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.