Reference no: EM133086808

Revlon, Inc.

Headquartered in New York City, Revlon is a large beauty and personal care products company and is a subsidiary of MacAndrews & Forbes Holding Inc. Popular Revlon products include lipsticks, skin care products, deodorant, blush, makeup, hair and nail products, and much more, marketed under such brands as Almay, SinfulColors, Pure Ice, Revlon ColorSilk, Charlie, Jean Naté, Mitchum, Gatineau, and Ultima II. Revlon sells products worldwide through its sales force, sales representatives, and independent distributors, and licenses its trademarks to select manufacturers for complementarybeauty-related products and accessories.

Revlon was founded in 1932 when brothers Charles and Joseph Revson, and chemist C. R. Lachman, launched a new product-a nail enamel that came in colors other than red. Being the only provider of different color nail polishes, Revlon had a large leg up on competition, and within 6 years the firm was a multimillion dollar organization. Throughout the next 20 years, Revlon acquired many different cosmetic related firms to expand its product offerings. Revlon acquired Mirage Cosmetics in 2011 and Colomer Group in 2013 and hired both Emma Stone and Olivia Wilde to promote its products. Revlon divested all of its Chinese operations in 2014. Revlon hired a new CEO in 2014, Lorenzo Delpani. He needs a clear strategic plan going forward, as rivals such as Avon, L'Oreal, Mary Kay Cosmetics, and Estee Lauder compete for market share in the industry.

Revlon has one statement as follows on the corporate website related to vision/mission: "Revlon is a global color cosmetics, hair color, beauty tools, fragrances, skincare, anti-perspirant deodorants and beauty care products company whose vision is Glamour, Excitement and Innovation through high-quality products at affordable prices."

The company has two primary divisions: Professional and Consumer. The two divisions focus on selling products to beauty salons (Professional Segment) and individuals (Consumer Segment), respectively. The current structure was finalized in
October 2013 with the acquisition of the Colomer Group for $664 million in cash. The Colomer business comprises 100 percent of Revlon's professional segment.

Revlon uses sales representatives and independent distributors primarily in marketing. Revlon's largest customers in this country are Walmart, CVS, Walgreens, Boot Alliance, and Target. In November 2014, Revlon launched its "Love is On" marketing campaign in all markets globally-the firm's first global marketing campaign in over 10 years. Revlon spent $32 million on R&D in 2014 and employs 200 people in its R&D locations in New Jersey, Florida, and California. The bulk of Revlon's products are produced at its own factories in North Carolina and in South Africa. The firm produces products for its professional segment in Florida, Spain, Italy, and Mexico, as well as through various third-party contractors.

One of CEO Delpani's first decisions after taking over in 2014 was to divest the firm's Chinese business, which accounted for only 2 percent of total sales. Delpani also cut 15 percent, or approximately 5,000, Revlon employees. The decision to exit China came on the heels of rival Avon reporting a 67 percent decline in Chinese sales in 2013, and rival L'Oreal reporting slowing sales in China, despite the market being worth an estimated $20 billion. Revlon's acquisition of Colomer Group bolstered the company's offerings to professional salon customers. This acquisition added the Creative Nail professional and Shellac Nail polishes to Revlon's portfolio, as well as American Crew men's hair care products. Colomer also gave Revlon some geographic diversity since Colomer obtained about half of its sales from Europe, the Middle East, and Africa, and about 40 percent from the United States, while Revlon obtains about 56 percent of its sales from the United States.

Revlon's Consumer segment, which accounts for about 74 percent of total revenues, focuses on cosmetics products for the face, lips, eyes, and nails. Revlon's Professional division accounts for about 26 percent of revenues. This division is aimed at selling products directly to professional salons rather than the consumer at mass merchant and grocery stores. Revlon's recent balance sheet shows negative retained earnings because the company has been incurring losses, although for 2014 there was a positive net income of $41 million.

The beauty products business contains over 3,000 different competitors with top companies being Procter & Gamble, Unilever, L'Oreal, Estee Lauder, Mary Kay, Avon, Helen of Troy, Coty, Ultra Salons, and Revlon. The industry is comprised of many different classes of competitors with many different missions.

A notable trend in the industry is less customer loyalty and increased commoditization. Many customers today are willing to mix and match and try various products based on attributes other than the brand name. This bodes well for many firms, as customer spending has increased substantially as a result. However, R&D and marketing expenses are on the rise in the industry, as corporations try to attract buyers to their products by providing new and exciting selections.

There is a growing trend promoted by many online articles, several from the New York Times, and from celebrities taking photos with hashtags "no makeup" that are encouraging women to be more natural in appearance. No clear data exist yet on how popular or enduring this trend may become, but it is worth noting, and possibly a factor cosmetic firm should be aware of moving forward. The growing population of women who endorse the natural look claim that "being comfortable in your own skin and low maintenance is the true beauty; to the extent you apply layers of makeup you only become more frivolous and superficial." Various theories on why the trend is developing include attractive women wanting everyone to know just how attractive they are without the use of makeup, a new fashion trend for everyone, or possibly just laziness. Whether or not the trend will be enduring, most experts agree, it is like underdressing for the job or not brushing your hair.

Therefore the impact on cosmetic firms, for now, is probably limited, but it is certainly something worth monitoring.

QUESTION 1

Critically analyse the resource strengths, weaknesses, competitive capabilities and deficiencies of Revlon Inc.

QUESTION 2

Revlon hired a new CEO, Lorenzo Delpani. He needs a clear strategic plan going forward, as rivals such as Avon, L'Oreal, Mary Kay Cosmetics, and Estee Lauder compete for market share in the industry.

In light of this statement and the case study above, discuss the key characteristics that Lorenzo should possess to be a good strategic leader.