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Jim Southard
Siena Heights University
Revlons Milestones:
1932.
1950.
1952.
1955.
1956.
1968.
1973.
1977.
1985.
1987.
1996.
2002.
2008.
Company founded.
Launched twice-yearly nail enamel and lipstick promotions.
First television advertisement aired, boosting sales.
Offered stock to the public.
Listed on the New York Stock Exchange.
Death of Founder Charles Revson, Michel Bergerac took over as CEO
Introduced Charlie fragrance, which became the #1 Fragrance in the world.
Reached sales beyond the $1 billion mark.
Revlon was sold to a subsidiary of MacAndrews & Forbes Holdings.
Acquired Almay makeup line
Went to a public company and listed on the New York Stock Exchange.
Launched the Moisturous Lipcolor line of hydrating lipstick.
Introduced ColorStay Mineral & Custom Creations foundations and Beyond
Natural Makeup line.
Threats
Opportunities
Weaknesses
Strengths
0.10
0.15
0.07
0.08
0.06
3
3
4
3
3
0.30
0.45
0.28
0.24
0.18
0.09
0.12
0.08
0.09
1
1
1
1
0.09
0.12
0.08
0.09
1.83
0.15
0.10
0.20
0.05
2
3
2
1
0.30
0.30
0.40
0.05
Aging Population
Severe Competition
Economic Issues / Unemployment Rate
Rising Oil Prices
0.20
0.05
0.15
0.10
1
2
2
1
0.20
0.10
0.30
0.10
1.75
currently facing, it has caused stock prices to plummet and there is now little to no dividend
payout.
Revlons External Factor Evaluation Matrix:
The EFE Matrix shows external opportunities and threats that Revlons faces, and how well it
responds. Revlon is attempting to re-introduce their products and add new ones to their brand.
The use of social media could be a good and cost effective way to re-invent themselves in an
attempt to stop their market share from slipping. Through the exposure of social media, could
bring them an increased opportunity for some partnerships with technology.
Maybe a
smartphone app that provides updates on products and promotions, tutorials that demonstrate
products, product locator, etc. This is a way to virtually place their products back in the hands of
their customers. Externally, Revlon is struggling to stay afloat in an overall declining industry
with severe competition. They face declining sales with an aging population that is decreasing
demand. The slow economic recovery and rising oil prices are factors in their production efforts,
as raising oil prices are forcing production cost up, and household disposable income down.
Revlons Financial Analysis:
After viewing the ratios and the horizontal and vertical analysis on the balance sheet and income
statement, Revlon is struggling at managing their finances. Their profitability or lack thereof
fluctuates a bit from year to year, and overall isnt doing well. Compared to the industry, Revlon
isnt the leader, and is considered to be weak in the industry. They only ratio they are neutral
compared to the industry is liquidity. They currently have a $1.13 of liquid assets available to
cover each $1 of current liabilities. The higher the quick ratio is, the better the company's
liquidity position. However, dont let that fool you as they have an obscene amount of long-term
debt they must contend with. They are making some progress through their restructuring efforts;
however, they still have a way to go before they will start showing a healthy profit.
See the
attached appendices for a detailed outline on Revlons performance compared to the industry.
Department Stores
Beauty Salons
Raw Material Suppliers (packaging, shipping, product ingredients)
Revlons 5-Forces Model:
Pure Competition
(Large # of sellers
with no barriers to entry)
the amount of competitors and array of products in the market, it makes firms have to work even
harder to establish brand loyalty.
Revlons Competitive Strategies:
Currently, Revlon is utilizing retrenchment as their competitive strategy. They are trying to cut
operating expenses by combining warehouses and distribution centers to become more efficient.
They also have streamlined their human resources and management in efforts to avoid overlap in
job positions, to help their bottom line as well. They have made some progress controlling their
debt, but they are still unable to turn a profit. This has caused some effect on the integrity of the
business in the way of stakeholder interest. The company has also struggled with leadership; and
some of the lack of leadership has contributed to the overwhelming amount of debt they are
floating. The next step of the retrenchment process would be bankruptcy, but the company is
saving this as a last resort as this will give them a black eye in the industry and could cause a
major shift in brand loyalty and put the company out of business for good.
Revlons Generic Strategies:
I would say that Revlon started out as a Type 3 differentiation strategy. They introduced some
strong brands such as Charlie perfume, Almay, and ColorStay.
comfortable and competitors started to catch up and create competing products that started
winning Revlons once loyal customers over.
introduce any new products that were enticing customers. Then the recession hit and pulled the
rug out from under them. In their efforts to regain control of the company, they changed to a
Type 1 low cost strategy. This is going to be especially difficult for them because of their large
amount of debt they already have accrued. They are drastically trying to streamline operations to
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get cost down so they can pass it on to customers to maintain this strategy and regain control of
the company. (David, F. R. 2013, pg. 148-149)
Recommendation & Implementation Plan:
Considering all the unscrupulous decisions that have already been made at Revlon in the past
few years, they have left themselves in a position that doesnt leave them a lot of options. With
the high debt they already have and with their lack of ability to pay down their debt, weary
stakeholders, and by now, unfavorable credit; an acquisition or new product development would
cost money and resources that they no longer have. Therefore, my recommendation is that they
employ a divestiture strategy. They currently manufacture color cosmetics, womens hair color,
skin care, fragrances, antiperspirants, deodorants, and beauty tools. This is quite an assortment
of products. They need to keep their top 3 which I believe to be cosmetics, fragrances, and hair
color and divest from the remaining products. This will allow the company to focus on these 3
areas and do them well. Right now they are average to below average; which is just a nice way
of saying the best of the worst. In the beginning, the differentiation strategy worked for them
until the market became flooded with equal to better products, and left them down and out. If
they can successfully complete the divesture, they can use some of the proceeds to rebrand,
reorganize, pay down some of their debts, and then regain some control of the market. By being
the best at manufacturing the 3 products, in a new, streamlined, capacity this will allow them to
shift into a Type 2 best value strategy. This means they will produce quality, distinctive, and
unique products at an affordable price, giving them the leverage they need to regain their
competitive advantage and sustainability.
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The Divesture:
1. The management team and key advisors will identify the goals desired in the sale. While
collaborating with other advisors (e.g., attorneys and CPAs) to be sure that legal and
personal financial considerations are taken into account.
2. Prepare a valuation of each product line; this will include a detailed analysis of the value
that should be achieved in each sale. Finance will review this with the Management and
affirm the decision to go forward.
3. Finance will use its network of industry contacts to develop a targeted list of potential
acquirers and review it with the management. Revlon CEO / CFO will contact
prospective buyers and screen them for interest. They need to solicit as many buyers as
possible, even if preliminary discussions are already underway with one prospective
buyer, this will create demand among buyers and provide them with the best price
possible.
4. Operations will prepare confidentiality agreements for prospective buyers to sign before
receiving proprietary information. When necessary, they will negotiate the terms of these
agreements with buyer counsel.
5. While the buyer contact process is underway, finance and operations will prepare a
detailed information package referred to as an offering memorandum. It includes
financial information (historical and projected) along with a description of the company's
markets, clients, competition, staff, facilities, and other resources.
The offering
12
13
11. Final papers will be signed, employees will be notified, funds will be exchanged, and the
product line is now owned by the new company and Revlon will move forward without
the product line.
12. Once the all the loose ends are completed from the sale, finance and management can
start collaborating on how to allocate the funds to maximize their returns.
I would anticipate this process to take approximately 9 18 months to successfully divest from
the 4 products. I would estimate this would reduce their long term debt and operating expenses
around 35% - 40%, drastically improving their financial position. In the meantime, R&D can
start taking place, evaluating their strong products and possible new ones; marketing can be
working on new campaigns to promote the remaining 3 products. This will mark the new
beginning for Revlon, and get them back on track and possibly become bigger and strong than
ever before.
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Work Cited:
2. Glassdoor (n.d.). Revlon Company Reviews | Glassdoor. Retrieved March 28, 2014,
from http://www.glassdoor.com/Reviews/Revlon-Company-Reviews-E5812_P2.htm
4. Revlon Products: Makeup, Fragrances, Hair Color, Nails, Beauty Tools. (n.d.).
Retrieved March 30, 2014, from http://www.revlon.com/#/1
5. Serwer, A. E. (May 2). Trouble at Revlon - ABC News. Retrieved March 30, 2014, from
http://abcnews.go.com/Business/story?id=88252&page=1
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Honor Pledge
I pledge that I have neither given nor received unauthorized aid in completing this work.
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Date _______________