UNIVERSITY OF CENTRAL PUNJAB

ASSIGNMENT NO.1

SUBMITTED TO: Prof. ISHFAQ AHMAD

SUBMITTED BY: AYESHA MIR

SUNDAS MIR

SHAHRAIZ NASIR

RAMIZ SHAHID

REHAN AHMED

ROHAIL RAZZAQ

TOPIC:

REVLON CASE STUDY1. SHOULD REVLON CONCENTRATE ITS EFFORTS ON INTERNATIONAL

MARKETS, GIVEN THE LOW VALUE OF DOLLAR AND COMPETITIVE

PRESSURES? WHAT COUNTRIES SHOULD REVLON FOCUS ON?

Revlon should continue to pursue efforts internationally even given the low value of the

dollar and the competition. The company may be struggling, but the products are already

known in the 100 countries that Revlon currently has markets in. The company should

continue to expand in the United States, maybe choosing some different target groups as

the current targets do not seem to be responding as well as they would like. Revlon

should focus on countries in Europe and Asia where the majority of the fashion world is

located. France, England, Italy, Japan and China would be good starting countries as

these are all fashion capitals. . The company may also reorganize its international

operations by appointing distributor setup and windup its presence in the higher costing

markets. This option should be opted for the sub–continental and Latin American

markets. Cosmetics and beauty products go hand in hand with fashion trends and would

probably quickly align with this type of market. 

2. SHOULD REVLON DIVERSIFY ITS OPERATIONS OR DEVELOP JOINT VENTURES WITH OTHER COSMETICS COMPANIES? WOULD JEWELLERY BE A GOOD INDUSTRY TO ENTER GIVEN THE AGING SOCIETY?

Looking into the current scenario according to the case study, Revlon is going through a great

debt of $2.3 billion, in this situation it would not be a wise decision for Revlon to enter into

diversification or in other words diversify its product line. Reason being recently when Revlon

launched VITAL RADIANCE LINE eye shadows in 2006 in the price range of $12-$19 for the

older class of women, the product was not highly acceptable in the market because of the fact

that it was expensive in comparison to the other products that Revlon was selling at its major

retailers (Wal- Mart and Wallgreens). In response to this Revlon had to discontinue the Vital

Radiance in sep.2006 which left a negative impact on Revlon.Inc. Of approx.110M. Revlon

wanted to launch a new prestige fragrance FLAIR in 2006 but delayed this idea of theirs as they

were unable to come out of their recent debts due to the recent launches that they did. A much

wiser decision would be to enter into joint venture with one of its competitors who are selling

similar range of products as that of Revlon. This will give an access to new markets and

distribution networks, increased capacity of production, sharing of risks and costs with a partner,

access to greater resources, including specialized staff, technology and finance. A joint venture

will increase the level of flexibility of working at a wider scope with a wider range of ideas,

concepts and a totally new and wider range of health, personal and beauty care products.

Entering into the jewelry industry is in other words is diversifying itself by entering into a new

line of products, which is not again a very healthy sign for Revlon as its all recent launches have

not been a great success. Coming up with this concept; that too in the aging society would be a

really bad idea since the target audience is baby boomers who are at a level where they would

not enjoy wearing funky style jewellery pieces, and to attract this class of people Revlon would

have to produce a high class jewellery with lots of antique styles made out of gold, white gold,

gems, diamonds etc. which Revlon with the current state of debts would not be able to afford to

produce at any cost.

To sum up the whole question diversifying and entering the jewelry industry both if implemented

by Revlon will make them face severe consequences in the form of lost reputation and a lost

worth in the market with lots of more debt bundling onto them.

3. SHOULD REVLON AGREE TO SELL ITSELF TO PERLMAN OR TO A RIVAL FIRM? WHAT IS REVLON’S WORTH ON THE MARKET?

“Revlon is a company in trouble”. Even after its operations in 100 countries with a vast range

of skin care, cosmetics, personal care, fragrances and professional products, Revlon product’s

market share has fallen since the second quarter of 2006-2007. Net sales according to the

geographic areas have shown a decline in the US market from 61% in 2004 to 59% in 2005 and

to 57% in the year 2006. However, the case is somewhat opposite with regard to the

International market where the net sales have been 39% in 2004, 41% in 2005 and 43% in

2006. Consumers have become more health and beauty conscious over the years, their

concentration have moved more towards the personal care products (skin creams, dyes etc),

cosmetics and personal care is not an industry for women only, men purchase personal care

products in an effort to improve appearances. Due to this reason the net sales of the personal care

products has increased from 33% in 2004, to 38% in 2006. However this affected the net sales

of cosmetics and fragrances to certain extend and the net sales declined from 67% in 2004 to

62% in 2006. The statement of operations shows very clearly that the operating income was

going in a positive amount of $88.5 in 2004 which gradually reduced to 64.9 in 2005 and finally

ended up to a negative amount of $ -50.2 in the year 2006. In comparison to Revlon, all its

competitors are in the upfront with much better financial positions in terms of revenues and

sales.

Brands Sales ($) 2004 2005 2006

P&G 51,407 56,741 68,222

L’Oreal 13,641 14,533 15,790Avon 7,747.8 8,149.6 8,763.9

Estee Lauder 5,742 6,280 6,464

Revlon should sell itself to L’Oreal since it’s the world’s largest cosmetics firm which had

recently held 7.5 percent share of the market which after the acquisition of Maybelline made

L’Oreal the number two cosmetic firm in the United States. L’Oreal is at present competing

Revlon on all grounds on all the areas whether its fragrances, cosmetics, hair care etc. after being

sold to L’Oreal, all those major products that Revlon had always wanted to sell to its customers

but was unable to do so because of the debt crises that it was always facing after the launch of

new products every time. Even though the advertising for Revlon was done in an effective

manner but after being sold to L’Oreal these products that recently were creating debt for Revlon

might now under the name of L’Oreal be able to be advertised properly through the L’Oreal

advertising spokespersons Beyonc Knowles and Katharine McPhee. Due to its brand name and

effective spokespersons L’Oreal has been successful in making high sales over the last 3 years.

Therefore it would be a wise decision for Revlon to sell itself to L’Oreal.