Accounting Essay Paper on The Estee Lauder Companies Inc.

The Estee Lauder Companies Inc.

            Estee Lauder Companies is a manufacturing organization that produces products for skin care, hair care, makeup and fragrance under different brand names. It is a business that has operated for a long period of time, and has been recording great performances over the few past years, due to creative innovations as well as the commitment to product quality, that they apply to manufacture their products, thus attracting a great number of consumers. The company’s idea of coming up with transformative strategies has brought much success to the business.

            The business is basically concerned with women’s beauty as well as their health. However, the management has to lay down the factors that would lead the company to more successes in terms of, creating a large number of women globally to know about their products and their objectives. For instance, the company’s initiative of increasing awareness of breast cancer globally is a success factor as the corporate social responsibility. Through this initiative, women are educated on the importance of being screened for breast cancer often, to avoid the diagnosis of the illness at later stages, which could be a risk to a victims health and life (Business guide 445). However, as more women learn of this, they also get to know more about the products of the company and will tend to try them at first for them to understand the quality of the business products and services. The awareness will also enable the business to enter and invest in new markets, as they spread the knowledge of breast cancer awareness in other parts of the world. For example the business was able to launch its awareness to the women of China, and in conjunction with other local institution in China, the campaign was able to educate a large number of Chinese women, and through this the campaign attained another theme of ‘Beauty, Health and Breast’ in the country (Business guide 446). These actors clearly show an evidence to the success of the business, since it is important for customers to know about the products and services, for them to be interested in them.

            Similar to other organizations, the group of companies faces a number of bootlenecks, that they have to face in order to meet its set goals and objectives. Competition is one of the major setbacks of the group of companies, where  different companies come to the market with main objectives as the companies, to spread ‘prestige beauty’. Some of these companies come with imitations of their products and others come in way way of offering services, such as surgeries to make people look beautiful than actually how they are. Therefore the management of the companies has to ensure that it comes with proper strategies for all brands, that will help the companies remain relevant and dominant in the market. Another challenge that some competitors use against the group of companies, is their opinion that the business is managed by the name and not the people employed in different management posts (Ferrell 116). The organization should therefore ensure that it takes advantage of the firm’s name, and come up with innovative ideas that would benefit them from expanding their business operations territories, to earn more profits. Through this, the level of competition against their rivals will be less intense, since the group of companies would be able to dominate in all their brands in terms of sales and profits as well.

            The operations of the business and the results of the business, is a clear indication that the management applies the basic concepts of balanced scorecards. The objective of the business is ensuring that it creates prestige beauty products and services that are diverse for customers with different culture, has been aligned to the business plans and operations to ensure that the business actually achieve this objective. Moreover, the business and its different brands, have been able to develop an effective communication system that would help the management of different brands to understand what their diverse expect from their brands. The business brands actually do this by creating platforms such as e-commerce that would maximize the level of communication to their customers and retailers worldwide. Therefore, through this, the business and all its brands are able to experience and register high performances of their products and services.  

However, through the positive approach of the company’s financial matters and specifically for all brands, creates a balanced scorecard since the business management will be able to cut down costs from the unwanted activities, and invest the same amount to expand its sales in different places. It therefore through a company’s effort to have a balanced scorecard, that would translate to the business’ visions and objectives into performance measures in different perspectives; financial, employee learning and growth, customer, and internal process, in order to maintain high results (Niven 1).

The group of companies had to come up with different initiatives, such as the breast cancer awareness to streamline their level of supply management in order to bring valuable services and products to the market. The management for the purpose of supply-chain management had to come up strategies that would help their products reach a large area of places and especially those in different cultures in other parts of the world. For example, the management had to use the internet sites to enable more people to purchase their products online.

Moreover, the company had to increase the number of companies all over the world, to ensure there is ease of distribution of their products and services. More marketing strategies therefore had to be implemented for more people to know about the different brands of products and services. The company therefore included prominent personalities in their marketing strategies, to add more customers using their products and services. Moreover, the management of the groups of companies also had to build equity to all the brands for personal development of the company and therefore had to invest more on aggressive marketing programs. Consumer safety has always been a priority of the Estee Lauder Companies Inc., therefore it had to invest in researching on new innovations as well as development, especially those that would benefit the society in one way or another. To consider a high level of  Consumer safety was considered, the business had to ensure that all their products are well tested to ensure that they do not affect the customers in any way. 

The company, however, also contributed in coming up with brands that were meant for the both genders, or at least come with a brand for the men. Most of the products and services of the business were created for the female gender. However, by considering this, they were able to attract a different sort of demand from different parts of the world (Hill and Jones 423).

Due to the level of competition the business faces from other business offering similar products and services, the pricing of the products and services would be considerate to all their customers, in respect to the level of standard of living in a region as well as the level of income earned by consumers. The Estee Lauder companies Inc., had to ensure for them to remain competitive, they would need to balance their pricing with respect to several factors. By creating a large group of loyal consumers, the business would be confident to supply more of their products in different areas, to attract other customers. The business also considered making similar brands for similar purposes for different prices also to consider those who could afford less expensive of their product. By doing this, they company was able to create a market that is highly dominated by the brands, due to the pricing as well as products that cater customers wants.

The company due to its widespread coverage and brand, the business will create a market bear for other competing business with less of their varieties and in few located areas. This however, creates a barrier to the entrance of the market, by potential competitors. Most businesses aspiring to enter the market may not invest in the market with the fear of having a cost disadvantage.

However, businesses need to understand and know their break even points of the operations to create benchmarks for long-term decision making. By knowing a company’s ‘break even’, the company would be able to be guided in pricing and debt services. Therefore, in finding the break-even point of the Estee Lauder Companies Inc., there is need to consider when the revenues of the business cover the expenses of the business. Therefore, when getting a break even point, enable the management to be sure whether all other expenses met in the production of their products have been included in the final pricing of the product. A company could be making less profits perhaps due to the lack of finding the break even points of their financial records after a fiscal period and compared with the previous fiscal period.

The fixed costs of production usually exist regardless of sales made or no sales. The fixed costs usually include; rent, salaries and wages and other expenses that contribute to the production of the products.

Total fixed cost 6,629.8 total variable costs 1475.2

Therefore the break-even point of this group of companies will be equal to: given $ (millions) 6629.8 as fixed costs and $ (millions) 1475.2 as variable costs.

Break even = fixed cost/ variable costs

     6629.8/1475.2 = 449

The break-even of the group of companies is $ 449 million

The business after getting this information will be able to the profitability of their present product lines, the far sales can decline before incurring losses, how the reduction of the volume of sales would affect the business profitability and how many products need to be sold in order to make profits (Wentworth and Cafferky 2). It is therefore necessary for the group of companies to determine break-even points of all the brands differently, to understand better the level of demand and supply for different brands and also modifications need for certain brands.

Work Cited

Business Guide to Beijing and North-East China. Hong Kong: China Briefing Media, 2006. Print.

Cafferky, Michael E, and Jon Wentworth. Breakeven Analysis: The Definitive Guide to Cost-Volume-Profit Analysis. New York: Business Expert Press, 2010. Internet resource.

Ferrell, William P. Marketing. Cengage Learning: Stamford, 2004. Print.

Hill, Charles W. L, and Gareth R. Jones. Strategic Management: An Integrated Approach. Boston, Mass: Houghton Mifflin, 2007. Print.

Niven, Paul R. Balanced Scorecard Step-by-Step: Maximizing Performance and Maintaining Results. Hoboken, N.J: Wiley, 2006. Internet resource.