PROBLEM: For the past years, Revlon continues to launch or reintroduce new product lines but in effect it does not generate sufficient income to cover the expenses of the company incurring losses and resulting to increasing liability and a continues restructuring program. These things would not have happened if the Marketing and Research and Development Departments which are among the cost centers of the company attentively take necessary actions by way of responsible expending of money and by creating effective marketing strategies and product development.
AREAS OF CONSIDERATION:
Revlon is an American company that sells products for skin care, cosmetics, fragrance, personal care and professional products. It was founded in 1932 by Charles & Joseph Revson and Charles Lachmann, who contributed the ‘L’ in the REVLON name. The company started with only one product – nail enamel. These are sold door-to-door at salons, and eventually distributed widely in select drug stores and department stores in the 1930s. After World War II, they began to produce manicure and pedicure instruments. Revlon’s successful international presence in the 1960s was because of the “American Look” campaign featuring known U.S. models. The Charlie fragrance line was introduced in the early 1970s and the sales surpassed $1 billion by 1977. Michel Bergerac took over the company after the death of Charles Revson. By 1985, two-thirds of Revlon’s sales were health care products and the company was losing ground in cosmetics. It is then sold to a subsidiary of MacAndrews & Forbes Holdings, Inc. which Ronald Perelman is the chairman and chief executive officer.
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The company was taken public and traded on the New York Stock Exchange (NYSE) in 1996. He refocused the company to become an internationally known manufacturer and seller of cosmetics and fragrances. The acquisitions in South America increased the distribution and manufacturing capabilities of Revlon. To reduce expenses, the company’s worldwide professional products line was sold in March 2000. The company also closed its in-house advertising division and the Colorama brand of cosmetics was sold to L’Oreal. Despite financial struggles, Revlon continuously reintroducing or launching new product lines. Such as Ultima II brand, Charlie perfume, Moisturous Lipcolor, Moonlit Mauve color collection and Almay Bright Eyes. After two years of research and development, Revlon launched Vital Radiance line for older women in January 2006.
However, the new brand was not well received by the market. It was discontinued in September 2006. Its negative impact is approximately $110 million. Revlon planned the launch of a new fragrance called Flair but delayed it until debt could be reduced. David Kennedy as newly selected Chairman and CEO in 2006 made decisions and strategies like cost cutting by reducing the workforce of the company and organizational restructuring. Moreover, the current assets and total assets decreased from 2005-2006 while the total liabilities increased. Their net sales are decreasing relative to the consistent incurrence of losses.
ALTERNATIVE COURSES OF ACTION:
1. Concentration on international markets
2. Diversification of operation or develop joint ventures
3. Presence of Revlon’s too many brands
4. Selling the company to Perlman or to a rival firm
RECOMMENDATION:
Among the four alternatives that Revlon can pursue in dealing with its debt problems and trying to continue its strategy of innovation, product development and globalization, the concentration of its efforts on international markets given the low value of dollar and competitive pressures has a more realistic and closer solution to the main problem of Revlon with regards to the Marketing and Research and Development Departments. Looking at the international portion of the total net sales of the company from 2004-2006 which increases by $62 million as compare to the decreasing sales in United States by $27.8 million, this shows that Revlon has an opportunity in the international markets. Currently, majority of their products are sold in United States, Japan, Canada and Europian countries which comprises less than 20% of world’s population. With the only aforementioned countries, the sales from these countries already occupy the large portion of their total sales so how much more if Revlon would expand their international markets by entering or giving an enough effort to the available market in other countries.
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Also, as mentioned in the case, there is a significant opportunities for companies in Asian countries which comprises the 60% of world’s population. In relation, it is stated that “Women in China, India and the Middle East are rapidly growing interested in purchasing more cosmetics and fragrances.” Thus, with the support of these facts, the concentration on international markets could be given to the Asian countries. The low value of dollar is an opportunity to Revlon because as its value decreases, Revlon’s products become cheaper which will make it sounds affordable by women, teenagers and professionals. When it becomes affordable, products could possibly generate bigger sales which may compensate the expenses of the company and at the same time, they will be able to pay its debt.
Relative to the chosen alternative of the company, there are some recommendations which could be formulated in order to see how the plan of concentration on international markets will be given an adequate plan with the expectation of positioning Revlon’s products in different markets. It is also good to consider that Revlon has already established its name in the market. The present focus now is how to make Revlon more established and be able to sustain its life in its industry. The vision of the company mentioned “at affordable prices.” This is contradictory to the fact that their prices are much higher as compare to its competitors. Thus, it is better to say “at reasonable prices.”
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The ‘reasonable’ word does not expressly say high or low prices but the price of the product compensate the quality and benefits that the product delivers to its users. Revlon has many brands which in such situation it is very recommendable that the company should engage in ‘growth-share matrix.’ In this matrix, each strategic business unit of the company will be evaluated according to its market growth rate and relative market share – SBUs could be evaluated as star – need heavy investment to finance rapid growth, cash cow – need less investment to hold their market share, questions mark – require lot of cash to hold their share (either subsequently be star or be phased out) and dog – generate enough cash to maintain but do not promise to be large sources of cash.
After evaluating current businesses, Revlon should consider developing strategies – market penetration, product development, market development and diversification. Then, they can now review or create new marketing mix – 7Ps – product, price, promotion, place, people, process and physical evidence. But of course, they should have a clear market segment and market positioning. The abovementioned engagements/recommendations highly needed Marketing and Research and Development Departments efforts.
With regards to the rumor mentioned in the case and in relation to the above discussion, one good strategy is adopting Avon’s door-to-door sales tactics in China. Despite of the busy environment of China, Chinese are particular with cosmetics, skin care and personal care products. Also, in 1996, Revlon got the approval of manufacturing, distributing and marketing its products in China. This is one advantage for Revlon as support to their rumored plan for marketing strategy. It was mentioned that one of the preferred ways in purchasing cosmetics and other related products is from door-to-door sellers. It is more advantageous as compare to the current way of purchasing through Internet.
It can establish a good relationship between the customer and the product itself as it become more reachable through the sale representatives. A personal intimacy can be established between the representatives and their customers as it provides high level of service. It is somehow a reciprocal relationship between Revlon and its sale representative as they both generate income. Thus, direct selling strategy can help individuals earn extra income or for the other, it provides a good and flexible job with a minimal capital investment.
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Also, as the environment gets busy and everyone gets busy too, direct selling can provide a less hassle shopping for the many like those professionals, trendy and on-the-go women. Direct selling can also help answer the fact that cosmetics/personal care industry is not only for women but also for men as they become more conscious in improving their appearance through making direct selling brochures a shop for all – teens, youngs, adults women and men. However, this requires a careful study as it is the first time that they will enter such strategy and considering the competition pressure like Avon which is number one direct seller of cosmetics and beauty products in the world.
