REVLONS STRATEGIC ANALYSIS Executive Summary Revlon is a company leader in the cosmetic and personal products industry.

The company produces goods under Revlon, Almay, and Ultima brand names. Product categories are skin care, cosmetic and personal products. Revlon has implemented an aggressive R&D investment. This has resulted in positive aspects for the company such us brand recognition and increase in sales. It focuses on global expansion. Therefore, the firm is successful in markets like Africa and Latin America. However, the competition is intense. The companys top competitors are Procter & Gamble, LOreal, Estee Lauder, and Avon. These competitors represent a major threat for Revlon. They sell their products in international markets and have aggressive strategies to increase revenues. Revlon has struggled with debt in resent years. Its long term debt was $1,308,200 for 2004. The company is not financially stable. The net income has been negative for the last three years. Its growth rates are below the industry rates. The strategic analysis shows that the company has some internal and external problems. The company has low competitive advantage compared to top competitors. This means that the company will be in a poor position to change with the market. Revlon has a low rate of return and cash flow problems. The Internal and External Strategic Position and Action Evaluation shows that the company has a weak competitive position, a negative growth in a stable industry.

 The Boston Consulting Matrix demonstrates that the companys market share is in a medium position relative to the industry market share. The Internal-External Matrix shows that Revlon has average weighted scores. Current Mission Statement Revlon strives to provide our costumers with the latest and most innovative beauty products in the world. Revlon is the number one provider of cosmetic and personal care products worldwide, and continues to expand the markets it operates in. With our excellent R&D department we continue to produce leading edge beauty products. Revlon believes that our consumers deserve the safest and most technologically advanced products. Our tremendous partnership with large mass merchandisers and chain stores provide our consumers with widespread access to Revlon products. Our exceptional team and excellent training program will develop Revlon into enjoyable company to work for. Revised Mission Statement 1. Customers Who are the firms customers? Revlon strives to provide our costumers with the latest and most innovative beauty products in the world. Our tremendous partnership with large mass merchandisers and chain stores provide our consumers with widespread access to Revlon products.

The mission statement does not mention who the customers are. 2. Products and services What are the firms major products and services? Revlon strives to provide our costumers with the latest and most innovative beauty products in the world. Revlon is the number one provider of cosmetic and personal care products worldwide, and continues to expand the markets it operates in. 3. Markets Geographically, where does the firm compete? Revlon is the number one provider of cosmetic and personal care products worldwide, and continues to expand the markets it operates in. 4. Technology Is the firm technologically current? Revlon believes that our consumers deserve the safest and most technologically advanced products. With our excellent R&D department we continue to produce leading edge beauty products. 5. Concern for Survival, Growth, and Profitability Is the firm committed to grow and financial soundness?

Revlon is the number one provider of cosmetic and personal care products worldwide, and continues to expand the markets it operates in. 6. Philosophy What are the basic beliefs, values, aspirations, and ethical priorities of the firm? Revlon believes that our consumers deserve the safest and most technologically advanced products. Our tremendous partnership with large mass merchandisers and chain stores provide our consumers with widespread access to Revlon products. 7. Self-Concept What is the firm distinctive competence or major competitive advantage? Revlon strive to provide our costumers with the latest and most innovative beauty products in the world. 8. Concern for Public Image Is the firm responsive to social, community and environmental concerns? Revlons mission statement does not describe its concerns with the community and environment. 9. Concern for Employers Are employees a valuable asset of the firm?

Our exceptional team and excellent training program will develop Revlon into enjoyable company to work for. Revlon strive to provide our costumers with the latest and most innovative beauty products in the world. Revlon is the number one provider of cosmetic and personal care products worldwide, and continues to expand the markets it operates in. With our excellent R&D department we continue to produce leading edge beauty products. Revlon believes that our consumers deserve the safest and most technologically advanced products. Our tremendous partnership with large mass merchandisers and chain stores provide our consumers with widespread access to Revlon products. Revlon takes care of the environment. We develop products that do not pollute the atmosphere. Our exceptional team and excellent training program will develop Revlon into enjoyable company to work for. The External Factor Evaluation (EFE) Matrix Opportunities 1) U.S. demographics are growing in the proportions of racial/ethic populations. Most growth is in the Hispanic-American, AfricanAmerican, and Asian-American categories. 2) The U.S. population is getting older. Customers in the large baby boomer group are now reaching their 50s. 3) Shoppers have increased their purchasing power. U.S. consumers are spending significant portions of their disposable income. 4) A mini-baby boom will result in the in an increase in the preteen market. This population will become the largest population in the U.S.

5) Global expansion to Asia, Latin America, and East Europe markets offer significant opportunities to grow. 6) Men now demand skin care products. 7) International markets are becoming wealthier. Many traditionally third-world nations have developed consumer markets and their citizens are demanding products from the developed world. 8) The U.S. is becoming more affluent and less affluent at the same time. Significantly more consumers have high levels of disposable income. The number of consumers at the poverty level continues to increase. Threats 1) Competition is intense and from a variety of sources: retail sellers of cosmetics/skin care companies, door-to-door sellers, and catalogue sellers. The competition is world-wide with a French company (LOreal) maintaining the leadership role in the cosmetics area. 2) Companies face significant entry barriers in some countries in the form of protectionist trade laws. 3) International economic problems such as economic instability and inflation may put at risk operations. 4) Consolidation of competitors in the industry makes competition more intense. One example is the purchase of Maybelline by LOreal. 5) The U.S. economy is currently in a downturn.

6) Political conditions in some international markets also provide uncertainty for companies. 7) Consumers no longer believe brand is an important indicator of quality in the cosmetics/skin care industry. Key External Factors Weight Rating Weight Score Opportunities 1.Ethnic/racial population is growing .07 4 .28 2. Baby boomer group are now reaching their 50s .07 3 .21 3. Shoppers have increased their purchasing power .07 3 .21 4. Mini-baby boom generation .07 3 .21 5. Global expansion to other continents .05 4 .20 6. Men now demand skin care products .07 3 .21 7. International markets are becoming more affluent .05 3 .15

8. The U.S. is becoming more affluent and less affluent at the same time. .08 3 .24 Threats Competition is intense .14 3 .42 Entry barriers in international markets .06 2 .12 Economic Instability in international markets .06 2 .12 Consolidation of competitors .05 4 .20 The U.S. economy is currently in a downturn .06 2 .12 Political instability in some countries .05 2 .10 Brand is not an important indicator of quality .05 2 .10

Total 1 2.89 The Competitive Profile Matrix Critical Success Factors 1. Price Competitiveness 2. Market Share 3. Product Quality 4. Advertising 5. Customer Loyalty 6. Financial Position Revlon Este Lauder Avon Success Factors Weight Rating Weighted Score Rating Weighted Score Rating Weighted Score Price Competitiveness .10 4 .40 2 .20 4 .40 Market Share .20 3 .60 3 .60 3 .60 Product Quality .15 4 .60 4 .60 3 .45 Advertising .15 2 .30 4 .60 3 .45

Customer Loyalty .20 2 .40 3 .60 3 .60 Financial Position .20 1 .20 3 .60 3 .60 1.00 2.50 3.20 3.10 The Internal Evaluation Factor (IFE) Strengths 1) Good management response in attempts to handle debt problems. 2) Successful introduction of the Color Stay lines domestically and internationally. 3) Improvements in ordering and retailer relationships that helped to increase product category sales. 4) Advertising campaign includes well-known celebrity spokespersons. 5) The company has acquired some manufacturers in international markets. 6) The companys acquisition of African Pride allows them to compete in the market for sales to African Americans. Weaknesses 1) The market share of older, affluent consumers is weak. 2) The company entered the specialty markets for African-American women and Hispanic women late. 3) Revlon had net losses in 1998 - 2004.

4) Long-term debt is high. 5) Decreases occurred in international sales in 1998 - 2003. Key Internal Factors Weight Rating Weighted Score Internal Strengths Good management response .09 3 .27 Successful introduction of the Color Stay lines .10 4 .40 Improvements in ordering and retailer relationships .04 3 .12 Excellent advertising campaign .10 4 .40 the company has manufacturers in international markets .08 3 .24 The companys acquisition of African Pride .05 3 .15 Internal weaknesses The market share of older is weak. .08 2 .16 The company entered late to the market of the African-American and Hispanic women. .09 1 .09 Revlon had net income losses .15 1 .15 Long-term debt is high .12 1 .12 Decreases in international sales .08 1 .1 Total 1.00 2.20 The Strengths-Weaknesses-Opportunities-Threats Matrix

Strengths S 1. Good management of debt 2. Released the Color Stay line of products 3. More efficient ordering system increases sales 4. Use celebrities for advertising 5. Now has international manufacturing 6. New product line for African Americans Weaknesses W 1. Does not appeal to older people with more money 2. Took long time to create product lines for minorities 3. No net profit from 1998-2004 4. High debt for long term 5. Selling less products internationally from 1998-2003 Opportunities O 1. The number of minorities in America is increasing 2. Larger % of Americans are older than before 3. Americans spend a lot of money on consumer items 4. There are a lot of young Americans who will soon be available for Revlon to market to them

5. Globalization means more international markets and potential to grow 6. Men are buying more body care products 7. Some developing countries now have demand for consumer products 8. More rich people and more poor people in the United States, less middle class SO Strategies 1. Create new products to increase sales and market share (S2, S6, O1, O4) 2. Continue using a strong marketing campaign (S4, O1, O2, O4, O6) 3. Use current product line to develop other products to attract new customers (S2, O2, O4, O8) 4. Create new products for men (S6, O6) WO Strategies 1. Concentrate on designing new product lines for minorities (W2, W4, O1) 2. Use advertising to increase Revlons % of older women consumers (W1, W4, O2) 3. Design elite product lines (W4, O7) Threats - T 1. The is a lot of competition in the industry

2. Some countries have policies that protect their markets from outside companies 3. Global economics and inflation might damage business 4. The industry is consolidating and this makes competition even stronger 5. Americas economy is not very strong right now 6. The political problems in some countries hurt business 7. Consumers dont identify with cosmetic brands like before ST Strategies 1. Buy the competition (S6, T1) 2. Buy an multinational cosmetics company (S5, T2, T3, T6) WT Strategies 1. Do not do business in markets that are not stable (W5, T3, T6) 2. Create partnerships with different businesses (W4, T4, T7) 3. Sell parts of the company that are not profitable or that Revlon can sell for a lot of money (W3, W4, T1, T4) The Internal and External Strategic Position and Action Evaluation (SPACE) Matrix Financial Strength + Ratings Return on investment is negative 1.0

Leverage: Current ratio 1.28 1.0 Quick ratio 0.79 1.0 Debt-to-Assets 2.01 1.0 Working Capital 1.0 5.0 Competitive Advantage Market Share: Revlon has big market share only in specific products -1.0 Product Quality: Revlon uses ISO 9000 standards -2.0 Product Live Cycle: Revlon does not offer a variety of products compared to the top competitors -1.0 Customer loyalty: Revlon sells its products in more than 100 countries -2.0 Competition is aggressive -1.0 Technological know-how: Revlon improves production efficiency 5.0 Control over suppliers and distributors: Revlon focuses on top-notch products -2.0 -14 Environmental Stability -

Rate of inflation: Less advanced companies experience high inflation and political instability -1.0 The inflation is rising 2.1% a year -1.0 Demand variability: price between competitors are almost the same -2.0 The demand changes depending on the countrys financial stability -1.0 Barriers to entry -1.0 Risk is unpredictable -1.0 -6 Industry Strength + Growth Potential: Revlon doesnt have significant growth 1.0 Profit Potential: competitors are making profits 1.0 Financial Stability 1.0 3 Conclusions ES average -6 /3=2 IS average 3/3=1 CA average -14/3=4.6

FS average 5/3=.333 X=-4.6+1=-3.6 Y=.333+-2=-1.66 The Boston Consulting Matrix (BCG) Division Revenues in Millions Percent Revenues Profits Percent Profits Market Share in The U.S. Industry Percent Growth Rate 1 1,297.20 100% -142.5 100% .044 5.9 The Internal-External Matrix Division Sales Percent Revenues Profits Percent Profits IFE Scores EFE Scores 1 1,297.20 100% -142.5 100% 2.20 2.89 The IFE Total Weighted Scores Strong Average Weak 3.0 to 4.0 2.0 to 2.99 1.0 to 1.99 -100% High 3.0 to 4.0 Medium 2.0 to 2.99 Low 1.0 to 1.99

The EFE Total Weighted Scores The Quantitative Strategic Planning Matrix First Strategy: It is important that the company reduces its debt by 25% over the next years. Second Strategy: To increase sales and profits the company has to innovate, to increase participation in international markets, and to invest in product development. First Strategy Second Strategy Key Factors Weight AS TAS AS TAS Opportunities Ethnic/racial population is growing .07 1 .07 3 .21 Baby boomer group are now reaching their 50s .07 1 .07 3 .21 Shoppers have increased their purchasing power .07 1 .07 4 .28 Mini-baby boom generation .07 1 .07 3 .21 Global expansion to other continents .05 1 .05 4 0.2 Men now demand skin care products .07 1 .07 3 .21 International markets are becoming more affluent .05 1 .05 3 .15 The U.S. is becoming more affluent and less affluent at the same time. .08 1 .08 3 .24

Threats Competition is intense .14 1 .14 3 .42 Entry barriers in international markets .06 1 .06 3 .18 Economic Instability in international markets .06 1 .06 3 .18 Consolidation of competitors .05 - 0 - 0 The U.S. economy is currently in a downturn .06 3 .18 3 .18 Political instability in some countries .05 1 .05 3 .15 Brand is not an important indicator of quality .05 1 .05 4 0.2 Total 1 Internal Strengths Good management response .09 4 .36 4 .36 Successful introduction of the Color Stay lines .10 3 0.3 4 0.4 Improvements in ordering and retailer relationships .04 3 .12 4 .16 Excellent advertising campaign .10 1 0.1 4 0.4 The company has manufacturers in international markets .08 2 .16 4 .32 The companys acquisition of African Pride .05 1 .05 4 0.2 Internal weaknesses The market share of older is weak.

.08 1 .08 4 .32 The company entered late to the market of the African-American and Hispanic. .09 1 .09 3 .27 Revlon had net income losses .15 3 .45 4 0.6 Long-term debt is high .12 4 .48 3 .36 Decreases in international sales .08 3 .24 4 .32 1 Total; 3.5 6.73