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Avon Case study
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  • 1. INDIVIDUAL ASSIGNMENT 2 Goliath’1. Avon was referred to as the `Graying Goliath when Andrea Jung took over as CEO. Analyze and Explain why. (2 marks) • The term “Graying Goliath” was basically a figure of speech used to describe Avon with reference to the following – 114 years of existence of Avon – It’s aging grey haired customer base – It’s outdated products – It’s frumpy (dowdy) image in the market – It’s traditional direct sales model and – It’s massive sales workforce and operations in 137 countries MANDAR GHANEKAR SCIT EXMBA 2011
  • 2. INDIVIDUAL ASSIGNMENT 2 Jung’s turnaround2. Discuss the various elements of Jung s turnaround strategy. Was the move into Internet sales and retail stores a good one? (5 marks) a. Jung’s Turnaround Strategy i. Cutting back the product line – Involved retiring more than 1/3rd of the company’s old products & repackaging the rest in an effort to revitalize existing product line. ii. Introduction of new blockbuster products - This involved investing more in R & D which resulted in the instauration of the following products a. Retroactive anti-aging cream b. “Wellness” line of health and wellbeing related products c. “beComing” line of beauty products to be sold exclusively in retail outlets d. “Mark” line of products targeted at teenagers e. A two-in-one beauty aid where one side of a tube held lipstick which the other held mascara MANDAR GHANEKAR SCIT EXMBA 2011
  • 3. INDIVIDUAL ASSIGNMENT 2iii. Venturing in to Retail and Internet selling – Jung realized that selling Avon’s products through either of these channels would undermine the importance and affect the business of the direct sales representatives and could jeopardize the company’s longstanding relationship with them. She devised strategies like a. Introducing a different line of products (priced slightly higher than other Avon products) especially for retail outlets. b. Franchising retail kiosks to interested representatives c. Providing its representatives the necessary hardware and software to build the business online.iv. Strengthening Avon’s Ladies – Since the direct sales force of Avon brought in a major chunk of the business, Jung introduced the following two initiatives to motivate this huge sales force. 1. The “Leadership” program which empowered the sales representatives to recruit new ones down three generations and gave them a percentage of the sales made by the person they recruited. MANDAR GHANEKAR SCIT EXMBA 2011
  • 4. INDIVIDUAL ASSIGNMENT 2 2. The “Beauty Advisor” program to train the representatives to become personal beauty advisors for their customersv. Expanding into new markets – Replacing several regional brands by a global brand as the concept of beauty was quite similar across the world and women wanted the same basic products with minor differences. An aggressive marketing campaign in international markets like Russia, China, India, Eastern Europe, Middle East etc helped the company to achieve a record sales growth.vi. Supply Chain Restructuring – This included the following cost cutting measures 1. Cutting down the number of District manager posts as the sales representative started recruiting new talent under the “Leadership” program. 2. Pruning the number of suppliers from 300 to 75 which to avoid duplication and excess inventory. 3. Automating the ordering process of sales representatives to lower the error rate caused by manually filled orders. MANDAR GHANEKAR SCIT EXMBA 2011
  • 5. INDIVIDUAL ASSIGNMENT 2 4. Using the internet to sell Avon’s products which brought down the cost or processing an order from $1 to 20 cents vii. Global Image Makeover – Under Jung’s leadership Avon’s image transformed Avon from being a ‘frumpy’ to being a ‘fashionable’ modern company that catered to the beauty needs of women across age groups and social strata. Jung invested heavily on improving the quality of the product brochure, employing confident, attractive models and celebrities for endorsing their products and improving the packaging of the products to make them more appealing.b. Moving to Internet & Retail Sales – Yes the move to retail and internet sales was a good move considering the following facts i. Avon was losing a major market share by staying out of these two emerging sales channels. Surveys revealed that 95% of women who brought cosmetics at mall kiosks had never bought Avon products before and these women brought cosmetics only at retail stores since they could see and test the product before purchasing. ii. Secondly, the target consumers at the retail outlets were well educated, career women who were different from Avon’s traditional market of homemakers. In the MANDAR GHANEKAR SCIT EXMBA 2011
  • 6. INDIVIDUAL ASSIGNMENT 2 absence of Avon’s products at retail kiosks, these career women didn’t have an option but to buy from a competitor. iii. Also, only a limited number of Avon’s product were available via internet which made Avon to lose it’s initial lead in online sales as other competitors started offering their entire range of products online. CONCLUSION - Considering the above factors in additional to customer and employee convenience, Avon’s venture in retailing and online selling was a beneficial move for the company for deeper market penetration. The major predicament; however was to reconcile and balance old time-tested practices with the plethora of promising new ones which Avon addressed via smart marketing strategies.3. What are the different need-based segments Avon targets? Draw a profile of each and identify what variables can be used to profile these segments (5 marks) Avon targets the following need based segments 1. Homemakers 2. Career Oriented Women 3. Teenagers MANDAR GHANEKAR SCIT EXMBA 2011
  • 7. INDIVIDUAL ASSIGNMENT 2The following chart summarizes the profile of each of these segments along with thevarious variables used Need Based Segments Type Variables Career Oriented Homemakers Teenagers Young Women Age 34 and above 20-34 13-19 Secondary Nest Builders : Fledglings : 13- school parents : 20-34 possibly 19 Teenagers Life Stage Have children married but Demographic living with their aged 10 years or without own parents older children Cash strapped Income Affluent Cash strapped (possibly) Lifestyle Sober Flamboyant Care free Psychographic Personality Conservative Courageous Adventurous Values Achiever Thinker Experiencer Indifferent or Attitude Positive Enthusiastic hostile Behavioral Benefits Value for money Hard core Loyalty Status Split loyalist Switchers loyalist MANDAR GHANEKAR SCIT EXMBA 2011
  • 8. INDIVIDUAL ASSIGNMENT 24. Analyze the environmental factors that shaped the business strategy at Avon MANDAR GHANEKAR SCIT EXMBA 2011
  • 9. INDIVIDUAL ASSIGNMENT 2 MANDAR GHANEKAR SCIT EXMBA 2011