MAC Cosmetic: External Factors Effect on Strategic Plans

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Table of Contents

Executive Summary
Introduction
Historical Background
Financial Perspective
Customer Perspective
Internal Business Process Perspective
Learning Growth Perspective
Recommendation
Conclusion
Reference List

Executive Summary

This paper analyzes the business Strategic Plan of MAC Cosmetic to establish how it is affected by the external factors like the societal expectation, status of the economy, law and the political environment. The needs and expectations of different stakeholders in the company have also been highlighted. In addition, the major changes in the environment of the business and their impact on the business have also been reviewed.

Furthermore, the business plan of the company has been analyzed to help determine the position of the company in the current market. Finally, a Swot analysis was done to establish the company’s competitive strengths and weaknesses.

Introduction

MAC Cosmetics is a global company that deals with beauty products, fashion, film, TV, music and photography. The name MAC is derived from the initials Make-up, Art and Cosmetics. It has previously focussed its strategic plan on a specific market niche; the professionals.

Its strategy now has shifted to individual consumers, trying to meet the needs of each consumer as much as possible. This has resulted in the company sales sky-rocketing and actually hitting the “121 million dollar mark. MAC CEO is John Dempsey.

Historical Background

MAC Cosmetics was found in 1984 in Toronto by two men, Frank Angelo and Frank Toskan. It opened its first shop in the US in 1991 in New York. It currently has 108 branches with over 50 of this in the UK.

Since its inception in 1985, it has marketed its products through the word of mouth and through different sponsorships. It has however avoided the conventional methods of advertisement. Its success is based solidly on researching the consumer needs and going out to satisfy it.

“The best advertisement is through testimony of those who have used a product” (Jaharveb, 2011, p.121). Mac cosmetics’ philosophy is captured in its mission statement; “All Races, All Sexes, All Ages”.

The first factor that an organization must consider is the social factor. “The general behavior, attitudes and customs of the market affects the business organization” (Ravi, 2011, p.218).

The changes envisaged in the business strategic plan should not be fundamentally in conflict to the target market. They advocate green principles by encouraging back-to-mac programme. The company has recently focused on the fight against Aids through the Viva Glam celebrity fund.

Secondly, the strategy of Mac Cosmetics must be in line with the prevailing legal framework with regard to employment laws. The company strategy might need to accommodate the new employees that will be hired. The business must also operate within the confines of the law.

Thirdly, the prevailing economic environment is not very favorable for a company dealing with non-essential commodities like cosmetics. However, the strategy of the company not to invest heavily on advertisement but depend on the word of mouth will work in its favor especially for its target market.

In addition, the company has established its Corporate Social Responsibility (CSR) through several charities including Kids for kids and Viva Glam celebrity Aids fund (Andersen 2000, p. 186 ).

Finally, business is driven by technology and it will be necessary to review the technology adopted by the company viz a viz its competitors.

Stakeholders in a business organisation like MAC Cosmetics are the people that the organisation serves. Their relationships with the organisation is mutually symbiotic since they both depend on each other for survival.

Firstly, the shareholders are more concerned with the dividends they receive on their investment. The need to expand the business will mean that they dig deeper into their resources to provide capital for the envisaged expansion.

Secondly, employees’ benefits from job design that increases satisfaction enhanced working surrounding and, safety standards. The company has a retention rate of 80%, far much better than the average for the industry at 30% (Shahbaz et al 2011).

Thirdly, customers are interested in safe products that meet their needs and value of money. They are also keen on the cause that the organization focuses on and will support any cause that benefits the society.

Fourthly, suppliers expect prompt payment of their money following delivery of goods and being subjected to fair terms of trade. The also need the organization to be financially stable in order to receive future supplies.

Fifthly, the society expects the organization to sponsor local events and offer job opportunities to people living in the community. The society also expects that the organization will follow all the rules and regulations that relate to the standard of the products they produce and environmental regulation.

The consumer needs are not static. The business must prepare to meet the changing needs when and as they arise. The business cannot just focus on the niche market of professional, but must change to accommodate all people as stated in its mission statement.

When new competitors enter a market, the strategy of the company will have to focus on the differentiation of the business product so that it stands out from its competitors’ product.

New laws introduced by the government also affect the company and its strategy. The company must always strive to operate within regulations. A case in point is its non-cruelty policy aimed at protecting animal rights.

In order to compete with the many small business rivals, the company will have to practice target marketing so that they meet the specific people they intend to meet. On the other hand, the company must also be ready to face the challenge posed by the few large rival firms.

There is also need for the company to adopt new technologies and give consumers products that meet their expectations. This way, they will be able to gain competitive advantage over their competitors.

MAC is currently spreading its wings in the cosmetics business globally. It has plans to expand its stations to more countries in Europe, Asia and the Far East.

The company’s business plan is influenced by the following views:

Financial Perspective

The business plan needs to anticipate the revenue growth. There is likely to be an increase in profitability. Due to its expansion, there will be no cash flow since money is held up. The business must strive to ensure that the cost of production is reduced even as the quality of the product is improved (Hamel, 1989, par.3).

Customer Perspective

The business must strive to understand what the customers needs are. This means that the key features of the product must be highlighted in their marketing. The value of the product to the consumers can be measured by how well the product is doing in the market in comparison to its competitors.

In addition, the rate of acquisition, retention and satisfaction by the customer will be an indication of how well the product is doing in the market (Hamel, 1989, par.7).

Internal Business Process Perspective

This emphasizes productivity, quality cost and delivery characteristics of the production process. It also includes internal mechanism of handling customer dissatisfaction e.g. meeting regulatory requirements and after-sale service.

Learning Growth Perspective

This area focuses on the employee needs. The fact that the company has an employee retention rate of 80% at a time when that of the industry is 30%.

A swot analysis of MAC cosmetics business strategy reveals that the company has strengths in their products like Heart to soul and their recycling policy dabbed Back-to-Mac recycling. It is also empowered by the fact that the prices of its products are comparatively cheap.

This is attributed to the fact that the company does not invest heavily in conventional advertising like its competitors since it relies on the word of mouth advertisement.

Its major weakness lies in the fact that their distribution does not include drugstores and therefore unnecessarily losing an available market.

One major opportunity available for Mac cosmetics especially now is a joint venture with the second largest company in the US The company needs to explore Far East countries.

The major threat for the company lies in the fact that its competitors are aggressively distributing their products in major US drugstores while they are not.

Recommendation

The MAC cosmetic business strategic plan must incorporate internet sale to capture the market outside the US. This is more so considering that the brand distribution does not include drugstores but in select cosmetic stores that have been mandated by the company to sell its products.

Conclusion

This paper has analyzed the strategic plan of MAC cosmetic business to establish how it relates to external business factors. The paper has also investigated how the businesses plan to meet the need and expectations of the different stakeholders.

The major changes taking place in the environment of the company have also been highlighted. The business plan of MAC cosmetic was also subjected to test in order to establish the position of the business in the market. A swot analysis was also done to determine the comparative strength and weaknesses of the business.

Reference List

Andersen, T 2000, ‘Strategic planning, autonomous actions and corporate performance.’ Long Range Planning, [Online] 33, pp 184-199. <https://www.journals.elsevier.com/long-range-planning/>.

Hamel, G & Prahalad, CK 1989, ‘Strategic intent’, Harvard Business Review. <https://hbr.org/2009/03/four-fatal-flaws-of-strategic.html>.

Jaharveb, S. & Bakhliar A 2011, ‘Idea Generation: A catalyst for productivity and innovation in advertising.’ International Journal of Contemporary Business Studies, vol.3, no. 2, pp. 118-30. Web.

Ravi, K., & Anupam, S 2011, Corporate Social Responsibility: A corporate vision, International Journal of Contemporary Business Studies, vol.3, no. 2, pp.216-36. Web.

Shahbaz, K., Majeed, R., & Zio-ur, R 2011, ‘Role of training to Improve employee efficiency (A study of SPEL packaging Industry (Lahore)’, International Journal of Contemporary Business Studies, vol.2, no.1, pp.233-54. Web.

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