Term Paper on "Change From the Competitive Landscape"

Term Paper 5 pages (1914 words) Sources: 3

[EXCERPT] . . . .

Helen of Troy Competitive Landscape

Helen of Troy Limited is a global leader in the "design, production, and marketing of brand-name personal care and household consumer products" (Helen of Troy Limited.com. 2011). The company's two divisions: personal care products and household products represent a diverse offering of well-known brands including: Revlon, Dr. Scholls, Sunbeam, Vidal Sassoon, and Oxo. The company's lines are present in 74 countries around the world, and their global operations generated net sales revenue of $647,626,000 in the 2010 fiscal year, while net income for the year was $71,817,000 (Helen of Troy Limited Annual Report 2010). Helen of Troy Limited works to build market share in both of their divisions by focusing on branding and new product innovation; "ten key brands currently account for approximately 83% of the company's consolidated annual net sales revenue" (Helen of Troy Limited Annual Report 2010). Continued success for the firm depends on building revenue and controlling costs in a competitive industry in which consumers continue to seek high quality tailored products at a fair price.

Competitive Landscape

Helen of Troy Limited occupies space in the personal products industry according to Hoovers (Hoovers.com. 2011), while Yahoo Finance designates the company as part of the consumer goods sector with an emphasis on appliances (Yahoo Finance.com.2011). The diversity of the Helen product line provides difficulty in assigning the precise arena in which the firm operates. According to the company's annual report, competitors vary in size and financial strength from Procter & Gamble, to Newell Rubbermaid, Elizabeth Arden, Revlon, and Lifetime Brands (Helen of Troy Limited Annual Report 2010). Amidst this backdrop the competitive landscape for Helen of Troy is one of high intensity in product specialization and cost controls. According to Hoover the company competes across multiple industries: personal care, appliances, hand tools, power tools, lawn & garden equipment, housewares, home storage and organizational products, and electronics (Hoovers.com. 2011). The company's diverse product line requires executive management to spur innovation while maintaining effective supply chain management to control expenses. Because of the company's product diversity there is utility in narrowing the focus of analysis to a specific product line to better explicate the competitive environment.

Competitive Landscape- Personal Care Products

Personal care products remain the company's bread and butter with a preponderance of sales generated from the domestic U.S. market; "79, 76 and 78% of total net sales revenue in fiscal 2010, 2009 and 2008, respectively" (Helen of Troy Limited Annual Report 2010). Consumer care product companies depend on specialization and brand awareness for their success in revenue generation. In this space, competitors: Elizabeth Arden, Revlon, Conair Corporation, L'Oreal Group, and Inter-Parfums all rely on specialty innovation for profitability. Yet perhaps more critical to competitive success for Helen of Troy Limited is the management of their retailers in regards to product offerings and pricing. According to the annual report; "current trends among retailers include fostering high levels of competition among suppliers, the requirement to maintain or reduce prices and deliver products under shorter lead times" (Helen of Troy Limited Annual Report 2010).

As an example, Helen of Troy Limited depends substantially on five retail sources for their revenue generation; "sales to these customers accounted for approximately 46, 43 and 44% in fiscal 2010, 2009 and 2008, respectively" (Helen of Troy Limited Annual Report 2010). Additional examination reveals that two outlets: Wal-Mart and Bed Bath and Beyond Inc. were critical to the company's success. "Wal-Mart accounted for 18, 17 and 19% of net sales revenue in fiscal 2010, 2009 and 2008; while sales to Bed Bath and Beyond, Inc. accounted for 10, 8 and 8% of net sales revenue in fiscal 2010, 2009 and 2008 (Helen of Troy Limited Annual Report 2010).

Profitability in this segment requires a two-fold approach: driving brand recognition, product innovation, value, and customer- centric options for consumers; while managing supply relationships with retailers to ensure shelf space, market share, and the delivery of pricing optimization.

Risk Factors

Remaining in the personal care segment for analysis of Helen of Troy Limited, there are two competitors: Elizabeth Arden and Revlon which based on financials and exposure are roughly the same size in terms of revenues, net income, market capitalization, and global presence. The three companies in question compete across the personal care line with a myriad assortment of products yet, each firm identifies certain risk factors which are particularly relevant to their competitive advantage. Perhaps equally important these risk factors are identified by management for future years to determine the company's trajectory and growth opportunities. Some of these factors which may have been in place in 2000 may or may not be present in 2010.

Constant Risk Factors in 2010 and 2000

Helen of Troy Limited identifies three risks which have remained stable throughout the last decade: reliance on specific customers for sales, dependence on international manufacturing and operations for products, and competitive balance among personal care product peers.

For Revlon the picture is quite similar with emphasis on risk factors associated with intense competition, global procurement and sourcing, and most crucial the reliance on specific outlets for sales generation. For Revlon and Helen of Troy Limited, Wal-Mart represents their biggest purchaser. As mentioned previously, Wal-Mart represents 18% of sales for Helen of Troy Limited in 2010 and 26% of sales in 2000 (Helen of Troy Limited Annual Report 200 & 2010). For Revlon the numbers are relatively similar with 16.5% of sales to Wal-Mart in 2000 and 22% of sales in 2010 (Revlon Annual Report 2000 & 2010). Essentially one fifth of revenues are derived from the world's largest retailer.

The story at Elizabeth Arden paints the same scenario across the decade. Reliance on global manufacturing and procurement is cited by management in 2000 and 2010 as a risk. Second the threat of peer competitors which impact market share and profitability. Lastly, the reliance on large purchasers such as Wal-Mart for revenue; in 2010 Wal-Mart accounted for 15% of net sales, while in 2000 the figure was indicated to be above ten percent (Elizabeth Arden Annual Report 2000 & 2010).

Risk Factors Present in 2000 but not in 2010

In this case risk factors for the three firms which were present in 2000 do not find their way into management's analysis in 2010. Helen of Troy Limited finds concern in liquidity allocation for its funding of a working capital line in conjunction with their acquisition of Tactica's, a health and wellness company. A second risk involved transition of electrical product testing to a new company Underwriters Laboratories Inc. Lastly, management concerned itself with the integration of licensing agreements with Sunbeam, a producer of retail hair clippers (Helen of Troy Limited Annual Report 2000).

For Revlon risk factors in 2000 not present in 2010 involved considerable transformation of their distribution and production structure; "plant closures and relocating manufacturing result in charges of $55 million to $60 million" (Revlon Annual Report 2000). Second, a comprehensive review of advertising efficacy resulted in a change of advertising firms which executive management cited as a risk to revenue generation. Lastly, concerns over bank covenant agreements on short-term lines of credit provided insecurity for Revlon management (Revlon Annual Report 2000).

Elizabeth Arden's year 2000 risk factors included a movement of distribution to a new Edison, New Jersey facility which posed logistical supply chain risk in the short-term. Second a costly expansion of the company's e-commerce business which placed downward pressure on earnings. Lastly the depletion of capital reserves in conjunction with targeted company acquisitions (Elizabeth Arden Annual Report 2000).

Risk Factors Present in 2010 but not in 2000

2010 provided particular risk factors for Helen of Troy Limited not present in 2000. First, the lack of a large set of senior level managers operating the company's operations; suggesting that "the loss of our chief executive officer or any senior managers could have a material adverse effect on business" (Helen of Troy Limited Annual Report 2010). Second the consolidation of 72% of distribution into the company's Southaven, Mississippi distribution center, which could affect logistics and supply chain considerations. Lastly the increased cost of raw materials which the company may not be able to pass on to customers in the form of product price increases (Helen of Troy Limited Annual Report 2010).

In 2010 Revlon's risks were associated with financial concerns including: inability to generate revenue to service debt payments, possible suspension of dividend, and bank restrictions on 140 million dollars of working capital lines. Financial risks for Revlon dominate the 10-K filing (Revlon Annual Report 2010).

Elizabeth Arden's 2010 risks were likewise financial in nature and focused on exchange rate fluctuations which could impact operational cash flows, debt service covenant restrictions on 278 million in aggregate borrowing, and finally instability in credit markets to facilitate operational expansion (Elizabeth Arden Annual Report 2010).

Three Common Risks in 2000 and 2010

Common risks for the three companies in 2000 and 2010 are remarkably similar. Executive management cites a stiff and vibrant competitive market in both years as a risk to… READ MORE

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