Strategic Management Procter and Gamble

Summary

This 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

• 📈 The color cosmetic industry is characterized by a few major manufacturers dominating the market, leading to moderate buyer power.
• 🛍️ 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.
• 🧱 Suppliers, such as chemical, mineral, and packaging companies, have moderate bargaining power due to the size and market dominance of cosmetic manufacturers.
• 🔄 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.
• 🚧 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.
• 💄 Intense rivalry within the industry is driven by high advertising, promotion, and price wars, although slowed by slow growth and lack of differentiation.
• 🚚 Revlon's core competency lies in its efficient inbound logistics, just-in-time inventory, and integrated business planning, reducing inventory and forecast errors.
• 🔬 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.
• 🔄 Procter & Gamble's core competency is its consumer-driven supply network and collaborative planning, which allows for responsive and accurate demand forecasting.
• 🎖️ Procter & Gamble's business strategy includes horizontal integration, targeting different markets with acquired brands, and a focus on cost savings and innovation.
• 🌐 Revlon's corporate strategy is based on related diversification through acquisitions, aiming to grow by acquiring companies in the cosmetics and related industries.
• 💡 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

00:00

📈 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.

05:00

🚀 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.

10:01

💄 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.

Keywords

💡Procter & Gamble

Procter & Gamble (P&G) is a multinational consumer goods corporation known for its wide range of brands in various product segments. In the context of the video, P&G is analyzed as a major player in the color cosmetics industry, with Covergirl being one of its successful brands. The company's strategy, including its supply chain and branding, is discussed to illustrate its competitive advantage.

💡Revlon

Revlon is a global cosmetics, beauty products, and fragrance company. The video discusses Revlon's core competencies, such as its manufacturing and supply chain optimizations, as well as its corporate strategy of related diversification through acquisitions. The company's efforts to innovate and compete in the market are highlighted.

💡Five Forces Analysis

This is a framework used to analyze the competitive intensity of an industry and the profitability of companies within it. In the video, the Five Forces Analysis is applied to the color cosmetics industry, examining the power of buyers and suppliers, the threat of substitutes, the barrier to entry, and the intensity of rivalry.

💡Buyer Power

Buyer power refers to the ability of buyers to influence the terms of purchase. In the video, it is mentioned that major retailers have moderate buyer power due to their ability to negotiate with manufacturers like P&G and Revlon, but the dominance of these manufacturers also limits this power.

💡Supplier Power

Supplier power is the ability of suppliers to influence the terms of sale. The script explains that suppliers of raw materials for cosmetics have moderate power, as they are smaller compared to the large manufacturers, but they still maintain some influence due to the specificity of their products.

💡Substitutes

Substitutes are products or services that can replace another. The video mentions that there are few substitutes for color cosmetics, such as self-tanning products or Botox, but the high demand for cosmetics keeps the threat of substitutes low.

💡Barriers to Entry

Barriers to entry are obstacles that prevent new firms from entering an industry. The script describes how established companies like P&G have high economies of scale and established distribution channels, making it difficult for new entrants to compete.

💡Rivalry

Rivalry refers to the competitive struggle among existing firms in an industry. The video discusses how rivalry in the cosmetics industry is moderate due to high advertising, promotion, and price wars, despite the lack of differentiation and slow growth.

💡Core Competency

A core competency is a strength or capability that an organization possesses, which enables it to provide a unique product or service. The video highlights Revlon's manufacturing and logistics as core competencies, which give them an advantage in the market.

💡Point-of-Purchase

Point-of-purchase refers to the location or display where a consumer makes the final purchasing decision. The video describes how both Revlon and P&G use celebrity endorsements and strategic product placement in stores to attract customers and increase sales.

💡Corporate Strategy

Corporate strategy is the direction and scope of an organization, including its long-term actions and performance. The video outlines P&G's strategy of horizontal integration through acquisitions and Revlon's strategy of related diversification, both aimed at growth and market expansion.

💡Market Share

Market share is the portion of the total market for a particular product or service that is controlled by an individual company. The script suggests that Revlon, despite its debt, should focus on gaining market share by targeting niche markets like Hispanics and investing in advertising.

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