and Procter & Gamble, the moderate bargaining power of buyers and suppliers, and the challenges new entrants face due to established brands' economies of scale and potential retaliation. The rivalry within the industry is noted as moderate, influenced by high advertising, promotion, and price wars, yet somewhat mitigated by slow growth and product uniformity. The paragraph also touches on the value chain activities of each company, identifying core competencies in logistics and manufacturing for Revlon and a consumer-driven supply network for Procter & Gamble.
đ Core Competencies and Business Strategies
The second paragraph outlines the core competencies and business strategies of Procter & Gamble and Revlon. It discusses Procter & Gamble's consumer demand-driven supply network, which allows for real-time tracking of demand and a responsive supply chain, reducing inventory and improving cycle times. The company's growth strategy is characterized by horizontal integration through acquisitions of various cosmetic brands to target different markets. Revlon's strategy is based on related diversification, with a history of acquisitions to fuel growth. The paragraph also mentions the companies' corporate strategies, including Procter & Gamble's focus on strengthening core businesses and cost savings, and Revlon's recent acquisition activities to continue its growth trajectory.
đ Point-of-Purchase Marketing and Strategic Recommendations
The third paragraph examines the point-of-purchase marketing tactics used by Revlon and Procter & Gamble, including celebrity endorsements and organized product displays. It describes the competitive environment at retail locations and the merchandising methods that make products desirable. The paragraph suggests that Covergirl should create a new line of nail polishes to capitalize on market growth, targeting both younger and older consumers with a range of products and prices. For Revlon, given its debt and market position, the recommendation is to shift from a growth to a stability strategy, focusing on niche markets like Hispanics and investing in advertising to improve market share without increasing the overall marketing budget.
Mindmap
Keywords
đĄProcter & Gamble
đĄRevlon
đĄFive Forces Analysis
đĄBuyer Power
đĄSupplier Power
đĄSubstitutes
đĄBarriers to Entry
đĄRivalry
đĄCore Competency
đĄPoint-of-Purchase
đĄCorporate Strategy
đĄMarket Share
Highlights
John introduces the analysis of Procter & Gamble and Revlon in the color cosmetics industry.
The five-forces industry analysis for color cosmetics is presented, focusing on buyer and supplier power.
Major buyers include retailers like drug stores and big-box retailers, with moderate buyer power due to the dominance of a few manufacturers.
Suppliers' power is moderate, with chemical, mineral, and packaging companies being smaller compared to large manufacturers like Revlon and P&G.
The threat of substitutes is weak due to high demand for cosmetics and few alternatives like self-tanning products or Botox.
Barriers to entry are high due to economies of scale, established distribution channels, and potential retaliation from major players.
Rivalry within the industry is moderate, influenced by high advertising, promotion, and price wars.
Revlon's core competency lies in inbound logistics, with a just-in-time inventory system and reduced inventory.
Revlon's R&D center in New Jersey innovates new products and packaging, with a focus on technology as a competitive advantage.
Procter & Gamble's core competency is in inbound and outbound logistics, with a consumer-driven supply network and real-time demand tracking.
P&G's corporate strategy involves horizontal integration, acquiring brands to target different markets.
Revlon's corporate strategy is related diversification, with a history of acquiring companies to fuel growth.
Revlon's recent acquisition of the Coulomb Group for $660 million demonstrates a commitment to growth through acquisitions.
Both Revlon and P&G use celebrity endorsements and effective point-of-purchase displays to sell their products.
Suggested strategy for Covergirl includes creating a new line of nail polishes to cater to both young and older markets.
Revlon is advised to switch from a growth to a stability strategy, focusing on niche markets like Hispanics and improving sales.
Revlon's debt-to-equity ratio and recent acquisitions suggest a need for a strategic shift towards stability and market share defense.
A targeted marketing campaign towards Hispanics, with celebrity endorsements and a focus on darker shades, is recommended for Revlon.
In conclusion, Revlon's strategy to cater to untapped markets like the Hispanic market could potentially increase market share.
Transcripts
good afternoon please put away your
electronic devices my name is John and I
will be taking you through an analysis
of Procter & Gamble and Revlon before I
get started let me just finish my decaf
mocha latte cappuccino let's take a look
at the five forest industry analysis for
the color cosmetic industry color
cosmetics include eye face and lip
makeup as well as nail polish the time
frame is the past year from 2011 to 2013
major buyers include retailers such as
drug stores specialty stores and big-box
retailers there are a few major
manufacturers these manufacturers are so
big that they dominate the market thus
the buyers have little power because
they want the major players to be sold
in their store additionally there are no
high switching costs with makeup and the
buyer does not purchase a large
percentage of industry outputs thus
decreasing the buyer power on the other
hand the major retailers such as Walmart
are able to negotiate good prices with
the manufacturers which increases their
power over all the buyers power is
moderate not low but not high either
when analyzing suppliers power it is
necessary to consider all of the
suppliers which include chemical mineral
and packaging companies compared to the
large manufacturers of cosmetics such as
Revlon or Procter & Gamble the suppliers
are very small decreasing the suppliers
power comparable makeup can be made with
other raw materials which also decreases
the supplier power however the makeup
manufacturers are not the suppliers only
customers therefore suppliers still have
some power over all the suppliers
bargaining power is moderate substitutes
for color cosmetics would be other
products to satisfy the need to improve
self-image there are very few products
that are considered substitutes which
include self tanning products or Botox
however cosmetics are in such high
demand that the threat of substitutes is
still weak and are not a serious threat
entry into this market would be
challenging due to the barriers to entry
and the expected retaliation for example
these large companies produce at a lower
cost therefore they have high economies
of scale
this increases the barrier to entry
since the major players such as Procter
& Gamble are already well established in
the industry they have access to
distribution channels and during firms
might have a difficult time convincing
the retailers to carry their new unknown
brand these large companies produce at a
lower cost therefore they have high
economies of scale all of these factors
increase the barrier to entry
furthermore if a new company does enter
that makeup industry the expected
retaliation will be high the large
companies will lower their prices offer
coupons or discounts
therefore the barrier to entry further
increases overall the threat of new
entrants is low because the barrier to
entries and expected retaliation are
high there is rivalry within the
industry which is evident through high
advertising promotion and high price
wars of the top firms the intensity of
rivalry is reduced because of the slow
growth and the lack of differentiation
between different lipsticks or other
cosmetics however the high fixed cost
from the research and development
centers increases the competition
because it puts pressure on pricing
lastly there are high exit barriers from
the specialised asset or the production
facilities which keep firms competing
and therefore increasing the intensity
of rivalry overall the rivalry is also
moderate after analysing the non
activities for the value chain for each
company not all of them added value
therefore they are not a core competency
facility which activities does each
company do better than their competitors
and we're here at Revlon's Manufacturing
plan at Oxford North Carolina where I
will discuss Revlon's first core
competency inbound logistics most of our
suppliers are located in northeast we
partner with the niche carrier in North
Carolina that makes overnight runs from
that area before we partnered with them
it took 2 to 3 days to get products from
our suppliers now we have next day
shipments we also have a competitive
advantage with our just-in-time
inventory which allows us to have an
order turnaround of 1 to 3 days we are
fast and getting new products on the
shelf and with our new integrated
business planning model which deals with
Sales and Operations planning we had a
50% reduction inventory and a 50%
decrease in forecast errors our inbound
logistics let us get to the products to
the consumers faster and more
efficiently revlon has a strong research
and development center in new jersey
innovates new products packaging ideas
recently they standardized their
technology throughout the company and
simplify their IT using virtualizations
now technology is truly a competitive
advantage we set up a private iCloud
using that app storage system which
consolidated our servers by 56% we also
added a new data structure that
automatically sorts organizes and
structures Big Data allowing us to
analyze
within hours versus the old system which
took weeks next we in source a disaster
recovery program in case of a disaster
such as a fire it allows us to duplicate
our data from the original data center
and move it to a new safe location all
under one our technology is a
competitive advantage because as
resolved the new system we can see
benefits and supply chain optimization
increased manufacturing efficiency
automated picking and packing and
improving our helpdesk Procter &
Gamble's core competency are their
inbound and outbound logistics they have
consumer driven supply network which
means that they are a consumer demand
driven instead of forecast driven the
demand is based off of the intelligent
daily forecasting which allows them to
track daily demand in real-time sales
they also have a collaborative planning
forecast and replenishment system which
is the system that shares sensitive
information with trusted partners by
developing a formal relationship and
allowing partners to see the total
supply chain visibility Procter & Gamble
is able to work with them to meet the
highly volatile consumer demand their
core competency allows them to have a
shorter cycle time increase
responsiveness to consumer demand
accurate demand forecasting reduce the
total supply chain response time and
reduced inventory their supply chain
gives them a competitive advantage I'm
on my way to an interview with Procter
and Gamble and Revlon to discuss their
business strategy glad you can make it
John first discuss Procter & Gamble it's
important to highlight that we have
several businesses that operate in the
color cosmetics industry covergirl is
one of our most successful brands in the
industry a brand that is primarily
focused on attracting the twelve to
sixteen year old market and it's done so
by having built an emotional bond with
its consumers its positions itself as
fun sassy and fresh furthermore by
harnessing the power of a consumer
driven supply network and outsourcing
most of our technical development we can
keep our costs low therefore providing a
competitive price that sits at the lower
end of the industry and although
covergirl is available in the US Canada
and Australia we still consider it to
have a focused low cost strategy because
of its highly focused target market
ultimately covergirl is a trusted best
friend of a younger generation Redlands
business strategy is broad
differentiation we aim to sell our color
cosmetics products on a global scale we
make a clear effort to provide an
attractive product for all and are
constantly trying to develop new
products via a state-of-the-art R&D
center in New Jersey we strive to
deliver a quality good and service worth
the premium pricing we're in the
business of standing out by having a
heavy foot on innovation product
development and advertising now let's go
to the headquarters to see their
corporate strategy at Procter & Gamble
our corporate strategy is growth by
horizontal integration we have acquired
different color cosmetic brands such as
covergirl Max Factor and dolce gabbana
cosmetics in order to target different
markets our corporate organization is
divided into four industries and we
encourage each of these industries
to produce innovation while we provide
the support they need to create these
innovations in more recent years we are
focusing on strengthening our core
businesses and divesting where needed we
are also focusing on creating a cost
focused culture by implementing a
five-year cost savings plan with an
estimated 10 billion dollars in savings
we have made these possible by
implementing strategies such as
outsourcing operations to better focus
on our mission
we have dedicated our NT resources and
funding to develop new innovations into
changing existing product categories and
creating new ones at Procter & Gamble we
provide each industry with the support
and tools needed to succeed Thank You
Gianni next we will analyze Revlon's
corporate strategy hi welcome to Revlon
my name is Tyler I am the head of
corporate strategy here at Revlon we use
related diversification to fuel our
growth we started off small during the
Great Depression 1931 and since then we
have been acquiring companies throughout
the last 80 years it started around the
late 50s when we really started to
implement our corporate strategy we've
acquired dozens of companies since then
the even some that are still around
today
in 1957 required no mark tidy bold in
1957 as well evan-picone in 1962 u.s.
vitamin pharmaceutical corporation in
1967 Mitchum in 1970 Colborne optical
industries in 1976 Armour pharmaceutical
companies in 1977 Louis Howe company in
1978 Mack's faster alan beatrice charles
of the ritz jermaine Montiel almay
lancaster houston you know what you get
the point
we've been acquiring companies over the
last several decades until with 1987 we
were on this huge buying spree but
unfortunately we spent a little bit more
than we could afford so we had to divest
for different divisions in order to get
back on track the good news is that we
recently just got back into our
corporate strategy again and in 2011 we
purchased Mirage cosmetics berry
cosmetics in 2012 and most recently the
coulomb our group into
13 4 660 million dollars in an all-cash
transaction this just shows that we are
dedicated to our corporate strategy that
we put in place early on and we will
continue to grow through related
diversification through acquisitions
thanks for visiting Revlon today if you
have any other questions let me know hey
Mandy
want to go to Walmart to learn about how
Revlon and Procter & Gamble use
point-of-purchase
yeah let's go oMG Taylor Swift wears
covergirl Emma Stone where's Revlon I'm
buying both totally both companies as
well as their competitors use celebrity
endorsements to help sell their products
cover girl chooses younger celebrities
and Revlon chooses older celebrities
which coincides with their target
markets it's very competitive given that
all their competitors are directly next
to them and look this Revlon lipstick is
buy one get one I love how both Revlon
and covergirl are organized by makeup
products all the lipsticks are together
all the face makeup the nail polish it's
so easy to see especially when it's
sorted by shade - the lighting is so
bright to illuminate the brands and make
it easy to see the packaging of
covergirl is so bright and fun it
definitely attracts the younger customer
well of Revlon's packaging is a little
more sophisticated and wearable samples
deals and rebates also encourage the
customer toward their brand I like how
both use merchandising displayed kiosks
to highlight their brands and show new
products look at these double sided
Revlon nail polishes over here in the
standalone display Wow right next to the
cash register some Maybelline mascaras
too bad covergirl and Revlon don't do
this it's such a great method of selling
should I grab one before I check out
you're such an impulsive shopper do it
covergirl and Revlon merchandising
methods are pretty similar in all
drugstores big-box retailers even
specialty stores like Ulta they do a
really good job making their products
look desirable and you need their point
of purchase is clearly very well thought
out and aggressive compared to their
cosmetic competitors given the fact that
there is a 27% growth within the nail
polish industry we think that covergirl
should create a new line of polishes to
cater to the younger market while still
attracting the older market the line
will consist of nail polish strips
at-home gel nail polishes color changing
polishes and magnetic polishes these
polishes will target their typical
younger customer with bright colors and
glitter while also appealing to an older
market with classic colors and nudes
this market offers a great opportunity
for
girl as industry leader OPI dominates
the market with his high prices at $9
per bottle
mostly sticking to classic colors and
gel polishes covergirl will offer lower
priced polishes at between $3 to $5 per
bottle while utilizing their advertising
and marketing capabilities to spread the
word of its new venture another upcoming
trend includes stick-on makeup in the
form of lipstick eye shadow and eyeliner
these will appeal to the younger
customer while we would continue to sell
these and drugstores and big-box
retailers we think they should also be
sold in other retail distributors such
as Claire's justice and icing Procter &
Gamble spends around 2 billion dollars
annually on the research and development
of 27 different products based on this
we estimate that covergirl could allow
up to 75 million dollars to develop this
new line of products Revlon has a debt
to equity ratio of negative 1.99 and
they just spent 660 million in
acquisitions therefore they need to
switch from a growth to a stability
corporate strategy Revlon is trying to
compete against the bigger brands like
L'Oreal but size-wise they are unable to
keep up because they cannot leverage the
company they need to focus on improving
sales to gain a greater market share for
this reason we suggest finding smaller
niche markets and repositioning
themselves towards Hispanics and other
ethnic groups we think Hispanics are a
profitable target market as the growth
rate is four times that of whites in
America and AD companion with Hispanic
celebrity spokespeople such as Eva
Mendes and Penelope Cruz will be
beneficial as well as expanding their
extensive color range with darker shade
palettes
even though Revlon is heavily in debt we
believe that Revlon needs to defend
their market share by investing in
advertising we predict the cost of the
suspended campaign to be 15 million
which is the average cost of a regular
campaign
this will include hiring Hispanic
celebrity endorsements spanish-language
commercials print advertisements in
Spanish as well as social media campaign
even though Revlon has a small marketing
budget compared to its competitors if
they reposition their brand to different
target market they might be able to gain
market share without spending additional
money on advertising they would only
have to allocate 15 million or a portion
of their current advertising expenditure
towards this campaign
in conclusion Revlon small size of 1.3
billion in sales prevents them from
competing in the mass market with Lola
or Estee Lauder however we believe that
by catering towards untapped markets
such as the spanic market Revlon can
gain more market share thank you are
there any questions
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