Business Strategy of Revlon Corporation - Case Study Example

Revlon Corporation Analysis Industry Rivalry Analysis using Porter`s five factors Revlon does not operate in a vacuum. It competes and deals with other companies in the cosmetic products industry. To be able to fully analyse an industry it is important to apply a tool that will give this information in detail.  In this case we will apply porter's five forces framework which is a tool used for analysing competition in a business (Porter, 2008).  It is based on the Industrial Organisation (IO) economics where it derives its 5 forces that determine the intensity of competition within an industry.  This intensity thereby defines the attractiveness of that industry which also goes hand-in-hand with the profitability of the same industry.  The clear definition of unattractive industry is whereby the 5 forces will affect the overall profitability of that industry.  An industry that is approached by pure competition is what is defined as the most “unattractive” industry whereby the available profits are driven to normality levels (Porter, 2008).  .  This model is associated with its creator who is known as Michael E. Porter from Harvard University. Porter defined the forces in this model as a microenvironment so as to differentiate it from the general used term macroenvironment. This forces are those that are touchy to a company whereby they affect its capability to deliver to its customers thereby influencing its profits.  Where a change is recorded in any of the forces the company is forced to reassess the operating environment so as to remain competitive in that industry.   An industry being attractive does not necessarily mean that every business within that industry will make profits.  Businesses are capable of applying their business model, network and even their core competencies in a manner that allows them to make more profits than their industry average (Porter, 2008). A good example of an industry that is unattractive though some businesses still make good profit is the airline industry.  Profitability in this industry is generally low due to the underlying structure and the high cost of fixed assets.   These factors make it hard to enter into this industry.  However, some airlines e.g. Virgin Atlantic have been able to maximize sales and reduce costs and thereby emerging profitable than the industry. Threat of substitutes This one is considered to moderately affect the existence of Revlon.  Of late many people have preferred to use natural products.  Many people have been raising concerns about the amount of chemical found in cosmetics.  This has led to the creation of many natural cosmetic products.  Revlon produces chemical products, and therefore this poses a moderate threat.  It is also important to note of the increasing growth in "cosmeceutical" Offerings. Another issue affecting substitutes is not only the availability of these natural remedies but also the availability of a distribution network.  Through the use of social media, it is now possible for anybody to enter into the cosmetic industry so long as they have the product.  Many of these natural products are sold online through the use of peer influence.  People share on how they have discovered a new remedy to a certain condition e.g. acne and refer the offence to new shops. All these changes go into reducing the market for Revlon's products.  Threat of entry The main goal of Revlon is to grow to all corners of the globe.  This comes with its own challenges.  International economics come up with a unique challenge especially when you dealing with cosmetic products. It is obvious that emerging markets in Asia and Eastern Europe are in dire need of mass marketers.  However, these markets are uncertain for Operations. Another important factor to consider is the emerging of a middle class in Africa, Asia, Latin America and Europe.  This creates a market for personal care products. It is crucial to note that expansion is not always the best strategy for a business.  An expansion strategy needs to have been well thought of before it is executed.  This is due to the fact that expansion uses a lot of company funds. Failure in an expansion strategy could even lead to the downfall of the company. The bargaining power of buyers Social media has become an important tool in this century especially when it comes to business.  Consumer relationships are defined and developed through social media. People buy items with the influence of their peers.  This is more so in the cosmetic industry.  It is crucial to note that the cosmetic industry is no longer a woman industry alone.  There has been growth that has been witnessed in male-oriented products in the hygiene and grooming section.  The worldwide demand for deodorants and antiperspirants, which are mainly used by men, is expected to grow by 75.3% by the year 2021, (R, 2016). Another emerging market targeting men is products on improving the shaving process. Revlon can look to lead in this front. The number of companies in the cosmetic industry has also increased in the recent past.  Due to this increase competition has now moved from quality to quantity and pricing.  The introduction of e-commerce in this industry is also another change that has happened in the recent past.  Due to these changes buyers are now more informed and therefore can bargain better than they could in the past. Buyers are even now able to compare prices online without having to move from the houses. All this has made it easy for the buyers to choose between the available products in the market. Competition Rivalry Social media has been used in the past to conduct certain campaigns by Revlon's competitors.  There are hundreds of brands and products cosmetics/ skincare industry making it difficult to eat again or even sustain a competitive advantage. Some of the competitors to Revlon include P&G, L`Oreal, Avon, Estee Lauder and Unilever which are also present in many countries (Kell, 2016).  These companies also have many years of experience making this industry a difficult one. One cannot also ignore the presence of traditional remedies cosmetics and skincare.  This also occupies a certain market is difficult to enter into. Competitive Strategies We will use the space matrix, which can be defined as a management tool that is used to analyse a company. It determines the kind of strategy a company should undertake to improve its performance.  SPACE is an acronym for strategic position & Action evaluation matrix.  It focuses on the strategic formulation especially those related to the competitive position of a company.  It can be used as a basis conducts other analyses including SWOT analysis, BCG matrix model, assessing strategic alternatives and industry analysis. When conducting the industry analysis, it was clear that having a competitive advantage is crucial in the cosmetics and skin care industry. SPACE matrix is the best positioned for coming up with a strategy aimed at improving the competitive strategy of Revlon, therefore, its use (Varga, 2009). Through the application of the SPACE matrix, it is clear that having a huge market share is not necessarily the strategy that a firm requires. When using SPACE matrix a business needs to look into its clients and competitors and determine who is giving the best customer value and what it can do to counter this (Varga, 2009). When applying the SPACE matrix one compares the internal strategic dimension with those of other companies and the external dimension as well. Internally, one checks at the competitive position and the financial position. Competitively, Revlon was found to be strong in its corporate social Responsibility and Brand recognition. In this front the company scored poorly due to its continuous loss in the market share. The company was also found to have a small advertising budget when compared to its competitors. Financially the firm was strong in the leverage front though at the same time it was found to be burdened by the huge long term debt. Externally one considers the industrial position and the stability position. In terms of the industry position the industry performed well due to the growing population and lost points due to the increasing competition. As per the stability position the industry is stable due to the emergence of youth and teen market. The industry was found wanting due to the ongoing global financial crisis and the aging of the US cosmetic consumers. Y-axis: CP + IP = -3.3 + 2.25 = -1.05 X-axis: FP + SP = 3 + (-2.8) = 0.2 Therefore XY= (-1.05, 0.2) Recommendations Through the use of SPACE matrix, it was found that the company has a middle strategic positioning. Based on this results the company should apply a conservative strategy. It should carry out campaigns aimed at consolidating its position as opposed to trying to get into new markets thereby growing its market share. There is stiff competition, and therefore the company should focus on maintaining what it already has. The company should focus on Market penetration in the market where it already has the presence. Another sphere that the company should focus on is product development together with concentric diversification. This will enable the firm to maintain its current market share while at the same time achieve market development. References Kell, J. (2016, March 28). Revlon just named Fabian Garcia its new CEO. Retrieved September 29, 2017, from http://fortune.com/2016/03/28/revlon-finds-new-ceo/ Peyrefitte, J., & David, F. R. (2006). A content analysis of the mission statements of United States firms in four industries. International Journal of Management, 23(2), 296. Pwc, (n.d). Global Economy Watch – Projections Retrieved October 17, from https://www.pwc.com/gx/en/issues/economy/global-economy-watch/projections.html R. (2016, February 04) Global market study on deodorant and antiperspirant ingredients Retrieved October 18, 2017, from goo.gl/PqpoZS Revlon Inc A. (n.d.). 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