Case Study of AVON Product Inc.

2009

Group Members:
Tariq Ali Shaikh MBA 90 (6th)
Syed Shahzaib Abbas MBA 90 (6th)
Anum Siddiqui MBA 36 (1st)
Muhammad Usama Daudpota MBA 36 (1st)
Muhammad Waseem Memon MBA 90 (5th)
Sandiya MBA 72 (4th)

Introduction
Avon Products, Inc., Known as Avon, is an
American International Manufacturer and direct
Selling company in beauty, Household & Personal
Care Categories.
David H. McConnell founded The California
Perfume Company (CPC) in 1886 with the first
office located in New York.
In 1906 the San Francisco earthquake destroyed
CPCs California office however, before long the
company reopened. CPCs first office outside United
State was opened in 1914 in Montreal, Canada.

Introduction Cont:
In the 1920s CPC sales doubled to $2 Million during this
time there were more than 25,000 representatives in the
U.S. The Companys name was change to Avon Products
Inc.
Avon adopted 5 core values which are Trust, Respect,
Belief, Humility & integrity which are evident in the mission
statement to be a Global beauty leader, womens choice of
buying, premier direct seller, the best place to work, largest
women foundation and the most admired company.
Avon success lies within it channel of distribution, it is the
worlds largest direct seller with 5.4 million Avon
representatives in over 100 countries. Additionally, it is the
largest micro lender to woman and it among the world top
global brands.
There are 3 product categories which Avon distributed,

Introduction Cont:
The company advertising cost increased from $136 million in
2005 to $249 million in 2006 and $368 million in 2007
Reese Witherspoon is the Avon Foundation first global
ambassador and honorary chairwoman who appear in
advertisement for Avon make up, skin care products and
fragrances.
. Spotlight the new fragrance was launched in 2009 with
celebrity Courtenay Cox as the face of the brand.
Avons largest manufacturing plants, Brazil, China and Poland
received the ISO 14001 certifications in 2008.
Various awards were granted during this period such as the
Clean Industry Certificate to the manufacturing plant in Mexico.

Introduction Cont:
Avon products Inc. closest competitors are Revlon, Inc and
Mark Kay Inc. Mary Kay Inc uses the same approach as Avon
which is direct marketing approach which Revlon sells its
products through cosmetics counters in department stores
are pharmacies.
Avon revenues far exceed that of its competitors in 2008
Avons revenue was $10.37 billion compared to Mary Kay
$2.40 billion and Revlon $1.35 billion.
Avon implemented reconstructing programs in 2009 which
included closing two manufacturing facilities
Andrea Jung is the CEO who is leading the management
team of thirteen to achieve its goal.

Vision And Mission

Vision Statement
To be the leading provider of home, fashion and beauty
products that will satisfy customers while preserving the
environment.

Mission Statement
Avon is committed to being the leading global provider of
home, fashion and beauty products that will enhance the
lives of customers. Avon will utilize latest technology and
will pursue new growth opportunities that will bring about
wealth for all stakeholders. At Avon they firmly believe in
respect: respect for people and respect for the
environment.

Avon Inc. Location Map

External Factor Evaluation Matrix

(EFE)

Opportunities

1.
2.
3.
4.
5.
6.
7.

Cosmetic industry tends to be countercyclical

Growing trend of green products
Urban Trendsetters market
Increasing trend of eye make-up
Online markets becoming increasingly popular
Emergence of fashion Industry
Moving to low cost countries to get location
economies
8. Technological advancement
9. Aveda cosmetics found 68% of consumers will be
loyal to a company that has a social and
environmental commitment
10. Going Green (Conservation)

Threats

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Intense Competition
Economic Downturn
Rising Inflation
Natural Catastrophes
Change in consumer preferences abruptly
Hostile Takeover
Customers Switching towards low price products
Large market to operate in
Exchange Rate risk
Increase in commodity Prices
TOTALS

Weight Rating
0.08
0.05
0.08
0.06
0.05
0.03
0.04

3
2
2
3
2
3
4

Weighted
Score
0.24
0.10
0.16
0.18
0.10
0.09
0.16

0.03
0.05

3
4

0.09
0.20

0.03

0.09
Weighted
Score
0.28
0.24
0.06
0.06
0.12
0.06
0.24
0.15
0.12
0.10
2.84

Weight Rating
0.07
0.08
0.03
0.03
0.04
0.03
0.08
0.05
0.04
0.05
1.00

4
3
2
2
3
2
3
3
3
2

Internal Factor Evaluation Matrix

(IFE)

Strengths

1.
2.

Recognized global brand

Extensive Distribution channel (worlds largest direct
seller)
3.
Committed and dedicated workforce - 5.4 million Avon
representative in over 100 countries
4.
Highly responsive to CSR
5.
Manufacturing operations match ISO 14001standards
6.
Successful television advertising campaigns
7.
The Largest Women Foundation
8.
Unique Portfolio
9.
Worlds Largest Micro lender for women
10. Avon own its major manufacturing And distribution
centers

1.

Weaknesses

Avon lagged behind seven of their cosmetic

companies in customer loyalty
2.
Increased in prices of products
3.
High advertising cost
4.
Increase in long term debt
5.
Home Segment experiencing loss
6.
Revenue decreased in North America by 129.4million
in 2008
7.
Lack of control over representatives
8.
Company's global challenges is generating buzz
9.
Does not target urban trend setter
10. Furlough unprofitable operations due to economic

0.08
0.05

3
3

Weighted
Score
0.24
0.15

0.04

0.16

0.05
0.07
0.10
0.03
0.02
0.03
0.03

3
4
4
3
3
3
4

0.15
0.28
0.40
0.09
0.06
0.09
0.12

Weight Rating

0.07

Weighted
Score
0.07

0.06
0.02
0.04
0.05
0.05

2
1
2
1
1

0.12
0.02
0.08
0.05
0.05

0.03
0.10
0.05
0.03

1
2
1
1

0.03
0.20
0.05
0.03

Weight Rating

Competitive Profile Matrix (CPM)

Avon
Critical Success Factors

Revlon

Mary Kay

Weight Rating Score Rating Score Rating Score

Advertising

0.10

0.40

0.20

0.30

Market Penetration

0.08

0.24

0.08

0.16

Customer Service

0.11

0.44

0.33

0.44

Store Locations

0.08

0.24

0.32

0.24

R&D

0.08

0.16

0.16

0.24

Employee Dedication

0.10

0.40

0.10

0.30

Financial Profit

0.07

0.28

0.14

0.21

Customer Loyalty

0.12

0.24

0.36

0.48

Market Share

0.07

0.21

0.21

0.28

Product Quality

0.08

0.16

0.08

0.24

Top Management

0.05

0.15

0.15

0.15

Price Competitiveness

0.06

0.18

0.12

0.18

Totals

1.00

3.10

2.25

3.22

Space Matrix
Internal Analysis:
Financial Position (FP)
Return on Investment (ROI)
Leverage
Liquidity
Working Capital
Cash Flow

Financial Position (FP) Average

4.4

External Analysis:
Stability Position (SP)
Rate of Inflation
Technological Changes
Price Elasticity of Demand
Competitive Pressure
Barriers to Entry into Market

Stability Position (SP) Average

-1
-2
-2
-3
-2

External Analysis:
Industry Position (IP)
Growth Potential
Financial Stability
Ease of Entry into Market
Resource Utilization
Profit Potential

4
4
5
4
5

Internal Analysis:
Competitive Position (CP)
Market Share
Product Quality
Customer Loyalty
Technological know-how
Control over Suppliers and
Distributors

Competitive Position (CP) Average

-2.0

Industry Position (IP) Average

X-axis

1.4

Y-axis

2.0

-3
-3
-2
-2
-2

-2.4

5
3
2
2
5

3.4

BCG Matrix

GRAND Matrix

SWOT Strategies
SO Strategy:
Increase Workforce by online markets becoming more popular. (S3,
O5)
Increase trend of eye makeup by unique portfolio products. (S3, O5)
Manufacturing and distribution more products that are going to be
green. (S10, O10)

ST Strategy:
Decrease Advertising Cost to protect the fashion industry. (W3, O6)
Increase market share by position products to attract urban
trendsetters market. (W9, O3)

WO Strategy:
Make more portfolio to avoid competition from other companies
( S8, T1)
Improving marketing strategies to new and existing consumer
preferences. (S10, S2, T5)

WT Strategy:
Discount Products that are unprofitable due to economic downturn.
(W10, T2)
Improve Experience to operate market for home portfolio. (T8, W5)

The Decision Stage

QSPM
Improved
Marketing
Strategies

1.

Opportunities
Weight
Cosmetic industry tends to be
0.08
countercyclical
2.
Growing trend of green products
0.05
3.
Urban Trendsetters market
0.08
4.
Increasing trend of eye make-up
0.06
5.
Online markets becoming increasingly
0.05
popular
6.
Emergence of fashion Industry
0.03
7.
Moving to low cost countries to get location
0.04
economies
8.
Technological advancement
0.03
9.
Aveda cosmetics found 68% of consumers
0.05
will be loyal to a company that has a social
and environmental commitment
10. Going Green (Conservation)
0.03

Improved
R&D to
introduce
Green
Products
AS
TAS
2
0.16

AS
3

TAS
0.24

2
3
3
2

0.10
0.24
0.18
0.10

4
2
2
2

0.20
0.16
0.12
0.10

3
4

0.09
0.16

2
3

0.06
0.12

2
3

0.06
0.15

3
2

0.09
0.10

0.06

0.12

The Decision Stage QSPM

Threats

Weight

AS

TAS

AS

TAS

1.

Intense Competition

0.07

0.28

0.07

2.

Economic Downturn

0.08

0.16

0.16

3.

Rising Inflation

0.03

0.06

0.06

4.

Natural Catastrophes

0.03

0.09

0.06

5.

Change in consumer preferences abruptly

0.04

0.04

0.08

6.

Hostile Takeover

0.03

0.09

0.06

7.

0.08

0.24

0.16

8.

Customers Switching towards low price

products
Large market to operate in

0.05

0.15

0.10

9.

Exchange Rate risk

0.04

0.12

0.08

0.05

0.10

0.10

10. Increase in commodity Prices

The Decision Stage QSPM

Strengths

Weight

AS

TAS

AS

TAS

1.

Recognized global brand

0.08

0.32

0.16

2.

Extensive Distribution channel (worlds

largest direct seller)

0.05

0.15

0.10

3.

Committed and dedicated workforce - 5.4

million Avon representative in over 100
countries

0.04

0.08

0.08

4.

Highly responsive to CSR

0.05

0.10

0.20

5.

0.07

0.14

0.21

6.

Manufacturing operations match ISO

14001standards
Successful television advertising campaigns

0.10

0.20

0.30

7.

The Largest Women Foundation

0.03

0.09

0.06

8.

Unique Portfolio

0.02

0.06

0.04

9.

Worlds Largest Micro lender for women

0.03

0.09

0.06

10.

Avon own its major manufacturing And

distribution centers

0.03

0.09

0.03

The Decision Stage QSPM

Weaknesses

Weight

AS

TAS

AS

TAS

1.

Avon lagged behind seven of their cosmetic

companies in customer loyalty

0.07

0.28

0.14

2.

Increased in prices of products

0.06

0.18

0.12

3.

High advertising cost

0.02

0.04

0.04

4.

Increase in long term debt

0.04

0.04

0.04

5.

Home Segment experiencing loss

0.05

0.10

0.05

6.

Revenue decreased in North America by

129.4million in 2008

0.05

0.15

0.10

7.

Lack of control over representatives

0.03

0.00

0.06

8.

Company's global challenges is generating

buzz
Does not target urban trend setter

0.10

0.30

0.10

0.05

0.15

0.05

10.

Furlough unprofitable operations due to

economic downturn

0.03

0.06

0.00

TOTALS

9.

5.33

4.10

Financial Ratio
2006

2007

2008

Current Ratio

1.3

1.2

1.2

Quick Ratio

0.7

0.6

0.6

Long Term Debt to Equity

1.5

1.6

2.4

Inventory Turnover

4.0

4.1

3.9

Total Assets Turnover

1.7

1.7

1.8

Accounts Receivable Turnover

13.0

12.9

14.0

Average Collection Period

29.2

30.9

26.1

Gross Profit Margin

0.6

0.6

0.6

Net Profit Margin

0.1

0.1

0.8

Return on Total Assets (ROA)

0.1

0.1

0.1

Return on Equity (ROE)

0.6

0.7

1.3

Conclusion
The strategies that we proposed that of Avon Product Inc.
existing strategies. Internet users are increasing rapidly and it is
essential for an organization such as Avon to be innovative in
order to maximize on the opportunities that can be derived from
internet shopping as well as other market segments. Avon
Product Inc. is moving with the rapid changing of times by
assumption of the community concept; manufacturing products
to convince customers needs, making good marketing decisions
to achieve company objectives bearing in mind the long term
interests of society.