Tuesday, February 2, 2010

Case Study 1 (2) - (Estee Lauder – External Environment Analysis)

D. External Audit
Opportunities

1. Weak US Dollar makes US based products more affordable to customers in Canada and Europe.
2. Interest rates remain low in the US.
3. Increasing numbers of people are buying products online for convenience, cost savings, and
confidentiality.
4. Men are increasingly becoming more concerned with their looks and stereotypes of men using
skin care products are diminishing.
5. In 2006, China experienced a 15 percent growth in professional skin care sales.
6. The Hispanic population in the US is rapidly growing.
7. Customers are demanding products not tested on animals and which are environmentally friendly.
8. Customers are becoming more interested in herbal products that are derived from natural sources.
9. Aging US population opens new markets for developing skin care products for the elderly.
10. Many new start up companies with specialty products are created each year.

Threats

1. Consumer complaints and inquires into the use of animal testing for new products.
2. FDA plans to require cosmetic corporations to add a label stating “the safety of this product has
not been determined.”
3. Many new start up companies with specialty products are created each year.
4. Concerns about the use of aerosols, fluorocarbons and other chemicals in the production of
cosmetic products.
5. Top competitors in the cosmetics industry are diversified with many brand names and a wide
range of products.
6. Products can be purchased at significantly lower cost over the Internet, harming revenues and
traditional distributors.
7. Growing trend among sections of the population for a more natural look and reduction in their use
of make up and related products.
8. Customers tend to be extremely brand loyal.

CPM – Competitive Profile Matrix

* Estimates for Procter & Gamble focused on similar product lines they share with Estée Lauder not the
company as a whole.

Estée Lauder Revlon Procter & Gamble

Critical Weight Rating Weighted Rating Weighted Rating Weighted
Success Score Score Score
Factors
Market Share 0.20 4 0.80 4 0.80 3 0.60
Price 0.10 2 0.20 3 0.30 4 0.40
Financial 0.20 3 0.60 1 0.20 4 0.80
Position 0.15 4 0.60 2 0.30 2 0.30
Product Quality 0.10 4 0.40 3 0.30 4 0.40
Product Lines 0.20 4 0.80 3 0.60 2 0.40
Consumer 0.05 4 0.20 4 0.20 4 0.20
Loyalty
Employees
TOTAL 1.00 3.60 2.70 3.10

External Factor Evaluation (EFE) Matrix

Key External Factors Weight Rating Weighted Score
Opportunities
Weak US Dollar makes US based products 0.05 3 0.15
more affordable to customers in Canada
and Europe.
Interest rates remain low in the US. 0.08 3 0.24
Increasing numbers of people are buying 0.12 3 0.36
products online for convenience, cost
savings, and confidentiality.
Men are increasing becoming more concerned 0.05 4 0.20
with their looks and the stereotypes of men
using skin care products are diminishing.
In 2006, China experienced a 15 percent growth 0.05 4 0.20
in professional skin care sales.
Hispanic population in the US is rapidly 0.05 3 0.15
growing.
Customers are demanding products not tested on 0.03 3 0.09
animals and which are environmentally
friendly.
Customers are becoming more interested in 0.03 4 0.12
herbal products that are derived from
natural sources.
Aging US population opens new markets for 0.05 3 0.15
developing skin care products for the
elderly.
Many new start up companies with specialty 0.05 2 0.10
products are created each year.
Threats
Consumer complaints and inquires into the use 0.03 3 0.09
of animal testing for new products.
FDA plans to enforce cosmetic corporations to 0.02 1 0.02
add a label stating “the safety of this
product has not been determined.”
Many new start up companies with specialty 0.05 2 0.10
products are created each year.
Concerns about the use of aerosols, 0.03 4 0.12
fluorocarbons and other chemicals in the
 production of cosmetic products.
Top competitors in the cosmetics industry are 0.10 2 0.20
diversified with many brand names and a
wide range of products.
Products can be purchased at significantly lower 0.12 1 0.12
cost over the Internet cutting into revenues
and harming traditional distributors.
Growing trend among sections of the population 0.04 3 0.12
for a more natural look and reduction in
their use of make up and related products.
Customers tend to be extremely brand loyal. 0.05 3 0.15
TOTAL 1.00 2.68