Case Study: AVON

Strategic Position

In 2003, Avon was recognized as the undisputed leader in direct selling of beauty related products. In 2004, Thomson, Strickland and Gamble noted that Avon acquired about 20 percent of the outstanding shares in a couple of its China subsidiaries to additionally reinforce its grasp of the market (C-269).

In the same year, the company announced its plans to enter the metro sexual market with the launch of cosmetics for men. Avon entered into a multi year strategic business partnership with IBM Global Services, in November 2006. The company exited from certain unprofitable operations in 2006, which included the Avon Salon & Spa, the shutting down of business in Indonesia, the dropping of a product portfolio in China and the dropping of the beComing product line in the United States.

Order custom essay Case Study: AVON with free plagiarism report

450+ experts on 30 subjects Starting from 3 hours delivery

Get Essay Help

Company Performance

Following Andrea Jung’s appointment in 1999, there has been a series of changes that are aggressively promoted by the newly appointed CEO in order to make Avon one of the best companies again which resulted to pretty good results. In fact, the business documented returns of $8,763.9 million for the period 2006, an augment of 7.5 percent compared to 2005. However, not everything went smoothly. The disaster that included the beComing line and its first unsuccessful forays into the international scene particularly China and Eastern Europe were lackluster at best and its stiff competition from other well-known foreign brands continues to hound their steps everywhere they go.

External Environment Analysis

As with the emergence of the new consumers, Avon now has lots of opportunities to capture that market by continuously improving or in some cases creates new products that could readily capture their palate. In recent years, brand recognition has emerged as key differentiator. Overall, a competitive environment can adversely affect the company's market position and force it to curb its margins in future. Beauty consumers are increasingly seeking refuge in new technologies such as advanced dermatology, cosmetic surgery, hair and organ transplant and other treatments to enhance their beauty. Not only are the results from these treatments instant, but they are also long-lasting.

This could reduce dependence on traditional beauty aids such as creams and lotions, which could lead to a fall in demand for the skin and hair care products of Avon. Avon is also more exposed to changes in the regulatory environment unlike its traditional bricks-and-mortar retail competitors which can directly affect its particular business model. For example, in 1998, the Chinese government revoked the licenses of all direct sellers following widespread abuse by a number of participants. This forced Avon to change its business model and to become dependent on more than 6,000 independently-owned Beauty Boutiques and sales at the nation’s larger department stores.

Solutions and Recommendations

Since the cosmetics industry competition is getting stiffer by the day because of industry trends that does not prove to be helpful in boosting industry activity at all, a solution seen is to invest heavily on advertising, promotional campaigns and innovative marketing strategies to increase market share and drive consumer demand. Otherwise, Avon could try to maintain or boost sales through introduction of a number of product lines. Seeing that beauty consumers are more and more leaning towards new technologies, it could serve Avon better to introduce new product lines that will have longer lasting effect on the consumer, to somehow curb the impending consumer shift to permanent beauty solutions.

The unsuccessful venture to some of the foreign countries that Avon has tried to penetrate can be solved through focusing more on teritorries with promising future. Spurred by the increasing popularity of beauty contests and increasing disposable incomes, the importance of emerging markets such as India and Brazil is on the rise for cosmetics companies like Avon. The company, therefore, stands to benefit from the positive outlook in the emerging cosmetics markets.

WORK CITED

Thompson, Arthur, Alonzo Strickland and John Gamble. 14th ed. Crafting and Executing Strategy. New York: McGraw-Hill, 2005.

Don't let plagiarism ruin your grade

Run a free check or have your essay done for you

Check my essay Hire Writer