AVON PRODUCTS INC. Strategic Management Case Study
• Rizwan QamaR      M. Phil Fellow at Faculty of Contemporary Studies,          National Defence University, IslamabadPres...
•   Competitors Analysis• Avon Introduction                      •   Sales Pie Chart of Competitors  • Brief History      ...
Introduction
Brief History
• Avon is a leading global beauty company, with over $10  billion in annual revenue in 2008• Worlds largest direct seller•...
• Avon’s largest manufacturing plants, Brazil, China and  Poland received the ISO14001 certifications in 2008• The Clean I...
Organizational Structure
avon: The Company for WomenAvon Slogan (Actual)
Actual    Proposed              avon: The              Company for               EveryoneAvon Slogan
Actual                     Proposed• To be the company that  best understands and  satisfies the product,  service, and se...
Proposed Vision               Analysis• To be the leading beauty    • Word “Women” is  and cosmetics company         repla...
•   The Global Beauty Leader— We will build a unique portfolio of Beauty and related brands,    striving to surpass our co...
Proposed Mission                 Characteristics“Avon is committed to be the     • Broad in Scopeleading global provider o...
FinancialRatioAnalysisINTERNAL ASSESSMENT
2008    2007    2006               Beauty    72 %    70 %    69 %               Fashion   18 %    18 %    18 %Net Sales by...
Net Sales by Product                 CategoryINTERNAL ASSESSMENT
Revenue by              2008       %       2007      2006Product                            AgeSegments                7,6...
Growth                      Graph                        By                      Product                      DivisionINTE...
Division        2008      2007             Latin America   3,884.1   3,298.9             North           2,492.7   2,622.1...
INTERNAL ASSESSMENT
MarketPositioningMapINTERNAL ASSESSMENT
Maplocating thefirm’sOperations    INTERNAL ASSESSMENT
Strengths                                                  Weaknesses1.   Avon is a Global Market Leader                  ...
InternalFactorEvaluationMatrix(IFE)INTERNAL ASSESSMENT
1.Procter & Gamble              2.L’Oreal S.A.              3.Unilever PLC              4.Johnson & Johnson              5...
MajorCompetitorsEXTERNAL ASSESSMENT
Revlon                            Mary Kay• Revlon was founded in 1932,     • In 1963 Mary Kay Cosmetics was  by Charles R...
• Avon is seven and half times larger                      than Mary Kay and approximately                      eight time...
Pie Chart of Revenues 2008EXTERNAL ASSESSMENT
AVON      REVLONCompetitors          Market Cap   $ 9,710 M   $ 242.84 MFinancial Strength   Employees    42,000      5,60...
Opportunities                                       Threats1.   A growing trend in the cosmetics industry is   1.    Compe...
External FactorEvaluation Matrix(EFE)EXTERNAL ASSESSMENT
COMPETITIVE PROFILEMATRIX –CPMEXTERNAL ASSESSMENT
#            Forces             Intensity                1   Rivalry among competing       High                    firms  ...
STRATEGY ANALYSIS
SWOTMatrixSTRATEGY ANALYSIS
STRATEGY ANALYSIS
Y axis=FS (4) +ES (-3.2) = .08X axis=CA (-2.8) +IS (3.6) =1.2SPACE MatrixSTRATEGY ANALYSIS
BCG                    Matrix                      By                    Product                    DivisionSTRATEGY ANALY...
BCGMatrix   ByGeographic DivisionSTRATEGY ANALYSIS
STRATEGY ANALYSIS
Grand                    Strategy                    MatrixSTRATEGY ANALYSIS
Alternative Strategies   SPACE   BCG        IE Matrix                                                         NA   LA   EU...
QSPMDecision Stage
BalancedScore CardSTRATEGY ANALYSIS
Balanced                    Score Card                    …… Cont’dSTRATEGY ANALYSIS
Extension in the main products:    The sales of the personal care products are increasing in the main    sectors because o...
• Expand the Market to South Asia, Central Asia and  Africa• Acquire the small competitors to gain more Advantage• Invest ...
• David, Fred, R “Strategic Management” Concepts and Cases´ 10 th and 13th  Edition. Prentice Hall International 2009.• Av...
Further Discussion????
Avon Products Inc
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Avon Products Inc

  1. 1. AVON PRODUCTS INC. Strategic Management Case Study
  2. 2. • Rizwan QamaR M. Phil Fellow at Faculty of Contemporary Studies, National Defence University, IslamabadPresented by:
  3. 3. • Competitors Analysis• Avon Introduction • Sales Pie Chart of Competitors • Brief History • Competitors Financial Analysis • Brief Company Overview • • Opportunities and Threats EFE Matrix • Organizational Structure • Competitive Profile Matrix (CPM)• Mission, Vision & Slogan • Porters Five Forces Model • Existing • Strategy Analysis • Why change? • SWOT Matrix • Proposed • SPACE Matrix• Internal Assessment • BCG Matrix • Financial Ratio Analysis • By Product Division • Net Sales by Product Category • By Geographic Division • Revenue by Product Segment • The IE matrix • Revenue by Geographic Segment • Market Positioning Map • Grand Strategy Matrix • Map Locating the Firms • Decision Stage Operations • QSPM • Strengths and Weakness • Possible Alternative Strategies • IFE Matrix • Balance Score Card• External Assessment • Conclusion • List of Competitors • References • Major Closest Competitors • Q&AOutline
  4. 4. Introduction
  5. 5. Brief History
  6. 6. • Avon is a leading global beauty company, with over $10 billion in annual revenue in 2008• Worlds largest direct seller• Operating in 143 countries worldwide through 6.4 million independent Avon Sales Representatives• It is the largest micro lender to women• Avon is among the world top global brands• Increased Investments by $ 120 m in 2007 to develop a new Sales Leadership• Changed marketing approach from a homey image and started celebrity promotionsBrief Overview
  7. 7. • Avon’s largest manufacturing plants, Brazil, China and Poland received the ISO14001 certifications in 2008• The Clean Industry Certificate to the manufacturing plant in Mexico• During the same period Avon’s revenues increased 7.5 percent• Avon implemented reconstructing programs in 2009• There is heavy investment in online search engines and internet carrier sites• Andrea Jung is the Chief Executive Office who is leading the management team of thirteen Brief Overview . . . . . . . Cont’d
  8. 8. Organizational Structure
  9. 9. avon: The Company for WomenAvon Slogan (Actual)
  10. 10. Actual Proposed avon: The Company for EveryoneAvon Slogan
  11. 11. Actual Proposed• To be the company that best understands and satisfies the product, service, and self- fulfillment needs of women globally • To be the leading beauty and cosmetics company that best understands and satisfies the self- fulfillment needs of our customers globally.avon Vision
  12. 12. Proposed Vision Analysis• To be the leading beauty • Word “Women” is and cosmetics company replaced with that best understands and “Customers” satisfies the self- fulfillment needs of our customers globally. • To identify the industry words “beauty and cosmetics” are included.avon Vision
  13. 13. • The Global Beauty Leader— We will build a unique portfolio of Beauty and related brands, striving to surpass our competitors in quality, innovation and value, and elevating our image to become the Beauty company most women turn to worldwide.• The Women’s Choice for Buying— we will become the destination store for women, offering the convenience of multiple brands and channels, and providing a personal high touch shopping experience that helps create lifelong customer relationships.• The Premier Direct Seller— We will expand our presence in direct selling and lead the reinvention of the channel, offering an entrepreneurial opportunity that delivers superior earnings, recognition, service and support, making it easy and rewarding to be affiliated with Avon and elevating the image of our industry.• The Best Place to Work — we will be known for our leadership edge, through our passion for high standards, our respect for diversity and our commitment to create exceptional opportunities for professional growth so that associates can fulfill their highest potential.• The Largest Women’s Foundation — we will be a committed global champion for the health and well-being of women through philanthropic efforts that eliminate breast cancer from the face of the earth, and that empower women to achieve economic independence.• The Most Admired Company— We will deliver superior returns to our shareholders by tirelessly pursuing new growth opportunities while continually improving our profitability, a socially responsible, ethical company that is watched and emulated as a model of success.avon Mission (Actual)
  14. 14. Proposed Mission Characteristics“Avon is committed to be the • Broad in Scopeleading global provider ofhome, fashion and beauty • Less than 250 wordsproducts that will enhance the • Identify the Utility ofbeauty and satisfaction ofour customers. We will utilize Productslatest technology and will • Social Responsibilitypursue new growth • Includes Nine Components:opportunities that will bringabout wealth for all our • Customers, Product, Market,stakeholders. At Avon, we Technology, Growth,firmly care for the people and Philosophy, Self Concept,environment”. Concern for public and employeesAVON Mission (Proposed)
  15. 15. FinancialRatioAnalysisINTERNAL ASSESSMENT
  16. 16. 2008 2007 2006 Beauty 72 % 70 % 69 % Fashion 18 % 18 % 18 %Net Sales by Home 10 % 12 % 13 %ProductCategory Total 100 % 100 % 100 %INTERNAL ASSESSMENT
  17. 17. Net Sales by Product CategoryINTERNAL ASSESSMENT
  18. 18. Revenue by 2008 % 2007 2006Product AgeSegments 7,603.7 + 9.6 6,932.5 6,019.6 Beauty($ million) Fashion 1,863.3 + 6.2 1,753.4 1,562.7 Home 1,121.9 - 3.2 1,159.5 1,095.0 Total 10,588.9 + 7.5 9,845.2 8,677.3INTERNAL ASSESSMENT
  19. 19. Growth Graph By Product DivisionINTERNAL ASSESSMENT
  20. 20. Division 2008 2007 Latin America 3,884.1 3,298.9 North 2,492.7 2,622.1 America Europe, 3,071.2 2,886.4 Africa andRevenue by AsiaGeographic Asia Pacific and China 1,242.1 1,131.1SegmentsINTERNAL ASSESSMENT
  21. 21. INTERNAL ASSESSMENT
  22. 22. MarketPositioningMapINTERNAL ASSESSMENT
  23. 23. Maplocating thefirm’sOperations INTERNAL ASSESSMENT
  24. 24. Strengths Weaknesses1. Avon is a Global Market Leader 1. Decrease in North American Sales2. Committed and dedicated workforce - 6.4 million Revenue by 129.4 million Avon representative in over 100 countries making Avon the largest sales force 2. Weak Brand Image3. World’s Largest Micro lender for women - 3. High advertising costs – Companies extending some $1 billion in product and credit advertising spending went from each year to help women start their own $136millions in 2005 to $249 million entrepreneurial businesses in 2006 to $368 million in 2007 and 14%higher in 20084. Channel of distribution – world’s largest direct seller 4. Poor brand loyalty5. Manufacturing operations match ISO 14001 5. Does not target urban trendsetters standards 6. Beauty Sales in the first quarter 20096. Avon owns its major manufacturing and distribution were 12% lower compared to sales centers revenue in previous year 20087. Increased in revenue in most geographic area. Due 7. Avon lagged behind seven of their to increase in internet presence. (Revenues cosmetic companies in customer increased 7.5% from year 2007 to 2008) loyalty8. Avon is one of the world’s top global brands. Avon has major brand names such as Anew, skin-so-soft, Avon Color etc. with 90% recognition worldwide.9. First cosmetic to permanently end to animal testingINTERNAL ASSESSMENT
  25. 25. InternalFactorEvaluationMatrix(IFE)INTERNAL ASSESSMENT
  26. 26. 1.Procter & Gamble 2.L’Oreal S.A. 3.Unilever PLC 4.Johnson & Johnson 5.Kimberly-Clark Corporation 6.Colgate-Palmolive Company 7.Kao CorporationList of 8.Estee Lauder Companies In 9.Mary KayCompetitors 10.Revlon 11.The Body ShopEXTERNAL ASSESSMENT
  27. 27. MajorCompetitorsEXTERNAL ASSESSMENT
  28. 28. Revlon Mary Kay• Revlon was founded in 1932, • In 1963 Mary Kay Cosmetics was by Charles Revson founded in Dallas, Texas• Revlon Sales to Wal-Mart • In 2009 sales of Mary Kay products accounts for 23% of the reached $2.6 billion companys total sales • There are more than 37,000 women• The company earned $1.3 across the world who has become billion in sales and $950K in Independent Sales Directors net income in 2009 • Mary Kay products are expensive• Revlon attributes the loss to versus Avon the weak global economy and • Mary Kay seems to be targeting older Sales fell by 3.8% women• Revlon is the second largest • 90% of the company’s revenue is now color cosmetics company in generated through online orders the United States • It entered in Pakistan in 1984 while in India in 2007EXTERNAL ASSESSMENT
  29. 29. • Avon is seven and half times larger than Mary Kay and approximately eight times larger than Revlon • Its Competitors distribute their products to resellers but Avon sellsAVON’s Comparison its products solely through its direct-with Closest selling channelCompetitors • Avon brand products are now recognized all over the world due to the success of their international campaign • Avon also has a Representative development program that focuses on the professional training of RepresentativesEXTERNAL ASSESSMENT
  30. 30. Pie Chart of Revenues 2008EXTERNAL ASSESSMENT
  31. 31. AVON REVLONCompetitors Market Cap $ 9,710 M $ 242.84 MFinancial Strength Employees 42,000 5,6002008 Revenues $ 10.37 B $ 1.34 B Gross 63.03 % 63.48 % Margins EBIT % 1,440 M $ 171.40 M Operating 12.07 % 11.42 % Margin Net Income $ 807.9 M $ 28.5 M Growth 7.5 % 5.6 % EPS $ 4.72 $ 1.422EXTERNAL ASSESSMENT
  32. 32. Opportunities Threats1. A growing trend in the cosmetics industry is 1. Competition such as Mary Kay and Revlon the introduction of “green” products. More and many others than sixteen percent of beauty products 2. Rejection of internet selling by sales launched in 2008 were certified organic, representative ethical, or all natural. 3. Global economic climate stifled new product development, innovation and sustainability2. Eye makeup market programs in 2009.3. The cosmetics industry tends to be 4. In terms of color cosmetics, environmental countercyclical.. International Inc. predicted that many of4. Aveda cosmetics found that sixty eight these markets will see slowdown in volume percent of consumers will remain loyal to a demand. company that has a social and 5. Inflation rate environmental commitment. 6. Rising cost of commodities5. Urban Trendsetters markets 7. Direct-selling becoming more popular - Amid the financial crisis Aussie mums are6. Geographic growth – enormous growth increasingly turning to direct selling and at- opportunities existed in countries home product parties to supplement their populations such as China, Indonesia and household income. India and other Asian countries. 8. They are a multilevel based company that7. Demand for cosmetic products normally sells inferior quality with a higher price tag than what it is worth. remains constant and unaffected by economic distress. 9. Avon products outpaced by “jazzier” products to women who favored more8. The baby boomers are aging and they are exciting product lines more conscious on their appearance, beauty 10. Decreased earning opportunities and also improving their looks.9. Emphasize direct selling in emerging and developing markets. EXTERNAL ASSESSMENT
  33. 33. External FactorEvaluation Matrix(EFE)EXTERNAL ASSESSMENT
  34. 34. COMPETITIVE PROFILEMATRIX –CPMEXTERNAL ASSESSMENT
  35. 35. # Forces Intensity 1 Rivalry among competing High firms 2 Entry of New Competitor Low 3 Development of Substitute Low ProductsPorter’s Five 4 Bargaining Powers of Low SuppliersForces Model 5 Bargaining Power of High ConsumersEXTERNAL ASSESSMENT
  36. 36. STRATEGY ANALYSIS
  37. 37. SWOTMatrixSTRATEGY ANALYSIS
  38. 38. STRATEGY ANALYSIS
  39. 39. Y axis=FS (4) +ES (-3.2) = .08X axis=CA (-2.8) +IS (3.6) =1.2SPACE MatrixSTRATEGY ANALYSIS
  40. 40. BCG Matrix By Product DivisionSTRATEGY ANALYSIS
  41. 41. BCGMatrix ByGeographic DivisionSTRATEGY ANALYSIS
  42. 42. STRATEGY ANALYSIS
  43. 43. Grand Strategy MatrixSTRATEGY ANALYSIS
  44. 44. Alternative Strategies SPACE BCG IE Matrix NA LA EU APC GS Counts Forward Integration X X X X X X 5 Backward Integration X 1 Horizontal Integration X X 2Matrix Analysis Market Penetration X X X X X X X 6 Market Development X X X X X X 5 Product Development X X X X X X X 6 Diversification X X X X X X X 6 Joint Venture X 1 Retrenchment X 1 Divestiture X 1 Liquidation 0 Mergers & Acquisition X 1 STRATEGY ANALYSIS
  45. 45. QSPMDecision Stage
  46. 46. BalancedScore CardSTRATEGY ANALYSIS
  47. 47. Balanced Score Card …… Cont’dSTRATEGY ANALYSIS
  48. 48. Extension in the main products: The sales of the personal care products are increasing in the main sectors because of the following reasons. • To become attractive in working area. • Becoming more Health Conscious • Due to change in fashion & Trends. Expand In Asia and Africa: Asian countries like Pakistan, Bangladesh, Malaysia, Taiwan & Russia are a huge market because of the two reasons: •Stability in economies •Population growth Build a brand image in North American and Generation Y in existing markets by promotions and innovation of new product which are tailored to their specific needs: The Generation Y is the second largest population segment which is not focused by Avon and due to the lack of a proportion Avon has not a good image in North America. But Avon has a competitive advantage to expand in these markets.Possible Alternative Strategies
  49. 49. • Expand the Market to South Asia, Central Asia and Africa• Acquire the small competitors to gain more Advantage• Invest more in R & D to develop more “Green” products• Invest in departmental and online selling• Expand the product line and also focus on men and children• Repositioning the brand image through attractive packaging, new brand logo and distinguishing its products• Enhance Brand LoyaltyDecision
  50. 50. • David, Fred, R “Strategic Management” Concepts and Cases´ 10 th and 13th Edition. Prentice Hall International 2009.• Avon Products Inc. Retrieved May 5, 2012 www.avoncompany.com• Avon USA. Retrieved May 5, 2012 www.avon.com• Avon Products UK. Retrieved May 5, 2012 http://www.avon.uk.com/PRSuite/home_page.page• Avon Products Retrieved May 5, 2012 http://en.wikipedia.org/wiki/Avon_Products• Retrieved May 5, 2012 www.wikinvest.com• Avon Calling ± for Help´ Business Month April, 2010.• Avon Calls ± At 50 Times Earnings, ´ Business Month November, 2006 -2009.• Avon Products, Inc., Annual Report, New York, N.Y., 2010• Avon Products, Inc., Annual Report, New York, N.Y., 2009• How Avon Rings Their Chimes,´ Sales and Marketing Management, November, 2009• Avon Products, Inc.: DEVELOPING A GLOBAL PERSPECTIVE• Retrieved May 5, 2012 www.yahoo.com/images• Retrieved May 5, 2012 http://www.google.com.pk/imghp?hl=en&tab=wiReferences
  51. 51. Further Discussion????
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