86975418 a-case-study

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A Case Study
Jon Hedrec L. Benitez
Bachelor of Science in Industrial Engineering - 3C
Engr. Dennis Abesamis

Overview
• Introduction
• Company History
• Organizational Chart
• Our Products
• SWOT Analysis
• Mission and Vision Statement
• PEST analysis
• Porter’s five forces model
• Financial Condition
• Competitors
• Company Strategic Plan
• Issues and their Solution
• Conclusion
• Recommendation

I.
Introduction
Company Description
As a top company in the Cosmetics and Perfumes industry Estee Lauder specialize in manufacturing and marketing of skin
care, cosmetics, perfume and hair care products.
The Estée Lauder Companies Inc. is one of the world's leading manufacturers and marketers of quality skin care, makeup,
fragrance and hair care products. The Company's products are sold in over 150 countries and territories under the following
brand names: Estée Lauder, Aramis, Clinique, Prescriptives, Lab Series, Origins, M•A•C, Bobbi Brown, Tommy Hilfiger, Kiton,
La Mer, Donna Karan, Aveda, Jo Malone, Bumble and bumble, Darphin, Michael Kors, American Beauty, Flirt!, GoodSkin™
Labs, Grassroots™ Research Labs, Sean John, Missoni, Tom Ford, Coach, Ojon, Smashbox and Ermenegildo Zegna. For fiscal
2011, net sales were $8.8 billion and net earnings were $701 million.
Management
The company is still controlled by the Lauder family, which controls about 70% of voting shares, and Estée's son Leonard
Lauder is Chairman Emeritus of the Board of Directors. William P. Lauder, a grandson, is Chairman of the Board and Executive
Chairman. On July 1, 2009, Fabrizio Freda became President and CEO.
The Estée Lauder Companies’ annual Breast Cancer Awareness Campaign involves all of the 18 brands that make up The
Estée Lauder Companies. They collectively represent The Breast Cancer Research Foundation’s first and largest corporate
supporter. Estée's daughter-in-law created BCRF's signature pink ribbon.
Over $10 million was raised for The Breast Cancer Research Foundation between 1993 and summer 2003. Another $1 million
was raised from their retail partners between July 2002 and summer 2003.

II. Company History
The company began in 1946 when Joseph Lauder and his wife Estée Lauder began producing cosmetics in New York
City. They first carried only had four products: Super-Rich All Purpose Creme, Creme Pack, Cleansing Oil and Skin Lotion. Two
years later they established their first department store account with Saks Fifth Avenue in New York.
Over the next fifteen years they expanded the range and continued to sell their products in the United States. In 1960 the
company started its first international account in the London department store Harrods. The following year it opened an
office in Hong Kong.
In 1964 they started Aramis Inc., which produced fragrances and grooming products for men. In 1967 Estée Lauder
herself was named one of ten Outstanding Women in Business in the United States by business and financial editors.
This was
followed by a Spirit of Achievement Award from Albert Einstein College of Medicine at Yeshiva University in 1968. In that
year the company expanded again, opening Clinique Laboratories, Inc. Clinique was the first dermatologist guided
(Dr. Norman Orentreich), allergy tested, fragrance free cosmetic brand created by Estée Lauder.
Estée Lauder's Clinique brand became the first women's cosmetic company to introduce a second line for men when,
in 1976, they began a separate line called "Skin Supplies for Men". In 1981 the company's products became available in
the Soviet Union.
In February 2004 the company's teen-oriented jane business was sold; in April 2006, the professional-
quality Stila brand, which Estée Lauder purchased in 1999, was sold.
The company has had sometimes iconic spokesmodels, sometimes referred to simply as 'faces'. Past 'faces' for Estée Lauder
include Karen Graham, Bruce Boxleitner, Shaun Casey, Willow Bay, Paulina Porizkova, Elizabeth Hurley, Carolyn Murphy, Anja
Rubik, and actressGwyneth Paltrow. As of 2008 the main spokesmodel for Estée Lauder is supermodel Hilary Rhoda. In 2010,
the company added 2 more faces to the roster, Chinese model Liu Wen and French model Constance Jablonski. Their first
campaigns will come out June 2010, and will be shot by Craig McDean.
As of 2010 Estée Lauder sells its products in department stores across the world and has a chain of freestanding retail
outlets. On July 1, 2010, the company acquired Smashbox Beauty Cosmetics, Inc., a brand created in Smashbox Studios in
Culver City, California by brothers Dean and Davis Factor (as in Max).

On October 28, 2011, Aramis and Designer Fragrances, a division of The Estée Lauder Companies Inc., and Tory Burch LLC
announced the signing of a multi-year agreement for the exclusive worldwide license of the Tory Burch fragrance business.
This partnership marks Tory Burch's first step into the beauty industry. The first Tory Burch fragrance products are expected
to be introduced in 2013.
III. Organizational Chart
William P. Lauder
Executive Chairman
Fabrizio Freda
President and Chief Executive Officer
John Demsey
Group President
Amy DiGeso
Executive Vice President, Global Human Resources
Harvey Gedeon
Executive Vice President, Research and Development,
Product Innovation and Brand Product Development
Richard W. Kunes
Executive Vice President and Chief Financial Officer
Evelyn H. Lauder
Senior Corporate Vice President
Leonard A. Lauder
Chairman Emeritus
Ronald S. Lauder
Chairman, Clinique Laboratories, LLC
Sara E. Moss
Executive Vice President and General Counsel
Gregory F. Polcer
Executive Vice President, Global Supply Chain

Cedric Prouvé
Group President, International
Alexandra C. Trower
Executive Vice President, Global Communications
IV. Our Products
The company had its beginning in 1946, when its founder Mrs. Estée Lauder launched the only product (face crème) in that
year. Mrs. Estée Lauder focused on "beauty" with a difference. She wanted to bring out the best in every woman through her
special formulated cosmetic products. The brand had already won enough accolades by the time innovative fragrance Youth-
Dew was introduced to the consumer base in 1953. The well-researched formulations besides effective product line paved
way for popularity within a short span of time.
Buy Estee Lauder Cosmetics Now
Whether it is skincare, makeup or fragrance collections, Estée Lauder products embody the best blend of expertise,
knowledge and talent. Acknowledged for providing effective beauty care solutions in over 100 countries, it has not stopped
its run for collecting reviews from the various consumer groups across the world. Quality has never been compromised and
promises have been kept. This has been the success formula of Estée Lauder.
Estee Lauder Products product facts:
• Using advanced technology, the company gained worldwide reputation over the years for its innovative line of simple yet
elegant and luxurious products.
• All the products signify excellent standard in terms of quality, which is the result of widespread research and rigorous
product testing.

Estee Lauder Products product line:
• Make-up- blusher, bronzer, brushes & accessories, concealer, eyeliner, eye shadow, foundation, lip gloss, lip pencils lipstick
mascara nails powder
• Skin care-after sun, body care, cleansers & toners, eye care, masks & refiners, moisturizers, repair, self tan, sensitive skin, sun
care SPF
Estee Lauder Latest Products:
• Sensuous
• Sumptuous Bold Volume™ Lifting Mascara
• Perfectionist [CP+]
• Wrinkle Lifting Serum
• Private Collection Tuberose Gardenia
• New Pure Color Shades

V. Mission and Vision Statement
Our Mission - Bringing the Best to Everyone We Touch and Being the Best in Everything We Do…
Our Vision - The global leader in prestige beauty: a well-diversified, brand-building powerhouse of unrivaled creativity and
innovation.
Our Values
• Strive for excellence - deliver your best.
• Put your customer first. Know your customers, understand their needs, and surpass
their expectations
• Be passionate about what you do! Enthusiasm and energy are contagious.
• Never stop caring. Show concern and respect for every individual, regardless of
position or title.
• Understand your role in the big picture. We're all part of a larger whole.
• Look for new and better ways to do things to continually raise our standards.
• Communicate! Voice your ideas, share your concerns, pass on what you know, and be
honest.
• Be a team player. We're stronger when we work together.

• Listen when others speak. Good ideas can come from anywhere.
• Be flexible. Success depends upon willingness to adapt when situations change.
• Pay attention to details - little things do make a difference.
• Solve the real problem, don't treat the symptom.
• Spread the good news. Let others know when they've done a good job.
• Smile.... and have fun!
VI. SWOT Analysis
Estee Lauder, based in New York City, is a manufacturer of cosmetic products that include skincare, makeup,
fragrances, and hair products. The company was founded on 1946 by Mrs. Estee Lauder.
Their mission statement: “Bringing the Best to Everyone We Touch”. Some of the best known brands that are sold
under its umbrella are Aramis, Clinique, Prescriptives, Lab Series Skincare for Men, Origins, Tommy Hilfiger, M·A·C, Kiton, La
Mer, Bobbi Brown, Donna Karan, Aveda, Jo Malone, Bumble and bumble, Michael Kors, Darphin, American Beauty, Flirt!,
GoodSkin Labs, Grassroots Research Labs, Sean John, Missoni, Daisy Fuentes, Tom Ford, Coach, Ojon and Smashbox.
Strengths:
· Strong Brand Reputation (The brand is associated with luxury & quality. Also has a strong brand portfolio).
· Research & Development (Role model and leader in identifying consumer needs, and preferences and developing products
accordingly).
· Strong Distribution Network (The products are sold to a limited stores that compliments the image of the brands such as
department stores, upscale perfumeries, specialty stores, professional hairdressers etc. specially in U.S.)
· Vigorous Revenue & Profitability (Net Earnings for fiscal year 2010 $478 million while Net sales were $7.8 billion.)
· Products are sold in more than 150 countries.
· Powerful marketing techniques used by the firm: Free Gift, Gift-With-Purchase, Makeup ArtistEvents (for trying out the new
products) etc.
· Operations and cost maintenance with the firm holds a strong positive attitude in the long run.

Weaknesses:
· Lack of concentration regarding customer value (Client.)
· Profit oriented (loses sight of the customer)
· Weak Liquidity Position (decline in the firm’s liquidity in the past few years.)
· Distribution Network’s lack of reach to other viable markets.
· Declining operating income in various market marks the weak penetration of the products in those specific markets.
Opportunities:
· New markets are emerging in various countries where the firm can inject its products, such as India, China (known to be the
2nd
largest cosmetics market in Asia) etc.
· Markets where wealthy rule is also a good opportunity to tap in because of the tendency of the wealthy to own luxury
commodities.
· Many nations are growing to be beauty conscience every passing day; the firm will do well in order to tap-in without any
delay and initiate in order to get customer loyalty attached to its products.
· Diversification of the distribution channels.
· Expansion to global markets, worldwide.
Threats:
· Intense competition in cosmetics has increased and market initiators with quality providers are a serious threat to the firm.
· New entrants, even though the market has considerably mature in the sense that it has captured customer loyalty, but
there is always room for improvement in this field.
· Counterfeit commodities affect the sales of the branded commodities. 9%, according to the Global Congress on Combating
Counterfeiting, of all the world trade comprises counterfeit goods.
· Regulations are increasing due to the voicing of different groups about harmful chemical ingredients in cosmetic products.

VII. PEST analysis
1. Political, Governmental and Legal Forces
• The company made sure that they licensed some of their global brands like Tommy Hilfiger, MAC, Bobbi brown, Donna
Karan and a few others.
• The company’s manufacturing operations conform to the ISO 14001 standards.
• The Food and Drug Administration of every country requires companies to adhere to rules of statutory warnings. (E.g. The
safety of a particular product should be determined) The company should instead take safety tests and rely on passing this
message onto the customers to win their confidence.
• There have been restrictions on products that can be carried in-flight.
2. EconomicForces
• The dollar fluctuations would have an impact over the sales as the company has a global presence(E.g. Japan, Australia)
• Strengthening of U.S. dollar against the Japanese Yen would have negative impact on Estee Lauder’s Japanese Operations.
• Price varies from product to product and brand to brand, but tends to be in the mid-high to high rangeof

• theindustryhencerequiringsustainabilityofincomelevelsoftargetaudience.
3. Social, Cultural, Demographic and Environmental Forces
• Opportunities arise from increase in aging population and hence there will be increase in income from anti-aging products.
• Younger consumers (20-30) & Teens investing in preventive cosmetics.
• Complaintshavebeenreceivedintotheuseofanimalsfortestingfornewproducts.
• Estimates show that the 70 million people across the globe will reach an income level in the next20 years that allows
purchasing of cosmetic products.
• Emissions of fluorocarbons and other harmful gases has been an environmental threat. The companymusttakestrictmeasuresto
controlthis.
• Thelifeexpectancyoftheagingpopulationwillcontinuetoimprovewithdifferencebetweenmenandwomengraduallydiminishing.
4. Technological Forces
• Internet (E-commerce)
• Rapid technological changes in Product Development
• Technological efforts in Process Development

VIII. Porter’s five forces model
1. Rivalry among competitive firms
(HIGH)With the presence of large and powerful competitors like L’Oreal, P&G, Avon etc who also have a variety of brands
under different price ranges, Estee Lauder needs to INNOV ATE constantly in order to stay ahead of the competition.
2 Potential Entrants
(LOW)Given the size of the market and that of the existing players, it will be extremely difficult for a new player to enter into
the market and emerge as a SERIOUS THREAT to Estee Lauder or any of the other immediate competitors.
3 . Potential Development of Substitutes
(LOW)With a rapidly ageing population around the world especially in the developed markets, the demand for
cosmetics/beauty products is expected to be strong and the threat of substitutes looks unlikely.
4.Bargaining Power of Suppliers
(LOW) Since Estee Lauder is a billion dollar brand, it is expected that because of the volume of goods it procures from its
suppliers around the world and the numerous number of suppliers, suppliers have LIMITED bargaining power.
5. Bargaining Power of Customers
(HIGH)Due to the presence of large number of brands who cater to different segments of the market, consumers can switch
easily and inexpensively from one brand to another.

IX. Financial Condition
Income Statement
View: Annual Data | Quarterly Data All numbers in thousands
Period Ending Jun 30, 2011 Jun 30, 2010 Jun 30, 2009
Total Revenue 8,810,000 7,795,800 7,323,800
Cost of Revenue 1,936,900 1,829,400 1,881,600
Gross Profit 6,873,100 5,966,400 5,442,200
Operating Expenses

Research Development - - -
Selling General and Administrative 5,696,700 5,067,000 4,883,900
Non Recurring 87,000 109,500 139,900
Others - - -
Total Operating Expenses - - -
Operating Income or Loss 1,089,400 789,900 418,400
Income from Continuing Operations
Total Other Income/Expenses Net - - -
Earnings Before Interest And Taxes 1,089,400 789,900 418,400
Interest Expense 63,900 101,600 75,700
Income Before Tax 1,025,500 688,300 342,700
Income Tax Expense 321,700 205,900 115,900
Minority Interest (3,000) (4,100) (8,400)
Net Income From Continuing Ops 700,800 478,300 218,400
Non-recurring Events
Discontinued Operations - - -

Extraordinary Items - - -
Effect Of Accounting Changes - - -
Other Items - - -
Net Income 700,800 478,300 218,400
Preferred Stock And Other Adjustments - - -
Net Income Applicable To Common Shares 700,800 478,300 218,400
Currency in USD.
Balance Sheet

View: Annual Data | Quarterly Data
All numbers in thousands
Assets
Current Assets
Cash And Cash Equivalents 1,253,000 1,120,700 864,500
Short Term Investments - - -
Net Receivables 945,600 746,200 853,300
Inventory 995,600 826,600 795,000
Other Current Assets 492,300 427,500 399,700
Total Current Assets 3,686,500 3,121,000 2,912,500
Long Term Investments - - 12,700
Property Plant and Equipment 1,143,100 1,023,600 1,026,700
Goodwill 877,300 752,500 759,900
Intangible Assets 227,500 109,500 150,100
Accumulated Amortization - - -
Other Assets 339,500 329,000 314,700
Deferred Long Term Asset Charges - - 156,000
Total Assets 6,273,900 5,335,600 5,176,600
Liabilities

Current Liabilities
Accounts Payable 1,805,300 1,548,800 1,425,400
Short/Current Long Term Debt 138,000 23,400 33,800
Other Current Liabilities - - -
Total Current Liabilities 1,943,300 1,572,200 1,459,200
Long Term Debt 1,080,100 1,205,000 1,387,600
Other Liabilities 603,500 593,000 665,800
Deferred Long Term Liability Charges - - -
Minority Interest 17,600 17,000 24,000
Negative Goodwill - - -
Total Liabilities 3,626,900 3,370,200 3,512,600
Stockholders' Equity
Misc Stocks Options Warrants - - -
Redeemable Preferred Stock - - -
Preferred Stock - - -
Common Stock 2,700 2,700 2,600
Retained Earnings 4,116,500 3,564,000 3,195,000
Treasury Stock (3,243,100) (2,850,300) (2,586,100)
Capital Surplus 1,735,600 1,428,700 1,145,600
Other Stockholder Equity 17,700 (196,700) (117,100)
Total Stockholder Equity 2,629,400 1,948,400 1,640,000

Net Tangible Assets 1,524,600 1,086,400 730,000
Currency in USD.
Cash Flow
View: Annual Data | Quarterly Data
All numbers in thousands
Net Income 700,800 478,300 218,400
Operating Activities, Cash Flows Provided By or Used In
Depreciation 294,400 263,700 254,000
Adjustments To Net Income 62,400 53,200 10,500
Changes In Accounts Receivables (124,700) 79,200 103,800
Changes In Liabilities 238,700 109,700 47,400
Changes In Inventories (95,100) (60,800) 125,700
Changes In Other Operating Activities (52,500) 29,300 (72,200)
Total Cash Flow From Operating Activities 1,027,000 956,700 696,000
Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures (351,000) (270,600) (279,800)
Investments 200 (100) 8,800

Other Cash flows from Investing Activities (256,100) (10,700) (68,500)
Total Cash Flows From Investing Activities (606,900) (281,400) (339,500)
Financing Activities, Cash Flows Provided By or Used In
Dividends Paid (148,000) (109,100) (108,400)
Sale Purchase of Stock (246,100) (73,100) 38,700
Net Borrowings (16,100) (234,700) 194,100
Other Cash Flows from Financing Activities - - 1,400
Total Cash Flows From Financing Activities (313,100) (406,100) 125,800
Effect Of Exchange Rate Changes 25,300 (13,000) (19,500)
Change In Cash and Cash Equivalents 132,300 256,200 462,800

X. Competitors
Top 10 Competitors for Estee Lauder Cos Inc
Estee Lauder Cos Inc faces competition from:
1. LRLCY : L Oreal Co
2. CL : Colgate-Palmolive Co
3. KMB : Kimberly-Clark Corp
4. KCRPY : Kao Corp
5. AVP : Avon Products Inc
6. SSDOY : Shiseido

7. SVCBY : Svenska Cellulosa Aktiebolaget
8. KCDMY : Kimberly Clrk De Mex Sab De Cv
9. ACV : Alberto-Culver Co
10. CHTT : Chattem Inc
XI. Company Strategic Plan
CORPORATE STRATEGY
As we pursue our strategic journey, we’re investing greater resources in our most promising opportunities – by category,
brand, region and channel. We carefully decide where to allocate our resources to drive our momentum for the long term.
COMMITTED TO GROWTH
The Estée Lauder Companies’ long-term strategy seeks to achieve higher levels of sustainable, profitable growth to remain a leader in
global prestige beauty. Our Company is committed to increasing innovation throughout all aspects of its business, putting a greater focus
on consumer insights and integrating its brands, regions and functions to leverage scale and efficiencies. We are strengthening four
critical areas that distinguish our Company.
OUR KEY INITIATIVES
01

Creativity and Innovation
We are honing our innovation strategy to create fewer but more successful products, with a motivation to be “creativity-
driven and consumer-inspired.” We use the consumer as our muse to create beauty products she never imagined she needed.
02
High-Touch
Our High-Touch personal service creates an emotional connection with the consumer and inspires brand loyalty. Our
customized educational approach comes naturally from our talented beauty advisors and makeup artists, but we’ve
successfully adapted it for online, direct response television and self-assisted formats, as well.
03
Local Relevance
We strive to be locally relevant to all our consumers wherever they live. We do this by creating certain products for specific
markets and by altering our marketing depending on the region, to speak to consumers in more culturally relevant ways.
04
Enhancing Digital Capabilities
We are deeply immersed in the online world and continue to invest greater resources in all things digital. Many of our brands
interact with their consumers through Facebook, Twitter and YouTube, have established global e-commerce sites and
created powerful viral marketing campaigns. We are committed to being on the cutting edge of the evolving digital
experience.

XII. Issues and their Solutions
Problem:
Estée Lauder's boutique brand, M.A.C, aired an internet commercial starring M.A.C spokesperson Sandra Bernhard. Ms.
Bernhard referred to someone who might not approve of her outspokenness as "...little, freaked out, intimidated,
frightened, right-wing Republican thin-lipped bitch" in this now infamous internet ad. Many Estee Lauder brand customers
contacted the company to complain, asking that it be removed and a public apology made.
Solution:

The company apologized for the ad, and the video was removed from the official site, although it is still available on
YouTube.
XIII. Conclusion
Intensive strategies include MarketPenetration,Market DevelopmentandProduct Development.These strategies will require
intensive efforts as Estee Lauder needs to improve its competitive position with existing products. Intensive Strategies will
help Estee Lauder achieve the following long-term imperatives:
• Optimization of Brand Portfolio
• Strengthening of Product Categories
• StrengtheningandExpansionofGlobalMarkets

• Diversificationandstrengtheningofchannelsofdistribution
• Operational and Cost Excellence
XIV. Recommendation
1. Proposed Mission Statement:
I believe that the current mission statement of Estee Lauder Companies is well-crafted and would rather like to add the
following to the existing framework:
• Expand operations to all markets including Africa and become the global cosmetics leading brand
• Use cutting-edge herbal/non-herbal technology to cater to every global customer/market

2. Proposed Vision Statement:
“Attaining complete share of mind and heart of our customers by delivering the promise of µforever young leading to market
leadership in the cosmetics industry”
In my proposed vision statement, I have clearly stated the three key aspects including claiming to attain absolute share of
mind and heart of Estee Lauder’s valued customers which is reiterated by promising to deliver the promise that any Estee
Lauder product brings with it, of being young forever which will eventually lead to leadership position in global cosmetics
industry.
3. Other Recommendation
• Rely on the global brand awareness and build it further by endorsing celebrities from the local markets
• Havetie-upswithbeautysalons,clinicsetctopushtheirbrands.
• Using market research, find the brands that have been doing poorly and makes strategies to either improveitorcloseits
operations.Havinganidlebrandwilladdonasaburdentothecompany.
• Donothavetoomanybrandsforthesameproductcategorysinceitwillleadtocannibalization.
• Innovationisthekey.Identifynewcustomerneedslikeantiagingproductsandbringinproductsthat suit the customers better.
• Focusmoreonsellingovertheinternet.Itwouldbethebestchanneltoattracttheyouthwithsomuchhappeningovertheinternet.

• Introducenewbrandsthatarepricedmoreeconomically.
• Formulate new strategies for testing.
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