EVELYN C.

ARNALDO
MBA Student

CASE ANALYSIS FOR REVLON INC.-2000

EXECUTIVE SUMMARY:

Revlon was founded in 1932 by brothers Charles (Joseph Revson and Charles Lachman)

with a $ 300 million investment from nail products to beauty products. In 1937, Revson successful

started selling products in department stores and drugstores. Revson was taken public in 1996

traded on the New York stock Exchange.

The company’s consumer segment is comprised of product that are manufactured, market,

and sold in large volume retails, chain drug and food store, chemist shop, hypermarket, general

merchandise store, the internet and commerce, television shopping, department store, one stop

shopping beauty retailer, specialty cosmetic store. The consumer segment also includes a skincare

line under the nature honey brand and hair color line under conguergs brand that are sold in large

volume retails and other retailers,

The company professional segment, markets and sell professional products primarily to

hair and nail salon and professional salon distribution in US.

Today, Revlon is the global company which offering the products over 100 countries and

products focus on skin care cosmetics, personal care, fragrance, and professional products.

Revlon is struggling to recover and collect debt of almost $2.3 BILLION. The research and

development department is also struggling to offer new products to the market. In, recent years,

Revlon launched Vital Radiance, a cosmetic line for older women with 300 products and it was

the largest launch since ColorStay in 1994. However, the product was not well received by the

market because other competitors already provide the products and the rpices of the Revlon
product was very high as compare with rivals. The company issued $185 million in stick in

September 2006 to raise money to reduce debt.

The Revlon’s major competitors are Procter and Gamble, Avon Products, Estee Lauder

companies. L’Oreal and Unilever. Other competitors include small companies such as Urban

Decay, Bath and Body Works, Body Shop, and Victoria Secret.

I. TIME CONTEXT

The problem existed in the fiscal year of 2000.

II. VIEWPOINT

RONALD O. PERELMAN, Chief Executive Officer of Revlon is the one who

can solve the problem.

III. CENTRAL PROBLEM

There is a need to create and implement a strategic plan in order for the REVLON

Inc. maintains its leadership in cosmetic and personal care throughout the world.

IV. OBJECTIVES

MUST- To be able to create and implement a strategic plan in order for the REVLON Inc.

maintain being the market leader in cosmetic and personal care product industry address

financial issues that would improve their operation within one (1) year.

WANT- To be able to maintain its positon in the market.

V. AREAS OF CONSIDERATION

STRENGTHS

 Revlon manufacturers cosmetics, hair colors, skincare, fragrances, deodorants, and

other beauty products.

  Products are sold in more than 100 countries around the world with sales outside

the US accounting for 55% of all revenues.

 Revlon supports women’s health programs and many other community efforts

investing over $65 million in medical research programs.

 Revlon spent $24 million on R&D in 2010 employing 140 people on these tasks.

 Revlon offers and set up learning center and developed training programs to

communicate its strategic principles to employees.

 Products can be found in Wal-Mart, Target, Walgreens, and CVS.

 Global Brand name recognition.

 Several of the company’s plants have ISO-9000 certification signifying their

commitments to quality manufacturing standards.

WEAKNESSES

 Inventory turnover of 3.56 versus the industry average 4.9

 Global market share declined from 4% in 2009 to 3% in 2010.

 Mission statement is not well developed.

 Many of Revlon’s top brands in the US are not marketed outside the US.

 Has a substantial amount of outstanding indebtedness.

 Failure of the company’s information technology system.

 Revlon began restructuring the company by downsizing 720 employees in 1998.

OPPORTUNITIES

 Wealthy consumers were not affected by economic downturn.

 Diversification of distribution channels.

  There is an endless possibility to celebrities endorsing fragrances, these products

are successful because many consumers persuaded by fame of the celebrity.

 Consumers are interested in products that are made with all natural products.

 Customers are increasingly shopping with “green” companies.

 Strategic partnership and joint ventures with other companies develop the business

and expansion of operation.

 Substantial investment outcome.

THREATS

 Intense competition in cosmetics has increased market initiators with quality n

providers.

 New entrants, even though the market has considerably mature in the sense that it

has captured customer loyalty, but there is always room for improvement in this

field.

 Regulations are increasing due to the voicing of different groups about harmful

chemical ingredients in cosmetic products.

 External challenges beyond companies control.

 Recession is causing people to spend less on make-up products.

 Discounting premium cosmetics can damage the product image.

 Premium cosmetics are a prime target for counterfeiters.

VI. ALTERNATIVE COURSES OF ACTION (ACA’s)

ACA NO. 1 MARKET DEVELOPMENT

The most optimal strategy to implement by targeting new segments of customers and

markets to increase its market share and be capable of generating a sufficient volume of business

given its total investment and increased performing to decrease its debt load.

ADVANTAGES:

 KEEPING PACE- In a world where changing technologies are introduced more

quickly than most consumer can help us with them, a product line that stays the

same over time may come to seem tired and stale.

 PROVIDING OPPROTUNITIES- your business will have an easier time attracting

and helping talent if you build a reputation as an operation where creative

individuals have the space to innovate.

 Increased Sales Turnover

 Increased in market share by expanding geographically in other countries.

 BEING TRUSTWORTHY- Introduce new offerings that people want to hear about

reporters and bloggers will be eager to help spread the word.

DISADVANTAGES:

 Large cash flows because of large foreign investments.

 Government policies and regulations on entering new market.

ACA NO. 2: MARKET PENETRATION

Increasing market share for present products or services through greater marketing effort.

ADVANTAGES:

 It may cause quick diffusion and adoption of the product in the market.
  Highlighting competitive advantages over competitor’s offer.

 Increase Sales.

DISADVANTAGES:

 The pricing strategy must be better that the competitor’s pricing strategy to become

successful. It can stretch company’s cost.

 Increased promotional cost.

 Low prices mean low quality

 Possible harm to your company’s image and the risk of a pricing war.

ACA NO. 3: DIVESTITURE STRATEGY

It helps to liquidate that business and give some stability to the company. Divestment is

basically the selling off non-performing subsidiary business in an organization.

ADVANTAGES:

1. Helps the company to generate cash from its noncore investments which could be utilized

for expansion of existing business, starting a new business line or for retiring the existing

debt.

2. Allocate its resources in its main line of business and generate higher returns for its

shareholder by improving the return on equity.

3. Can use some of the proceeds to rebrand, reorganize, pay down some of their debts, and

regain some control of the market.

4. Transparency and Value

5. Strategic focus
DISADVANTAGES:

 COSTS- The company may encounter difficulty re-allocating personnel as some

employees may perform work for more than on business unit.

VII. RECOMMENDATION

Considering all the unscrupulous decisions that have already been made REVLON

in the past few years, they have left themselves in a position that does not leave them a lot

of options. With the high debt they already have and with their lack of ability to pay down

their debt. Therefore, my recommendations is that they employ ACA No. 3

DIVESTITURE STRATEGY. They need to keep their top 3 products which I believe to

be cosmetics, women’s hair color, fragrances and divest from the remaining product. This

will allow the company to focus om these 3 areas and to them well. Right now they are

average to below average, which is just a nice way of saying the best of the worst.

VIII. PLAN OF ACTION

 The management team and key advisors will identify the goal desired in the sale

while collaborating with other advisors to be sure that legal and personal financial

consideration are taken into account.

 Prepare a valuation of each product line; this will include a detailed analysis of the

value of it that should be achieved in each sale. Finance will review this with the

management and affirm the decision to go forward.

 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 scree 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.

 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.

 While the buyer contact process is underway, finance and operations will prepare

a detailed information package referred to as offering memorandum. It includes

financial information along with the description of the company’s market, clients,

staff, facilities and other resources. The offering memorandum is designed to

contain enough information for a buyer to make a bid decision.