This document provides an outline for a strategic audit of Estée Lauder Companies, Inc. It begins with an introduction that lists the company's production divisions and key facts. It then lists the company's achievements and competitors. The document discusses the company's vision and mission statements and compares them to a competitor. It provides an internal assessment of the company's strengths, weaknesses, business model, and financial ratios. It analyzes the company's organizational structure and provides recommendations to improve it. The document aims to conduct a thorough strategic audit of Estée Lauder.

3. STRATEGIC AUDIT OF
ESTÉE LAUDER
COMPANIES, Inc

4. THE OUTLINE PLAN
SER SUBJECT PRESENTED BY
1. Introduction Vision &
Mission Statements
Athula Marasinghe
2. External Assessment Piyal Pushpakumara
3. Internal Assessment Priyantha Perera
4. Strategy Formulation Bandula Kodippili
5. Strategy Implementation Shiraz Jjaldin
6. Strategy Evaluation
and Conclusion
Dhanush K.
Kannangara

5. AIM
To conduct a Strategic Audit on Estée Lauder
Companies, Inc.

6. INTRODUCTION

7. PRODUCTION DIVISIONS
 Makeup
 Skin Care
 Fragrances
 Hair Care

8.  HQ - New York.
 Operates over 150 countries & territories in
the Americas, Europe, Middle East, Africa &
Asia Pacific.
 Employees - Over 31,200
 Annual revenue - More than $ 7.8 billion.

9. ESTÉE LAUDER BRANDS
 More than 9000 Products
 28 Brands

10. Aramis - 1964
Estée Lauder - 1946

11. Clinique - 1968

12. Prescriptives - 1979

13. Lab Series Skin Care for Men - 1987

14. Origins - 1990

15. Tommy Hilfiger - 1993

16. M-A-C - 1994

17. Lar Mer - 1995

18. Bobbi Brown - 1995

19. Kiton - 1995

20. Donna Karan - 1997

21. Aveda - 1997

22. Jo Malone - 1999

23. Bumble and bumble - 2000

24. Michael Kors - 2003

25. Darphin - 2003

26. Rodan + Fields - 2003

27. American Beauty - 2004

28. Good Skin - 2004

29. Flirt - 2004

30. Donald Trump - 2004

31. Grassroots - 2005

32. Sean John Fragrances - 2005

33. MISSONI - 2005

34. Daisy Fuentes - 2006

35. Ojon - 2007

36. Smashbox - 2010

37. ACHIEVEMENTS OF ESTÉE LAUDER
1940 Estée and Joseph Lauder began making their own products.
1946 Officially launched the Estée Lauder Company.
1948 Established its first department store account in New York.
1960 Globalized its operations introducing products at Harrods in London.
1967 Estée Lauder was named one of 10 Outstanding Women in Business in the
US by business & financial editors.
1968 Received the Spirit of Achievement Award from Albert Einstein College of
Medicine at Yeshiva University.
1974 Hired Irving Penn to shoot Clinique Ads.
1992 Launched the annual Breast Cancer Awareness Campaign.
1993 Company begins licensing fragrances.
1994 Company begins practice of acquisitions.
1995 The company went public.
1998 Online shopping was introduced and ELC Online was created to manage
all online strategies & activities.

38. Mrs Estée Lauder
(Died in April, 2004)

39. COMPETITORS
 Avon Products
 Colgate – Palmolive
 L’ Oreal
 Procter & Gamble (P&G)
 Revlon
 Mary Kay Cosmetics

40. VISION AND MISSION STATEMENTS
“ What do we want to be come ” - Vision
“ What is our business ” - Mission

41. Estée Lauder Companies, inc
VISION STATEMENT
Existing Vision Statement
"Bringing the best to everyone we touch" and being the
best in everything we do. By 'the best' we mean the best
products, the best people and the beat ideas."
Improved Vision Statement
"Bringing the world's best experience and excitement to
everyone we touch with superior quality products and
services."

42. COMPARISON WITH A COMPETITOR’S VISION
STATEMENT
Estée Lauder Revlon
"Bringing the world's best
experience and excitement to
everyone we touch with superior
quality products and services."
" Glamour, Excitement and
Innovation through High-
quality Products at Affordable
Prices."

43. Estée Lauder Companies, Inc
Mission Statement
Developed Mission Statement
" Estée Lauder believes in providing branded superior quality
products & services in skin care, make up, fragrance and hair
care to endure passionate feelings of worldwide customers in all
the age groups and sexes even through our ELC Online
Shopping. Our everlasting business success in sales, profits and
values are built upon ethical standards & integrity which guide
growth with a genuine sense of responsibility to our employees,
customers, community and environment in which we operate.
We strongly advocate with corporate social responsibility to
our customers and communities in which we operate by
undertaking corporate philanthropic programs and community
involvement initiatives."

44. COMPARISON WITH A COMPETITOR’S
MISSION STATEMENT
Estée Lauder Revlon
"Estée Lauder believes in providing
branded superior quality products &
services in skin care, make up, fragrance
and hair care to endure passionate feelings
of worldwide customers in all the age
groups and sexes even through our ELC
Online Shopping. Our everlasting business
success in sales, profits and values are built
upon ethical standards & integrity which
guide growth with a genuine sense of
responsibility to our employees, customers,
community and environment in which we
operate. We strongly advocate with
corporate social responsibility to our
customers and communities in which we
operate by undertaking corporate
philanthropic programs and community
involvement initiatives."
" Revlon’s mission is to emerge as the
leader in cosmetic and personal care
throughout the world. Revlon takes pride
in manufacturing the top skin care
products and strives to please young and
older woman alike."

46. The Internal Analysis of strengths and
weaknesses focuses on internal factors that give
an organization certain advantages and
disadvantages in meeting the needs of its target
market. Strengths refer to core competencies
that give the firm an advantage in meeting the
needs of its target markets.
Any analysis of company strengths should
be market oriented/customer focused because
strengths are only meaningful when they assist
the firm in meeting customer needs.

47. Weaknesses refer to any limitations a
company faces in developing or implementing
a strategy.
A comprehensive strategic plan includes
a situational analysis that considers internal
strengths and weaknesses.
Analyzing a company's current strengths
and weaknesses provides a wealth of insight
helpful in accomplishing internal goals and
internal analyses can provide advantages for
achieving external goals, as well.

48. The company consists of four main business segments;
Skin Care, Make Up, Fragrance, and Hair Care.
The fiscal year 2011 Skin Care accounted for 42% of net
sales, Make Up accounting for 38%, Fragrance 14%, and Hair
Care representing 5% of net sales.
Furthermore, the company spans a geographic presence in
150 countries around the world.
The Americas is the largest market representing 47% of
net sales in 2010. Europe, Middle East, and Africa accounted for
39% of net sales, and Asia/Pacific captured 14% of sales.
BUSINESS MODEL

49. FINANCIAL RATIO
ANALYSIS

50. An initial review demonstrates that The Estée
Lauder Companies are a financially strong
organization with clear growth over the last two
years.
Actual revenue, gross margin, net income and
diluted EPS increased year-over-year, while COGS
and operating expenses as a percentage of revenue
decreased.
Current ratio and ROE are very strong in
comparison to industry competitors.

52. RATIO 2009 2010 %
Liquidity Ratios
Current Ratio 2.00 1. 00 50.00%
Quick Ratio 1.18 1.19 0.84%
Leverage Ratios
Debt to Total Assets Ratio 0.274 0.230 16.05%
Debt to Equity Ratio 0.62 0.85 37.1
Long Term Debt to Equity Ratio 0.846 0.607 28.25%
Times-interest- Earned Ratio 4.527 6.775 50%

53. RATIO 2009 2010
Activity Ratios
Inventory Turnover 2.11 2.26 0.15%
FA Turnover 7.133 7.616 0.483%
Total Assets Turnover 1.415 1.461 0.046%
Account Receivable Turnover 7.74 9.75 2.01%
Average Collection Period 67.07 75.32 8.25

54. RATIO 2009 2010 %
Profitability Ratios
Gross Profit Margin 74.31% 76.53% 2.22%
Operating Profit Margin 5.71% 10.13% 4.42%
Net Profit Margin 2.98% 6.14% 3.16%
Return on Total Assets (ROA) 4.29% 9.10% 4.81%
Return on Stockholder’s Equity (ROE) 13.32% 26.66% 13.34%
Earning per Share (EPS) 0.55 $ 1.19 $ 0.64 $
Price Earning Ratio 0.00 17.41 17.41

55. RATIO 2009 2010
Growth Ratios
Sales/Revenue% - 7.42 6.44 13.86%
Net Income % - 53.9 119 172.9%
Earning Per Share (EPS) % - 54.17 116.36 170.53%
Dividends per Share 0.28 0.28 -

56. The company recorded revenues of $7795.8
million in the financial year ended June 2010
(FY2010), an increase of 6% over FY2009.
The operating profit of Estee Lauder was $789.8
million in FY2010, an increase of 89% over
FY2009.
The net profit was $ 478.3 million in FY2010, an
increase of 100% growth over FY2009.
KEY NOTES

57. The company recorded Net earning per
Common Share of f $2.38 in the financial year
ended June 2010 (FY2010), an it is a recorded
increase of 100% over FY2009.
The Total Assets of Estee Lauder was $ 5335.6
million in FY2010, an increase of 3% over FY2009.
The Stock Holder’s Equity was $ 1948.4 million
in FY2010, an increase of 19 % growth over
FY2009.

58. ORGANIZATIONAL
STRUCTURE ANALYSIS

59. Bringing the Best to Everyone Touch………

60. William Lauder
Chairman of the Board
Amy DiGeso
Executive VP
Global HR
Harvey Gedeon
Executive VP, Global R &
D, Corporate Product
Innovation and Package
Development
Evelyn Lauder
Senior Corporate VP
Fabrizio Freda
CEO and President
John Demsey
Group President of
Domestic Operations
Cedric Prouv
Group President of
International Operations
Sara Moss
Executive VP and General
Counsel
Gregory Polcer
Executive VP
Global Supply Chain
Aleandra Trower
Executive VP
Global Communications
Richard Kunes
Executive VP and CPO
Leonard Lauder
Chairman Emeritus

61. Organization structure is a business unit type
structure.
Detailed succession plan in place for Fabrizio Freda
to take over as CEO in March of 2010.
Primarily managed by the Lauder Family members.
The company has manufacturing plants, R & D
facilities and business offices on nearly covering every
continent.
 13 Manufacturing Plants – USA,
UK, Canada, Belgium, Switzerland
 R & D Operations – 475 Scientists
 Business offices – 43 World wide

62. POINTS
Indistinguishable organizational structure.
Most of the power/authority in the company is vested in
family members and those high ranking managers focused
on family ownership.
It is not clear whether the four presidents have authority
over the four product lines or four geographic regions thus
a questionable line of command exists.
Less focus on emerging high income groups in China,
India and SE Asian countries.

63. IMPROVED
ORGANIZATIONAL
STRUCTURE

64. William Lauder
Chairman of the Board
Amy DiGeso
Executive VP
Global HR
Harvey Gedeon
Executive VP, Global R &
D, Corporate Product
Innovation and Package
Development
Evelyn Lauder
Senior Corporate VP
Fabrizio Freda
CEO and President
John Demsey
Group President of
Domestic Operations
Cedric Prouv
Group President of
International Operations
Sara Moss
Executive VP and General
Counsel
Gregory Polcer
Executive VP
Global Supply Chain
Aleandra Trower
Executive VP
Global Communications
Richard Kunes
Executive VP and CFO
Leonard Lauder
Chairman Emeritus
Executive VP
Global Strategy
Assistant VP
American Region
Assistant VP
Asia/Middle East Region
Assistant VP
China/ SE Asia
Assistant VP
Europe Region

65. REASONS FOR IMPROVEMENTS
 More space for strategy planning process
 Delegated power will ease the regional operations
and will pave the way to dive through the emerging
markets
 Simplifications of global marketing process
 Added delegation of power to reduce authoritative
structure
 More opportunities to elite business minds to join
hands with.

66. ANALYSIS OF
MARKETING POSITION

67. COMPANY MARKET SHARE (US $ Billions)
Procter & Gambel 26.3
L’Oreal 25.8
Unilever 16
Avon 7.6
Beiersdorf 7.5
Estee Lauder 7.3
Shiseido 6.9
Kao 5.9
Johnson & Johnson 5.6
Henkel 4.4

68. COMPETITIVE ANALYSIS
Largely consolidated, however many small players
exist.
Estimated to exceed $600 Billion USD Globally.
Cosmetic/Beauty sector $57 Billion USD in United
States.
USA Cosmetics/Beauty industry employs more than
56,000 people.
L’Oréal is the largest horizontally integrated player
at €23 Billion.
Loosely regulated in USA.
EU and Canada regulations much stricter.

70. Single greatest expense for the company.
Marketing departments part of Brand Business Unit.
Regional marketing groups in USA.
Domestic Marketing teams report into Brand Business
Unit.
Regional Marketing groups service subsidiaries.
All Global Marketing teams report into Brand Business
Unit.
In house creative teams report into Brand leadership.
MARKETING STRATEGY

71. As of 2010 Estee Lauder sells its products in
department stores across the world and has a chain
of freestanding retail outlets.
On July 2010, the company acquired Smash Box
Beauty Cosmetics Inc, a brand created in Smash
Box Studios in Culver City, California by brothers
Dean and Davis Factor.

72. All brand business units consist of marketing, sales
administration, creative, finance, accounting and
product development. Other brand functions
including packaging, legal, R&D, corporate
communications, travel retail, quality, manufacturing
and distribution are managed by corporate divisions
that do not report directly into the brand business
units.
In this manner The Estée Lauder Companies
corporate divisions function as agencies servicing
their clients.

73. SUPPLY CHAIN
 The Estée Lauder Companies corporate structure
places all supply chain activities outside of the brand
business units, and therefore all Supply Chain
operations are corporate functions.
 Multiple production facilities are positioned
strategically around the globe and allow for final
product assembly to occur on the same continent as the
target market.
 Major production operations for the company are
in Long Island, NY, Pennsylvania, Canada, Belgium and
Japan.

74.  The largest cost for products is packaging, and
the package development division of the company
works with a global network of suppliers, many of
whom have operations in the New York/New Jersey
region.
 Global Package Development is a corporate
division dedicated to the cost effective and quality
production of packaging for all 28 brands.
 The global Supply Chain faces many challenges
from a plethora of regulations on product and
packaging that vary significantly by country.

75. VALUE CHAIN ANALYSIS
CHART

76. VALUE CHAIN ANALYSIS

77. CULTURE
• All EL employees committed to the highest standard of professional and personnel conduct. All
employees of the company are expected to conduct themselves at all times within the letter and spirit
of the Code.
MANAGEMENT
• Bumble and Bumble had expanded to all stand alone Sephora doors in the U.S. Launched its first
ever print and campaign for its new texture cream in North America. EL also gained share in South
Africa . In Rusia EL sales –every-day remains strong rising more than 20 percent which is about
double the overall Prestige beauty growth Continue to acquire more brand licensing
FINANCE
• EL releases its fourth quarter and fiscal year financial result in mid-August of each year. Sales of skin
care products account for 41 percent or 44 billion of net sales.
PRODUCTION
• The company has manufacturing facilities…nearly every continent, see exhibit 2 (Page30, Para8) Estee
Lauder manufacturing operations are certified by an independent third party to conform to the
ISO14001 standard-safely initiatives
R & D
• The company expanded again by opening Clinique Laboratories, Inc. Launched multiple product
lines including Grassroots Research Labs. The company has R&D operation nearly every continent. A
new division called ELC Online was created to manage all online strategies and activities for all of its
brands

82. VALUE OF THE FIRM
ANALYSIS

83.  Estée Lauder Companies’ long term strategy is
achieving higher levels of sustainable and profitable
growth that will allow them to remain a leader in
global prestige beauty.
 They are committed to continuing to innovate in
all aspects of their business. They put a greater focus
on consumer insights and they integrate their brands,
regions and functions to leverage scale and
efficiencies.
EL Committed to Growth

84. Creativity and Innovation They are focused on
creating fewer, but more successful products. They are
motivated to be “creativity driven and consumer inspired.”
Their muse is the consumer, who is used to create beauty
products that they couldn’t have imagined needing.
High Touch Their High Touch personal service allows
the company to create an emotional connection with the
consumer and inspire more brand loyalty. They implement a
customized educational approach that comes from beauty
advisors and makeup artists. They have also adapted it for
online use, using direct response television and self
assisted formats as well.
Key Initiatives

85. Local Relevance - Estée lauder strives to be locally
relevant to consumers everywhere they live. They do this
by creating certain products for specific markets and
altering their Estee Lauder Strategic marketing depending
on the region, this allows them to speak to consumers in a
more culturally relevant way.
Enhancing Digital Capabilities - They are
immersed in the online world and continue to invest
resources in everything digital. Many of their brands
interact with consumers via Facebook, Twitter, and
YouTube. They have also established global ecommerce
sites that create powerful viral marketing campaigns.

86. STRENGTHS AND
WEAKNESSES OF EL

87. Estee Lauder currently has 26 brands selling in over
130 countries.
Each brand has a single global image which is
promoted with consistent logos, packaging, and
advertising designed to differentiate it from other brands.
Estee Lauder was awarded/included in Ten
Outstanding Women in Business in the U.S by business
and financial editors in 1967 which contributed largely
towards brand :building of the company.
Global licenses and globalized operations.
STRENGTHS

88.  Defined/numerous/wide channels of distribution.
 Manufacturing operations match ISO 14001
standards.
 Early/effective use of internet/technology in 1998
added strength to their sales.
 Excellent promotional strategies: Discounts, gifts
and free samples with purchases, Celebrities
endorsements.
 Advertisements which differentiates their products
from others.

89. Innovation:
First dermatologist : guided, allergy tested,
fragrance : free cosmetics brand.
First major prestige cosmetic firm to offer
shopping via internet.
First to introduce consistent brand imagery around
the world.
Advertisements which differentiates their products
from others.
Global expansion as a result of strengthening of the
U.S dollar.

90. Indistinguishable organizational structure
Lower sales in Fragrance product category. As a
result of this, the company is struggling particularly in
American region.
Most of the power/authority in the company is
vested in family members.
It is not clear whether the four presidents have
authority over the four product lines or four geographic
regions thus a questionable line of command exists.

91. INTERNAL FACTOR
EVALUATION (IFE)
MATRIX

92. KEY INTERNAL FACTORS WEIGHT RATING
WEIGHT
SCORE
STRENGTHS
Wholly owned and operated offices in 43
countries and territories and sold in over
135 countries.
0.12 4 0.48
Test products on animals only when
required by law.
0.03 4 0.12
EL markets more than 9,000 products
under many brands names such as Estee
Lauder, Aranis, Clinique, Prescriptive,
M.A.C, Bumble and its new acquisition
Smashbox.
0.10 4 0.40
Detailed succession plan in place for
Fabrizio Freda to take over as CEO in
March of 2010.
0.05 4 0.20

93. KEY INTERNAL FACTORS WEIGHT RATING
WEIGHT
SCORE
STRENGTHS
Acquisitions including Jo Malone, Stila
Cosmetics, Gloss.com…The same year also
license agreements with Sean John,
Missoni, and Donald Trump.
0.10 4 0.40
Company continues to purchase interest in
start up and established companies such as
Bumble and Bumble Products LLC.
0.05 4 0.20
Strong increases in all regions, recent
technologically-advanced innovations
include Clinique,Estee Lauder.
0.15 4 0.60
Company specializes in mid level and upper
end cosmetics products; markets over 9,000
products.
0.05 4 0.20

94. KEY INTERNAL FACTORS WEIGHT RATING
WEIGHT
SCORE
WEAKNESSES
In 1990, 75 nameplate department stores
sold Estée Lauder; today that number is
only 17.
0.10 2 0.20
Stock price has been stuck between $25 and
$50 trading range since 1996.
0.05 1 0.05
Estée Lauder lacks clear mission and vision
statements.
0.05 1 0.05
Confusing organizational structure; it is
unclear whether group presidents have
control over product lines or geographic
areas.
0.05 1 0.05
Net sales of fragrance products decreased 4
percent to $1,213B; company continues to
struggle in this segment.
0.05 1 0.05
Company does not offer enough brand
names tailored to lower budget consumers.
0.05 1 0.05
Total 1 3.05

96. Why external assessment ?
 The purpose of the External assessment is to develop
a predetermined opportunities that could benefit
and threats that should be avoided.
 Firms should be able to respond either offensively or
defensively to the factors by formulating strategies
that take advantage of external opportunities or to
minimize the impact of potential threats.
Este’e Lauder Companies, Inc

97. Este’e Lauder Companies, Inc
Key Industry Trends
Main External forces
1. Economic forces
2. Social, cultural, demographic, & environment
forces
3. Political, governmental, and legal forces
4. Technological forces
5. Competitive forces
Changes in above forces translate into changes in consumer
demand that can affect the products developed , nature of
positioning and market segmentation strategies.

98. Este’e Lauder Companies, Inc
Key Economical variables
 Unemployment rate in the U.S. in 2010 around 9 %
which leads the job insecurity
 Standard & Poor’s projection an inflation adjusted
growth of 2.6 % for 2011.
 Depreciation of US Dollar against international
currencies
 Technological variables
 Innovation in product development has rapidly
gone up in the industry

99. Este’e Lauder Companies, Inc
Key Social, cultural, geographic, demographic, &
environment variables
 Global women’s purchasing power is expected to increased
by $5 trillion and beauty is the category those consumers
most likely to spend money after food and clothing
 U.S. Census Bureau predicts that by the year 2030,
Americans over aged of 65 will represent 1:5 of the
population
 All geographic regions will impact by over aged population
specially countries like China & India
 Tendency of younger consumers spending money over
beauty products
 Demand for Organic products favorably increased

100. Este’e Lauder Companies, Inc
 Political, governmental, and legal variables
 Whole continent of Africa is coming online
 Consumer complains and inquiries into use of animals for
testing purposes which leads industry to move humane and
creative testing techniques
 Federal Drug Agency’s involvement on safety warnings
Competitive variable
 Increase producing green products in the personal care
industry

101. External Factor Evaluation (EFE) Matrix
Ser NoOPPORTUNITIES WEIGHT RATING
WEIGHTED
SCORE
1
Increase international market share more than 60 %
Sales growth from acquisitions over nest three years &
increasing operating mergers from 13% to 14%
0.40 4 1.60
0.04 2 0.08
2 Reinvestment of $50 million to increase market share 0.06 2 0.12
3 $42 million was added to the quarters net sales owing
additional orders from Europe
0.04 2 0.08
5 Getting certified to ISO 14001 standard 0.10 3 0.30
4
First major prestige cosmetics firm to offer shopping via the
internet
0.10 2 0.20
5
Research shows that by 2015, global women's purchasing
power is expected to increase by $5 Trillion
0.02 1 0.02
6
Demand for natural and organic products and tendency of
customers to spend on beauty after food and clothing
0.02 1 0.02
Este’e Lauder Companies, Inc

102. External Factor Evaluation (EFE) Matrix
Ser
No THREATS WEIGHT RATING
WEIGHTED
SCORE
1
Japan Tsunami will hamper company sales by half a
presentation point 0.05 3 0.15
2
About 31 million was contributed by the company's long term
marketing strategy adopted in the Europe, Middle East, and
Africa regions.
0.03 2 0.06
3
Spending on consumer products may be down in many parts
of the world 0.01 1 0.01
4
US market suffering from high unemployment 9% which
leading
of job insecurity among the working population
0.02 3 0.06
5 Stock market dropped more than1000 points in Aug 2011 0.02 3 0.06
6
High gas prices impact transportation cost in production and
packaging 0.06 4 0.24
7
Consumer complains of using animal of testing on new
products
Safety warning on the products has been enforce by the local
agency
0.02 3 0.06
8 Companies interest on spending some profits to the research
and development of new appealing products
0.01 2 0.02
Total 1.00 3.08
Este’e Lauder Companies, Inc

103. Este’e Lauder Companies, Inc
Current Environment & Industry Trends
 Cosmetics and personal care industry is one of the world’s largest
industries expected a growth of 70 million customers across the globe
in the next 20 years.
 Due to intense advertising and brand name recognition the industry
has a relatively high profit margin compared to other industries.
 All top competitors in the filed are diversified with many brand names
and a wide range of products.
 Customer service is expected with the sale of prestige cosmetics and
rewarded with high level of customer loyalty.
 The industry is now turned to look for innovative products with natural
herbal and organic products due to customers interest in purchasing
such products

104. Este’e Lauder Companies, Inc
Main competitors to Estee Lauder
 Procter & Gamble (P&G) 127,000 employees working
in over 80 countries. Many P&G products compete
directly with Estee Lauder products.
 L’oreal is one of the world wide leaders of cosmetics
distributes products over 130 countries having 66,619
employees and offices in 58 countries

105.  Colgate –Palmolive which marked its 200th year in 2006.
Palmolive and soft soap brands Irish Spring and Protex ,
Speed stick and lady speed stick deodorants
antiperspirants are the competitive products to Estee.
 Avon products sells beauty and related products consisting
of cosmetics. They are the world largest direct seller of
personal products mainly the cosmetics
 Revlon is one of the best known brand names in the world
which excels at mass marketing. Revlon offers a variety of
cosmetics and beauty products under many brand names.
All of which complete with Estee Lauder’s product line.
Este’e Lauder Companies, Inc

106. Este’e Lauder Companies, Inc
-
10,000.00
20,000.00
30,000.00
40,000.00
50,000.00
60,000.00
70,000.00
80,000.00
90,000.00
Intensity of competition in the Industry -
2010 (IN MILLIONS US$)
REVENUE

107. Competitive Profile Matrix
ESTEE LAUDER L'Oreal Procter & Gamble
Critical Success Factors Weight Rating Score Rating Score Rating Score
Advertising 0.15 3 0.45 3 0.45 3 0.45
Product Quality 0.15 4 0.60 4 0.60 4 0.60
Price Competitiveness 0.10 3 0.30 4 0.40 4 0.40
Management 0.10 1 0.10 3 0.30 3 0.30
Financial Position 0.15 2 0.30 4 0.60 4 0.60
Customer Loyalty 0.10 2 0.20 3 0.30 4 0.40
Global expansion 0.15 3 0.45 3 0.45 4 0.60
Market share 0.10 3 0.30 4 0.40 4 0.40
Total 1.00 2.7 3.5 3.75
Este’e Lauder Companies, Inc

108. STRATEGY FORMULATION

109. A Retrospective……..
 Estee Lauder began to market products directly to let
customers samples the products before they bought.… Earning
trust and confidence by Market Penetration.
 Target High Class customers…… Dominating the
industry and wining trust and confidence of reliable
customers by Market Penetration.
 Selling products exclusively through boutiques and
department stores and selectively distributing in better stores
…..Confidence and strength to exploit the market through
Forward Integration.
 Went on globalization 1st in 1960 London followed by
Hong Kong and later expanding it to USSR in 1983… accepting
risk and Market Development.

110.  Introduced R & D in 1960…..Product Development.
 Acquiring more brand License(28 at present) from 1946
till 2010 and it continues….Horizontal Integration and
Related Diversification.
 Exploiting Inter Net( E Trading Strategy) way back in
1998 the one among the 1st to do so …Market Penetration.
 Business office in nearly every continent….. Market
Development.
 Manufacturing facilities R&D and 31200 employees…
Facilitate to Grown and Build whilst adopting to maintain
an aggressive business strategy.
A Retrospective……..

111. Estee Lauder Strategies were basically
based on:
 Integration Strategies.
 Intensive Strategies.
 Diversification Strategies.
Aggressive policy to grow and build
from the inception of the company up
to date…..?

112.  Estee Lauder’s performance objective include
generation of 60 percent of sales for beauty market
from international market.
 1 % of sales growth from acquisitions.
 Increase operating margins from 13% to 14%.
 Increase rate of inventory turnover.
 Reduction of costs.
 Reinvestment of $50 million to increase global
market share.
 Estee lauder reported 3rd quarter of fiscal 2011 with
quarterly earnings of 71 cents per share.
Estee Lauder Companies, Inc Strategy
Towards Key Industry Trends

113.  Raised full year diluted earnings estimate from $3.55 to $3.65.
 Net sales grew 16.0%.
 Added $42 Million to the quarters net sales owing additional
order from Europe.
 Net sales are expected to grow 10.5%.
 Skin care products sales increased by 14%.
 Make up sales increased by 24%.
 Hair care products increased by 14%.
 America sales by 12%.
 Europe ,Middle East and Africa sales surged 20%.
 Asia /Pacific region rose up to 19%.
Estee Lauder Companies, Inc Strategy Towards Key
Industry Trends cont…

114. Estee Lauder is a globally recognized manufacturer
and marketer of makeup, skin care, fragrances and
hair care products. The company's wide geographical
presence reduces the business risk due to diversified
revenue stream and enables participation in fast
growing developing markets. However, intense
competition in the beauty market may adversely affect
the company's market share.
SWOT ANALYSIS

115. SWOT ANALYSIS
1. Large geographical
footprint diversifies
revenue stream.
2. Strong brand portfolio
well positioned to
participate in the revival of
consumer Spending.
3. In-house research and
development facilitates
high consumer acceptance
and quick market
penetration.
4. Strategic modernization
initiative program.
1. Positive outlook for the cosmetics
market in China, India and Brazil.
2. Growing popularity of online retail
channel and social networking media
offers growth opportunities.
3. Retail environment in emerging
economies provides strong growth
potential.
4. Men's personal care products segment
offers fast growing and large potential
Market.
1. Highly competitive market.
2. Increase in the counterfeit products may hurt
the brand image.
3. Increasing labor cost in the US and Europe
OPPORTUNITIES
STRENGTH
THREATS
SO MATCHES ST MATCHES
SO1. Market development strategy to
maintain presence in emerging markets.
SO2. Market penetration by E Marketing
Strategy to be maintain to gain competitive
advantage.
SO3. Well positioned R & D programmes
could meet the growing market demands
thus keeping in abreast with the retail
environment to penetrate new markets.
SO4. Modernization programme with the
aim of Product development strategy thus
Unrelated or Related Diversification to
meet the men’ demand.
ST1. Horizontal Integration using Brand
portfolio and geographical footprint to diminish
the competition in the emerging as well as
traditional new markets .
ST2. Exploit provisions in the Intellectual
Property Rights (IPR) Seizure by Customs
and Border Protection, (CBP) Office of
International Trade, strong R&D facilities,
strategic modernization initiatives could
address the counterfeit products to safeguard the
brand name.
ST3. Market Development by expanding in to
new geographical area with cheap labour.

116. 1. Limited distribution
strategy increases
dependency on specific
channels.
WEAKNESSES
SO1. Forward integration by moving in to new
markets, exploitation of retail market environment
in emerging economics to address the issues of
limited distribution in order to maintain
completive advantage in the emerging markets.
ST1. Planning for Forward
Integration and Backward
Integration for a sound distribution
network is a urgent requirement to
maintain the competitive advantage
over many geographical regions and
new markets in China, India and
Brazil.
1. Positive outlook for the cosmetics market in
China, India and Brazil.
2. Growing popularity of online retail channel
and social networking media offers growth
opportunities.
3. Retail environment in emerging economies
provides strong growth potential.
4. Men's personal care products segment offers
fast growing and large potential Market.
1. Highly competitive market.
2. Increase in the counterfeit
products may hurt the brand image.
3.Increasing labor cost in the US and
Europe.
OPPORTUNITIES THREATS
WT MATCHESWO MATCHES
SWOT analysis cont….

117. SWOT MATRIX ANALYSIS
SUGGESTED STRATEGIES
SO ST
 Market Development
 Market Penetration
 Product Development
 Unrelated Diversification
 Related Diversification
 Horizontal Integration
 Market Development
WO WT
 Forward Integration  Forward Integration
 Backward Integration
SWOT analysis recommend to adopt Integration Strategies, Intensive
Strategies and Diversification Strategies facilitating Estee Lauder to
Grow and Build aggressively.

118. Strong
3.0 to 4.0
Average
2.0 to 2.99
Weak
1.0 to 1.99
High
3.0 to 4.0
Medium
2.0 to 2.99
Low
1.0 to 1.99
1.0
3.0
2.03.0
4.0
2.0
1.0
EFE IFE
3.08 3.05
The IFE Total Weighted Score
TheEFETotalWeightedScore
GROW AND BUILD
IE MATRIX

119. QUANTITATIVE STRATEGIC PLANNING
MATRIX(QSPM)
STRATEGIC ALTERNATIVES
Key Internal Factors Weight Introduce
New
Products for
Non
Traditional
Customers
Continue
to expand
in to new
geographic
markets
Ser
No
Strength AS TAS AS TAS
1. Wholly owned and operated offices in 43 countries
and territories and sold in over 135 countries.
0.12 2 0.42 4 0.48
2. Test products on animals only when required by
law.
0.03 - - - -
3. EL markets more than 9,000 products under many
brands names such as Estee Lauder, Aranis,
Clinique, Prescriptive, M.A.C, Bumble and its new
acquisition Smashbox.
0.10
3 0.30 4 0.40
4. Detailed succession plan in place for Fabrizio
Freda to take over as CEO in March of 2010.
0.05 -- -- -- --

120. STRATEGIC ALTERNATIVES
Key Internal Factors Weight Introduce
New
Products for
Non
Traditional
Customers
Continue
to expand
in to new
geographic
markets
Ser
No
Strength AS TAS AS TAS
5. Acquisitions including Jo Malone, Stila Cosmetics,
Gloss.com…The same year also license
agreements with Sean John, Missoni, and Donald
Trump.
0.10
2 0.20 3 0.30
6. Company continues to purchase interest in start up
and established companies such as Bumble and
Bumble Products LLC.
0.05
4 0.20 4 0.20
7. Strong increases in all regions, recent
technologically-advanced innovations include
Clinique,Estee Lauder.
0.15
4 0.60 4 0.60
8. Company specializes in mid level and upper end
cosmetics products; markets over 9,000 products.
0.05
2 0.10 4 0.20
Quantitative strategic planning matrix(QSPM)
cont…

121. STRATEGIC ALTERNATIVES
Key Internal Factors Weight Introduce
New
Products for
Non
Traditional
Customers
Continue
to expand
in to new
geographic
markets
Ser
No
Weakness AS TAS AS TAS
9. In 1990, 75 nameplate department stores sold
Estée Lauder; today that number is only 17.
0.10
2 0.20 1 0.10
10. Stock price has been stuck between $25 and
$50 trading range since 1996.
0.05
1 0.05 1 0.05
11. Estée Lauder lacks clear mission and vision
statements.
0.05
1 0.05 1 0.05
12. Confusing organizational structure; it is
unclear whether group presidents have
control over product lines or geographic
areas.
0.05
1 0.05 1 0.05
13. Sub Total 1.0 2.17 2.43
Quantitative strategic planning matrix(QSPM)
cont…

122. STRATEGIC ALTERNATIVES
Key Internal Factors Weight Introduce
New
Products for
Non
Traditional
Customers
Continue
to expand
in to new
geographic
markets
Ser
No
Opportunities AS TAS AS TAS
1
Increase international market share more than 60 %
Sales growth from acquisitions over next three years
& increasing operating mergers from 13% to 14%
0.04 4 0.16 4 0.16
2
Reinvestment of $50 million to increase market
share
0.06 4 0.24 4 0.24
3 $42 million was added to the quarters net sales
owing additional orders from Europe
0.04
2
0.08
2 0.08
4. Getting certified to ISO 14001 standard 0.10 2 0.20 3 0.30
5.
First major prestige cosmetics firm to offer shopping
via the internet
0.10 3 0.30 4 0.40
Quantitative strategic planning matrix(QSPM)
cont…

123. STRATEGIC ALTERNATIVES
Key Internal Factors Weight Introduce
New
Products for
Non
Traditional
Customers
Continue
to expand
in to new
geographic
markets
Ser
No
Opportunities AS TAS AS TAS
6.
Research shows that by 2015, global women's
purchasing power is expected to increase by $5
Trillion
0.02 4 0.08 4 0.08
7.
Demand for natural and organic products and
tendency of customers to spend on beauty after food
and clothing
0.02 3 0.06 2 0.04
Threats
8.
Japan Tsunami will hamper company sales by
half a presentation point
0.05 3 0.15 3 0.15
9.
About 31 million was contributed by the
company's long term marketing strategy adopted
in the Europe, Middle East, and Africa regions.
0.03
2 0.06 3 0.09
10.
Spending on consumer products may be down in
many parts of the world
0.01 1 0.01 1 0.01
Quantitative strategic planning matrix(QSPM) cont…

124. STRATEGIC ALTERNATIVES
Key Internal Factors Weight Introduce
New
Products for
Non
Traditional
Customers
Continue
to expand
in to new
geographic
markets
Ser
No
Threats AS TAS AS TAS
11.
Research shows that by 2015, global women's
purchasing power is expected to increase by $5
Trillion
0.02 4 0.08 4 0.08
12.
Demand for natural and organic products and
tendency of customers to spend on beauty after food
and clothing
0.02 3 0.06 2 0.04
13.
Japan Tsunami will hamper company sales by
half a presentation point
0.05 3 0.15 3 0.15
14.
About 31 million was contributed by the
company's long term marketing strategy adopted
in the Europe, Middle East, and Africa regions.
0.03
2 0.06 3 0.09
15.
Spending on consumer products may be down in
many parts of the world
0.01 1 0.01 1 0.01
Quantitative strategic planning matrix(QSPM) cont…

125. STRATEGIC ALTERNATIVES
Key Internal Factors Weight Introduce
New
Products for
Non
Traditional
Customers
Continue
to expand
in to new
geographic
markets
Ser
No
Threats AS TAS AS TAS
16.
Spending on consumer products may be down in
many parts of the world
0.01 1 0.01 1 0.01
17. Sub Total 1.00 1.48 1.92
18. Grand Total 3.65 4.35
Quantitative strategic planning matrix(QSPM) cont…

126. SWOT matrix and IE matrix results, shows that Estee
Lauder should Grow and Build its position. This means
intensive and aggressive tactical strategies should be adopted.
Quantitative strategic planning matrix(QSPM) suggest
that Estee Lauder has better opportunities in Introducing
New Products for Non Traditional Customers and
Continue to expand in to new geographic markets.
Therefore, following are the best chosen strategies for Estee
Lauder as they are positioned in aggressive area:
a. Integration Strategies.
b. Intensive Strategies.
c. Diversification Strategies.
STRATEGY FORMULATION CONCLUSION

127.  Estee Lauder brand to develop a clear brand image and provide its
customers with something that is unique.
 Possibility for Estee Lauder would be to create a new brand image
through the release of a Sub brand especially in China, India and Brazil
considering and incorporating traditional beauty culture methods.
 The company should take measures to stop product counterfeiting
as it will harm their business as well as their brand image. Besides it may
result in customer dissatisfaction leading to low customer concentration,
that finally would lead to business drooping.
 Estee Lauder could introduce sub brands customized for different
markets, which provide the flexibility to enjoy multiple brand images
without diluting each other.
RECOMMENDATIONS FOR STRATEGY
IMPLEMENTATIONS

128.  No doubt that THE ESTEE LAUDER has a very vast and diversified
product assortment but still it has to keep in mind about the increasing
competition which can provide a strong hindrance to its smooth and calm
operation of business.
 Market segmentation policy in the emerging new markets in
China, India and Brazil considering cultural, ethnic and religious
sensitivity.
 The world’s aging population will multiple by 2.5 times in the
next 40 year including in high growth countries such as China and India.
Therefore developing products to meet the aging population will place
Estee Lauder in Competitive Advantage position.
 Since ESTEE LAUDER is a global name, so it must provide the
same concentration on all its markets to bring in global stability in its
business as a whole.
Recommendations for strategy
implementations cont…

129. STRATEGY IMPLEMENTATION

130. MANAGEMENT AND OTHER ISSUES
RELATED TO IMPLEMENTATION
The following are the Management and other issues
that need to be considered prior to implementing
the Strategies Formulated:
 Establish Annual Objectives.
 Devise Policies.
 Allocate Resources.
 Alter an existing organizational structure.
 Restructure and Reengineer.
 Revise Reward and Incentive Plans.

131.  Minimize resistance to change.
 Match Managers with strategies.
 Develop a strategy supportive culture.
 Adapt production/operation processes.
 Develop an effective human resources
function.
 Downsize and furlough as needed.
 Link performance and pay to strategies.
management and other issues
related to implementation cont…

132. OTHER ISSUES
The other important issues are as follows:
 Current Marketing Issues.
 Market Segmentation.
 Product Position.
 Finance/Accounting Issues.
 R & D Issues.
 MIS Issues.

133. In order to implement strategies the
following actions are required:
 Altering sales territories.
 Adding New Departments.
 Closing Facilities.
 Hiring New Employees.
 Changing the pricing strategy.
 Developing Financial Budgets.
 Developing New Employees Benefits.
 Establishing cost control procedures.
 Changing Advertising Strategies.
 Building New Facilities.
 Training new employees.
 Transferring managers among divisions.
 Building a better Management
Information System.

134. LIMITATIONS
The presentation by the group will cover only a few
recommendations made above in respect of Estee
Lauder due to time constraints. The recommendations
made in respect of Emerging Markets in India, China
and Brazil will be analyzed with Market Segmentation
Product Positioning and Current Marketing Issues.

135. MARKET SEGMENTATION
Subdividing of a market into distinct subsets
of customers according to needs and buying
habits.
Widely used in implementing strategies.

136. MARKET SEGMENTATION
Strategies such as market development, product
development, market penetration, and
diversification require increased sales through new
markets and products.
Market segmentation allows a firm to operate with
limited resources because mass production, mass
distribution, and mass advertising are not required.
Market segmentation decisions directly affect
marketing mix variables: product, place, promotion,
and price.

137. MARKET SEGMENTATION
 GEOGRAPHIC
 DEMOGRAPHIC
 PSYCHOGRAPHIC
 BEHAVIOURAL

138. As per the portfolio of Estee Lauder it is capable
of producing a brand in China, India and Brazil in
line with the Geographic requirement of Market
Segmentation.
In terms of Demographic requirement to support
Market Segmentation it should cater for the aging
population in this region.
The upper class in the region needs to be targeted.
The quality and regularity of use is important in
Behavioural aspect of market Segmentation.

139. PRODUCT POSITIONING
Entails developing schematic representations
that reflect how your products or services
compare to competitors’ on dimensions most
important to success in the industry.

140. Select key criteria that effectively differentiate
products or services in the industry.
Diagram a two-dimensional product-positioning
map with specified criteria on each axis.
Plot major competitors’ products or services in the
resultant four-quadrant matrix.
Identify areas in the positioning map where the
company’s products or services could be most
competitive in the given target market. Look for
vacant areas (niches).
Develop a marketing plan to position the company’s
products or services appropriately..

141. PRODUCT POSITIONING MAP

142. An effective product positioning strategy meets two
criteria:
It uniquely distinguishes a company from the
competition.
It leads customers to expect slightly less service
than a company can deliver.

143. Estee Lauder will be product B in the Product
Position Map.
The product of Estee Lauder will be high in price
and quality and that segment or market has not
be targeted by the competitors.
The product to the emerging markets in China,
India and Brazil will be an Anti Wrinkle product
for the aging population with a touch of
traditional beauty culture method incorporated.

144. CURRENT MARKETING ISSUES
How to make advertisements more interactive to be
more effective
How to best take advantage of Facebook and Twitter
conservations about the company and industry.
To use exclusive dealerships or multiple channels of
distribution.
To use heavy, light, or no TV advertising versus online
advertising.
To limit (or not) the share of business done with a
single customer.
To be a price leader or a price follower.

145. To offer a complete or limited warranty.
To reward salespeople based on straight salary,
straight commission, or a combination
salary/commission.
Firms should provide incentives to consumers to
share their thoughts, opinions, and experiences on
the company website.
The company website must not be all about the
company—it must be all about the customer too.

147. Estee Lauder places high value in consumer
communication and awareness.
Systems are in place to provide customer service and
open dialogue on behalf of the company and its
brands.
Service and individualized attention is offered via
brand websites, toll free phone numbers and Global
Consumer Care Centres.
Estee Lauder sells products through selective
distribution channels to complement the images
associated with its brands.

148. Shopping via Internet.
Live chats with consumers and using Twitter as an
effective means to provide service to customers.
Estee Lauder offers free samples with gift. EL also uses
celebrities to market their products.
Prestige pricing in target markets.

149. To summarize the strategy implementation of
Estee Lauder taking onto consideration Market
Segmentation, Product Positioning, Current
Marketing and other issues relevant will be as
follows.
EL will target the aging population in China, India
and Brazil with a Anti Wrinkle product that will
cater to a age group of 38 to 45. This product will
have a traditional touch in order to attract the
upper middle class customers keeping in mind
the brand image and quality of EL.

150. The growth rate of Estee Lauder over the last two
years has improved. Hence expenses related to R&
D of the new product, expenses for structural
changes required in the new market, expenses for
training of employees in relation to the new
product, infrastructure expenses, Marketing
expenses to promote the product can be initiated.
EL also plans to reinvest $50 Million to increase
global growth and market share. This will be
possible through reduction in operating cost
which is $5176.5 Million in year 2010.

152. Strategy Evaluation
 The process of determining the effectiveness of a given strategy in
achieving the organizational objectives and taking corrective action
wherever required.
 The final step of strategy management process.
 strategy evaluation activities
appraising internal and external factors present strategies,
measuring performance
Evaluation makes sure that the organizational strategy as
well as it’s implementation meets the organizational objectives

153. Techniques of Strategic Evaluation
1)Gap Analysis
strategic evaluation technique used to measure the gap between the
organization’s current position and its desired position.
2) SWOT Analysis
common strategic evaluation technique used as a part of the strategic
management process. The SWOT analysis evaluates the organization’s
strengths, weaknesses, opportunities and threats.
3) PEST Analysis
The political, economic, social and technological factors that may impact the
organization’s ability to achieve its objectives.
4) Benchmarking
This often used to evaluate how close the organization has come to its final
objectives, as well as how far it has left to go.
5) Balance Scorecard

154. Strategy Evaluation Framework
Examining the underlying bases of strategy
Comparing expected results with actual results
Taking corrective actions to ensure that
performance conforms to plans

155. Strategy Evaluation Assessment Matrix

156. Changers/
Activity
Have Major
changers Occurred
in the Firm’s
Internal Strategic
Position ?
Have Major
changers
Occurred in
the Firm’s
External
Strategic
Position ?
Has the Firm
Progressed
Satisfactorily
Toward
Achieving its
Stated
Objectives ?
Result
50’s
The Creation of
High Tough
(Person to
Person Contac)
No No Yes Continue
Strategies
60’s
Go to
International
Market(British
London)
No No No Take
Corrective
Action
70’s
Scent
Galore(New
Fragrances)
No No yes Continue
Strategies

157. Changers/
Activity
Have Major
changers Occurred
in the Firm’s
Internal Strategic
Position ?
Have Major
changers
Occurred in
the Firm’s
External
Strategic
Position ?
Has the Firm
Progressed
Satisfactorily
Toward
Achieving its
Stated
Objectives ?
Result
80’s
Serious Skin
Care(Night
Repair cream )
No No No Take
Corrective
Action
90’s
Designing
wellness
brine(Proof of
Science)
No No yes Continue
Strategies
00’s
Dreaming up
the next
Brand(Beauty
No No No Continue
Strategies

158. Strategy Evaluation Framework

159. Activity : Acquisition of Smash box Beauty Cosmetics in
2010(Great Strategic Decision)
Do Significant Differences
occur?
No
Net Earning $ 478.3
Cont
Do significant difference occur?
Take
Corrective
Action

160. No
Continue till 2014
Note
Here I’m taking One example to describe Strategy
Evaluation Framework.
Abstraction:-
In 2010 Estee Lauder announced the acquisition of
Smash Box Beauty Cosmetics from the Factor Brothers,
great grandsons of the Legendry Max Factors

162. Strategic plan By Company Strategic Plan by Presentation Group
Estee Lauder brand to develop a clear brand
image and provide its customers with
something that is unique.
Same
Same brand introduce to the China, India
and Brazil
create a new brand image through the
release of a Sub brand especially in China,
India and Brazil
No Action measures to stop product counterfeiting as it
will harm their business as well as their
brand image
Gross margin performance has a direct
impact on operating profit,
(Same)
Cost reduction, Effectiveness, Efficiency
Direct impact on Operation Profit
(Same)

163.  The Estée Lauder Companies face many challenges
Environmental law as it pertains to the waste stream, primarily a result
of product packaging and shippers.
 Exchange rates pose another challenge as foreign markets
become increasing vital.
 Currently 26% (2011) of all sales occur in international
department stores.
 Cultural views of cosmetic products and animal testing
continue to have an effect on the company
 Increasingly health conscious and wellness focused
consumers that reject The

164. The Estée Lauder Companies can do,
 Include packaging risks, instrument manufacturing,
infrastructure costs, merchandise, a portion of payments to
customers, license agreements and royalties based on net sales.
 Company must become vertically integrated through the
acquisition of new business units in holistic beauty such as
yoga/wellness and products that support a lifestyle
luxury furniture,
boutique fashion/apparel,
wine & spirits
jewelry.