Extended Essay In Business And Management 242fp

Extended Essay in Business and Management

Growth Strategy of MAC Cosmetics To what extent has the growth strategy of Mac Cosmetics been successful to improve their financial performance?

Introduction In this extended essay, the question “To what extent has the growth strategy of M.A.C cosmetics’ been successful to improve their financial performance?” will be looked at in detail. M.A.C is a leading beauty and cosmetic brand mainly targeting professional makeup artists. The company was originally established in Toronto, Canada in 1984 when make-up artist and photographer Frank Toskan and beauty salon owner Frank Angelo “brainstormed a make-up line”1 mainly targeting the modeling and photography industry for professional makeup artists. But how is it that in the time span of mere 30 years a small domestic business2 grew into a leading cosmetic brand. From the most apparent steps like becoming the subsidiary to a giant cosmetic manufacturer and marketer of high quality makeup, hair care, skincare products and fragrances, Estee Lauder to the other unseen factors and steps taken by MAC cosmetics, everything will be investigated to figure out their growth strategy. I think it is worth the time and effort to inquire into the growth strategy of Mac cosmetics and its journey from being domestically produced to becoming one of the most successful cosmetic brands to ever exist! I will be looking at Mac cosmetics primarily from the view point of the 1st unit of the DP Business and Management syllabus, “Business organization and environment.“ One of the very first things I realized during my research was that a significant part of this essay will discuss the parent company, Estee Lauder Inc. And how Mac cosmetics being a subsidiary of this cosmetic giant have helped it to grow and prosper financially. Many other factors have contributed to their success and they will be discussed in the essay ahead, however, the campaigns like “Viva Glam” will not be discussed in this essay. Because they may have helped Mac cosmetics grow but not in financial because all the profits earned from the “Viva Glam” campaign go directly to the MAC Aids Fund3, thus it is irrelevant to my research question hence, it shall not be included in my research.

Methodology To appraise the effectiveness of Mac cosmetics’ growth strategy, the business was researched predominantly through secondary sources. For example, the internet, books, newspaper and magazine articles etc. These sources gave me the basic information, however, to answer my question I had to keep the other factors in mind that could cause the brand to grow but were not affecting the financial performance of the company and other limitations. The relevant information was then analyzed 1“Our History” Mac cosmetics. n.p, n.d. Web. 29 Aug. 2015 2 “Our History” Mac cosmetics. n.p, n.d. Web. 29 Aug. 2015 3Felemin . Olivia “The $270 million Lipstick” Dailymail, Com Laude. 5 Dec 2012. Web.29 Aug.2015

and put into context with the essay question to decipher the growth strategy of Mac Cosmetics and its effects on their financial performance.

Theory Used To investigate my topic, I will look at the growth of Mac cosmetics, predominantly in of Unit 1 Business organization and envoirnment.I will first do a SWOT analysis of the business for a detailed study of the company, mainly focusing on looking at the strengths and weaknesses of the company and how they have impacted the growth of the business and then my main tool used will be the Ansoff Matrix. This will lay down a foundation to determine the growth strategy of the business. Lastly, the concept of efficiency ratio analysis From unit 3 Finance and s of the IB Business Management Syllabus will help me know the financial performance of the company at different time periods and their comparison to discuss the effectiveness of the growth strategy in of finance and profitability. All theory used is documented in Loykie Lomine, Martin Muchena and Robert A. Pierce’s Business management course companion. 4

Body Background Mac cosmetic was founded by Frank Toskan, a makeup artist and photographer and a beauty salon owner Frank Angelo. They collaborated their skills and knowledge from their respective fields to come up with a makeup line with a range of vivid colors which suited the photography and modeling industry. So they domestically made the products from their kitchen and sold them to fellow makeup artists and photographers, soon the demand began and the duo launched their first store in 1984 in Toronto, Canada. The brand first gained recognition after their matte red lipstick was photographed on the pop sensation, Madonna. Although, the brand was targeted for professional makeup artists, the company became so popular that it was made available for general public soon after. However, after about a decade, in 1995 the ever so popular and award winning makeup line sold its 51% share to the Estee Lauder companies. This step helped the Mac Cosmetics to increase its distribution throughout the world and so much that in 1998 Estee Lauder bought rest of the shares too. Where, Mac cosmetics gained the advantage of distribution, Estee Lauder too gained financial advantage as Mac cosmetics was a reason of a staggering 13% net makeup sales increase which was worth $274.8 million.5 4Lominé, Loykie,

Martin Muchena, Rober A.Pierce. Business Management. Oxford: Oxford university, 2014. Print.

5 M.A.C “Fast Company”, n.p. Sept 1 2006. Web. 30th August 2015.

Application of Theory SWOT Analysis Strengths  World renowned  High quality products  Brand endorsements by celebrities  Word of mouth endorsements from makeup artists  Cruelty free products

Weaknesses  High prices  Limited ment  Legal issues

Opportunities  Expand Market  Start an affordable line of products  Maintain Brand loyalty with existing customers

Threats  Cheaper Brands seen as “good enough”  Makeup not being a necessity  High end competitors

By doing a SWOT analysis, I have found out that the main element in Mac cosmetic’s growth strategy has been the quality of their products. Solely on the basis of the quality of their products was their first store opened and even to this day the quality of their products has been the reason for their popularity, hence the high demand which leads to more sales and opening of new stores worldwide causing the company to grow and be financially stronger. Similarly, when it comes to weaknesses, the main element there is price. A high price hinders a brand’s growth especially when there is so much competition in the market. Domestic s or local public tends to go for cheaper options like “Revlon”, “Maybelline” and newer brands like “Benefit” which offers an array of different kinds of fun and innovative products with a suitable or “good enough” quality and an affordable price. Looking at opportunities gives an idea of what possibly can be done in order for Mac cosmetics to grow

even more or what could have been, which is expanding their market by penetrating into new markets. Also Mac Cosmetics should not just rely on the quality of their products for Brand loyalty.