Estee Lauder Case Study

Subject: Case Studies
Pages: 12
Words: 3659
Reading time:
13 min
Study level: PhD

Vision, mission, strategies and objectives for Estee Lauders: existing and perspective

Estee Lauder is a ‘family issue’ business. That is the pillar upon which this company was found and managed for more than sixty years. That fundamental premise determines also the way this company treats its customers. A ‘family service’ tries to take care of its customers as its own family members. This is why they openly declare on their website that this company puts quality, service and reputation before profit. In a certain sense it acknowledges that importance of community caring and social responsibility a business has toward its clients. The vision of Estee Lauder is of a company that ‘takes care’ of its customers. Estee Lauder does not just sell a product to the market. It offers its clients (and to all its potential customers) a complete care package. As it states in its mission statement, Estee lauders strives to ‘bring the best to everyone they touch’. Just like a family would treat its members. That may seem a ‘romantic’ view for a business company but it has brought to this company some important benefits.

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This is confirmed by their vision of a business and its role. Ethics and integrity are the fundamental tenets which form the base for its corporate culture. The company is seriously committed to ethics and integrity internally and externally. The demonstration of this is the fact that for all of its employees, the highest standards of ethics and integrity are a requirement for employment equal to their professional development. The company rule encompasses from the members of the Board of Directors to the lowest hierarchical levels of its staff in every corner of the planet.

To fully comprehend the company culture it would be appropriate to refer to their own description of the goals and objectives they pursue. As a family company committed to work together with other players of the market and the community Estee Lauders strives to:

  • Provide customers with innovative cosmetic products with the highest quality possible;
  • Delivering ‘outstanding’ service by treating each individual customer as anyone (including company’s owners) would like to be treated;
  • Pursue profit but never at the expense of quality, service or reputation;
  • Create for the community an environment which fosters personal growth and wellbeing;
  • Eliminate the maximum possible waste and reduce inefficiency in order to provide maximum value to the customers;
  • Build partnerships with suppliers, retailers and colleagues that is based on trust and fairness;
  • Enhance company’s image, prestige and service;
  • Be responsible citizens in each community where the company does business;

Under these pillars the company has launched health and beauty related products. It began in the aftermath of the Second World War as a personal effort to provide people with cosmetic products which favored beauty, youth and health. Mrs. Estee lauders lived up to witness the triumphing of her ideas and business model which were not favored by Madison Avenue back at the beginning.

The company is based in New York City and it covers most of the North American market with comfortable market share. Since the beginning of the 1960’s the company has gone global. It pursued a gradual overseas extension strategy. It began with a branch in the United Kingdom and its colonized territories of Hong Kong. This strategy paid off and nowadays its products are on the local markets of 130 countries. That is truly a global extension that many companies would like to achieve for their business activities.

Currently, there are four basic product lines that Estee Lauder has on the market. For each of them the company is pursuing a separate market strategy. This different market strategy technique has been going on for more than two decades now. The four categories of products are skin care products, fragrances, hair care products and makeup. Under these categories the company has launched several product lines in the past under different brand names. These brand names include, Estee lauder, Aramis, Clinique, Perspective, American Beauty, Origins, Flirt!, Good Skin, etc. The company’s strategy has been to adapt its branding and products to the local cultural environment.

That is also one of the major challenges for the future this company will have to face. The mission, vision and objectives will continue to be a valued asset for Estee Lauders but the changing social and cultural conditions of the world accompanied by global financial turmoil will oblige this company to, at least, change part of its strategy. In the coming pages we will develop a detailed analysis of the present situation of the company. We will try to identify the market trends accompanying this industry. One we asses this, we will lay down some recommendations on the possible course of action that this company should take.

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External opportunities and threats for the organization

Industry experts have determined that much of the expected growth for the entire personal products industry is to be expected not in industrialized countries, but in developing countries and emerging markets. There is a constant rising demand from consumers in these emerging markets. Whosesoever will be able to capture the trend and provide what customers want in these markets; will ensure great success for his business. The worlds aging population will increase by more than two times in the next three decades. This means that more people will devote time and money to anti-aging products. This rise in age of the world population will not spare even countries with high growth rate like China and India. In fact, estimates show that by the year 2030 over 70 million people over the world will reach an income level which will put them in condition to be able to purchase cosmetic products. Since the life expectancy gap between men and women is expected to close, the worldwide potential for this industry seems enormous.

In the United States alone the age of population is rising fast. In fact over the next thirty years people aged 65 or more with comprise one fifth of the nation’s population. It is predictable that they will spend more on ageing related cosmetic products. Trends show a culture of using cosmetic products even among the youngster. There is a rising part of the consumers aged 20 to 30 years which devote much of their income to cosmetic products related to aging prevention. This culture is spreading even among the teenagers. Even though in small percentages, they are consistently spending on these age prevention cosmetic products.

But here comes one major problem for Estee Lauder. The company has been forming brands for luxury over the past five or so decades. In relation to prices, its products vary from brand to brand but none of them is above the average market price. They begin from the mid-high to the high levels of market price. It has constantly targeted consumer groups with high income levels. We will discuss in more details this situation in the SWOT analysis.

Companies will be obliged by this new market conditions to devote large sums for investment in their new product development. In addition to that, due to the fierce competition on pricing from megastores like Wal-Mart, they will have to redirect considerable amount of their investment dollars into innovation and technology development which will make them able to cut operating costs. But that would drain the financial resources of Estee Lauders and will negatively influence its cash flow and short term operating costs. It will also increase its debt assets as the company will much probably seek for additional credit from investors. That is a serious external threat for the future.

Another threat coming externally is the fact that due to the changing social and political situation around the world many non for profit organizations (NGOs) have been pressuring governments for various reasons. Some of them have asked governments to outlaw the use of animals for testing purposes in the developing of new cosmetic products. This situation has a negative influence of research and development for cosmetic companies (Estee Lauder included). They will have to change their research and developing techniques. Here we have to mention the rising fear from chemical components used in the cosmetic products.

In fact, this is not an issue that rose recently. Since the mid 1960’s there are concerns related to the use of fluorocarbons and aerosols as components of cosmetic products. These concerns have been enhanced now that the environmental issues are on the agenda due to global warming and its negative effects. The fact that these chemical substances are considered to be environmental hazards plays a significantly negative role in their use for cosmetic products. Governments can be obliged by public pressure to ban the use of these chemicals on cosmetic products. An argument for this is the fact that the federal Food and Drug Administration notified cosmetic producers that it will enforce the use of labeling which will include a statement who will inform a customer that is dealing with an untested for safety products which may harm his/her health. That would be enough for a bad marketing image creation.

A final external threat would be the fact of changing flight rules and regulations. The events of September 11th, 2001, and the subsequent rising threat of international terrorism, changed the way travel retail business functions. Recent regulations have banned many products from being carried on board during the flight. Many cosmetic products are among these banned products. This security issue for governments raises a big financial issue (better let say problem) for cosmetic products companies. For the fiscal year 2006, Estee Lauder had a significant share of its total sales (7%) comprised by the travel retail business sales. In terms of total operating income they accounted for almost 20%. Surely these new security regulations will negatively impact sales and operating income for Estee Lauders. But the costs will be higher since the company will be obliged to spend energy and assets in order to pursue new strategies and find new ways to increase sales.

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In the SWOT analysis will give some more information related to many of these external threats mentioned.

Competitive profile matrix (CPM)

Another external threat would be that of rising competition. Surely Estee lauders will have to face fierce competition for success in these new developing markets. This can be considered the main external threat for this company. There are many companies in the cosmetic industry worldwide but only eight (including Estee Lauders) are truly global competitors. They are Estee Lauder, Avon, Unilever, Colgate-Palmolive, Alberto-Culver, Revlon, Procter & Gamble and L’Oreal.

In order to have a better picture let us construct a competitive profile matrix in which we will compare them and after that we will analyze its results.

Success Factors Weight Estee Launder Avon L’Oreal Procter & Gamble
Rating Score Rating Score Rating Score Rating Score
Advertising 0.2 4 0.8
Product quality 0.1 4 0.4
Price competitiveness 0.1 1 0.1
Management 0.1 2 0.2
Financial position 0.15 3 0.45
Customer loyalty 0.1 2 0.2
Global expansion 0.2 4 0.8
Market share 0.05 3 0.15
Total: 1 3.1
Success Factors Weight Colgate-Palmolive Unilever Alberto-Culver Revlon
Rating Score Rating Score Rating Score Rating Score
Advertising 0.2
Product quality 0.1
Price competitiveness 0.1
Management 0.1
Financial position 0.15
Customer loyalty 0.1
Global expansion 0.2
Market share 0.05
Total: 1

Internal strength and weaknesses

Estee Lauder is a ‘family issue’ business. That is the pillar upon which this company was found and managed for more than sixty years. That fundamental premise determines also the way this company treats its customers. A ‘family service’ tries to take care of its customers as its own family members. This is why they openly declare on their website that this company puts quality, service and reputation before profit. In a certain sense it acknowledges that importance of community caring and social responsibility a business has toward its clients. The vision of Estee Lauder is of a company that ‘takes care’ of its customers. Estee Lauder does not just sell a product to the market. It offers its clients (and to all its potential customers) a complete care package. As it states in its mission statement, Estee lauders strives to ‘bring the best to everyone they touch’. Just like a family would treat its members. That may seem a ‘romantic’ view for a business company but it has brought to this company some important benefits.

This is confirmed by their vision of a business and its role. Ethics and integrity are the fundamental tenets which form the base for its corporate culture. The company is seriously committed to ethics and integrity internally and externally. The demonstration of this is the fact that for all of its employees, the highest standards of ethics and integrity are a requirement for employment equal to their professional development. The company rule encompasses from the members of the Board of Directors to the lowest hierarchical levels of its staff in every corner of the planet.

To fully comprehend the company culture it would be appropriate to refer to their own description of the goals and objectives they pursue. As a family company committed to work together with other players of the market and the community Estee Lauders strives to:

  • Provide customers with innovative cosmetic products with the highest quality possible;
  • Delivering ‘outstanding’ service by treating each individual customer as anyone (including company’s owners) would like to be treated;
  • Pursue profit but never at the expense of quality, service or reputation;
  • Create for the community an environment which fosters personal growth and wellbeing;
  • Eliminate the maximum possible waste and reduce inefficiency in order to provide maximum value to the customers;
  • Build partnerships with suppliers, retailers and colleagues that is based on trust and fairness;
  • Enhance company’s image, prestige and service;
  • Be responsible citizens in each community where the company does business;

Under these pillars the company has launched health and beauty related products. It began in the aftermath of the Second World War as a personal effort to provide people with cosmetic products which favored beauty, youth and health. Mrs. Estee lauders lived up to witness the triumphing of her ideas and business model which were not favored by Madison Avenue back at the beginning.

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The company is based in New York City and it covers most of the North American market with comfortable market share. Since the beginning of the 1960’s the company has gone global. It pursued a gradual overseas extension strategy. It began with a branch in the United Kingdom and its colonized territories of Hong Kong. This strategy paid off and nowadays its products are on the local markets of 130 countries. That is truly a global extension that many companies would like to achieve for their business activities.

Currently, there are four basic product lines that Estee Lauder has on the market. For each of them the company is pursuing a separate market strategy. This different market strategy technique has been going on for more than two decades now. The four categories of products are skin care products, fragrances, hair care products and makeup. Under these categories the company has launched several product lines in the past under different brand names. These brand names include, Estee lauder, Aramis, Clinique, Perspective, American Beauty, Origins, Flirt!, Good Skin, etc. The company’s strategy has been to adapt its branding and products to the local cultural environment.

That is also one of the major challenges for the future this company will have to face. The mission, vision and objectives will continue to be a valued asset for Estee Lauders but the changing social and cultural conditions of the world accompanied by global financial turmoil will oblige this company to, at least, change part of its strategy. In the coming pages we will develop a detailed analysis of the present situation of the company. We will try to identify the market trends accompanying this industry. One we asses this, we will lay down some recommendations on the possible course of action that this company should take.

External opportunities and threats for the organization

Industry experts have determined that much of the expected growth for the entire personal products industry is to be expected not in industrialized countries, but in developing countries and emerging markets. There is a constant rising demand from consumers in these emerging markets. Whosesoever will be able to capture the trend and provide what customers want in these markets; will ensure great success for his business. The worlds aging population will increase by more than two times in the next three decades. This means that more people will devote time and money to anti-aging products. This rise in age of the world population will not spare even countries with high growth rate like China and India. In fact, estimates show that by the year 2030 over 70 million people over the world will reach an income level which will put them in condition to be able to purchase cosmetic products. Since the life expectancy gap between men and women is expected to close, the worldwide potential for this industry seems enormous.

In the United States alone the age of population is rising fast. In fact over the next thirty years people aged 65 or more with comprise one fifth of the nation’s population. It is predictable that they will spend more on ageing related cosmetic products. Trends show a culture of using cosmetic products even among the youngster. There is a rising part of the consumers aged 20 to 30 years which devote much of their income to cosmetic products related to aging prevention. This culture is spreading even among the teenagers. Even though in small percentages, they are consistently spending on these age prevention cosmetic products.

But here comes one major problem for Estee Lauder. The company has been forming brands for luxury over the past five or so decades. In relation to prices, its products vary from brand to brand but none of them is above the average market price. They begin from the mid-high to the high levels of market price. It has constantly targeted consumer groups with high income levels. We will discuss in more details this situation in the SWOT analysis.

Companies will be obliged by this new market conditions to devote large sums for investment in their new product development. In addition to that, due to the fierce competition on pricing from megastores like Wal-Mart, they will have to redirect considerable amount of their investment dollars into innovation and technology development which will make them able to cut operating costs. But that would drain the financial resources of Estee Lauders and will negatively influence its cash flow and short term operating costs. It will also increase its debt assets as the company will much probably seek for additional credit from investors. That is a serious external threat for the future.

Another threat coming externally is the fact that due to the changing social and political situation around the world many non for profit organizations (NGOs) have been pressuring governments for various reasons. Some of them have asked governments to outlaw the use of animals for testing purposes in the developing of new cosmetic products. This situation has a negative influence of research and development for cosmetic companies (Estee Lauder included). They will have to change their research and developing techniques. Here we have to mention the rising fear from chemical components used in the cosmetic products.

In fact, this is not an issue that rose recently. Since the mid 1960’s there are concerns related to the use of fluorocarbons and aerosols as components of cosmetic products. These concerns have been enhanced now that the environmental issues are on the agenda due to global warming and its negative effects. The fact that these chemical substances are considered to be environmental hazards plays a significantly negative role in their use for cosmetic products. Governments can be obliged by public pressure to ban the use of these chemicals on cosmetic products. An argument for this is the fact that the federal Food and Drug Administration notified cosmetic producers that it will enforce the use of labeling which will include a statement who will inform a customer that is dealing with an untested for safety products which may harm his/her health. That would be enough for a bad marketing image creation.

A final external threat would be the fact of changing flight rules and regulations. The events of September 11th, 2001, and the subsequent rising threat of international terrorism, changed the way travel retail business functions. Recent regulations have banned many products from being carried on board during the flight. Many cosmetic products are among these banned products. This security issue for governments raises a big financial issue (better let say problem) for cosmetic products companies. For the fiscal year 2006, Estee Lauder had a significant share of its total sales (7%) comprised by the travel retail business sales. In terms of total operating income they accounted for almost 20%. Surely these new security regulations will negatively impact sales and operating income for Estee Lauders. But the costs will be higher since the company will be obliged to spend energy and assets in order to pursue new strategies and find new ways to increase sales.

In the SWOT analysis will give some more information related to many of these external threats mentioned.

Competitive profile matrix (CPM)

Another external threat would be that of rising competition. Surely Estee lauders will have to face fierce competition for success in these new developing markets. This can be considered the main external threat for this company. There are many companies in the cosmetic industry worldwide but only eight (including Estee Lauders) are truly global competitors. They are Estee Lauder, Avon, Unilever, Colgate-Palmolive, Alberto-Culver, Revlon, Procter & Gamble and L’Oreal.

In order to have a better picture let us construct a competitive profile matrix in which we will compare them and after that we will analyze its results.