Estee Lauder Company Strategic Analysis

30 June 2012

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Table of Contents
Introduction…………………………………………………………………………………………………………….3

Estee Lauder’s History………………………………………………………………………………………………4

Estee Lauder’s Product Mix……………………………………………………………………………6
Competitors…………………………………………………………………………………………………6

General Strategy……………………………………………………………………………………………………..7

Target

Market…………………………………………………………………………………………………………7 Strengths………………………………………………………………………………………………………………8 Weaknesses…………………………………………………………………………………………………………….9

Threats ………………………………………………………………………………………………………………..10 Opportunities……………………………………………………………………………………………………….11

Financial Analysis…………………………………………………………………………………………………..13

Estee Lauder’s Gross Profit Margin(2010-2012)………………………………………………13
Estee Lauder’s Total Net Income(2010-2012)………………………………………………….13
Comparison with Competitors(2012)……………………………………………………………..13

Future Goals of Estee Lauder…………………………………………………………………………………..14 References…………………………………………………………………………………………………………….15 .

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Introduction

This research paper will explore the Estee Lauder company. This paper will include the history of Estee Lauder, and how Estee Lauder started in the United States, and now has become one of the most popular markets for beauty care in and out of the United States. This paper will give the reader a strategic analysis of the company. The paper will explain the competitive advantage, financial attributes, along with strengths and weaknesses, growth opportunities, and future goals of Estee Lauder. The paper will discuss Estee Lauder’s competitors, and how Estee Lauder continues to overcome and strive for more prestige beauty care.

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History
Estee Lauder is a manufacturer and marketing company for prestige skincare, makeup, fragrance and hair care products. The headquarters of the company is in the Manhattan area of New York City, New York. Estee Lauder began in 1946 when Joseph Lauder and his wife Estee Lauder (Josephine Ester Mentezer) began producing cosmetics in New York City. In the beginning they only had four products. These four products included a Super-Rich All Purpose Creme, Creme Pack, Cleansing Oil, and Skin Lotion. Mrs. Lauder sold these four products in salons and hotels in the New York area. Within two years, they established their first department store account in Saks Fifth Avenue in New York. Their market idea of gift with purchase, made a way for Estee Lauder to promote more of their product by giving sample sizes of cream based powder with their purchase. A new creation came about and selling their famous face creme made with an whole egg, Estoderme, which was made in 1951. Estoderme also was being sold at Saks Fifth Avenue in New York.

In 1953, Youth Dew was created, it was a bath oil, since in this time, perfumes were given as gifts to women, women were not buying for themselves outright. With the creation of Youth Dew, if gave the women a sense of smelling good, without feeling guilty. In 1959, Evelyn marries Leonard Lauder, and becomes part of the family business. Evelyn Lauder starts education programs for beauty advisers, a must have in this business.

Estee Lauder did well over the next fifteen years, and in 1960 they went global with their first international account in the London department store Harrods. In 1961 they open an office in Hong Kong. In 1964, they started Aramis Inc., which is a line that produces products for men. These products include colognes and grooming items. In 1965, the first factory in Oevel, Estee Lauder5

Belgium becomes open, and gives Estee Lauder an international step to flourish. In 1967, they produced a second line for men that included skin care. In 1968, Estee Lauder launches, Clinique. It is the first dermatologist created prestige beauty brand, with 117 products. In the seventies, 1974, Estee Lauder hired photographer Irving Penn to shoot the famous “Twice a day” ad for the Clinique Line. In 1979, Prescriptives is created. In 1982, Estee Lauder creates the first overnight creme care for anti-aging, being named, Night Repair. In 1985, Beautiful became known. It was a fragrance that was made from 2,000 fresh flowers, and hit in the top 10 at this time, and still remains one of the most favored fragrances. In 1989, Estee Lauder opens their first perfumery in Moscow, Soviet Union. In 1990, Origins is created.

It is the first wellness brand in the United States. In 1992, Evelyn Lauder and Alexandra Penney create the Pink Ribbon to assign it with breast cancer, and make everyone aware of this cancer. The BCA campaign distributes 1.5 million pink ribbons across its 2500 Estee Lauder counters in this year alone. In 1993, Estee Lauder begins licensing some of their fragrances. Example is Tommy Hilfiger, he is a fashion designer now with a perfume/cologne line. In 1993, Estee Lauder and Clinque launch in Shanghai, China. In 1994, Estee Lauder buys a majority interest in MAC cosmetics, in Toronto, Canada. Estee Lauder then creates a M.A.C Aids fund to serve all races, ages, sexes who are affected by this disease. They used Ru Paul and Lady Gaga as their spokesperson. In 1995, Estee Lauder becomes active in the stock exchange. In 1996, the company launches its first e-commerce site for Clinique and Bobbi Brown. In 1997, the company acquires their first hair care brand, Aveda. In 2004, American Beauty and Flirt launch in Kohls Department Stores in the United States. In 2009. the first Bumble and Bumbling style bar opens in Bloomingdale’s Estee Lauder6

59th street, New York. In 2009, Estee Lauder launches new version of their Night Repair. In 2010, Origins opens first counter in mainland China, at Parkson Department Store. Also in 2010, PureDKNY is introduced with Aramis and Designer fragrances. Smash box joins the portfolio in 2010 as well. In 2011, Estee Lauder signs on 3 foreign spokes models to enhance their global strategy. These models are Liu Wen, China, Constance Jablonski, France, and Joan Smalls, Puerto Rico. In 2011, a new innovation center is built in Shanghai, China. These will give Estee Lauder an advantage to work and develop products tailored to Asian skin care. Brands of Estee Lauder-Product Mix

Estee Lauder M.A.C Darphin Kiton La Mer Michael Kors Bobbi Brown Donna Karan Bumble and bumble Aramis Aveda Jo Malone Clinique Prescriptives Lab Series Skincare for Men Origins Tommy Hilfiger American Beauty Flirt! GoodSkin Labs Grassroots Research Lab Tom Ford Coach Ojon Smashbox Ermenegildo Zegna

Competitors
Estee Lauder does have competitors. Their main competitor is Proctor and Gamble. Proctor and Gamble sells make-up, cremes, hair and skin care products at cheaper costs. The other main competitor is L’Oreal. L’Oreal is the worlds largest beauty products company. Proctor and Gamble and L’Oreal sells in all stores, Walt-Mart, Roses, Dollar General, Walgreen’s, etc. Estee Lauder sells in department stores and/or online. This can be a great competitive advantage for Estee Lauder as well its competitors. Estee Lauder 7

General Strategy
Estee Lauder’s strategy is to enhance ones beauty/aging process by selling skin products to both female and male consumers. They also carry fragrances and perfumes to provide ones ability to smell good. Their strategy is to market their products with specific brands to each consumer. An example would be the M.A.C. Line, which is used to gain popularity by all races and eternities, and age.

Target Market
Estee Lauder’s target market is all races, all elasticities, all ages, male and female. Estee Lauder has products that are affordable to all economic classes. Estee Lauder is now able to reach the younger crowd as well as the older crowd of consumers, be it man or woman.

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Estee Lauder Strengths and Weaknesses
Strengths
The Estee Lauder Company is a leading manufacturer and marketer of fragrances, skin care, make-up, and hair care products. (Hoovers, 2013) The company offers products under renowned brands including Estee Lauder, Aramis, Clinique, Origins, MzAzC, Bobbi Brown, La Mer, and Aveda. (Hoovers, 2013) New fragrance line to come out in October 2013, “Tory Burch”: Tory Burch signed on with Estee Lauder with a multi-year agreement in October of 2011. Estee Lauder sells most of their products through upscale department stores, specialty retailers, upscale perfumeries, and pharmacies, prestige salons, and spas. (Hoovers, 2013) Estee Lauder products are sold in more
than 150 companies.(Hoovers, 2013) The company has offices in 50 countries.

These areas are in the Middle East, Africa, Europe, America, and the Asia Pacific.(Hoovers,2013) Estee Lauder has a strong impact in prestige beauty in the North Americas and China. Skin care products seem to be the best product strategically, however, with make-up due to particular lines, the sales have increased in 2013, third quarter as well. (Hoover, 2013) In 1992, the BCA, (Breast Cancer Awareness) campaign was launched by Evely H. Lauder. She was the co-creator of the pink ribbon along with Self Magazine as the symbol of breast health. (Wikipedia)

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Weaknesses
Estee Lauder has been a target with a big boycott campaign since 2001. In February of 2001 pro-Palestinian activists targeted the corporation due to Ronald Lauder’s activities of pro-Israel. In June 2003, San Francisco-based Queers Undermining Israeli Terrorism (QUIT) took up the boycott with their slogan “Estee Slaughter”. Estee Lauder does test their products and ingredients on animals prior to humans and before making them available to public. At this time, there is weakness in the Southern Europe Countries and Korea due to economic uncertainties, so net sales did drop, but overall the company as a whole has done well. It is projected, that while Korea will still have weakness in prestige beauty, it will grow by 6% in constant currency.

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Threats
The major threat to Estee Lauder is not going to hit this company at whole. Due to Estee Lauder having many products, and major names and labels, each threat is labeled to a different category, so the sales will either increase or decrease. The company as a whole will balance each one out, however there are some categories doing better than others. There are some geographical regions doing worse than others. By product category, Estee Lauder saw its skin care net sales for the quarter at $1.015 billion, make-up net sales were $919.2 million, fragrance net sales were 233.2 million, hair net sales came to 2.29 billion. (GCI Magazine) By geographic region, Estee Lauder recorded net sales for the quarter of $988.1 in the Americas, $847.9 million in the Middle East, Africa, and Europe, and $455.8 million in Asia-Pacific. (GCI Magazine) A major threat for Estee Lauder is their advertising. With the constant advertising of skin care products, and make-up, they can potentially get a litigation case on them on imposing unnatural beauty is not beautiful. Also, with all the costs of advertising and paying for top models and actors and actresses, it could cost the company more.

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Opportunities
Estee Lauder prepares the launch of its new perfumes, which are in creation for soon 10 years. Among these perfumes we can find the new perfume “Modern Muse” and the perfume “Uomo” of the Italian brand Ermenegildo Zegna. Furthermore, the launch of several perfumes inspired by the special tastes of certain countries such as the Middle East or still Japan is planned for soon. Indeed, Estee Lauder is known to create local brands being inspired by needs for the various populations, for example, the brand “Nutritious” which was specially created to seduce the Chinese. Some groups such as P&G or L’Oreal have already conquered China in term of cosmetics; they register of important profits and a real commercial growth. Estee Lauder is that the 5th market player of cosmetics behind these two groups, it registers however an increase of its sales of 13 % in 2011 and reaches a figure of 6,2 billion euro turnover. The group would justify this increase through the success of its products with the Chinese of the whole world which would represent approximately 700 million euros of its sales of 2012.

However, in spite of the high potential that reserves the Chinese market, Estee Lauder continuous to maintain its strong presence in the United States, where it holds at present 38 % of the market share. Indeed, for the CEO of the group, the United States represent the most emergent and promising country of the world. Many perspectives would be planned with in particular two figures which would be representative of the evolution of cosmetics within the Estee Lauder12

population Americans. According to Fabrizio Freda, 70% of the growth will come from the old women of more than 55 years old and 80 % of the growth of the market of cosmetics will be represented by the populations of origins African and Latinos. (HTTP://marketing/Estee-Lauder-bases-its-future-growth-on-perfumes-and-make-up/)

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Financial Analysis
Estee Lauder Company reported net sales for its 3rd quarter ending March 31, 2013 at $2.29 billion, a 2% increase compared to $2.24 billion in prior-year quarter. The company reported net earnings for the quarter rose 37% to $178.8 million, compared with $130.4 million last year. (GCI Magazine) Estee Lauder’s Gross Profit Annually

June 29
2010
June 29
2011
June 29
2012
$5,966,400$6,873,100$7,717,800
Estee Lauder’s Total Net Income
June 29
2010
June 29
2011
June 29
2012
$478,300$700,800 $856,900
Proctor & Gamble and L’Oreal Comparison of Gross Profit and Total Net Income Proctor & Gamble (2012)
L’Oreal(2012)
Gross Profit $41,289
Gross Profit $20,978
Total Net Income $ 10,756
Total Net Income $3,789
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Future Goals and Projected Growth Areas
Estee Lauder has projected more growth in China. In today’s society, males are becoming concerned about their skin as well. Estee Lauder will also continue to market M.A.C as their stepping stone into the international market in the Latino, African, and Middle Eastern countries. Estee Lauder wants to capture all sexes, all races, all ethnicties, and all ages.

I believe if Estee Lauder continues on with the idea of gift with purchase, this too will market their new creations for the years to come. With the past campaigns concerning Breast Cancer and Aids, I would like to see Estee Lauder do a campaign for Alzheimer, this could benefit the company as well.

 References
www.gciamagazine.com/business/financial/205790371.HTML?
utm_source+Most+Read&utm_medium+website
Estee Lauder Companies-Wikipedia
GCI Magazine
Wikipedia/wiki/Estee_Lauder_Companies
Hoovers, 2013
www.elcompanies.com
yahoo finance.com
Estee Lauder Companies (EL)
http://models.com/oftheminute/?p=17176models.com
Wikipedia/Estee_Lauder_Companies
http://www.businessweek.com/articles/2013-03-21/with-m-dot-a-dot-c-dot-est-e-lauder-enters-emerging-markets Self-Evaluation