Introduction
The Estée Lauder Companies Inc. is a manufacturer of skincare, fragrance, makeup, and hair products. It was founded in 1946 and has become one of the leading global marketers. Its net sales reached more than $13.6 billion in 2018 (“At a glance,” 2019). The organization owns over 25 popular brands including Estée Lauder, Clinique, Tom Ford, DKNY, and Too Faced. The Estée Lauder Companies Inc. has more than 46,000 employees who work in more than 150 countries (“At a glance,” 2019).
The skincare products the manufacturer sells include serums, moisturizers, cleansers, toners, and sun care products. The stock of color cosmetics is presented in lipsticks, mascaras, eyeshadows, and other makeup tools. Fragrance products involve colognes and sprays, as well as candles, creams, and powders. The hair care segment includes shampoos, conditioners, and hair color products.
This report analyzes Estée Lauder Companies Inc. from the perspective of its market share and market growth rate. It provides a table of the organization’s strategic business unit (SBU) based on recent statistics for each stock-keeping unit (SKU) and a Boston Consulting Group (BCG) matrix analysis. The report discusses possible financial decisions for the company based on these figures. The report concludes that there are no profitable segments in the company, but the skincare market may grow rapidly, which means that the Estée Lauder Companies Inc. might invest in it. At the same time, color cosmetics bring no profit to the organization; it may be necessary to sell some of the makeup brands to other manufacturers.
Table of SBUs in terms of market share and market growth rate
BCG Matrix Analysis
Question marks
Skin and hair products, as well as fragrance, is in the question marks category, which means that these segments have a low market share but a high growth rate. Skincare products have less than 4% market share but show significant growth of more than 15% (“The Estée Lauder Companies,” 2019). Hair products have less than 1% market share, but a 7% market growth rate. At the same time, the fragrance has less than a 2% market share and a 5% growth rate (“The Estée Lauder Companies,” 2019). The analysis shows that the organization has to spend a lot of money on these product types without achieving significant profits.
As skin and hair products show fast growth, they can possibly reach the stars category and become very profitable (Martin, 2018). One suggestion for the company would be to choose the brands in this segment that have the highest potential, invest in them, and sell those that are the least profitable. It is possible that the segment of skincare products can reach the stars level quickly because of its high growth rate, which may not happen with hair products. As for fragrance, it has a very small market share and relatively slow growth. This means that the company probably should not invest in this segment now.
Dogs
The only category in this segment is color cosmetics or makeup. It has less than 5% market share and only a 3% growth rate (“The Estée Lauder Companies,” 2019). The analysis shows that the company is not investing funds in color cosmetics and does not earn much money from them. This means that this segment is not beneficial for the organization. However, it should be mentioned that some makeup brands of Estée Lauder Companies Inc., such as MAC Cosmetics and Smashbox, are popular around the world and their market share may grow over time. A possible suggestion for the organization would be to sell the least profitable brands to other manufacturers. It is not necessary to invest in this segment.
Conclusion
The Estée Lauder Companies Inc. is one of the leading manufacturers of skin and hair care, fragrance, and makeup products. However, the analysis of its segments, their market growth rate, and relative market share shows that some of its products may have no profit potential for the organization. The company might invest in skincare products as they are growing quickly and might achieve the star category in the BCG matrix. At the same time, Estée Lauder Companies Inc. should sell some of its makeup brands as they have a low market share and a low growth rate. The investment decisions for the other categories depend on future changes; currently, there is no need to support them.
References
At a glance. (2019). Web.
EL’s competition by segment and its market share. (2019). Web.
Martin, M. (2018). What is a BCG matrix? Web.
The Estée Lauder Companies achieves outstanding fiscal 2019 second quarter results. (2019). Web.