STRATEGIC MANAGEMENT

CASE STUDY

SUBMITTET TO:

Sir. Ishfaq Ahmed

SUBMITTED BY:

Dur-e-shahwar Butt 681 Sonia Latif 693 Asma Khalid 694 Rafia Riaz 695 Maryam Zahid 697 Bushra Khalid 700 Sadia Qaiser 708

Hailey College of CommerceUniversity of the Punjab

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Table of Contents

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PageTopics

4History

5Vision, Mission

5Financial and business Performance

9Financial strengths

10Environmental analysis

12SWOT analysis

13CPM-Competitive Profile Matrix

14External Factor Evaluation (EFE) Matrix

15Internal Factor Evaluation (IFE) Matrix

16SWOT Matrix

17SPACE Matrix

18Grand Strategy Matrix

18The Boston Consulting Group (BCG) Matrix

19The Internal-External (IE) Matrix

20The Quantitative Strategic Planning Matrix(QSPM)

21Suggestions

History:

Revlon was founded in 1932, by Charles Revson and his brother Joseph, along with a chemist, Charles Lachman, who contributed the "L" in the REVLON name. Starting with a single product - a nail enamel unlike any before it - the three founders pooled their meager resources and developed a unique manufacturing process.

1950:The company began its success with opaque long-lasting nail enamel sold to beauty salons. Revlon sold its nail enamel through department stores and selecteddrugstores.

1960:Revlon contributed directly to the war effort, by manufacturing first aid kits and dye markers for the navy. At war's end, Revlon began to produce manicure and pedicure instruments.

1970:1973 saw the introduction of Charlie® fragrance, designed for a young, working woman market and by the mid 70's, Charlie® was the #1 Fragrance in the world. Revlon sales figures passed the $1 billion mark in 1977.

1980:Growth and innovation led the way for Revlon. In 1985, Revlon was sold to a subsidiary of MacAndrews & Forbes Holdings. In 1987 Almay joined the Revlon lineup.

1990:the 1990's, Revlon revitalized its cosmetics business and strengthened its industry leadership role. Revlon introduced the first transfer resistant lipcolor which led to a full ColorStayTM 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. Revlon again became a public company in 1996, listed on the New York Stock Exchange (NYSE: REV).

Business Description:

Revlon, Inc.. The Groups' principal activities include manufacturing, marketing and selling an array of cosmetics, women's hair color, beauty tools, anti-perspirants/deodorants, fragrances, skincare and other beauty care products. It is a direct and indirect majority-owned subsidiary of MacAndrews & Forbes Holdings Inc. The Group's products are sold worldwide and marketed under brand names, including the Revlon ColorStay, Revlon Super Lustrous and Revlon Age Defying franchises, as well as the Almay brand, including the Almay Intense i-Color and Almay Smart Shade franchises, in cosmetics; Revlon ColorSilk in women's hair color; Revlon in beauty tools; Mitchum anti-perspirants/deodorants; Charlie and Jean Nate in fragrances, and Ultima II and Gatineau in skincare.

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Vision:

Revlon Inc. Vision is “Glamour, Excitement and Innovation through High-quality Products at Affordable Prices.”

Mission:

Revlon Inc. mission is to emerge as the leader in cosmetic and personal care throughout the world. Revlon takes pride in manufacturing the top skin care and strives to please young and older woman alike.

Evaluation of mission statement:

Customer: it is customer –oriented as it focus to fulfill the needs of the customer. Products and Services: Revlon is a company leader in the cosmetic and personal

products industry. Markets : the firm is successful in market as it has implemented an aggressive R&D

investment. Technology: no Concern of survival, growth and profitability: yes Philosophy – It focuses on global expansion.     Self concept – yes Concern of public image = yes Concern of employees –no

Financial and business performance in last 3 years:

key Revlon, Inc. Financials

Company Type Public -(NYSE: REV)Headquarters

Fiscal Year-End

December

2009 Sales (mil.)

$1,295.9

2009 Employees

4,800

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Revlon, Inc. Stock Quote (NYSE: REV)

Latest

06/03/10 12:43:49 ESTChange ($) Change (%) High Low

$12.87  -0.180  -1.379 $13.41 $12.70

Quotes delayed 15 minutes for NASDAQ, 20 minues for NYSE and AMEX. Market Data provided by Interactive Data. Powered and Implemented by Interactive Data Managed Solutions.

Prev. Close $13.05 Open $12.92High $13.41 52 Week high $19.87Low $12.70 52 Week Low $4.29Volume 90,381 Market Cap ($ mil.) 0,636EPS $0.73 P/E Ratio 17.88

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Revlon, Inc. Income Statement:

All amounts in millions of US Dollars except per share amounts.

Dec 09 Dec 08 Dec 07

Revenue 1,295.9 1,346.8 1,400.1

Cost of Goods Sold 474.7 490.9 522.9

Gross Profit 821.2 855.9 877.2

Gross Profit Margin 63.4% 63.6% 62.7%

SG&A Expense 629.1 709.3 748.9

Depreciation & Amortization 60.1 91.9 3.3

Operating Income 170.8 155.0 121.0

Operating Margin 13.2% 11.5% 8.6%

Nonoperating Income (21.5) (6.8) 8.5

Nonoperating Expenses (92.5) (119.0) --

Income Before Taxes 56.8 29.2 (8.1)

Income Taxes 8.3 16.1 8.0

Net Income After Taxes 48.5 13.1 (16.1)

Continuing Operations 48.5 13.1 (16.1)

Discontinued Operations 0.3 44.8 --

Total Operations 48.8 57.9 (16.1)

Total Net Income 48.8 57.9 (16.1)

Net Profit Margin 3.8% 4.3% -1.1%

Diluted EPS from Total Net Income 0.94 1.13 (0.30)

Revlon, Inc. Balance Sheet:

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All amounts in millions of US Dollars except per share amounts.

Assets Dec 09 Dec 08 Dec 07

Current Assets

Cash 54.5 52.8 46.8

Net Receivables 181.7 169.9 202.7

Inventories 119.2 154.2 169.1

Other Current Assets 48.2 51.6 52.6

Total Current Assets 403.6 428.5 471.2

Net Fixed Assets 111.7 112.8 113.7

Other Noncurrent Assets 278.9 272.1 304.4

Total Assets 794.2 813.4 889.3

Liabilities and Shareholder's Equity Dec 09 Dec 08 Dec 07

Current Liabilities

Accounts Payable 82.4 78.1 89.7

Short-Term Debt 13.9 19.4 8.6

Other Current Liabilities 213.0 225.9 250.4

Total Current Liabilities 309.3 323.4 348.7

Long-Term Debt 1,186.2 1,310.2 1,432.4

Other Noncurrent Liabilities 332.3 292.6 190.2

Total Liabilities 1,827.8 1,926.2 1,971.3

Common Stock Equity (1,033.6) (1,112.8) (1,082.0)

Total Equity (1,033.6) (1,112.8) (1,082.0)

Shares Outstanding (thou.) 51,894.6 51,894.6 51,894.6

Revlon, Inc. Cash Flow Statement:

All amounts in millions of US Dollars except per share amounts.

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Dec 09 Dec 08 Dec 07Net Operating Cash Flow 110 22 4Net Investing Cash Flow (12.7) 100.5 (17.6)Net Financing Cash Flow (97.6) (112.3) 24.6Net Change in Cash 1.7 7.7 11.4Depreciation & Amortization 60.1 91.9 3.3Capital Expenditures (15.2) (20.7) (20.0)

Financial Strength:

Company Industry SectorQuick Ratio 0.83 1.37 1.05Current Ratio 1.21 1.73 1.40LT Debt to Equity -- 19.71 34.89Total Debt to Equity -- 31.18 53.27Interest Coverage 1.31 1.03 0.78

Profitability Ratios: Company Industry Sector

Gross Margin 63.61 6.24 7.43

Gross Margin - 5 Yr. Avg. 62.25 56.66 34.99

EBITD Margin 16.92 -- --

EBITD - 5 Yr. Avg 8.36 13.10 9.55

Operating Margin 12.49 1.52 2.79

Operating Margin - 5 Yr. Avg. 6.65 8.35 6.32

Pre-Tax Margin 4.11 1.50 2.58

Pre-Tax Margin - 5 Yr. Avg. -3.50 8.39 6.46

Net Profit Margin 2.93 0.97 1.86

Net Profit Margin - 5 Yr. Avg. -4.42 5.26 4.16

Effective Tax Rate 28.71 3.08 5.52

Efficiency:

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Company Industry Sector S&P 500Revenue/Employee 270,438 1,293,032 2,678,755 587,392Net Income/Employee 7,917 156,251 75,411 69,569Receivable Turnover 7.90 0.80 6.29 8.27Inventory Turnover 3.52 0.31 1.32 6.42Asset Turnover 1.67 0.13 0.20 0.50

Management Effectiveness:

Company Industry Sector S&P 500Return on Assets 4.90 1.46 1.53 5.30Return on Assets - 5 Yr. Avg. -6.41 5.92 4.33 5.33Return on Investment 8.07 2.08 2.22 6.79Return on Investment - 5 Yr. Avg. -10.91 8.69 6.38 6.84Return on Equity -- 4.32 4.80 14.73Return on Equity - 5 Yr. Avg. -- 12.55 9.54 10.11

Environmental analysis:

(a).1.Internal Analysis:The Revlon Company’s goal is to provide glamour, excitement and innovation to consumers

through high quality products at affordable prices. Lately the company has been experiencing many challenges to their success. Some of these challenges are global economic problems, increasing competition, and debt concerns from within the company. Despite all of these challenges Revlon has seen some strong growth but have also been experiencing some strong challenges. Revlon has many different categories of which it sells products and they are skincare, cosmetics, personal care, fragrance, and professional products. Revlon has many recognizable names within these categories and the company’s ultimate goal is to emerge as the dominate cosmetics and personal care firm through the twenty-first century.

2.Current Corporate and Business Strategies:

Revlon’s believe is in individual values and the integrity of the firm and its actions. The company established a strong team of experienced managers that work to achieve leadership in the cosmetics and skincare industry. The company established the Revlon Learning Center and training programs to communicate its principles to employees.

(b).External analysis:

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Opportunities:

There is a lot of room for international expansion. revlon is a well-known brand, and

therefore once it enters new markets it should be able to establish itself without much difficulty.

revlon owns several brands, which allows it to reach out to customers of all income

ranges. Furthermore, it supplies everything from makeup to fragrances to hair products.

revlon is a successful company, and can afford to take additional brands under its

wings. This can prove to be especially beneficial if it buys out brands in foreign markets, such as China and Africa, to be able to increase its market share.

revlon has the prestige and brand loyalty, to be able to expand further into the

fashion industry, by introducing products like handbags or jewellery

Revlon’s reputation and credibility allows it to sell products at a higher price,

Threats

Intense competition is the major thereat for revlon. Therefore, it needs to be aware of what the competitors are doing, and respond accordingly to retain its market share.

Inadequate research and development, and testing can result in lawsuits, if a product impacts customers adversely.

Because revlon sells products in different parts of the world, restrictive trade policies of other countries may become an issue. Also, exchange rate fluctuations can impact the company’s bottom line profit considerably.

SWOT analysis:

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Strengths:

Cost advantage Asset leverage Effective communication High R&D Innovation Online growth Loyal customers Market share leadership Strong management team Strong brand equity Strong financial position Supply chain Pricing Real estate Reputation management Unique products

Weeknesses:

Bad communication Diseconomies to scale Not innovative Not diversified Poor supply chain Weak management team Weak real estate Weak, damaged brand Ubiquitiouegory, products, service

Opportunities: Acquisitions Asset leverage Financial markets (raise money through debt, etc) Emerging markets and expansion abroad Innovation Online Product and services expansion Takeover

Threats:

Competition Cheaper technology

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Economic slowdown External changes (government, politics, taxes, etc) Exchange rate fluctuations Lower cost competitors or imports Maturing categories, products, or services Price wars Product substitution

Strategy formulation framework:

1. Input stage:

i). CPM-Competitive Profile Matrix:

  Revlon L’Oreal Estee lauderCritical Success Factors

Weight Rating Weighted Score

Rating Weighted Score

Rating Weighted Score

Price 0.15 3 0.45 4 0.60 3 0.45

Financial Position

0.10 3 0.30 4 0.40 4 0.40

Consumer Loyalty

0.10 4 0.40 4 0.40 3 0.30

Advertising 0.10 3 0.30 3 0.30 4 0.40

Product Quality

0.10 4 0.40 3 0.30 4 0.40

Innovation 0.15 3 0.45 3 0.45 3 0.45

Market Share 0.10 4 0.40 2 0.20 3 0.30

Management 0.06 3 0.18 3 0.18 3 0.18

Global Expansion

0.15 3 0.45 4 0.60 4 0.60

Total 1   3.33   3.43   3.48

ii). External Factot Evaluation (EFE) Matrix:

External key Weight Rating Weighted score

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factorsOpportunitiesIst mover advantage

.10 4 .40

New executive team appointed to boost sales

.08 3 .24

Improved cash flow

.05 2 .10

Create uniform images

.08 3 .24

Product and service expansion

.10 4 .40

Threats Weight Rating Weighted score

Competition .15 3 .45

Cheaper technology

.15 2 .30

Improved cash flow

.10 2 .20

Price war .12 3 .36

Exchange rate fluctuation

.07 3 .21

Total 1.00 2.9

iii). Internal Factor Evaluation (IFE) Matrix:

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Key Internal Factors Weight Rating Weighted Score

Strengths

Strong brand name, image and reputation.

0.10 4 0.40

Large market share. 0.10 3 0.30

Strong global presence. 0.05 2 0.10

Revlon Plan to Win focuses on people, products, place, price and promotion

0.12 4 0.48

Strong financial performance and position.

0.08 3 0.24

Introduction of new products. 0.10 4 0.40

Customer focus 0.15 4 0.45

Weaknesses

Diseconomies to scale 0.10 3 0.30

Weak management team 0.15 2 0.30

No innovation 0.05 3 0.15

Total 1.00 3.12

2. MATCHING STAGE:

i).SWOT Matrix:

Strengths Weaknesses

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1. Strong brand name, image and

reputation.

2. Large market share.

3. Strong global presence. .

4. Revlon Plan to Win focuses on

people, products, place, price and

promotion

5. Introduction of new products.

6. Customer focus

7. Strong performance in the global

marketplace.

1.Customer losses due to

fierce competition.

2.Diseconomies to scale

3.Weak management team

Opportunities S-O Strategies W-O Strategies1. Low cost that will

attract the customers.2. Ist mover advantage.3. New executive team to

boost sales.4. Product and service

expension.5. Improved cash flow.

1. Expansion in market share by more investments in Asia (S2, O1).2. Focus on Plan to win to attract customers and expansion in other countries (S4,S5 O4).

1.Customer looses because of fierce competition.(O1,W1)

Threats S-T Strategies W-T Strategies

1.Excahnge rate fluctuation.

2.Competition 3.Price war 4.Cheaper technology

1.Provide new product and keep innovation (S5, T2).

1.Return on investment reduces.(W2,T1)

ii). SPACE Matrix:

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Conservative Aggressive

CompetitiveDefensive

FS

ISCA

ES

Financial Strength Rating Environmental Stability RatingReturn on investment 4 Rate of inflation -2Leverage 3 Demand Changes -3Net Income 4 Price Elasticity of demand -1EPS 4 Competitive pressure -4ROE 3 Barriers to entry new

markets-2

Cash Flow 4 Risk involved in business -2Average 3.67 Average -2.33    Y-axis 1.37Competitive Advantage Rating Industry Strength RatingMarket share -1.00 Growth potential 5Product Quality -1.00 Financial stability 5Customer Loyalty -2.00 Ease of entry new markets 4Brand and image -3.00 productivity 3

average -1.75 average 4.25  X-axis 2.5

Directional vector point is :( 2.5, 1.37)

iii).Grand Strategy Matrix:

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Quadrant II Quadrant I

Quadrant IVQuadrant III

Rapid Market Growth

Strong CompetitivePosition

WeakCompetitive

Position

Slow Market Growth

Question Marks

Cash Cows Dogs

Relative Market Share Position

IndustrySales

GrowthRate

Stars

Revlon

The Internal and External Strategic Position and Action Evaluation shows that the company has a weak competitive position, a negative growth in a stable industry.

iv).The Boston Consulting Group (BCG) Matrix:

The Boston Consulting Matrix demonstrates that the company's market share is in a medium position relative to the industry market shar

v).The Internal-External (IE) Matrix:

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The IFE Total Weighted Score

Strong Average Weak

3.00 to 4.00 2.0 to 2.99 1.0 to 1.99

4.0 3.0 2.0 1.0

High

3.0 to 4.0

3.0

Medium

2.0 to2.99

2.0

Low

1.0-1.99

1.0

3. DECISION STAGE:

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I

II

III

IV V VI

VII VIII IX

Revlon

The Quantitative Strategic Planning Matrix (QSPM):

StrateStrategy 1

Building strong brands.

e Strategy 2

Developing organizational capability loping organizational capability

Key Internal Factors Weight AS TAS AS TASStrengths Strong brand name, image and reputation

0.10 4 0.40 4 0.40

Large market share 0.10 3 0.30 2 0.20

Strong global presence 0.05 3 0.15 2 0.10

Strong financial performance and position

0.10 2 0.20 3 0.30

Introduction of new products 0.10 3 0.30 4 0.40

Customer focus 0.15 4 0.45 4 0.60

focuses on people, products, place, price and promotion

0.10 4 0.40 3 0.30

Weaknesses:

Diseconomies to scale 0.10 1 0.10 3 0.30Weak management 0.15 2 0.30 2 0.45No innovation 0.05 3 0.15 3 0.15SUBTOTAL 1.00 2.75 3.2

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Strategy 1

Building strong brands.

Strategy 2

Developing organizational capability

Key External Factors Weight AS TAS AS TAS

OpportunitiesIst mover advantage 0.10 2 0.20 3 0.30

Product and service expension 0.12 4 0.48 3 0.36

Emerging markets and expansion abroad 0.15 3 0.45 2 0.30

Growth of the industry 0.10 3 0.30 3 0.30

Threats

Exchange rate fluctuation 0.10 2 0.20 2 0.20Price war 0.09 3 0.27 3 0.27

competition 0.12 3 0.36 4 0.48Cheaper technology 0.10 2 0.20 2 0.20Product substitution 0.12 2 0.24 2 0.24SUBTOTAL 1.00 2.7 2.65SUM TOTAL ATTRACTIVENESS SCORE 5.45 5.85

Suggestion:

The company should continue to build strong brands by focusing on innovative, high-quality, consumer-preferred brand offering,appropriate levels of advertising and promotion; and superb execution with retail partners.they should also develop organizational capability through attracting, retaining and rewarding highly capable people and through performance management, development planning, succession planning and training.

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