Introduction:

Revlon has been a giant in cosmetics, skin care, fragrance and related products for over seven
decades. Its products are sold in more than 100 countries around the world with sales outside
United States comprising 43 % of sales in 2006. The company’s long term mission is to emerge
as the dominant cosmetics and personal care firm in the 21st century by appealing to young and
trendy women, health conscious women, and older women with a variety of brands.

But recently Revlon is doing too well and is in trouble. Revlon is struggling to recover and
collect debt of almost $2.3 billion. The research and development department is also struggling
to offer new products to the market. In recent years Revlon launched Vital Radiance, a cosmetic
line for older women with 100 products and it was the largest launch since ColorStay in 1994.
However the product was not well received by the market because other competitors already
provide the products and the prices of the Revlon product was also very high as compare with
rivals. Revlon discontinued the brand in September 2006. Revlon planned to launch a new
prestige fragrance called Flair in 2006, but delayed the launch until debt could be restructured.
The company issued $185 million in stock in 2006 to raise money to reduce debt. MacAndrews
and Forbes Holdings agreed to purchase a portion of the stock and to purchase any stock not
purchased by current stockholders. MacAndrews also extend a line of credit of $87 million to
Revlon which can help the Revlon in the recovery of losses.

The cosmetics and personal care industry is impacted by two major changes s in demographics
of the United States: The aging population and the change in proportions of ethnic and racial
populations. Older people tend to spend less on cosmetics and this is a growing problem for the
industry. The ethnic racial composition of American population is shifting. While African
Americans represent the largest minority segment, the Hispanic American segment is the fastest
growing segment and is expected to be the largest minority segment in the United states by the
year 2010 with approximately 40.5 million individuals. The result is that non Hispanic white
share of the US population is expected to decline to 68% by the year 2010.

Revlon is facing intense competition in the cosmetics and skin care industry. The global industry
is $200 billion. Today large number of women prefer purchasing these items at drugstores,
supermarkets and mass retail stores such as K-Mart and Wal-Mart etc. The Revlon’s major
competitors are Proctor and Gamble, Avon Products, Estee Lauder Companies, L’Oreal, and
Unilever. Other competitors include small companies such as Urban Decay, Specialty stores such
as Bath and Body Works, Body Shop, and Victoria’s Secret.

Analysis:

Revlon recently is facing some major problems and have brought changes in some sales and
marketing functions to reduce operating costs. The company also eliminated some senior
positions and reduced staff by about 8 percent of their US workforce to save approximately $33
million a year. Net sales for 2006 decreased by $1 million to $1331 billion and net losses in 2006
were $251 million following a loss of $84 million in 2005. The company has shown losses for
eight consecutive years and has struggled with debt since 1985, so Revlon is a company in
trouble and following matrices will further elaborate the company’s current position.

Internal Factors Evaluation (IFE) Matrix:

Key Internal Factors. Weight Rating Weighted Score

Strengths

1. $25 million spend on CSR programs .10 4 .40

2. Spend $24.4million on R & D .10 3 .30

3. Aggressive advertising worth $120 million .05 3 .15

4. Great operating efficiency and use of capital assets .05 1

.05

5. Quality manufacturing standards and having

ISO-9000 certification .10 2

.40

6. Strong brand recognition .05 1 .05

7. Rapid new product development .05 1 .05

Weaknesses

1. Long term debt nearly $2.3billion .10 3 .30

2. High restructuring costs ($17.9 million, 2006) .05 2 .10

3. High prices than competitors .05 2 .10

4. Decrease in net sales for 2006 by $1 million .05 3 .15

5. High net losses in 2006 i.e. $251 million .10 3 .30

6. Employee layoff by 8 % .05 1 .05

7. Less diversified products compared with competitors .05 1 .05

8. Constant organizational restructuring .05 2 .10
-------- -----------
1 2.55
Since total weighted score for Revlon is equal to 2.55 which is not impressive and is just .05
above the average IFE score of 2.5. So this score indicates that there is room for improvement
and Revlon has to work on its internal factors so as to capitalize on strengths and improve on
weaknesses.
EFE Matrix for Revlon
Key External Factors. Weight Rating Weighted Score

Opportunities:

1. Increase in US teen market i.e. 20 million segment by 2010 .10 2 .20

2. Growth in Hispanic population i.e. 40.5 million by 2010 .10 2 .20

3. Asian markets with 60% world’s population still uncovered

by Revlon .15 2 .30

4. Increase in online retailing .05 3 .15

5. Women in China, India and Middle East are rapidly .05 1 .05
Growing interest in purchasing more cosmetics

6. Men also using the cosmetic products. .025 2 .05

7. Expansion in hair coloring market amongst youth .025 4 .10

Threats

1. Racial and ethnic changes in US market .10 2 .20

2. Intense competition .10 2 .20

3. Disposable income of Americans decreasing .05 2 .10

4. Consumer’s concerns about product safety and

CSR activities .05 4 .20

5. Major retailers reducing inventory levels due to recession .10 2 .20

6. Decrease in the value of dollar .05 1 .05

7. Ageing US population .05 1 .05

-------- ----------

1 2.05

So the total weighted score of EFE matrix for Revlon is 2.05 which is below average score of 2.5.

This indicates that the company is responding unsatisfactorily to external environment factors.