Managing the Networked Enterprise: the Estee Lauder Company Inc.

1. Introduction

This report provides an analysis of the Estee Lauder Company Inc. The analysis is divided into four sections. The first section contains the company analysis, which will be started with brief information about the company, and then followed by the company's major competitors, key trend and development in the industry, and the company's SWOT analysis. The second section contains an explanation about the company's stage development of technology, the company's business model and revenue model, including the company responses to the digital market challenges. The third section provides relevant theories that explain the impacts of the Internet to the company's competitiveness, including the company successful experience for doing e-business and e-commerce. The last section provides argument about whether technology gives the company competitive advantage or not. And then the report will be ended by a conclusion.

2. The Company Overview

The Estee Lauder Company is one of the global manufactures and marketers of beauty and personal care products. Their products are sold under various brand names, in several regions such as North America, Latin America, Asia Pacific, Western and Eastern Europe, Australia, Middle East, and Africa (The Estee Lauder Company Inc., 2012). Following is the company profile.

Table 1 The Estee Lauder Company Inc. Profile

Industry: Beauty and Personal Care

CEO/President: Fabrizio Freda

Ownership: mostly own by members of the

lauder family; and Public (NYSE: EL) Headquarters: 767 Fifth Avenue

New York, 10153

Telephone: (212) 572-4200

Total Sales: US $8,810.0 million

Operating Income: US $1,089.4 million

Total Assets: US $6,273.9 million

Established: 1946

# of employee worldwide: 32,300 employees

# of factories worldwide: 13 factories

Market share in US: 8%

Global market share: 2.9%

Brand Names (28 brands) Products Target Market:

Estee Lauder Clinique

Tommy Hilfiger Aveda

Bobbi Brown Coach

Smashbox M.A.C, etc. Skin care

Makeup

Fragrance

Hair Care Estee Lauder: adult females aged 30 plus and middle to upper income level, who are looking for high quality products

Source: The Estee Lauder Company Inc. and Euromonitor International, 2012

The company's products are sold in high level department stores, retail stores, perfumeries and pharmacies, hair salons and spas, retail stores, duty-free shops in airports and cities, and the Internet.

2.1 Main Competitors

The company's major competitors are Revlon Inc., Shiseido Company Ltd., and Elizabeth Arden Inc. The following is the companies SWOT analysis.

Revlon Inc.

Strengths • Strong customer loyalty

• Strong financial resources

• Established brand names

• Affordable prices

• The products are sold under various brand names Weaknesses • Most of the company's products are sold through department stores, which are experiencing declining traffic

Opportunities • Consumers are looking for good quality products and convenient access.

• There are strong opportunities for growth in emerging markets

• The Internet has become a preferable channel to access products

• There is a growing digital market Threats • Competition from substitute brands

• Competitors offer organic and natural products

Source: Revlon Inc. and Euromonitor International, 2012

Shiseido Company Ltd.

Strengths • A Japanese company with reputable and well established brand in the domestic and the global market

• Strong customer loyalty in Asian markets

• Strong financial resources

• High quality products

• Focus on one brand Weaknesses • Niche target market

• High price products

Opportunities • Consumers are looking for good quality products and convenient access.

• There are strong opportunities for growth in emerging markets

• The Internet has become a preferable channel to access products

• There is a growing digital market market Threats • Numerous competitors offering very similar substitute products

Source: Shiseido Ltd. and Euromonitor International, 2012

Elizabeth Arden Inc.

Strengths • Strong customer loyalty

• Strong financial resources

• Reputable and well established brand in the domestic and the global market

• Focus on one brand Weaknesses • Most of the company's products are sold through department stores, which are experiencing declining traffic

Opportunities • Consumers are looking for good quality products and convenient access.

• There are strong opportunities for growth in emerging markets

• The Internet has become a preferable channel to access products

• There is a growing digital market Threats • Numerous competitors offering very similar substitute products

Source: Elizabeth Arden Inc. and Euromonitor International, 2012

2.2 Key Trends and Development (Euromonitor international, 2012)

Due to the economic crisis in the US, consumers have tighter budgets, which encourages them to observe more information about the products before buying them. This makes the use of the technologies increase, including the use of mobile devices. Then, not only for research tools, but the Internet and mobile devices are also becoming a purchasing option. This phenomenon causes Internet retailing to grow, however retail stores are declining.

Value has become a driving factor in consumer behavior. Consumers not only seek low prices, but also better quality products and convenient access channels. Thus companies are investing more not only in physical, but also digital infrastructures, such as online, mobile, and social networks that support the consumers' expectation for using these channels.

As mentioned before, the Internet has become one of the fastest growing retail channels in domestic or global markets, which benefits consumers by offering the ability to easily compare prices, find products' information, and choose a wider selection. Moreover, the opportunities for online shopping and researching / comparing activities have increased because there is an increase in the use of smartphones and tablets.

Because of technological advances, customers and companies' relations have become more connected. For example, social media allows consumers to interact and influence the development of companies' products and services, as the companies can get more information about consumers' experiences for using their products, whether it is good or bad, and consumers' tastes and preferences. Moreover, technology allows companies to track and generate data about consumption behavior, which improves companies in targeting and delivering products to several different consumer segments.

2.3 The Estee Lauder Company Inc. SWOT Analysis

Strengths • Established Brand Names

• Strong customer loyalty

• High quality products and services

• Strong marketing strategies

• Strong financial resources

• Early engaged in e-business Weaknesses • Most of the company's products are sold through department stores, which are experiencing declining traffic

Opportunities • Consumers are looking for good quality products and convenient access.

• There