TITLE OF THE CASE: ESTEE LAUDER COMPANY INC.

TIME CONTEXT

The case study was conducted in 2018.

☐ The case study focuses on the company’s status for 2008.

SUMMARY/ABSTRACT

The comprehensive strategic management case study will focus on Estee lauder Company, Inc. In

accordance, the purpose of this report is to assess Esteé Lauder’s operations based on the case study and

comprehend how the company can develop strategic intent for their business operations following the

analysis of external and internal business environments.

Estee Lauder has been considered as one of United States’ major corporations as well as one of

the world’s leading manufacturers and marketers of quality skin care, makeup, fragrances, and hair

products. The company was first established in 1946 and became public in November 1995. Today, Estee

Lauder expands its sales to over 130 countries with thousands of products under various brands. However,

upon analysis of the case, there is a current control problem posed on the company itself.

The cost of sales as a percentage of total sales increased to 26.1 percent as compared with 25.5

percent in the prior year. Moreover, the operating income of the company decreased by 15 percent to

$619.6 million. Likewise, the operating margin was 9.6 percent of sales in fiscal 2006 as compared with

11.6 in the prior year. Upon analysis of the finances by products, the fragrance segment appears to be

experiencing lower net sales as compared with the other product lines. Net sales of fragrance products

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decreased four percent or approximately $47.3 million as the company continue to struggle for this

product line. In relation, the case study will strive to solve the aforementioned predicament that threatens

the competitive performance of the corporation.

VISION

Estee Lauder’s vision statement is “bringing the best to everyone we touch.”

The vision statement tells us what the company hopes, to achieve their objective. Suffice to say

that the vision statement shows Estee Lauder’s commitment to the future aspect which is to offer nothing

but quality products to the public and create the best environment for their stakeholders.

MISSION

We are a family committed to working together with uncompromising ethics and integrity.

We strive to always:

1. Provide customers with innovative cosmetic products of the highest quality.

2. Deliver outstanding service by treating each individual as we ourselves would like to be treated.

3. Create an environment that fosters personal growth and well-being.

4. Build partnership with our suppliers, retailers and colleagues based on fairness and trust.

5. Enhance our reputation of image, style, and prestige.

6. Pursue profit, but never at the expense of quality, service, or reputation.

7. Eliminate waste and reduce inefficiencies in order to provide maximum value to our customer.

8. Be responsible citizens in every community we have.

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 CORPORATE SOCIAL RESPONSIBILITY

“The Company’s founding values inspire our commitment to operate responsibly and motivate us to

build a sustainable business based on uncompromising ethics, integrity, fairness, diversity and trust. In

partnership with our suppliers, our retailers, our consumers and everyone we touch, we aspire to foster

our heritage of respect for people and the environment and be a positive influence in every community

we serve.

From pioneering philanthropic efforts, including The Breast Cancer Campaign and the M·A·C AIDS

fund, to our global campaigns championing environmental stewardship and workplace safety, our

employees and brands have created and nurtured programs that drive and sustain our shared

commitment to responsible corporate citizenship.”

HONORS, AWARDS, RECOGNITIONS RECEIVED BY THE COMPANY

o Recognized as Best Employer for Women by Forbes

o Fortune Magazine’s most admired companies

o Marie Claire Prixe D’Excellence

o Editor’s Choice Awards: Cosmetics/Personal Care Packaging magazine

o Human Rights Campaign’s Corporate Equality Index for LGBT Employees

o AmeriStar Packaging Awards

o The 3M Integrity Award

o Estee Lauder was awarded and included in Ten Outstanding Women in Business in the United

States by business and financial editors in 1967

o In 1968, she received the Albert Einstein College of Medicine Spirit of Achievement Award.

o In 2004, shortly before her death, Estee Lauder received the Presidential Medal of Freedom.

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STATEMENT OF THE OBJECTIVES

o To develop a strategy that will solve the decline of the company’s fragrance product line sales
and decrease in profit

o To gain competitive advantage over the company’s competitors

o To maximize profit and minimize cost

CENTRAL PROBLEM

How can the company solve the decrease of net sales for the fragrance product?

AREAS OF CONSIDERATION

STRENGTHS WEAKNESSES
1. Well-established brand name 1. Decreasing profitability of
with great branding fragrance product line

2. Online sales because of 2. Indistinguishable

internet evolution organizational structure

3. High revenues enabling 3. Concentrated authority

sustainability and expansion vested on family members

4. Wide channels of distribution

5. Celebrity endorsement

6. Globalized operations

OPPORTUNITIES THREATS

1. Growing cosmetic industry 1. Numerous competitors

2. New emerging markets 2. Consumer complaints

towards animal testing
3. Diversification on distribution of new products
channels into new markets
3. FDA regulations
4. The increasing need for using
anti-aging products

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5. Improving life expectancy of
the older generations who are
 ALTERNATIVE COURSES OF ACTION
NO. 1 Product development

Product development will involve modification of an existing product or its presentation. In this

case, I believe that the company could invest on research and development if it would lead to the

betterment of the fragrance products which will draw more customers in return.

Advantages Disadvantages
1. The company’s products particularly the 1. The company will shell out additional costs

fragrance products will be improved. The for the research and development

improvement may be associated with the expenses to better the product.

inclusion of new ingredients, new

packaging etc. 2. There is no guarantee if the product itself

will be better through the eyes of the

2. Product development adheres to the customers

company’s vision which is “bringing the

best to everyone we touch.” 3. Existing customers might be anxious to

test new products

3. Product development may lead to

customer satisfaction 4. Products can fail unexpectedly

NO. 2 Market Penetration

Market penetration is a measure of the amount of sales or adoption of a product or service

compared to the total theoretical market for that product or service. In addition, market penetration can

also include the activities that are used to increase the market share of Estee Lauder’s fragrance product

line. With these strategy, Estee Lauder would have to set a lower price for its product.

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 Advantages Disadvantages

1. There will be more people that the 1. Since the company produces a luxury

company’s products will reach. product, it will miss opportunities if it

markets the item as a cheap product.

2. Gain competitive advantage over Consumers who desire luxury items

competitors when the company reaches would avoid the product.

new market first.

2. There could be unmet production costs

3. Cost efficiency could be achieved.

3. Company will lose reputation of prestige

4. Market could still get saturated.

NO. 3 Market Development

Market development is a growth strategy that identifies and develops new market segments for

current products. With market development, Estee Lauder will target non-buying customers in currently

targeted segments.

Advantages Disadvantages
1. Expands consumer exposure 1. Requires capital investment in expansion

to build new locations and expand

2. Widens geographical reach of products marketing efforts

3. Gain competitive advantage over 2. May struggle to satisfy existing clients

competitors

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 3. The fragrance product may not be

accepted by the new market

RECOMMENDATION

I conclude that the best solution to the problem is alternative course of action no. 1 which is

Product Development, because I understand that the company only struggles with its fragrance products.

With product development, the company could know what customers look for in a product and find out

what might be an existing fault with their merchandise. Thus, it will promote innovation and betterment

for the product line which could ultimately lead to the increase of their sales. Moreover, it will highlight

the company’s vision which is to bring the best to everyone they touch.

PLAN OF ACTION

1. Conduct a marketing research or survey with regards to the customer’s preferences and

their perception towards the products of Estee Lauder.

2. Address the potential problems of the existing products.

3. Determine the potential demand and how much competition exist for similar product.

Estimate all costs for the product to help determine profit margin.

4. Invest on research and development for any improvement of existing products and

development of new products.

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POTENTIAL PROBLEMS

1. What if the newly-developed products will not be accepted by the customers?

2. What if the products fail unexpectedly?

3. What if the products will be subject to government regulations and environmental

constraints?

4. What if the new products bring about unmet costs particularly the research and

development costs?

CONTINGENCY PLAN

1. The company should not launch the product in an instant. They should develop prototypes

first and conduct a market test first to a handful of customers.

2. Use the feedback from the market test to make adjustments.

3. Allow the regulators of cosmetic products to test it for probable anomalies so it could be

accounted for immediately.

4. Intensify the marketing efforts for the products.