A strategic analysis of Estee Lauder

A strategical compendium of Estee laudatorIn the world of business today, where contender is one of the major challenges that every g everyplacenance is facing, the need for strategic intentionning and abstract arises. These atomic number 18 essential for the survival of an organisation as salutary as determining the worry in which an enterprise is going in relation to its environs in order to achieve a competitive advantage by formulating a competitive strategy. It is important that an organisation grabs every opportunity that is coming along its way, and responds to any risks and limitations presented by the external environment.In order for an organisation to sham and take correct decisions, it requires an understanding and knowledge virtually the impact the environment can moderate on the organisation. This is strategic guidance. It is therefore important not altogether to look at what is best for the organisation, but overly to take the needs of shargonholders into consideration. For effective strategic management, it is important to eat a strategic epitome. The reason for an analysis is beca utilisation the issues that are being analysed are often quite complex even if there may be enough information available Fleisher. C Bensoussan .B (2002).This engage is organised as follows Chapter two defines important terms which will help in the further understanding of this study. Chapter three introduces the fellowship Estee lauder. Chapter four evaluates the strategic analysis of Estee lauder by looking at techniques, models and processes, and chapter five concludes.Chapter 2 strategical AnalysisThis is where a strategy is formulated by carrying let out a look on the organisation and the business environment in which the organisation operates (BNET Business Dictionary.)However, Professor Les Worrall defined it as,a theoretically informed understanding of the environment in which an organisation is operating, together with an understan ding of the organisations interaction with its environment in order to improve organisational efficiency and effectiveness by increasing the organisations force to deploy and redeploy its resources intelligently.2.1 Strategic modelManagers must take in to account three major factors when strategic decisions are madeThe shareholders expectations and objectives it is important that organisations are clear about their long-term objectives. However, due(p) to factors that an organisation does not have any control over may crop the organisation to revision its objectives, thereof conflicting with the shareholders. Therefore, management must know how to reconcile the shareholders expectations while setting the objectives of the organisation.Available resources for an organisation to achieve its objective Depending on the strengths and weaknesses of organisations resources, the staunch can pursue its strategies. However, these may change with the prevailing environment.Total enviro nment within which the organisation operates Forecasting what the future may bring is a difficulty that managers face, because the environment is uncertain. This factor likewise has an influence on what strategy can be pursued.Taking each of the above three factors into consideration is know as strategic analysis.2.2 Aim of strategic analysisIt understands an organisations strategic state of affairs. Strategic analysis forms a view of the key influences on the present and future well-being of the organisation and what opportunities are afforded by the environment and the competencies of the organisation Baily. P, Farmer. D, Jessop. D, Jones. D (2005).2.3 Importance of strategic analysis.Strategic analysis is important in providing an organisation with meaningful insights and with a clear framework so as to contrive itself for change. Its importance lies in evaluating patterns and trends for the organisation. It is also important in the identification and assessment of the opport unities available to the organisation Fleisher. C Bensoussan .B (2002). It also helps the organisation understand its strategic position by providing information such as what is happening in the business environment and industry, and what competencies should be developed so as to stay competitive.It gives the description of strategic goals and the firms business strategy. Strategic analysis also leads to goals that are clear and relevant, helps in the taking of decisions with better quality, and provides a secure future by preparing the organisation with what may happen in the future.Strategic managementThis is a process of making and implementing strategic decisions. The organisation must also analyse the competencies already present in the organisation. These competencies help in formulating strategies. The process should consist of the following elementsThe analysis of a strategy- Understanding the changes going on in the environment in which the organisation exits, and how thes e disturb the organisation, its activities, its strength of resources and the expectation of stake holders, also analysing competitor strategies through assumptions, focusing on weaknesses and threats.The choice of strategy- This is concerned with all the possible causes of action which may be taken. Eliminating out many other strategies chosen, and putting in order of importance.An evaluation of each of the causes identified- The selection of those which the organisation must attempt to follow, and therefore discuss at length the strategies short-listed.Implementation of selected intend strategy- This is turned into an effective caused action. Discuss on implementing, but not actual implementation.2.4 Importance of strategic managementIt is a planned process that needs to be followedIts considers the future and anticipates what it could bringIt cast ups organisational growth as it brings in opportunitiesIt also looks at the threats the external environment may poses and works on how to get rid or manage theseHelps companies remain stable by foreseeing what the future may bring.Chapter 33.1An Organization is a consciously coordinated cordial entity, with a relatively identifiable boundary, that functions on a relatively conscious basis to achieve a common goal or set of goals. Richard, (2002)Estee Lauder was founded in 1946. It is a globally recognised conjunction, whose headquarter is in New York, but is in over 140 countries. It manufactures and slitets hair care products, fragrances, skin care and makeup. The company has 29 flaws, some of which are Estee Lauder, Clinique, M.A.C, Aramis, Bobbi Brown, Darphin and many more. Estee Lauder is technologically advanced and has a reputation for mental institution, superior quality and sophistication.3.2 Estee Lauders StrategyKoontz and ODonnell describes strategy as a decision about how to use available resources to secure a major objective in the face of possible obstructions.such as competitors, public op inion, legal status, taboos and convertible forces.Their strategy is to build a diversified business base, which they believe will strongly boost up their growth globally. Their focus is to remain a autocratic leader in the global prestige cosmetics. Their three essential growth strategies areTheir geographic presence should be expanded and strengthenedTheir product categories should also be strengthenedTheir channels of distribution should also be strengthened and diversifiable.3.3 Vision MissionA companys mission and vision is for its employees and customers. The Mission defines and reflects the company, its core purposes, its set and principles. The vision however, provides an image of the future.The Vision Statement of Estee LauderBringing the best to everyone we touch. By The best, we mean the best products, the best people and the best ideas. These three pillars have been the hallmarks of our Company since it was founded by Mrs. Estee Lauder in 1946. They remain the founda tion upon which we continue to build our success today.3.4 ObjectivesThey are energetic, innovative and first for customersPower endeavour to do our very best and enhance the companys leadership throughout the worldBuilding strong global brands through innovative delivery of products and increase revenuesLook after(prenominal) our people so they can look after our customersUnderstand customers better than anyone and Use our strengths to deliver unbeatable value to our customersBusiness relationshipsThrough distribution channels, make the customers globallyTrust and respect each other3.5 ScopeAccording to Mintzberg and Quinn there are five definitions of strategyStrategy as a planStrategy as a patternStrategy as a positionStrategy as a perspectiveStrategy as a ployEstee Lauder adoptedPlanEstee Lauder has good planning and they strongly believe all their success is all because of its planning.PerspectiveEstee Lauders perspective was to increase its company growth globally by 2008. T his was achieved mainly because of the international business, mainly from emerging markets such as China and India.Chapter 44 Estee Lauders External environment analysis4.1 PESTEL Analysis for Estee LauderPESTEL analysisis the external analysis of the different macro-environmental factors that a business must consider. Kotler (1998)The PEST analysis is a useful appliance for understanding the position, potential and direction for a business as well as the market growth or decline.The radical and ongoing changes occurring in society create an uncertain environment and have an impact on the function of the whole organization Tsiakkiros, (2002). Hence the analysis of the macro-environment is very important to identify factors which could bushel various variables and arrangements within the organisation.Macro-environmental analysis assist Estee Lauder management to increase its attentiveness of appropriate environmental changes thus improve strategic planning by enriching its indust rial and market analysis. The PESTEL analysis in addition to Porters Five Force model and SWOT can be applied by an organization to reappraisal its strategic direction. These have been discussed below.Political factorsThe political environment within which an organisation exists has far reaching consequences. The political environment most obviously operates at subject area level, but may also be significant at local and international levels. Estee Lauder gives direction to countries through the way they exert control over the economy. Estee Lauder should not only be cognisant with the politics of a country, but also with the media, industry and labour leaders. The following political factors can arrogate the business environmentLevel of government involvement in businessStabilityLiberalisation revenueCo-operation and integration, e.g. EUEconomical factorsThis is concerned with the nature and direction of the economy in which a firm operates. Estee Lauder looks at the interplay o f market forces that dictate the state of the economy and implications on both commercial and non-commercial organisations. Prices vary from brand to brand and product to product, but these are usually in the higher ranges of an industry. The factors includeExchange ratesInterest ratesSpending power pomposity and employmentSocio, Cultural FactorsThe socio cultural influences on businesses vary internationally. These affect a societys basic values, perceptions, preferences and behaviours. It is vital that such factors are considered if an organization penurys to achieve its proposed objectives. Factors includeThe lateralisation of the religionEducation and beliefThe impact of language upon the diffusion of products onto marketsWhen do customers have time for shopThe roles of men and women within society and depending upon that the products should be launchedEstee Lauder has received customer complaints regarding the fact that new products are being tested on animals first. They hav e to look into this matter as it can pose atrocious issues with the customers.Technological factorsMore and more businesses are affected by technology. Technological factors affect the operations of the firm since technological changes serve to head off obsolesce and to stir innovation of relevant techniques in the industry. Estee Lauder has rapid technological changes in its products, and these products can be accessed online via the internet. Some technological factors areIT rapid growth revolutionGovernment spending on researchNew discoveries and developmentsR D expenditureProduct life cycleEnvironmental FactorsThese factors are also known as the Natural factors. These factors help Estee Lauder in showing strategic doubts and their worth in the predicting and planning processes using environmental aspects. There have been emissions of pernicious gases and fluorocarbons, which Estee Lauder must take care of as it is and environmental threat. Its increases the significance of t he following factorsShortage of raw materialIncreased pollutionIncreased political interventionLegal FactorsEstee Lauder functions within a coordinate of Government regulations and legislations. These laws and regulations should be considered when running businessesLabour laws and industrial relationsMunicipal licensesFormationTaxationCompetitionCopyright and patent lawsMinimum wages laws and Employment lawDemographic FactorsThese factors may also exist under the macro-environmental factors. Following factors must are considered with regard to the key Demographic trends by Estee LauderWorld population growthChanging householdGeographic population shiftsBetter-educated, more white-collar custodyIncreasing DiversityChanging age structurePopulation consists of generational groups.Distinct segments typically exist within these generational groups.4.2 Porters Five Force ensampleThis model evaluates a companys competitive position. Any business works to develop an edge over its rival firms. This model helps in the understanding of the industry scene in which Estee Lauder operates. Below is a diagrammatical representation of the model.http//www.maxi-pedia.com/Five+Forces+model+by+Michael+PorterBarriers to entryThis is low in the case of Estee Lauder as it has made its position pretty strong and and then new entrants will not pose a threat to it as it will be difficult for these to enter into the market as the barriers are pretty high. They also have good access to their distribution channels and the correct knowledge of the segments they are operating in.SubstitutesThis is also low in the case of Estee Lauder. Customers have built a customer loyalty. Estee Lauder also provides the best quality products whose performance is to the mark as is the name, therefore threat of substitutes will be low.Bargaining power of suppliersThe suppliers would have a low bargaining power as Estee Lauder is a huge brand and the volume of goods required from the suppliers around th e world is also huge. There would be very many suppliers willing to supply such a company, hence it is important for the suppliers to provide the company with what they require and something that is unique from its competitors.Bargaining power of buyersThis is high as buyers can easily switch to other uncollectible brands as the number of these brands present in the market segment is high. However, due to customer loyalty to the brand, it does not face much of this as it provides its buyers with what they want and how they want it.Competitive RivalryThis is high in the case of Estee Lauder. Its major competitors are Avon, LOreal, PG, Max Factor, Revlon, etc. Estee Lauder therefore needs to have constant innovation of its products so as to stay ahead of competition. There are various brands under the company, therefore, it is important that the range of price is good and they can differentiate their products well without customers facing high switching costs.Estee Lauder created the line designed for men in 1976. It was called skin supplies for men (Estee Lauder 2003a). Avon, Max Factor and Revlon did not have men lines.4.3 SWOT analysis for Estee LauderA SWOT analysis is important as a clear basis is provided to examine the performance of a business. It is also very important for the products a company offer, as it is essential in the branding and marketing of the company products. This model helps in the understanding of the firm and its surroundings.InternalStrengthsWeaknessesStrong brand nameResearch and development focusStrong distribution networkRobust revenue and profit growth gross revenueWeak liquidity positionCustomer concentrationWeak performance in a few marketsExternalOpportunitiesThreatsDemographic trends in the United StatesCosmetics markets in emerging nationsGrowing riches- Rich getting wealthierCounterfeit productsIntense competitionIncreasing regulationsStrengthsThe brand name, Estee Lauder itself is a strength. The name is linked to quality and luxury. The company is also a global licensee for other big brands like Tommy Hilfiger, Donna Karen, etc. Estee Lauder leads in each market segment in the industry as it develops new products, redesigns existing ones and identifies and considers consumer preferences.It has a large network of retail. This therefore increases the market penetration opportunities and creates closeness to target customers. It has a strong management strategic perspective, and is also having a large growth. It also has various innovations such as offering shopping via the internet (it was the first major cosmetic firm to have offered shopping via the internet.)WeaknessesThe company bargaining power could be lowered by it concentrating on a single biggest client. They also have a poor cost structure in some areas, hence a decline in the performance of sales in certain regions. The company could be exposed to the debt market due to low liquidity levels, and this could thus affect the company growth. It is the Family members that have most of the power over the company. The companys organisational structure is not easily distinguished. In America, there are particularly lower sales in the fragrance category.OpportunitiesEstee Lauder targets aged people and therefore makes products to suit these people. Its revenues could be boosted by having a strong and great presence in its segments, thus also increasing growth. The cosmetics markets are doing good in emerging markets like India and China, as there are many salmon pink contests that take place. This cosmetics market is growing due to younger and middle aged women that are being more style conscious. Estee Lauder is also well positioned in these emerging markets. There is also a demand in the luxury goods. More money is spent on these goods. Therefore, the needs of these wealthy people are also taken into consideration, and products made to meet their needs and wants.ThreatsMany fake products are being sold, thus affecting Est ee Lauders sales. This can lead to the company losing its exclusivity of the brand. This could thus harm the image of the company. Customers may also be dissatisfied with these products as the fake product may harm them, thus the company would lose out on customers. Many big brands such as Revlon, LOreal, would increase competition in the market. The government may also impose certain rules and regulations on the products face that the product has high levels of chemicals which are harmful to people. This may thus lead to an increase in the cost of developing the products and also in the launching of the products.Chapter 5ConclusionBusinesses are different in many ways therefore every organisation needs to have a business plan, which needs to be reviewed in order to keep it up to date. The plan at Estee Lauder is articulated by corporate leaders, who give the organisation direction, so as to avoid a strategic drift. They create a vision of a possible future that allows both the man agers and others to see clearly the direction to take, building upon the companys current capacity and strength.To gain competitive edge and analyze the external environment, Estee Lauder could further use the Value chain, BCG growth model and scenario analysis for its strategic analysis. Recommended strategies that Estee Lauder could use are Forward, backward, horizontal integration, product and market development, market penetration and more diversification. Estee Lauder took the approach of providing great customer service, great quality and staff ownership, hence making it different from the rest.ReferencesAdvanced Diploma in Business Administration Corporate strategy Syllabus.Baily. P, Farmer. D, Jessop. D, Jones. D (2005). Purchasing Principles and Management. Pearson Education. FT Prentice Hall.Fleisher. C Bensoussan .B (2002). 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