Executive summary
The paper analyzes the MAC Cosmetic business plan, its strengths, weakness, opportunities and threats. In addition to that, its essential qualities have been compared to its competitors. Moreover, recommendations have been provided to ensure the effective execution of the MAC Cosmetics’ organizational structure.
Introduction
Background Information
MAC also referred to as Make-up-Art Cosmetics, is a highly distinct corporation. The business strategies and founding principles of MAC are extremely simple yet very effective in terms of contributing to the success of the company. Mac does not utilize business schemes that are fancy. In addition to that, it is greatly concerned with its consumers.
In the initial stages, the company struggled to establish itself. However, at the moment it has gained momentum and it is now a multimillion-dollar enterprise. Furthermore, the company is growing rapidly and has some of the most demanded and popular cosmetics present in the market environment. MAC as a company is remarkably dynamic and produces various products such as hair care, skin care, cosmetics and beauty products.
These products are meant for everyone such as the young or old, conservative or trendy, poor or rich, male or female. Given the fact that the company has the ability to easily expand to various locations, the company does not advocate for the idea of expanding. This is because the company believes that, for purposes of maintaining high quality levels, remaining in control is the key to the company success (Anonymous. Fragrance Wholesome, 2012)
MAC cosmetics were created with an extremely creative vision. The vision aim was to fill the existing gap between fashion photography and makeup artistry. In order to meet the increasing demand of beauty and entertainment professionals, Frank Toskan, a fashion photographer and Frank Angelo a salon chain owner, launched in 1985 a fashion frontward line in Toronto.
Long before MAC company history, the founders of MAC cosmetics (Toskan and Angelo) diverted their product line towards the fashion and beauty professionals industry that relied heavily on cake makeup, heavy cosmetics and stage makeup.
This was done in order to create the visual effects required to endure bright light during their shooting of photos.” Who better rise up to this demand than a fashion photographer”. With a product line that is celebrity endorsed and a glamorous image, MAC cosmetics takes the lead in the beauty industry (Machalack, 2012, p.1).
Revenue, Global Reach and Company Size
Estee Lauder in 1998 bought MAC and helped the company grow globally. Estee Launder generates 6.3billion dollars yearly between their twenty-five distinct brands. MAC is responsible for one hundred and sixty million of the revenue generated by Estee Lauder. Currently, MAC has over one thousand stores and is present in sixty seven countries around the globe (Anonymous, MAC Capaign, 2012)
Strategic Options for MAC Cosmetic
For the company to remain significant in the highly competitive market, it has to utilize the following modeling tools: Balanced Score Card and SWOT analysis. A SWOT analysis of the company helps in bringing out the strengths, weaknesses, opportunities and threats to the company as illustrated below
MAC SWOT Analysis
Solutions for Each SWOT Analysis
Make-Up Art Cosmetic has more strength compared to weakness. The direction being pursued by the Company is quite promising to a future increase in both of its finances and brand name. The company can utilize this increment to their advantage such as creating more demanded products such as lip shade palettes and or/ eye shadows. Despite the MAC Company made for makeup artist, it is being sold to Estee Lauder and the general public.
In that case, the MAC owners need to keep their statement in mind” Wanting to touch everyone.” Their major competitor, NARS, a make-up Art Cosmetics won the competition because when they sell their products to consumers, the consumers feel like they are achieving more. In addition to that, they like the compactness of NARS.
Given the fact that online shopping creates a great opportunity for the MAC Company, it can also be a great threat to their personal services that are pampering in nature. MAC customers have the urge of purchasing the company’s products online; however, they might also need to try first the product.
For instance, majority of individuals often want to try Make Up products to find out if they actually blend with their skin. Similarly, it is mandatory for them to confirm if a product is suitable for their skin. The company should go ahead and promote their online store. However, MAC should continue promoting celebrity posters on their standing stores that are free for purposes of keeping their personal experience celebrated by its consumers (Joines, 2009, P.12).
Balance Score Card
A balance scorecard is a management and strategic planning system utilized to align the business activities to an organization vision statement.
Ideally, balance scorecard tries to translate pious and vague hopes of a company’s mission statement/ vision into practicalities of effectively and efficiently managing the business. Therefore, through the use of a balance scorecard, MAC Company needs to look at the following areas in order to improve these areas. As a matter of fact, these areas are seldom exhaustive and in most cases are specific to a company.
Once MAC has analyzed its quantifiable and specific outcomes of the above, it should be ready to use the approach of the balanced scorecard in order to improve the deficient areas. Moreover, the metric in place must be specific, achievable, measurable, timely and reliable.
This is because an organization cannot improve on what it cannot measure. Generally, the four perspectives of Balanced Scorecard approach are customer, internal business processes, growth and learning and financial. MAC company effective balance scorecard implementation would result in the following: educated/motivated employees, improved processes, information systems that are enhanced, greater customer satisfaction, monitored progress and increased financial utilization (Anonymous. Balance scorecard. N.d)
Comparative understanding of the weakness and strength of MAC Cosmetics with its competitors (Revlon & L’Oreal”)
Currently, the cosmetic industry is in a flux state. Traditional brands such as L’Oreal and Revlon are perceived by customers as being old. In that case, the customers are looking forward to a more healing and holistic benefits from the skin care products. The consumers are no longer contented with the traditional brands thus making it a great challenge to Revlon & L’Oreal products.
The MAC Cosmetics has been able to supply consumers with awareness of natural and cruelty free products. This has impacted greatly on the knowledge of the consumers. The consumers have become more inquisitive about the benefits of MAC personal care products. MAC Cosmetics protects its consumers from damaging rays of the sun, moisturizing their skin and reducing aging effects. The major limitation with MAC cosmetics is that, it has a great demand, but there is no supply.
Whereas the MAC cosmetics are highly demanded than those of its competitors, it has been hectic to find out discounted products (Vasen 2007, p.1). In addition to that, outside United States, there are no media advertisements and most of the people are not aware of MAC products advantages and benefits.
According to statics, the effective way of getting MAC products information is via referrals (Bates, 2006, p.2). Given the fact that there is lack of MAC products promotional campaigns with absence of free samples, the company relies majorly on their existing customers to distribute information about their products.
In the light of the above, L’ Oreal is a company known internationally and their products are sold everywhere in the globe. Nevertheless, its products are distributed around the globe depending on the economical, social and cultural factors as the demand of women are quite distinct from each other.
In addition to that, it offers a variety of products to various countries in order to fulfill the needs of all women. Unlike MAC, L’ Oreal expenses of advertising are fairly high. This is because the company believes that it can only increase its profits via advertising (Uzun 2010, p.1). Just like L’Oreal, Revlon products are sold all over the globe and marketed under various brand names. Their products are meant to satisfy specific needs of the consumers.
Creating Options for the Future Organization Strategy
The most important thing is to assess the external context of the company, clustering and prioritizing threats and opportunities, developing strategic options, rating the options in terms of their significance and implementing them.
MAC external context
Current Legal, economic conditions and regulatory issues
Estee Lauders are expanding their niche in countries that are foreign. This has triggered the issue of foreign exchange, interest rates and each and every country individual issue including war and terrorism. In the year 2008, the interest rates for Estee Lauder contracts were thirty-one million dollars.
Furthermore, it had a currency forward contract of one million dollars in which the most competitive currency was the Euro’s. Various consequences pose a threat to the establishing up of brand new stores in the Middle East. The threats are such as retaliation and terrorist attack. On the contrary, according to 2008 Estee Lauders annual fiscal report, the sales had increased by 20% in the Middle East and approximately half of the stores net sales emerged from foreign countries.
The increased profits were as a result of increased urge of people and their ability to have their personal pampering. In consideration to these sales increase, The Make-up Art Cosmetics (MAC) exhibit an opinion that is optimistic of the economy in its present condition. With this in mind, MAC has been able to expand both regionally and financially (Joines, 2009, p.10).
Importance of technology advancement
Even though MAC has succeeded tremendously by their word-of –mouth strategy, their online environment boosting will help in improving their sales. With a wide recognition of its brand, MAC should exhibit a positive name and more capability of having wide variety of freestanding stores.
Given the fact that MAC is recognized widely by word-of-mouth, channeling more concentration to online will be of great advantage for the company promotional aspects. With more available online shopping, the company will have to incur more advertising expenses. Nevertheless, it should be viewed as a Make-up Art Cosmetic investment (Joines, 2009, p.11).
MAC strategic options
Strategies that are effective have an industry and a company point of view. They aid an organization in making fundamental choices and communicating them for purposes of aligning resources appropriately. The MAC company strategic options will be business growth and emphasis on competition. Business growth will help in answering various questions such as, how will MAC as a company generate new growth?
At what point will the value chain of MAC “anchor” and create internal capabilities that supersede those of its competitors? On the other hand, emphasis on competition will help in finding solutions to the questions such as, how will MAC as a company distinct itself in the eyes of its client?
Company leaders, who channel their investments to principal competences that align themselves to strategy, help in building market value. As a result, investors will have more confidence in the company. Since they believe the strategy will be executed by the company and deliver earnings in the future.
In terms of relevance, identifying a growth strategy comes fast. The growth strategy consists of product service, market/ customer, production capacity, technology and distribution. It is only after a company has chosen its growth option that it can identify its competitive emphasis.
This is where the company finds out the tactics to use in order to differentiate themselves in their customer’s eyes. There exist five principal ways in which a company can differentiate itself. These are such as low cost provider, speed, quality, innovation and service (“Strategic Options”).
Suitable structure for MAC Cosmetic
The organization design essence is to manipulate various parameters that determine coordination achievement and division of labor. Keeping in mind the needs of the organization of MAC, there is need for a matrix organizational structure that focuses on grouping by functions and the market.
This structure will enhance the MAC company end markets. Furthermore, given the significance of the workflow interdependencies, and the company cannot handle them easily via the use of standardization, using of this structure will highly favor grouping market bases for purposes of encouraging adjustments that are mutual and direct supervision. Through the adoption of the matrix organization structure, the MAC will benefit because, projects cost will be minimized and principal people can easily be shared.
The structure minimizes conflict and those in need of referrals that are hierarchical can be resolved easily. It ensures effective balance between performance, cost and time, sharing of responsibility and authority made easier, enhances rapid decentralization of decisions, improved access to a wide range of perspectives and skills that are diverse, improved regional and global projects, increased coordination and communication across the business and lastly reflects the regional customer needs (Scholz 2008, p.248-249).
Criteria for reviewing potential options for a strategy plan
For purposes of reviewing organizational structure and management strategy potential options and the environment, MAC Company must make sure that the perfect strategy considers clearly the size and age of the organization, environment and technical system and the governing framework.
The structure should elaborate its structure clearly. The prospective strategy should shun technical uncertainties, it should provide to the employees the operation and production strategy which proves to be efficient. In addition to that, it should be free of uncertainty strategically.
MAC pressure to come up with products that meets the demands of the customer is so high hence the management strategy proposed should ensure the problems and bottlenecks are dealt with appropriately rather than basing on future conditions analysis. As a matter of fact, new strategy implementation costs an organization millions hence the organizational stakeholders should ensure that they reduce the costs of operation and improve on the organization efficiency.
For the development of the organization, MAC cosmetics should always undergo a significant change at distinct points in their development. Change management comprises of sensitive implementation and thoughtful planning and the ones mentioned above. It is vital for the company to consult with stakeholders affected by the changes. If MAC forces change on its stakeholders, problems will definitely arise.
Organization change must be measurable, achievable and realistic(Huselid, 2005, p.134). In summary, MAC can utilize templates to come up with several principal strategies that can help in addressing the objectives of the organization. Of great significance, the strategies are created based on stakeholder’s inputs, operation and business analysis.
A detailed strategic plan that include implication of resources
Management strategy is an analysis that is systematic of the factors correlated with internal and external environment. The analysis provides the foundation for rethinking the management practices that are current. The principal objective of a strategic plan is to achieve a perfect alignment of strategic priorities and corporate policies.
In the case of MAC, the principal significant points of the agreed strategies that were proposed were concerned with the “Love YOUR LIPS” campaign. Lipstick has often been viewed as a form of refinement. The LOVE YOUR LIPS “campaign focuses on a variety of lipstick styles, techniques and looks. The ad campaigns strive to increase MAC customer sales target market. Additionally, it aims to reach a potential group of customers that are untapped.
Resource implications
The principal components of any strategic plan consist of discussions or analyses of the below named resource implication (Hankin, 2005, p.111-113)
Capacity requirements and Human capital: The human skills and capacity needed for strategy implementation, potential and current sources of these resources. Moreover, other capacity such as management structures, internal systems and a legal framework that is supportive is also needed.
Financial requirements: The required funding to implement the management strategy proposed, potential and current sources for the funds, funding gaps and the most crucial resource
Risk assessment and management strategy: The existing risks and how they can be addressed by the company
Estimate of the lifespan of the project, sustainability and its exit strategy: This addresses issues such as how long the stand strategy will be implemented, the time it will take for the strategy to be modified and why if it is only feasible to modify it and how the strategy will ensure corporate objective achievements sustainability.
Strategic plan management can only be viewed as complete when the discussed components have been clearly defined in broad terms. As the projects heads to implementation, majority of these components are tested in reality and defined deeply.
Comparing Core organization values with current business objectives of MAC Cosmetics
MAC cosmetic exhibits a significant position on social and corporate responsibility. Furthermore, the business public image is greatly supported as a result of distinct environments. MAC is “cruelty-free” as it does not use animals as their guinea pig when testing their products.
They utilize simple white and black packaging that are recyclable. In addition to that, they advocate for recycling practices with the aid of “Black-to-Mac” program.
Customers are often given a free lipstick in exchange of their returned six blank containers. In comparison to other multinational companies, MAC prices are quite good without empty promises. For instance, miracle creams that reduces an individual’s age. MAC Cosmetics is in the forefront supporting the fight against AIDS with the use of” Viva Glam,” the company’s popular lipstick (Anonymous. Ethics and social responsibility, 2012).
MAC environment comprises of all factors that affects the way decision are made within an organization. Therefore, they encompass the forces that can trigger an impact in the organization. Ideally, forces are made up of threats and opportunities which can be divided into external and internal environment.
The internal environment comprises of the management team and the shareholders. The external environment constitutes all the outside forces and institutions that the real potential, impact or interest on the ability of the organization to achieve its competitive objective lies.
The principal objectives of MAC company are as follows: to increase its yearly sales by at least 15% in 2012 in comparison to 2011. In addition to that, it aims to increase its customer involvement in the year 2012 by 20% and also to diversify their brands by renewing the perception of customers on the company by 15% or higher. It is evident that the objectives perfectly align with the company core values.
Through their involvement in social corporate responsibilities and other ethical issues, the company will enhance their revenues and customer perception.
Vision and Mission Statement for MAC Company
Mission statement (“LOVE YOUR LIPS”)
The campaign on “LOVE YOUR LIPS” has been designed for purposes of expanding the image of MAC in the cosmetic industry with a commitment that is continuous to high service, customer satisfaction and service, through the sales and advertisement of MAC lipstick.
Vision: To be the leading makeup professional authority in the world among both professional consumers and makeup artist whilst embracing the MAC credo of all age categories, sexes and races.
Agreed future objectives of the organization
The objective of the MAC Company is to make the company an expert in the industry dealing with cosmetics and also promote the image of MAC and lipstick sales. The LOVE YOUR LIPS” 2011 campaign was designed to increase MAC sales of lipstick, trigger customer involvement and MAC brand diversification.
Measures for Evaluating Strategic Plan
Sustainability
It concerns itself with whether the organization objectives or strategies address the essential issues identified in the acknowledgement of the organization strategic position.
To be precise, these needs an assessment of the extent to which the organization strategic option fits with the crucial drivers and the environment expected changes, strategic capabilities exploitation and its appropriateness in stakeholders content of influence and expectations. Tools such as TOWS matrix, strategic options ranking, scenarios and decision tree can be utilized to access sustainability (Thomas 1993, p.g3).
Acceptability
It deals with the strategy expected performance results. These can be categorized into three: Reactions from stakeholders, returns and risks. The benefits expected to be received by company’s stakeholders from the strategy are the returns. They can be computed by cost benefit analysis and financial analysis. Accessing of company risk is through the performing of financial ratios, sensitivity analysis reactions and shareholders’ value analysis.
Feasibility
Feasibility concerns itself with whether the firm has the needed competence and resources to adequately deliver a strategy. Numerous approaches can be used to acknowledge feasibility. They include resource deployment and financial feasibility among others.
Schedule for implementing a strategy plan in an organization
Monitoring and Evaluation systems for strategy plan implementation in an organization
The above is of great significance when it comes to the identification of organization strategic goals and issues. The advantage of evaluation and monitoring is that, it ensures that an organization strictly follows the strategic plan established directions. For MAC monitoring and evaluation, the six Henry Mintzberg’s monitoring and evaluation basics will be utilized. According to the model, the strategic plan monitoring and evaluation should strictly follow the below outlined six steps (Armstrong, 2002, p.123-126).
Direct supervision: This is whereby a single individual coordinates all the activities via giving orders to other employees. He only plays a role when it is vital for a specific number of individuals need to work together.
Standardization of work process: It comprises the direct programming of work content, putting in place the procedures that need to be followed.
Standardization of outputs: Focuses on the results rather than what is not supposed to be done, there is predetermination between job interfaces. For instance, the manager of a region is tasked with ensuring that he achieves a 10% sales growth so that the company can meet overall target sales. The standards often results from the company analysts.
Standardization of Skills: Helps in achieving coordination in the company. In this step, it is the worker rather than the outputs or work that gains standardization. The organization teaches its workers are taught a wide range of knowledge and a couple of skills which are consequently applied to the organizations work. The standardization process occurs outside the organization environment. For instance, in a profession school of university prior to job allocation. Unlike the standardization of outputs, these skills do not emanate from the analyst. On the contrary, the operator internalizes them as inputs to the job a worker is in pursuit of.
Standardization of norms: This is when the organization employees have a set of belief that is common and coordination of achievement is based on it.
Mutual adjustment: Helps in work coordination by the informal process simple communication. Those individuals working can interact in order to coordinate and achieve results. Paradoxically, mutual adjustment can be utilized in situations that are extremely complex. This is because; it is the only avenue that can be relied upon under circumstances that are extremely difficult.
Conclusion
The “LOVE YOUR LIPS” MAC campaign will greatly help in promoting the company lipstick sales. In addition to that, it will assist the company in involving customers in their activities and also in diversification of the MAC image. In comparison to its competitors, the company has numerous strengths and opportunities such as, brand recognition that is positive, customer loyalty, appealing packaging, trend setting, celebrity support and reasonable pricing among others.
Recommendations
The business strategic plan of MAC should boost online buying and selling for purposes of capturing market outside the United States of America. In addition to that, the company should consider supplying its brand to drug stores just like its competitors. Furthermore, the company should follow the following seven steps in order to make it strategic planning process to be effective.
The steps are such as, the developing or reviewing of the company mission and vision statement, analyzing the operation and business analysis (SWOT analysis), developing and selecting strategic options, establishing of strategic objectives, examining a company strategy execution plan, establishing resource allocation and execution of review. The following up of this seven steps will enable MAC Cosmetics that its various options are included as it forms a cycle that is complete for an existing or a new strategy planning initiatives.
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