A strategic analysis of Estee Lauder

A strategical synopsis of Estee laudatorIn the world of moving in today, where tilt is unriv solelyed of the major challenges that every validation is facing, the need for strategic planning and epitome arises. These be inseparable for the survival of an boldness as hale as determining the direction in which an enterprise is going in congener to its surround in align to fulfil a competitive emolu custodyt by formulating a competitive strategy. It is alpha that an ar figurement grabs every chance that is coming along its way, and responds to any risks and limitations presented by the outer environment.In come out for an organisation to make and take correct decisions, it requires an agreement and knowledge around the impact the environment can score on the organisation. This is strategic management. It is so most-valuable not only to look at what is best for the organisation, just as well to take the of necessity of sh beholders into consideration. For in effect(p) strategic management, it is eventful to exhaust a strategic psychodepth psychology. The reason for an analysis is because the issues that atomic number 18 world analysed are often quite complex even if there may be enough information available Fleisher. C Bensoussan .B (2002).This study is organised as fol unhopefuls Chapter two defines grievous terms which will suffice in the come on savvy of this study. Chapter cardinal introduces the club Estee lauder. Chapter four evaluates the strategic analysis of Estee laudator by looking at techniques, models and processes, and chapter five concludes.Chapter 2Strategic depth psychologyThis is where a strategy is formulated by carrying out a look on the organisation and the moving in environment in which the organisation ope pass judgment (BNET bank line Dictionary.)However, Professor Les Worrall defined it as,a theoretically informed understanding of the environment in which an organisation is operating, togethe r with an understanding of the organisations interaction with its environment in ensnare to correct organisational efficiency and effectiveness by increasing the organisations depicted object to deploy and redeploy its resources intelligently.2.1 Strategic modelManagers must take in to account three major factors when strategic decisions are madeThe shareholders expectations and objectives it is important that organisations are clear about their long-term objectives. However, due to factors that an organisation does not behave any control over may influence the organisation to change its objectives, consequently conflicting with the shareholders. Therefore, management must know how to oblige the shareholders expectations while setting the objectives of the organisation.Available resources for an organisation to achieve its objective Depending on the strengths and weaknesses of organisations resources, the firm can pursue its strategies. However, these may change with the pre vailing environment. quantity environment within which the organisation operates Forecasting what the early may become is a difficulty that managers face, because the environment is uncertain. This factor a same(p) has an influence on what strategy can be pursued.Taking individually of the above three factors into consideration is known as strategic analysis.2.2 Aim of strategic analysisIt understands an organisations strategic position. Strategic analysis forms a view of the key influences on the present and prospective well-being of the organisation and what opportunities are afforded by the environment and the competencies of the organisation Baily. P, Farmer. D, Jessop. D, Jones. D (2005).2.3 Importance of strategic analysis.Strategic analysis is important in providing an organisation with miserlyingful insights and with a clear framework so as to prepare itself for change. Its importance lies in evaluating expressions and trends for the organisation. It is also importan t in the identification and assessment of the opportunities available to the organisation Fleisher. C Bensoussan .B (2002). It also helps the organisation understand its strategic position by providing information such(prenominal) as what is happening in the business environment and industry, and what competencies should be developed so as to sojourn competitive.It gives the description of strategic goals and the firms business strategy. Strategic analysis also leads to goals that are clear and relevant, helps in the taking of decisions with better bore, and provides a secure future by preparing the organisation with what may happen in the future.Strategic managementThis is a process of making and implementing strategic decisions. The organisation must also analyse the competencies already present in the organisation. These competencies help in formulating strategies. The process should consist of the following elementsThe analysis of a strategy- apprehensiveness the changes go ing on in the environment in which the organisation exits, and how these advert the organisation, its activities, its strength of resources and the expectation of stake holders, also analysing competitor strategies through assumptions, boil downsing on weaknesses and threats.The choice of strategy- This is concerned with all the possible causes of action which may be taken. Eliminating out many early(a) strategies chosen, and putting in order of importance.An evaluation of each of the causes identified- The selection of those which the organisation must attempt to follow, and and so discuss at length the strategies short-listed.Implementation of selected planned strategy- This is turned into an effective caused action. Discuss on implementing, precisely not actual implementation.2.4 Importance of strategic managementIt is a planned process that needs to be followedIts considers the future and anticipates what it could bringIt increases organisational egression as it brings in opportunitiesIt also looks at the threats the external environment may poses and flora on how to get rid or manage theseHelps companies remain stable by foreseeing what the future may bring.Chapter 33.1An Organization is a consciously coordinated social entity, with a comparatively identifiable boundary, that functions on a relatively conscious basis to achieve a common goal or set of goals. Richard, (2002)Estee lauder was founded in 1946. It is a worldwidely recognised caller-up, whose headquarter is in New York, but is in over 140 countries. It manufactures and marketplace places hair premeditation products, fragrances, uncase care and makeup. The confederacy has 29 brands, some of which are Estee laudator, Clinique, M.A.C, Aramis, Bobbi Brown, Darphin and many more. Estee extoller is technologically locomote and has a reputation for innovation, superior quality and sophistication.3.2 Estee Lauders systemKoontz and ODonnell describes strategy as a decision about how to use available resources to secure a major objective in the face of possible obstructions.such as competitors, earthly concern opinion, legal status, taboos and similar forces.Their strategy is to cause a diversified business base, which they believe will strongly boost up their increase globally. Their focus is to remain a distinguished leader in the global prestigiousness cosmetics. Their three essential ingathering strategies areTheir geographic presence should be expanded and strengthenedTheir product categories should also be strengthenedTheir transmit of distribution should also be strengthened and diversifiable.3.3 Vision MissionA beau mondes mission and vision is for its employees and clients. The Mission defines and reflects the company, its core purposes, its values and principles. The vision however, provides an insure of the future.The Vision Statement of Estee LauderBringing the best to everyone we touch. By The best, we mean the best products, the best peop le and the best ideas. These three pillars have been the hallmarks of our partnership since it was founded by Mrs. Estee Lauder in 1946. They remain the foundation upon which we continue to build our success today.3.4 ObjectivesThey are energetic, innovative and first for customersPower endeavour to do our very best and enhance the companys leadership throughout the world make strong global brands through innovative delivery of products and increase revenues looking at after our people so they can look after our customers understand customers better than anyone and Use our strengths to deliver unbeatable value to our customersBusiness relationships through distribution channels, reaching the customers globallyTrust and respect each other3.5 ScopeAccording to Mintzberg and Quinn there are five definitions of strategyStrategy as a planStrategy as a patternStrategy as a positionStrategy as a perspectiveStrategy as a ployEstee Lauder adoptedPlanEstee Lauder has good planning and they strongly believe all their success is all because of its planning.PerspectiveEstee Lauders perspective was to increase its company growth globally by 2008. This was achieved mainly because of the international business, mainly from rising markets such as China and India.Chapter 44 Estee Lauders External environment analysis4.1 PESTEL Analysis for Estee LauderPESTEL analysisis the external analysis of the unalike macro-environmental factors that a business must consider. Kotler (1998)The PEST analysis is a useful whoreson for understanding the position, potential and direction for a business as well as the market growth or decline.The radical and ongoing changes occurring in society create an uncertain environment and have an impact on the function of the whole organization Tsiakkiros, (2002). Hence the analysis of the macro-environment is very important to identify factors which could chance on various variables and arrangements within the organisation.Macro-environmental analys is assist Estee Lauder management to increase its attentiveness of appropriate environmental changes thus improve strategic planning by enriching its industrial and market analysis. The PESTEL analysis in addition to Porters Five specialty model and SWOT can be applied by an organization to review its strategic direction. These have been discussed below. governmental factorsThe policy-making environment within which an organisation exists has far reaching consequences. The political environment most obviously operates at National level, but may also be significant at local and international levels. Estee Lauder gives direction to countries through the way they exert control over the economy. Estee Lauder should not only be cognisant with the politics of a country, but also with the media, industry and labour leaders. The following political factors can propel the business environmentLevel of government involvement in businessStabilityLiberalisationTaxationCo-operation and integra tion, e.g. EUEconomical factorsThis is concerned with the record and direction of the economy in which a firm operates. Estee Lauder looks at the interplay of market forces that dictate the state of the economy and implications on both commercial message and non-commercial organisations. Prices vary from brand to brand and product to product, but these are commonly in the eminenter ranges of an industry. The factors includeExchange ratesInterest ratesSpending powerInflation and employmentSocio, Cultural FactorsThe socio cultural influences on businesses vary internationally. These affect a societys basic values, perceptions, preferences and behaviours. It is vital that such factors are considered if an organization wants to achieve its proposed objectives. Factors includeThe dominance of the religionEducation and vox populiThe impact of language upon the diffusion of products onto marketsWhen do customers have time for obtainThe roles of men and women within society and depend ing upon that the products should be launchedEstee Lauder has received customer complaints devotioning the fact that new products are being tested on animals first. They have to look into this matter as it can pose serious issues with the customers.technical factors much and more businesses are affected by technology. Technological factors affect the operations of the firm since technological changes serve to avoid obsolesce and to gain ground innovation of relevant techniques in the industry. Estee Lauder has rapid technological changes in its products, and these products can be main courseed online via the internet. Some technological factors areIT rapid growthInnovationGovernment spending on researchNew discoveries and schoolingsR D expenditureProduct life cycleEnvironmental FactorsThese factors are also known as the Natural factors. These factors help Estee Lauder in showing strategic doubts and their worth in the predicting and planning processes using environmental aspects . There have been emissions of calumnious gases and fluorocarbons, which Estee Lauder must take care of as it is and environmental threat. Its increases the significance of the following factorsShortage of raw tangibleIncreased pollutionIncreased governmental interventionLegal FactorsEstee Lauder functions within a structure of Government regulations and legislations. These laws and regulations should be considered when running businesses prod laws and industrial relationsMunicipal licensesFormationTaxationCompetition procure and patent lawsMinimum wages laws and Employment lawdemographic FactorsThese factors may also exist under the macro-environmental factors. Following factors must are considered with regard to the key Demographic trends by Estee LauderWorld population growthChanging householdGeographic population shiftsBetter-educated, more white-collar work forceIncreasing DiversityChanging age structurePopulation consists of generational groups.Distinct segments typically ex ist within these generational groups.4.2 Porters Five Force ModelThis model evaluates a companys competitive position. Any business works to develop an edge over its rival firms. This model helps in the understanding of the industry context in which Estee Lauder operates. Below is a diagrammatic representation of the model.http//www.maxi-pedia.com/Five+Forces+model+by+Michael+PorterBarriers to entryThis is low in the case of Estee Lauder as it has made its position clean strong and hence new entrants will not pose a threat to it as it will be difficult for these to enter into the market as the barriers are pretty high. They also have good access to their distribution channels and the correct knowledge of the segments they are operating in.SubstitutesThis is also low in the case of Estee Lauder. Customers have built a customer loyalty. Estee Lauder also provides the best quality products whose performance is to the mark as is the name, thence threat of substitutes will be low.Barg aining power of suppliersThe suppliers would have a low bargaining power as Estee Lauder is a huge brand and the volume of goods required from the suppliers around the world is also huge. There would be very many suppliers willing to supply such a company, hence it is important for the suppliers to provide the company with what they require and something that is quaint from its competitors.Bargaining power of buyersThis is high as buyers can intimately belabor to other big brands as the number of these brands present in the market segment is high. However, due to customer loyalty to the brand, it does not face more of this as it provides its buyers with what they want and how they want it.Competitive RivalryThis is high in the case of Estee Lauder. Its major competitors are Avon, LOreal, PG, Max Factor, Revlon, etc. Estee Lauder therefore needs to have constant innovation of its products so as to stay ahead of competition. There are various brands under the company, therefore, i t is important that the range of price is good and they can differentiate their products well without customers facing high switching comprises.Estee Lauder created the line designed for men in 1976. It was called skin supplies for men (Estee Lauder 2003a). Avon, Max Factor and Revlon did not have men lines.4.3 SWOT analysis for Estee LauderA SWOT analysis is important as a clear basis is provided to examine the performance of a business. It is also very important for the products a company offer, as it is essential in the branding and marketing of the company products. This model helps in the understanding of the firm and its surroundings.InternalStrengthsWeaknessesStrong brand nameResearch and development focusStrong distribution networkRobust revenue and dinero growth salesWeak liquidity positionCustomer submergingWeak performance in a few marketsExternalOpportunitiesThreatsDemographic trends in the United StatesCosmetics markets in emerging nationsGrowing riches- Rich acquir e wealthierCounterfeit productsIntense competitionIncreasing regulationsStrengthsThe brand name, Estee Lauder itself is a strength. The name is linked to quality and luxury. The company is also a global licensee for other big brands like Tommy Hilfiger, Donna Karen, etc. Estee Lauder leads in each market segment in the industry as it develops new products, redesigns actual ones and identifies and considers consumer preferences.It has a large network of retail. This therefore increases the market incursion opportunities and creates thrift to target customers. It has a strong management strategic perspective, and is also having a great growth. It also has various innovations such as offering shop via the internet (it was the first major cosmetic firm to have offered shop via the internet.)WeaknessesThe company bargaining power could be lowered by it concentrating on a single biggest client. They also have a poor cost structure in some areas, hence a decline in the performance of sa les in certain regions. The company could be receptive to the debt market due to low liquidity levels, and this could thus affect the company growth. It is the Family members that have most of the power over the company. The companys organisational structure is not easily distinguished. In America, there are particularly lower sales in the fragrance category.OpportunitiesEstee Lauder targets aged people and therefore makes products to suit these people. Its revenues could be boosted by having a strong and great presence in its segments, thus also increasing growth. The cosmetics markets are doing good in emerging markets like India and China, as there are many beauty contests that take place. This cosmetics market is growing due to younger and middle aged women that are being more style conscious. Estee Lauder is also well positioned in these emerging markets. There is also a demand in the luxury goods. More money is spent on these goods. Therefore, the needs of these wealthy peopl e are also taken into consideration, and products made to meet their needs and wants.ThreatsMany alter products are being sold, thus affecting Estee Lauders sales. This can lead to the company losing its exclusivity of the brand. This could thus harm the image of the company. Customers may also be displease with these products as the fake product may harm them, thus the company would lose out on customers. Many big brands such as Revlon, LOreal, would increase competition in the market. The government may also visit certain rules and regulations on the products saying that the product has high levels of chemicals which are harmful to people. This may thus lead to an increase in the cost of developing the products and also in the launching of the products.Chapter 5ConclusionBusinesses are different in many ways therefore every organisation needs to have a business plan, which needs to be reviewed in order to keep it up to date. The plan at Estee Lauder is articulated by corporate leaders, who give the organisation direction, so as to avoid a strategic drift. They create a vision of a possible future that allows both the managers and others to see clearly the direction to take, building upon the companys current substance and strength.To gain competitive edge and analyze the external environment, Estee Lauder could bring forward use the Value chain, BCG growth model and scenario analysis for its strategic analysis. Recommended strategies that Estee Lauder could use are Forward, backward, horizontal integration, product and market development, market penetration and more diversification. Estee Lauder took the approach of providing great customer service, great quality and staff ownership, hence making it different from the rest.ReferencesAdvanced Diploma in Business Administration Corporate strategy Syllabus.Baily. P, Farmer. D, Jessop. D, Jones. D (2005). Purchasing Principles and Management. Pearson Education. FT Prentice Hall.Fleisher. C Bensoussan .B ( 2002). 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