Strategic Analysis of Bobbi Brown Cosmetics

Introduction

This report intends to perform a strategic analysis on operations of an existing company, to study different aspects of it strategic management; the firm chosen for this analysis is Bobbi Brown cosmetics. Bobbi Brown make-ups is a worldwide reputable and elegant brand that allows women to adopt and increase their individual beauty. It was founded in 1991 by Bobbi Brown, who before then was a makeup artist. The company offers universally accepted beauty items made with unique value and an inbuilt smell of what each lady wants: to gaze and experience herself as prettier and assertive. It offers make-up and skincare products such as cleansing oils, face tonics, makeup removers, creams, masks, lotions, serums, lipsticks, lip liners, eye shadows, highlighters, and more.

Today, the business has a global identity, with over 5,200 makeup artists in different corners of the globe. At the heart of Bobbi Brown is the drive to make ladies feel their natural beauty and the desire to give them the tools they require to feel more encouraged and confident with their appearance. With a collection of skincare and makeup at its helm, the brand enhances every woman’s natural beauty and helps them create a timeless and effortless look for themselves. The company relies on our Global Supply Chain and our world-class Manufacturing and Distribution operations which delivers quality products and packaging for its consumers around the world. It prides itself on better organizational management, and always aspires to be an agile, demand-driven supply chain — having the right product in the right place, at the right time, and at the right cost. It will be an interesting choice for the analysis, and the report will cover different strategic aspects for Bobbi Brown, including the industrial representation for the microenvironment. PESTLE analysis for the macro environment, and Porter’s five forces for structural analysis, and the analysis will cover United Kingdom only.

Industrial Representation

This section will look into a brief overview of the cosmetics and beauty industry around the world, and how the beauty and cosmetics business is doing in the United Kingdom. It will also highlight the companies that are competing against Bobbi Brown in the British Market, and the customers’ behaviours, preferences, shopping trends, and their purchasing power in terms of money spend on beauty products recently.

Global Overview of the Cosmetics Industry

The cosmetics industry exists in a market structure called monopolistic competition, characterized by many firms that differentiate their products and maintain control over their pricing. The beauty industry that employs close to one million people is showing no signs of slowing in growth. Its total global sales in 2020 were $483 billion despite the uncertainties created in the market due to Covid-19 (Sickler, 2021). With a yearly growth rate of 4.75%, total worldwide income is expected to hit over $716 billion by 2025 (Sickler, 2021). The market is dominated by the Asia Pacific region which controls 46% of the share, followed by North America at 24%, Western Europe at 18%, and the rest of the world taking 12% (Sickler, 2021). Most cosmetic products are purchased from stores, supermarkets, and retail shops (Sickler, 2021). However, with the integration of technology in businesses and ever-growing internet connectivity, there is a rapid scale-up of online sales, which is projected to hit 48% of total beauty products sales by 2023 (Sickler, 2021). Thanks to the Covid-19 pandemic outbreak which opened so many eyes of the industry players and necessitated a shift in marketing strategies.

Cosmetics Industry in UK

The United Kingdom is one of the leading consumers of cosmetic products in Western Europe alongside Germany and France. The beauty industry in the UK is worth billions of pounds and ranks as the seventh-largest cosmetics market in the world. There was a cosmetic sales increase in the UK around 2017 when the market recorded 9.8 billion British pounds (Ridder, 2020). By around 2019, the beauty products sales declined slightly compared to the previous years, for example, colour cosmetics witnessed a reduction in sales of 17% in that year (Ridder, 2020). Despite poor sales of many cosmetics in general, some other products like skincare cosmetics thrived in 2019, thanks to a variety of new skincare products launched on the market (Ridder, 2020). Additionally, the market value for skincare and fragrance products by 2019 was estimated at 2.2 billion pounds, and 1.74 pounds respectively (Ridder, 2020). Clearly indicating a huge potential of expanding to generate more revenue for industry players.

Looking at the retail market over the last 10 years, the UK retail stores selling cosmetics saw an increase in their turnover of sales. There was an improvement of more than 5.3 billion pounds in 2018 from 2.7 billion pounds in 2008 (Ridder, 2020). Consumers in the UK do spend a lot on personal care, and by 2019, their spending on cosmetics was approximated to be 33 billion pounds representing an increase of over 10 billion pounds from 2010 (Ridder, 2020). This trend in consumers purchasing preference alongside a boost in sales also catalysed the appetite for many people to venture into the cosmetics business.

Competitors

The cosmetic business has continued to record high growth over the years and emerged as one of the ventures with the highest potential for expansion and growth. There has been increased competition in the UK due to the increase in the demand for cosmetics. Brands are becoming very innovative and creative in providing unique quality products in the market to earn an advantage over the competitors (Rosen, 2016). Bobbi Brown competes with some of the best international brands like Benefit Cosmetics, MAC, Rimmel London, L’Oréal Paris, The Body Shop, Maybelline New York, Clarins, Estée Lauder, and Clinique.

Most Companies in the Cosmetics industry sell their cosmetics in specialised retail outlets. Competition has become intensive with electronic-commerce retailers expanding into the cosmetics market. Further, the emergence of online beauty subscription services, such as Beauty Pie has scaled it even higher. However, industry players are shielding themselves from the competition by offering wider range of product and personalised. For example, Bobbi takes advantage of using the strongest mobile sites for mobile-optimized tutorials for its customers (Rosen, 2016). The lessons have videos split into short segments which are easy to watch and there is room for shoppers to get customized and relevant content. These tutorial videos are set with step-by-step instructions below them that feed customers with relevant information.

Customers

In the UK, Women aged 18 to 34 are the biggest portion of the cosmetics market, and they are more likely to be buying more than 10 types of products a year. An estimated £10 billion is spent on cosmetics each year by British women, who spend an average of £95.94 on makeup and an additional £162.52 on hair care items (Santamaria, 2017). Statistics indicate that in 2019, the amount spent on cosmetics in the UK was £8.6 billion (Santamaria, 2017). This boom was witnessed before the Covid-19 pandemic slowed down the business in 2020.

Lockdowns due to the COVID-19 pandemic made the industry register big losses. There was a decline in retail purchases and the decreased overall demand forced a decline in customer spending to 2.9%. However, there was an increase of 54% in online purchasing during 2020, with the value of the online sales for cosmetics reaching £2.7 billion (Ridder, 2021). After the lockdown, it seems online customers are gaining popularity, and digitisation of business has changed consumer behaviour, and in cosmetics, the shift is profound. In addition, Social media has completely changed the way brands connect and communicate with consumers, and ushered in a new business model because they have become the new marketing and sales channels. Shopping experiences are shifting to online purchases away from the high streets stores.

Bobbi Brown took advantage of online shopping by launching the “foundation shade finder tool,” on its website last year. The tool has a three-step process mixing digital and analogue procedures to help the customers find the shades of their while shopping (Milnes, 2016). Online shoppers start by choosing a variety of shades from options available, then Bobbi Brown sends them samples for free. Once the consumer gets the samples, they are directed to watch a YouTube video showing how to find the best match of their choice. Then a “formula finder” online instructor takes them through a series of questions about their preferences, and lastly, the recommended products appear together with the buy button.

Macroenviromental Analysis

To understand the macro environment of Bobbi Brown, a PESTLE analysis tool will be used because it is an effective method to trace the effects of each Macroenviromental factor in the UK on Bobbi Brown (Perera, 2017). The factors are Political, Economic, Social, Technological, Legal, and Environmental. The analysis will on the impact these Macroenviromental factors have on Bobbi Brown in the UK market and how they enhance or hinder the business.

Political Factors

The British government had successfully exited the European Union means a lot of laws governing tax remittance, value-added tax, and other related laws have changed or will change. Bobbi Brown should therefore align itself with the changes to remain afloat in the market within the UK territory (BBC, 2021). The Brexit may also mean that trading with the larger European counties will be difficult and they may even lose some customers. It will most likely make the cosmetics company also lose free access to the European market, which could cause a shrink in their revenue base or added cost of doing business.

Economic Factors

The whole world is just coming back after the deadly Covid-19 pandemic. Several economies are still trying to adjust from the losses incurred during lockdowns and paralysis witnessed in all sectors. Several people in the UK lost their jobs, people have no money to spend or have adopted austerity measures to spend less and save more. Economically, and in terms of growth, and revenue generation, it means Bobbi Brown like any other market players are deeply affected. Inflation rates in the UK has also been going up, which means consumers must dig deep to buy products in the stores. (BBC, 2021). Further, the uncertainties created by British government exiting European Union will have a huge financial effects on Bobbi Brown’s operations for a long period of time.

Social Factors

Prolonged lockdown in the UK almost throughout 2020 all the way to April 2021, confined the general public indoors most of the times. This necessitated them to resort to online shopping as the only means to get goods delivered at their homes. It was a painful experience which ended up introducing the culture of purchasing good and services online in UK. Right now many people prefer online shopping than going to the stores to get goods. It is projected that in a very near future, online shopping will surpass the in-store shopping and become main stay as technology advances (Ridder, 2021). Bobbi Brown must align itself with this trend so as to remain relevant in the market.

Technological Factors

Network connective and IT infrastructure in UK is very high and excellent. This means high speed data transmission, along with huge penetration of smartphones and other devices in the UK makes the perspective customers more tech savvy, so they tend to incline more towards electronic commerce. Likewise, the availability of Big Data in UK has made data more available at favourable prices to the competitors, making the landscape more competitive.

Legal Factors

There are several laws governing trading and business operations, and property laws in UK, which Bobbi Brown must comply with in order to successfully operate within that territory. Secondly, it must abide by and execute its business in strict compliance with tax regime, policies regulating businesses, along with wage laws which are prevalent in UK. Similarly, to keep on conducting business in UK, Bobbi Brown must follow all the laws and regulations in the future as well.

Environmental Factors

According to March (2018), more than 120 billion packaging containers are produced by the cosmetics industry the world over, and a lot of that is not recyclable. The majority of these beauty products are packed in plastics that are non-biodegradable (March, 2018). Bobbi Brown cosmetics is well aware of this and has started recycling to reduce environmental pollution. The company has set a target to meet its environmental sustainability goals by 2025. Currently, 49% of its packaging materials are refillable, reusable, recycled, or recoverable, and it aims to make it 75% by 2025 (March, 2018). This it hopes will position its business as a leader on environmental sustainability.

Industrial Structural Analysis

For the industrial structural analysis, Porter’s five force analysis including the threats of new players, the threats of substitutes, the buyer power, and the supplier power will be applied to Bobbi Brown’s brand. In addition, the competition from the rival companies, the nature of competitive structures, and the future industrial environmental trends will also form part of this detailed analysis of Bobbi Brown Cosmetics Company.

Threat of New Players

The cosmetics business is one of the most lucrative ventures with a high potential for expansion. In the UK the demand for a variety of beauty products keeps rising every year, this makes it one of the industries in which new entrants into the business target. New entrants only increase competition for the established brands like Bobbi Brown; brands especially new ones will try to lower their prices to get a pie of the customers from the established competitors. Bobbi Brown must navigate these threats for it to continue dominating the market.

Threat of Substitutes

The threats of cosmetic substitutes are reals and exist for Bobbi Brown products, the competition is stiff with a number of international brands operating in the UK market. Some of the substitutes are Benefit Cosmetics, MAC, Rimmel London, L’Oréal Paris, The Body Shop, Maybelline New York, Clarins, Estée Lauder, and Clinique. The market share is distributed among these and many others, so Bobbi Brown’s performance and revenue generation are obviously affected.

Buyer Power

Having many beauty brands competing in the UK market means consumers have enormous power to choose what they prefer and brands which resonate well with them personally. The high inflation rates as a result of the Covid-19 pandemic also strengthen customers buying power to shift to brands which are offering their products at prices affordable to them.

Supplier Power

Bobbi Brown is not affected by the supplier power because its products are manufactured and distributed by Estée Lauder Companies Inc. This enterprise is one of the leading manufacturers and sellers of quality cosmetics like skincare, makeup, and perfumes, and hair care globally. It bought the rights to own Bobbi Brown from the founder in 1995.

Rivalry

The rivalry is high in the cosmetics and beauty industry because there are many international brands operating in the UK. With each and every brand targeting multiple consumer segments and therefore overlaps exist, which cause rivalry for Bobbi Brown.

Nature of Competitive Structures

Competition in the cosmetic market, is monopolistic, whereby a large number of companies and international brands exist and compete within the same market size. An array of new beauty ideas are stretching the competitive status quo (Euromonitor International, 2017). Technology has also enabled brands including Bobbi Brown to reach consumers directly through subscription boxes, Social media selling models, and the online market.

Future Industrial Environment Trend

The cosmetics industry is one of the fastest-growing currently, it will continue to expand in the future, as the demand for beauty products increase. The population trends are also predicting an increase in the population in the UK, thus the demand for beauty and care products will also rise. Now that normalcy is slowly returning after the pandemic is put under control, the UK economy will improve, and the consumer purchasing patterns will change again, increasing the demands for cosmetic products.

Strategic Analysis – Executive Summary

Bobbi Brown is undoubtedly one of the most trusted makeup brands when it comes to finding that all-around and perfect formulation. It is among the top 10 beauty brands in the UK market as far as consumer preferences are concerned. However, the UK market in the recent past has been affected by a number of factors that reduced revenue margins for many brands including Bobbi Brown. For example, the effects of Brexit and the COVID-19 pandemic have created uncertainty for many brands in the UK market. Competition and market rivalry are also very stiff in the UK but the ever-increasing demand for cosmetics will keep Bobbi Brown going stronger in the future.

Values, Vision, and Mission of Bobbi Brown

To understand the stakeholders and the strategy for Bobbi Brown, it is important to study their values, mission, and vision, as these statements are a summary of what a business aims to achieve, what it prioritizes, how it plans to achieve its aims, and its core practices.

Values

Bobbi Brown stands for three distinct values which are implacable value, individual elegance, and celebrating the assertiveness of women. It believes in giving customers the best quality products that reflect their taste, preferences, and their individual beauty. It also tailors its products in a way that improves the confidence of women who use them. The philosophy behind this brand is not to call for recognition to itself, but to let women’s routine elegance shine through.

Vision

Founded in 1991 by makeup and beauty artist, cum entrepreneur Bobbi Brown. The cosmetic brand intention is to offer universally complimentary items created with implacable standard and an automatic feeling of what and every woman needs. Which is to make women look and feel like themselves, be attractive and more self-assured. Further, the brand looks to create make-up to enhance beauty and not something people hide behind; it is about embracing natural beauty and using it to make women feel more confident in their skin.

Mission

Bobbi Brown beauty brand is focused and has always been passionate about bringing up the natural beauty in women, in fact, its mission statement is: “The secret to beauty is simple: be who you are”, a belief that the brand follows and uses as its guide whenever it wants to produce new products for the market. As a makeup artist, the founder of Bobbi Brown’s brand believed that women should be happier and more confident when they do not compare themselves to the models but themselves.

An Evaluation of Bobbi Brown’s Current Performance

Bobbi Brown enterprise’ witnessed one of the longest seasons of being down businesswise due to poor market demands as a result of the Covid-19 pandemic. The company suffered losses and did not generate revenue; the coronavirus that precipitated total lockdown in the UK resulted in loss of 11% in revenues in the third quarter of 2020 (Danziger, 2020). In response to this loss and uncertainties, Bobbi Brown introduced a trial virtual makeup dialogue service; the service opened up the company’s avenue of opportunities on innovative ventures that they did not realise for long. The service changed the training approach to elegance that is a symbolic of the brand, through three sessions including one of 15 minutes for match foundation. There are also 30 minutes for customised makeup lessons, and 1 hour for categories of up to four people.

This service was launched in May 2019 for its top-tier customer. Within a short time, it expanded to all loyal customers, and in just over one month the service was made available all to customers. The service made Bobbi Brown increase its new customer base by15% when it was rolled out on large scale. Opportunities are still available to scale up the service even more. It was reported that 46% of consultees converted to purchasers within 3 hours after the discussion (Danziger, 2020). Another 51% of those consumers came back to Bobbi Brown to buy items again (Danziger, 2020). While Bobbi Brown is an old brand, the virtual training service, and its values put the company in a strong position to speak automatically to young customers who are the largest consumers of beauty products.

The Way Forward

Bobbi Brown has stayed true to its values, they have been and are still transparent and they need to maintain this in the future to tap into the trust its customers have in it. They must scale up their simple less-is-more makeup message even more because it resonates well with young customers better; the youth especially under 34 years old ladies feel the technique is very relevant today. This strategy has proved to yield returns in customer numbers and thereby scaling up revenue generation (Danziger, 2020). It also gives Bobbi Brown a competitive edge over its competitor in the UK market, so the company should accelerate it further and even introduce new aspects which can make it even better. Additionally, the training service creates a connection between the company and its customers where they engage and share information online, thus virtual education should lead the market for Bobbi Brown.

Key Stakeholders

The key stakeholders for Bobbi Brown cosmetics are the top managers at Estée Lauder Companies Inc., along with the board of directors. The business performance directly affects their investment in terms of equity and their incomes through the dividends. Bobbi Brown’s performance in the UK market affects all these stakeholders, as it is a multinational business. Apart from this top-level group, other key stakeholders are the regional employees in the UK market. They are responsible for operating business in the UK, so any positive or negative results will reflect on their skills and ability, hence they are important associates of the company.

Other key stakeholders are the consumers, they are also affected directly by the strategic decisions made by Bobbi Brown Cosmetics Company, and they are on the list of key business partners. The customers are affected by the strategy, especially in the beauty industry, as it is linked with the prestige and elegance of one’s image (Li et al., 2014). The pricing tactics, along with the product varieties and quality are factors that directly affect the consumers, making them the key stakeholders.

Stakeholder Engagement Strategy

The best way for Bobbi Brown is to engage key partners like the board of directors is by holding frequent meetings which can be on monthly basis. During these meetings, the company should be able to present to stakeholders monthly reports of its operations and activities. They should also have a competent public relations department that will spearhead the building of the brand image and also communicate with the public. In addition, it must empower its employees to become more active participants and contributors to its public image. Bobbi Brown should also maintain and continue to adhere to sustainable best business practices that will help sustain its reputation among stakeholders and the general public.

Bobbi Brown must build a long-lasting connection with its customers through both face-to-face communications and online messages. Most importantly, it can scale up its presence on Instagram, Twitter, Facebook, LinkedIn, Telegram, and WhatsApp social media applications to help it reach even more customers (Danziger, 2020). It must continue reinventing ways of making customers feel its products in a special that they are able to relate with the brand more. Additionally, Bobbi Brown should try to reduce their prices marginally as a way of attracting customers against its competitors.

Conclusion

One of the industries with the greatest potential for growth and expansion is the cosmetics industry, which has maintained rapid growth throughout the years. The potential exist for continuous expansion in the future, as the demand for beauty products increase. Further, with the population increase in the population in the UK, the demand for beauty and care products will continue to rise. Most specifically, Women aged 18 to 34 who have been the biggest spenders on cosmetics, will likely maintain their purchasing trend or increase it by buying more beauty products a year. On average British women spend £95.94 annually on make-up and a further £162.52 on hair products, totalling an annual expenditure of £10 billion used on cosmetics. Bobbi Brown cosmetics should focus its virtual makeup consultation service on young women because they are reliable spenders on cosmetics. Additionally, these services resonate well with young women who statistics show are the biggest buyers of cosmetics.

The company must also navigate the macro-environmental factors to allow it to run legally accepted business without any problem particularly with the British government. The online market proved its worth during the pandemic, Bobbi Brown should maintain its online presence and even do more promotions to rope many shoppers on the web-based platform. Finally, the company should build upon its strong values, vision, and mission to create a deeper connection with customers in a manner that they feel, relate to, and resonate with its cosmetic products.

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