Today’s personal products market has become more competitive than ever. With economic and political uncertainty in many parts of the world, The Estée Lauder Companies Inc. has invoked a number of unique and diverse strategies in order to gain customer loyalty while attracting new customers for staying as a leader in personal products industry. This paper focuses on analyzing The Estée Lauder Companies Inc., including company overview and main strategies. The main purpose of this paper is using a series financial accounting ratios as tools to analyze the operation of this company from 2008 to 2012, the nearest five years. After researching of the strategies and data, I make a conclusion that this company is in a healthy financial situation and has a large capacity to develop well in the future.
Overview After one quarter learning about financial accounting, I have some sort of concept about this course. In order to deeply understand the knowledge we have learned in class and have solid experience about all of those formulas. I write this paper to turn abstract theory into practice. I choose The Estée Lauder Companies Inc. as my analysis target, not only because I am a loyal consumer for this company, but also I’m very interested in its unique business strategy. As we all know, The Estée Lauder Companies Inc. is a family business and remains the leader in the global prestige beauty market for a long history.
What’s more, even though it’s a traditional company, it has not fall behind in the extreme competition nowadays. I think its success mainly contributed to four critical areas: creativity and innovation, high-tough, local relevance and digital capabilities. This paper will focus on three parts to analyze The Estée Lauder Companies Inc. First, I plan to say something about this company, including its development overview and strategies. Second, I will put this company in the whole industry to analyze its opportunities and challenges. The last but not the least, I’d like to use financial accounting ratios as tools to deeply analyze the operation situation of this company.
The Estée Lauder Companies Inc. is one of the leading manufacturers and sellers of skin care, make up, fragrance and hair care products in the world. The company’s products are sold in over 150 countries and regions under almost thirty brands. Among those brands, there are some big brands we are very familiar with, and actually, those brands indeed contributed a lot to the whole company’s sales. They are Estée Lauder, Clinique, Aramis, Origins, Prescriptives, M•A•C, Bobbi Brown, Tommy Hilfiger, Kiton, La Mer, American Beauty, Flirt! , and AERIN Beauty. Taken together, sales of all the Company’s brands comprise about one-fifth of the $40 billion global prestige beauty business.
The Estée Lauder Companies’ long-term strategy is to achieve higher levels of sustainable, profitable growth to remain a leader in global prestige beauty business. In that case, they use consumers as their muse to create products that really needed. Those educational beauty advisors always keep a good connection with consumers, in order to inspire brand loyalty. What’s more, this company dedicated in creating certain products for specific markets and deeply immersed in the online world as well. At a glance, the company sells its products mainly through some kind of channels to keep their brands are easily accessible.
These channels involve department stores, retailers, TV shopping, stores on ships, in-flight, duty-free shops in airports and the Internet. The Americas, definitely occupies their largest region of sales, accounting for about 42% of total global sales. Europe, the middle east and Africa owns the highest percentage of operating income, because those regions enjoyed huge sales growth during the last two years. What’s more, China has become a more and more important market in the Asia/ Pacific region after Japan, fueled by rapidly growing demand of luxury brands.
The personal care industry concludes a variety of products, including fragrances, makeup, hair care, sunscreen, toothpaste, and products for bathing, nail care, and shaving. Major companies in this industry include Estée Lauder, Johnson& Johnson, Procter& Gamble, L’Oreal, Shiseido and Unilever. The United States, Europe, UK, Brazil and Russia dominate the global personal care products. India and China are the fastest growing markets for personal care products. The global personal care products industry has revenue of about $250 billion annually. Major products include cosmetics (35% of industry revenue), hair products (25%), and creams and lotions (20%). Other products include perfume (10%), toothpaste and mouthwashes (5%), and shaving preparations.
The global personal care products industry is concentrated with the top 50 companies holding a combined market share of around 85%. The profitability of individual companies depends on product innovation, effective sales and marketing, and efficient operations. Large companies like The Estée Lauder Companies Inc. have scale advantages in purchasing, manufacturing, distribution, and marketing. Small companies can compete effectively by offering specialized products. Over the coming years, the whole industry is likely to continue investing in eco-friendly practices.