Q6 What is the cost of capital for the restaurant division of Marriott?The Estée Lauder Companies, Inc. is a prestigious cosmetics company in the cosmetics industries which was found by Joseph Lauder and his wife Estée Laude. The Estée Lauder Companies, Inc. was started as a family business and develop to a public company. The top level management used to work by the family member of Lauder only; however, the top level management has changed to work by not related to family member of Lauder that is Fanrizio Freda. I believed the differences between running a family-owned business and a publicly-traded company with diverse, fragmented ownership is the development to the business. The pros of running a family business is the family business is your life which mean you are more conservative, because you don’t want to destroy your family business. In addition, the family business is built on the trust which means the more stable. On the other hand, the cons of running a family business are conservative which mean you don’t want to take risk on your business. And at the same time, your business might not to grow stable since you don’t want to change the business. Conflict also is a big challenge to run a family business; the challenges can be identity the development for the business. For example the old generation might not agree what the younger generation ideas, and doesn’t have enough rooms for them to learn and develop. The pros of running a publicly-traded company with diverse, fragmented ownership is the top level management officers more aggressive, because they know what they are doing, if not they will be fired. And also, they are professional since they are hired by the family business. On the other hand, the cons are they just keeping the stable growth but they don’t know what the purpose of the business is. The children of “founders” is hard to maintain a polished image because the
“The Estée Lauder brand was tired; it was like your grandmother’s brand”. “There is an old saying about family businesses: The first generation builds them, the second generation enjoys them, and the third generation destroys them.” As a result, the children of founders might not do well as their parents did and they don’t challenged a lot since their brand is prestigious and burdens from family. And for the third generation of the founder might blind by wealth, they don’t even know what the family business purposes is. As a result, they children of “founders” unable to match their parent when it comes to running the enterprise The solution to overcome this phenomenon would be hired people outside the company for the executive position. People from outside of the family business can work on the business without any family burdens. In addition, they can have more rooms to develop the company with new innovation ideas. They usually are experiences, and able to operate the business development. The original strategy of Estee Lauder is focus on the product quality and narrow distribution to high-end retailers. At the same time, the global economy was developing that help Estee Lauder aim to expand the business globally. As a result, I believed this strategy is over time because it is only workable in the economic growing and a few competitors in the market. In addition, the narrow distribution to high-end retailers has narrowed the ability to compete with diversify product line, and limited the ability to attract new customers. The Estee Lauder's strategy today is not only selling the product, and enhances the nature beauty as well. For example: Clinique Smart Bar that can help people to find information about skin conditions or what product you need to improve your skin. I think this is more aggressive way to sell the product because you let the customer know what is the problem with their skin and how should they improve it. And also, the generation in today likes to shop on the internet. Therefore, this is a good strategy for business in the competitive environment.