Examining the Business Performance of Avon Products: A Strategic Management Analysis

This report examines the business performance of Avon products, analyzes the external and internal environment, and provides strategic recommendations for future growth. It includes a company profile, mission and vision statement, organizational structure, and analysis of strategic issues faced by Avon. The report also includes a SWOT analysis, Porter's Five Forces analysis, and recommendations for business-level and corporate-level strategies.

Running head: STRATEGIC MANAGEMENT
Strategic Management
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Abstract:
This report is aimed to examine the business performance of the Avon products and check the
external as well as the internal analysis of the business. While doing so, the report is aimed to
trace the forces in the industry environment that may affect the strategy choice of the firm
and check the issues present within the operational framework of the firm. Next to this, the
report will provide options to the CEO McCoy in order to fix the issues and portray the
corporate strategy diversification so as to provide better scope to the firm regarding the
performance during future. From the discussion it has been found that Avon is one of the
oldest cosmetics and fashion products producer in the world. The firm has recently faced
various slugs in its operation due to the strategic management issues, however, presently the
firm is trying hard to become where it was three decade ago. From the external and internal
environmental analysis of the firm, it can be seen that it has large scope to enhance its
business in future and with effective strategic management it can earn much higher than as of
now.

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Table of Contents
Introduction:...............................................................................................................................3
Company profile:.......................................................................................................................4
Vision:....................................................................................................................................5
Mission:..................................................................................................................................6
Objective and strategies of the brand:....................................................................................6
Organizational structure:........................................................................................................7
Avon strategic issues:.................................................................................................................8
Avon Product Inc. issues:...........................................................................................................9
Strategic management issues:................................................................................................9
Global bribery issues:...........................................................................................................11
Sheri McCoy and the replacement of Andrea Jung issue:...................................................12
Forces in the industry environment that can change the choice of strategy of Avon:.............13
Porter’s Five Force analysis:....................................................................................................13
Finding from the internal analysis:..........................................................................................17
SWOT analysis:...................................................................................................................17
TOWS matrix:......................................................................................................................18
Value chain analysis:............................................................................................................19
Business-level strategy that Avon should pursue:...................................................................22
Options that CEO McCoy have to try and fix the company:...................................................23
Corporate strategy of diversification used by the Avon:.........................................................24
Conclusion:..............................................................................................................................25
Reference:................................................................................................................................26

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Introduction:
Beauty industry of the 21st century is on rise due to the rise in number of users and
with rise in the number of the demand large number of firms has arisen over the time who are
focused to provide world class service to the user. Among large number of brands, Avon is
one of the most renowned one who are known as the powerhouse in the beauty industry sale
and most interestingly arguably the firm is the largest within the beauty industry. During
1886 visionary entrepreneur David H. McConnell had the extraordinary idea of empowering
women with the opportunity to earn money in order to gain financial independence and from
there Avon came into existence, which is known a brand that has its presence in more than
100 countries and possess more than six million representatives (Chaudhri & Jain, 2014). As
per the latest statistics it can be seen that Avon has more than 6.2 million independent
representative all over the operational regions who are making the firm grow year on year
(OnlineSelfAppointments, 2018). product line of Avon not only include beauty products in
addition to this there is fashion and home products that come with the well-recognized brand
name such as Anew, Avon colour, Avon Naturals, Mark, Advance Techniques, Skin-So-Soft
and Ticker AVP. Though the firm was established during 1886 with a view to empower
women, however, it gradually become one of the main source of women employment and in
the New York. During initial days Avon was not the brand which it is now, rather the founder
of the business was a simple door to door paper seller in the city (Sippel, 2015). He failed to
entice the customers to buy papers from him and thus he came up with the idea to provide
free gifts with the paper and it worked. McConnell used to provide perfumes to his daily
customers and the plan become so successful that he had to hire 13 representative who used
to serve paper and perfumes for the McConnell. This set the launching ground of the Avon as
and later in 1920 the brand was actually introduced with the daily products (Ujhelyi et al.,
2018). In this regard it is important to mention that the name Avon was not came from the

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blue rather it was the name of the country side from where McConnell belonged and where
William Shakespeare’s house was also located. During the next 9 year from 1920, the brand
become so popular that Avon came as the firm that used to sell low cost daily usage products
ranging from beauty products to tooth paste (Moura, 2015). Over the years of expansion has
enhanced the business of Avon and vie the end of 1929 the brand had a well-established
service chain within the 48 stated of US (Mohammadzadeh, 2015).
This report is aimed to examine the business performance of the Avon
products and check the external as well as the internal analysis of the business. While doing
so, the report is aimed to trace the forces in the industry environment that may affect the
strategy choice of the firm and check the issues present within the operational framework of
the firm. Next to this, the report will provide options to the CEO McCoy in order to fix the
issues and portray the corporate strategy diversification so as to provide better scope to the
firm regarding the performance during future. In order to conclude the report it will provide a
summarised overview of the finding and deliver strategic recommendation for overall growth
of the business.
Company profile:
Avon Product Inc. founded in 1886 by the David H. McConnell is one of the largest
beauty product seller in the world. Though as per the market research done by the brand, it is
often argued that Avon is the largest in the market, however, there is considerate amount of
doubt regarding the same. Presently Avon operates in more than 100 countries and there are
more than 6.2 million of representatives who said the firm to operate smoothly with different
region of the world market (Breidenbach & Mille, 2016). Avon focus to remain a world
brand in order to entice more amount of consumers and direct sales is the main marketing
channel of the brand, however, sales through the catalogue, electronic marketing and bundle
selling are the other sales strategies utilized by the firm. As the product of sales the brand has

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various beauty products such as apparel, cosmetics, fragrance and grooming products. In
addition to this, the brand is well known for the sales of furnishing products as well as home
good that makes it stand out from the crowd. Large amount of product diversification is one
of the unique selling proposition of the brand, however, door to door selling through the
direct selling channel is one of the main strategy of the brand to enhance their revenue
through getting more number of customers (Garrison et al., 2016). Apart from being a
successful brand in the beauty products, Avon is popular due to its ability to employ more
number of employers other than any brand and additionally women empowering motive of
the brand has enabled it to become one of the widely accepted brand around the world
(Duggan et al., 2016). Out of the total number of representatives, Avon has large share of
women representative that makes it one of the women based firm. Apart from this as per the
latest statistics, subsidiaries of Avon has almost 50000 employees and out of which 6000 are
operational in US and the other in different countries (Ranade et al., 2015). As per the annual
report of 2017 it can be seen that there have been employment of 25,000 employees in
different center of Avon’s production line that makes it one of the largest employer in US as
well as in different operational zone of the firm (Bansal et al., 2015).
Vision:
Avon is one of the largest beauty product producer in the world that has been
operating since a century in the industry slowly transforming itself from cheap home products
to the sophisticated beauty products. The brand is aimed to provide best in class products to
their consumers so as to satisfy the demand of each consumers effectively (Rubinson, 2016).
in addition to this it can be seen that the brand has well defined vision statement that define
“To be the company that best understands and satisfies the product, service and self-
fulfillment needs of women - globally.” it depicts that the brand wants to become the largest

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appeal producer in the coming years and develop such products that satisfy the demand of the
each consumers with constant development of the production line.
Mission:
Objective and strategies of the brand:
Mission of a firm describes the necessity and the requirement of the existence of the
firm and depicts the operation of the firm towards the society. As far as the mission statement
of the Avon is concerned, it can be seen that it entails the beauty portfolio of the firm and the
uniqueness within the operational framework of the firm. The brand depends upon the
innovation, beauty and the value creation so as to entice as much customers as possible so as
to enhance the revenue of the brand (Genh & Fang, 2016). Secondly it can be seen that the
one of the main mission of Avon is to become the women’s favorite brand through the
continuous exposure to the world market and development of products depending upon the
market demand. Another mission of the brand is to become the premier direct selling brand
so as to enhance the revenue while reduce the cost of operation. Without operating dedicated
stores, it can be seen that the operational cost of the firm is low that enhance the firm’s
profitability over the years (Azmi et al., 2016). In addition to this, it can be seen that the firm
has largest numbers of representative after Amway and thus the firm wants to surpass the
same within the coming decade making it one of the largest beauty product producing brand.
Avon with a focus to become one of the best destination store of the women of different age
group that offers convenience of multiple channel and brands and sourcing high quality
shopping experience wants to make strong relationship with the customers. In addition to
this, it can also been seen that Avon has mission to empower women around the world
through employing them, producing product for them and serving them because the brand
was initially developed with the view to empower women through providing them a scope to
earn money (Nanda et al., 2016).

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Original mission statement of the firm depicts that "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.” From this, it can be seen that the brand has aimed to develop their business over
the coming years so as to provide better scope to enhance their performance and empower
more number of women in different region of the world (Racolta-Paina & Luncasu, 2014).
Through enhancement of the customer base and enhance of the direct sales channel the brand
always focus on the operational performance enhancement of the same. Avon over the years
has considered large number of strategies to entice different group of consumers and it has
strengthen the brand’s mission statement that depicts it rely on the innovation, development
and the change (Schueller & Romanowski, 2016). Thus from the mission point of view of the
Avon, it can be seen that the firm has a well stablished mission statement that not only focus
on the development of the revenue rather focus on the overall development of the operational
and the structural and the substantial performance of the brand.
Organizational structure:
As per the information 2011, it can be seen that the Avon Company has Sheri McCoy as its
CEO and the other heads of the firm is operational under the same. Being the sub ordinate
they operate under the CEO and answerable to them. Avon has Executive Vice President who
is Chief Financial Officer and Chief Operating Officer (Annual reports, 2018). Next, there is
Senior Vice President who are the Chief Ethics & Compliance Officer and General Counsel.
There is a separate body within the Avon’s organizational structure for the Global President
who looks after the business from the world perspective. Avon is well for their well-
established Human Resources & Chief Human Resources Officer who looks after the human
resources within the outside the firm in order to operate as per the local laws (People, 2018).

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Figure 1: Organisational structure of Avon
Source: (People, 2018)
Avon strategic issues:
Business environment around the world is becoming complex in nature over the years
and it can be seen that large number of operating firm within the world arena has becoming it
more complex. Apart from this ever changing customer demand has made the situation worse
where the firms are trying hard to cope up with the customer demand with the effective
business strategy (Sahota, 2014). Employees and the entrepreneur, both are required to make
sure that the business must have well established customer service that can provide aid to the
customers in case of any requirement arise. As it can be seen in case of the beautification
industry, the market is highly competitive in nature where more than eight large firms
operate. As the front line firms in the sector, Mary Kay, L’Oréal, Amway, P&G, Nivea can
be considered against which Avon is competing in the market (Investor.avoncompany.com.
2018). However, being one of the larder beauty product producer in the market it need to
have well established and effective market, business and supply chain strategy. Considering

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the case of the Avon, it can be seen that the firm during last one decade have been suffering
from the strategic issues inside the operational framework of the firm as well from the
external front as well. As it can be seen from the brand’s performance, there have been fall in
the share price of the firm by 50% post the resignation of the Andrea Jung from the post of
CEO during 2011 (Umemura & Slater, 2017). The firm is presently struggling to recover
from the poor strategic management that has led it global bribery investigation and CEO
changeover within a short span of time. Apart form this, it can be seen that frequent
restricting of the brand has reduced the effectiveness of the brand. as it can be seen that the
brand has gone through a restructuring during 2005, when 30% of managers were chopped
resulting in 15 layers of management to chopped down to 8 that has resulted in fall in the
efficiency of the management (Ismail, 2018). Post this, during 2009, the firm has went
through another restructuring program that has cause demoralisation and uncertainty among
the leadership of the firm. in other instance it can be seen that post the failed restrung
program of 2009, the brand during next year brought in another ambitious five year plan with
the name ‘Road to $20 billion’, however, surprising the firm failed here too causing cutting
off fading for the plan in further instances (Ismail, 2018). Thus, from here it can be seen that
the Avon has pure management misguidance and the issue is persistence since decades.
Avon Product Inc. issues:
Strategic management issues:
Avon is attempting to recoup from poor administration techniques that prompted a
CEO changeover. Avon has been confronting heaps of issue because of the crisscross of
position with the specialists. In December 2011, the Executive Chairman and CEO of Avon,
Andrea June reported that she would advance down from her situation when her substitution
was found. As indicated by the Fortune detailed that "The Company had amazed the Street,
missing investigators' evaluations, and revealing that it would never again hit its income

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development and working edge focuses for 2011." (Howitt, 2012). Thus, the administration
upset caused the beauty product producer’s image to decline. The offer cost had diminished
by in excess of 50 percent and Avon confronted the risk of takeover by its rivals. A private
held Coty, dominant part claimed by German holding organization Joh. A. Benckiser GmbH,
made a spontaneous offer for Avon toward the finish of March 2012 for $10 billion (Ramli,
2017).
Under Jung administration, Avon had encountered awesome development and
extension in the early long stretches of her execution. As in June 2004, Avon's stock cost rose
to $46 per share and the benefit expanded from $287 million of every 1999 to $846 million of
every 2004 (Aoun & Tournois, 2015). Also, Avon grasped global markets and non-US which
contributed up to 70% of offers. The satisfaction was not long last because of the
administration blunder of Jung and rising of potential contenders which seeking after Avon's
client, for example, P&G. Numerous examiners censured that Jung was removing Avon from
what it used to be (Sun, 2016). The organization did not have clear characterizes of vital
vision which befuddled the representative of the organization's destinations. Amid Jung
initiative years, Avon received a motto "The Company for Women," which blurred far from
its long haul advertisement crusade "Ding Dong, Avon calling." The old slogan stressed the
immediate offering procedure however Jung did not grasp the immediate offering system as
she was taking Avon to new field which is retail. Avon came to the best and actualized a half-
billion-dollar rebuilding, scaling down 30% of supervisors and chopping its 15 layers down
to 8 (Wang, 2015). This rebuilding made a spinning entryway at Avon that left
representatives unsettled and perplexity around Avon's key course. Further, Jung began
taking a gander at acquisitions as an approach to restart development. Avon had gained Silda,
a silver adornments coordinate merchant for $650 million (Griffin et al., 2016). It was a
terrible move to get Silda and Avon needed to record add up to $263 million due to dove in

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the silver cost in the product advertise in 2011 (Olavarrieta et al., 2015). Additionally, Avon
items in global markets, Brazil was likewise attempting to contend with a solid provincial
brand, Natura. The issue happened because of poor administration in items bundling and
conveyance. The items were conveyed late, arrange went unfilled and shipment to the agent
postponed. This issue hauled Avon's deal to drop around 8 percent. The circumstance turns
out to be more terrible in China when Avon was observed to be accountable for infringement
of the Foreign Corrupt Practices Act (FCPA) (Sutter et al., 2015).
To sum up, obviously every one of those issues rise in light of administration stumble
under the authority of Andrea Jung. Avon endured enormous misfortunes in both nearby and
global markets and item mark declined. Number of investors weight Avon to have fast
restoration of the organization. At last, Avon's board reported in December 2011 that Jung
would venture down as CEO with two years contract to remain as official executive.
Global bribery issues:
Avon went into China advertise in 1990 and the organization adequately sold its
splendour items because of appeal in the mass market. Sadly, the Chinese government
restricted the immediate offering in 1998 which constrained Avon to open the Beauty
Boutique as required. Avon got a permit to proceed coordinate offering in China in 2006 and
it ran its task by means of cross breed mode specifically keeping up offering in boutique in
addition to coordinate offering through delegates. As indicated by Wahhabi (2014), a senior
essayist of Fortune revealed that Jung had cozy association with the Chinese government
officer which humors her business, Avon to offer the beauty items effectively in the confined
commercial center (Mendini et al., 2018). In 2008 Jung got an informant that revealed her
mystery influence to the Chinese government with a specific end goal to seek after an
immediate offering in China. The assertion of infringement of Foreign Corrupt Practice Act
(FCPA) which drove Avon to start an inward examination by SEC that cost extensive

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measure to the store. It was accounted that Avon spent more than $225 million on lawful
expense and expert charge identified with the FCPA request and consistence surveys
(OnlineSelfAppointments, 2018). The income dove from 35% to 145% in China activity and
the notoriety of the Avon left at look down (Howitt, 2012). At last, Jung left Avon at
wounded as it endured extraordinary budgetary lost to experience the interior examination
and furthermore caused the organization items' image at awful notoriety. Concurring Avon
yearly report 2012, organization's income diminished by 1% as the final quarter of 2012. In
addition, Avon misfortune from proceeding with activity in the final quarter of 2012 was sum
up to $160 million (Kamarohim et al., 2016).
Sheri McCoy and the replacement of Andrea Jung issue:
At the point when Seri McCoy, the new CEO of Avon, assumed control over the
position, numerous public perspectives emerged as though she is the correct counterpart for
the test? Indeed, the organization Avon had endured serious misfortunes under the initiative
of previous CEO, Andrea Jung, subsequently Seri McCoy came to settle the organization is
an awesome test for her. McCoy was really attempting to turnaround the business by cutting
back and forsaking some of outside business sectors to cut the expenses. The rebuilding
design activity with new corporate procedure which is transnational system to keep up the
institutionalization of items and to upgrade the nearby responsiveness would assist Avon with
enhancing deals and execution. At this brief timeframe Avon would not have the capacity to
recuperate promptly since the cost-cutting activity by McCoy would have numerous things to
be re-established. For moment, organization promotion crusade and taking part in internet
business caused spending for $125 million to overhaul the product
(Investir.avoncompany.com, 2018). Thus, McCoy is experiencing serious difficulties to re-
establish the organization maintainability. Hrebiniak included that McCoy needs a few times
to turnaround the business since she has no involvement in coordinate offering and it could

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be enormous test after the chaos made by Jung's dubious vital administration of the
organization. Absolutely, McCoy is confronting the overwhelming arrangements of
difficulties keeping in mind the end goal to re-establish Avon to what it used to be (Sippel,
2015).
Forces in the industry environment that can change the choice of strategy of Avon:
Porter’s Five Force analysis:
In order to perform an external environment analysis of the Avon, in this section of
the report Porter’s Five Force analysis will be used. Though this model, the report will be
able to portray the bargaining power of the firm in the market with their product and the
control of the buyers on the purchasing of the same will be analysed.
Threat of New entrants: Moderate
Determining the threats from the new entrants is essential factor because it can
threaten the existence of the present market player. New entrants are threat for the existing
compactors because the new entrant may have potential to become the market leader if it is
allowed to enter into the market and capture substantial amount of market share from the
existing firms. Moreover, it can force the existing firm to exit the market through effective
pricing strategy and good strategic management. Contrary to this, if the threat from the new
entrant can be judged, then it will allow the producers to focus on their performance and
enhance the same leading to better productivity of the firm (Breidenbach & Mille, 2016).
Beauty product and cosmetic market is one of the highly competitive market where
limited number of firms operate and entrance of one new firm will lead to fall in the market
share of the present market players. Any such industry is vulnerable in front of the entrant
and when it comes to the cosmetics and beauty product market, then the level of threat for the
same become aggravated by a large scale. well stablished market players has well developed
retail establishment and the it help them to achieve economies of scale, however, this market

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has lucrative profit preposition and the well established customer demand that attract a lot of
new entrant to enter the market.
Though the entrance of the new market player in the beauty and cosmetic product
market brings in innovation, development of the present products, yet it put a large amount of
pressure on the production line of the present market. Thus, in case of the Avon, if there is
new entrant in the market, then it will reduce the market share of the Avon and lead it to lose
revenue (Bansal et al., 2016). On the other hand, it will force the firm to enhance their
product development and bring in new innovative product line that can entice the customers
positively. It is true that, new product will not only bring in new customers for the Avon,
additionally it will aid the firm to retain their customer rather than losing it to the new entrant.
Threat from substitute products: High
Substitution of the product is one of the main reason for the failure of the firms and in
case of the firms, it can be seen that a shift in the demand of the product from the customer
can cause a high amount of impact on the performance, profitability of the firm. This force is
threating for the brands like Avon, where the buyers can swiftly and easily shift from one
product to another one in case of attractive product specification, prices or in case of better
quality too (Ranade et al., 2015). Brand loyalty, brand preference in the market of the
cosmetics is very limited that makes the market one of the highly volatile market. substitute
of the products in the cosmetics and beauty product market can come in the form of the
product specification, price, product quality, variety of products available from the brand and
the allied services and this determine the scope and probable magnitude of the product
substitution in case of the beauty and cosmetic product.
Considering the scale and the probability of the product change in the market where
Avon operate, it can be state that threat of the product substitute is very high and the wide
availability of the alternative products in the market had made it more prominent in nature.

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Competitors like Olay, Mary Kay, P&G and others possess a high threat of substitution in
front of the Avon because these firms also have well developed product line that can serve for
the different requirement of different age group of user. On the other hand, price being one of
the main instrument to entice the market demand, it can be seen that firm present in the
market has the potential to snatch consumers from the Avon making the threat of substitution
high in front of the brand high. However, it is also true that Avon also possess threat to the
other brand as well with the effective market range of products and innovative and efficient
product line.
Bargaining power of suppliers: Low
Bargaining power of the supplier determines the market control of a brand and if it’s
considerably high, then it can be said that the market is under control of the said brand. There
are various factors that determine the bargaining power of the suppliers and when it comes to
the beauty and cosmetic product, then number of market players is one of the crucial factors
that alter the market power of the brands. In presence of the less number of suppliers, it can
be seen that bargaining power of the suppliers is higher and if the large number is
comparatively higher, then the bargaining power of the same become lower (Parsi, 2016). In
case of the beauty and the cosmetic products, it can be seen that the market is oligopoly in
nature and the price rivalry is high among the market players making the bargaining power
low. Almost all the firms of the cosmetic and beauty product are dependent upon the large
number of suppliers and market product is diverse in nature that depicts less amount of
bargaining power of the brand in the market.
When it comes to the Avon, then it can be seen that the firm tackle with the
bargaining power of the supplier through dedicated suppliers and the effective pricing policy
that deepens the trust and the performance of the firm. One of the main lesson learnt by the
firm from the brands like Walmart that product diversification is important for the brand in

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order to have better bargaining power because it brings in different customers to the brand
allowing the overall revenue to go higher. In addition to this with the implementation of the
Strategic Sourcing Initiative (SSI) from the brand has aided it to shift from its dependence
from the domestic supplier to the foreign supplier who can supply low price products to the
brand which are same in quality. Through this type of the effective and innovative ideas, it
can be seen that the brand could have enjoyed large amount bargaining power, however it is
low due to the present market structure of the beauty and cosmetic industry.
Bargaining power of buyers: Moderate
Buyers are the end user of the product developed by the different brand and it can be
seen that bargaining power of the buyers is one of the determinant force of the business. If
there is higher number of buyers, then the bargaining power will be less, however, if the
number of buyer is low, then it will showcase higher bargaining power. Considering the
beauty and the cosmetic market, it can be seen that the market has large number of population
who are willing to purchase these products that reduce the bargaining power of the same
(Ashraf et al., 2015). However, in this regard it is also important to remember that,
availability of the product substation, price discrimination, and product variation playas
crucial role to determine the overall level of the buyers bargaining power.
as it can be seen from the case of Avon there are large number of buyers, however,
there is high production substitution, threat from new entrant is moderate and the price of the
product like on the higher side, this the bargaining power of the firm is higher.
Rivalry among competitors: high
Considering the number of firms operating in the beauty and cosmetic product line,
there is large amount of players and the market is highly competitive in nature. Every firm
wants to enjoy market share of the other. Numerous contenders existing in the beauty product
business causes the contention high and this contention exhibit both in the local as well as the

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foreign markets. Aggressive competition increments when a firm is tested by a contender's
activities or when an organization perceives a chance to enhance its market position (Parsi,
2016). The grouping of organizations making beauty products is solid particularly in nations
where there is a high conflict among existing firms. Commonly, firms look for to separate
their items from rival's contributions in ways in which the organizations have an upper hand,
for example, item separation. Avon Products, Inc. works in an exceptionally aggressive
Personal Products industry.
Avon business development rate is low. This is expected to the various contenders,
for example, Argonne and Mary Kay to enjoy large amount of market share; Thus, as far as
the external analysis is concerned, it can be seen that there is large amount of threat in front
of the firm from the product substitution, low bargaining power, where as consumers possess
moderate amount of bargaining power.
Finding from the internal analysis:
In order to trace the internal environmental analysis of the Avon group this report will
utilise the SWOT analysis that will showcase the Strength, Weakness, Opportunity and
Threat of the firm (Ogasavara et al., 2016). In order trace the suitable strategy mix that Avon
should pursue can be strafed through the value chain analysis of the firm. It will depict the
effective strategies that the firm need to consider for the future growth.
SWOT analysis:
Strength:
Avon being one of the oldest cosmetics and beauty product producer is well known
among the population. In order to have exposure the brand has maintained strong brand
image and it is still one of the largest direct selling firm in the world that has provided it
callas operational strategy. Board of Directors of the Avon are experienced as well that has
enabled the firm to operate as per the requirement of the customer.

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Weakness:
Lack of innovative technologies is one of the main weakness of the firm. As it can be
seen from the operational strategy of the firm for the last two decades, it is focused on the
high end beauty products which are not consumable for all reducing the revenue of the firm
by a large amount. Poor focusing on the product line has impacted on the performance of the
firm and now it has revenue figure just above 5 billion dollars (Engvall, 2015).
Opportunity:
There is ample scope in front of the Avon group to enhance their performance in the
coming years mitigating the strategic issues faced by the branch during the recent years. One
of the main opportunity in front of the firm is to embrace technological advantage that will
keep Avon one step ahead of its rivals. New product innovation is another great opportunity
in front of the firm and it would be better if the firm goes for the green products which are
organic in nature and free of chemical providing boost to the Unique Selling Proposition of
the firm.
Threat:
Avon operate in the beauty and cosmetics industry where large amount of threat lie
within the both internal as well as the external environment of the firm. As it can be seen that
brand operates depending upon the direct selling strategy and during the 21st century it is
becoming obsolete. People is running out of time and they simply do not care to listen about
the features of a beauty products (Ostapenko, 2015). Thus, there is a threat for the firm if it
continues with the same principal.
TOWS matrix:
STRENGTH WEAKNESS
 Good brand image
 One of the largest
firm with direct
 There is lack of
innovation within
firm from the

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selling strategy
 Experience Board of
Directors
technological front
 Product line is not
efficient
 Focus is constraint to
producing high end
beauty product only
OPPORTUNITIES SO WO
 Embrace technology
and allow the firm to
grow
 Eco friendly and new
product innovation
 Producing a strong
image of the brand
with the help of
innovative line of
product
 Maximising direct
selling by the mean
of intendent and
other modern
technologies so as to
enhance the revenue
of the firm
 Enhance innovative
product through
utilising
technological
advancement
 Enhance awareness
of efforts in order to
enhance the revenue
of the firm
THREATS ST WT
1. Competitive
environment of
operation
2. Product substitution
 Producing
competitive
advantage in the
market with strong
brand image and
prioritising on direct
selling
 Experienced board of
directs need to take
effective decision
with the help of
technological tools
 Produce unique and
innovative product
with the help of
competitive
advantage
 Introducing new line
of product while
overlooking the
problem within the
present line of
production

20STRATEGIC MANAGEMENT
Value chain analysis:
Figure 2: Value chain for Avon
Source: (Dess et al., 2014)
General administration:
Avon though stores all of its outputs in firms, yet it do not possess retail outlasts and
depends upon the direct selling rather. Warehouse and the distribution centre are there only to
act as the distribution centre of the products which will be dispatched to the agents or to the
retail shops. Thus, in case of infrastructure, the firm suffers a lot and newly emerged case of
bribery has forced the brand to close its operation in china (Yang et al., 2017).
Human resource management:
Though Avon was introduced century ago with the aim to empower woman, however,
during the recent days, it has been observed that the firm has failed to do the same. Over the
last two decade, due to the bribery and the fall in revenue, there has been considerable
amount of debate regarding the maintenance of the human rights. More than 1500 employee
swore reduced to adjust the cost expenditure and 3 top executives were dismissed in order to
overcome the shortcoming of the firm (Emmett & Jones, 2015).
Technological development:

21STRATEGIC MANAGEMENT
Though Avon is one of the oldest operating firm in the beauty and cosmetics
production industry, yet, it can be seen that the firm sufficiently lags in case of the
technological development. It is highly recommended for the firm to move from the present
direct selling strategy to e-marketing strategy so as to bring in efficiency in sales as well as
enhance sales figure too by the means of higher exposure.
Procurement:
Being alleged by the bribery during the recent years in china so as to allow the firm to
operate in that region, it can be argued that the firm is nowhere to procure other firms and
enhance its business different regions of operations.
In this section primary activities of Avon will be depicted which are divided into
distinct activities on the particular industry.
Inbound logistics:
With the effective position of the store housed Avon focus on minimising the
shipping time of products and in addition to this Just-in-time (JIT) has been developed so as
to enhance the perform the inbound logistics (Johnson et al., 2008).
Operations:
Avon is based on the direct sales strategy and it does not have any dedicated stores.
Thus, it focus on effective plant operation in order to minimise the cost of operation by
efficient workflow design and efficient plant layout.
Outbound logistics:
In order to make the delivery quick and effective towards the store and the
representative, outbound logistics is focused to transport goods at lowest time while
minimising the damage. In addition to this, goods are distributed in lot sizes so as to minimise
the cost of transportation from the warehouse to stores and representative (Luthans & Doh,
2018).

22STRATEGIC MANAGEMENT
Marketing and sales:
One of the strategic sector where Avon excel is marketing and sales. Depending upon
the direct sales strategy and extensive advertising, the brand reach to most of its customers
and generate prospect buyers. Through proper identification of the targeted audience the
brand entice the overall market demand through effective advertising strategies and sales
representative are trained in such a way that they can influence the consumers so as to the
buy beauty products from Avon (Baker, 2014). Not only through media marketing, in
addition to this, Avon is slowly utilising the social network as well as the online marketing to
reach large number of buyers around the world.
Service:
Avon is focused to provide their customers best in class because it is one of the ways
to stand out from the crowd. In addition to this, it can also been seen that experienced team of
executive is available 24 x 7 to provide support service to the end user as well as the retailers
and direct sales agent.
Business-level strategy that Avon should pursue:
As per the Porter’s finding, there are three generic business strategy that a firm can
utilise in order to overcome the advantages of the rivals through gaining competitive
advantage. These strategies are gaining industry wide product differentiation, cost leadership
within the industry, Focus on particular segment where the firm lags compared to its peers.
Figure 3: Porter’s business-level strategy for Avon

23STRATEGIC MANAGEMENT
Source: (Dess et al., 2014)
Product differentiation:
From the porter’s five force model and the SWOT analysis, it can be seen that Avon
has limited amount of product differentiation which is only focused to the high end users who
are agreed to pay premium price for the premium quality product produced by the firm.
Contrary to this, peers firm of Avon has established wide range of products for different
consumers. Thus, it is primary objective of the Avon to establish differentiated product line
that attract different consumers (Stewart et al., 2018). In addition to this, establishing green
line of products which are organic in nature is required to bring in that can enhance the
performance of the brand.
Cost leadership:
Gaining cost leadership is essential for a brand to success in its business endeavour. It
will enhance the acceptance of the brand to wide range of consumer around the different
operating zone. Moreover, it will guide the firm to gain sustainability to enhance revenue and
higher number of sales. As the strategy to gain cost leadership, the firm need to look into the
cost burden of the firm and reduce the price of the factors where it induce much amount of
cost.
Focus:
Segment focus is required for the firm in order have better economic performance as
well as financial performance. As of now, the firm need to bring in transparency in its
operation a supply chain in order to overcome the issues of bribery (Ginter et al., 2018).
Moreover, it is required by the firm need to focus on its technological front so as to bring in
up gradation of specification of the products and in corporate green line of product for better
environmental sustainability as well as future operational sustainability of the firm.
Options that CEO McCoy have to try and fix the company:

24STRATEGIC MANAGEMENT
Considering the given scenario of the firm and the CEO McCoy following options
need to be fixed:
Market penetration:
Enhanced market penetration in different areas of the world is the ultimate option in
front of the Avon CEO McCoy because it can enhance the deteriorating performance of the
firm. as it can be seen from the given case study is that the revenue figures of the firm is
deteriorating since the last decades, higher market penetration will allow the firm to operate
with better exposure leading to rise in the revenue for the firm. on the other, exposure through
market penetration will allow the firm to have better scope to enhance the share price
because, post China bribery case, share price of the firm has been slashed to half causing fall
in the earning of the stakeholders as well as the relation between the firm and stakeholder has
also got reduced.
Eco-friendly products:
Most of the competitive brands of the Avon has introduced their line of eco friendly
and organic product. Thus, it is of high importance to bring in eco friendly product and the
organic line of product that will allow the firm to gain much amount of market share who are
concerned about the products being used. Demand for the green products from the Avon is
very viable because distributors as well as consumers are becoming more focused about the
protection of the environment through creating demand for the products which are developed
by the green theme of the brand that force the CEO of the brand to provide on the same with
immediate effect. These are effective, free of chemicals and organic in nature thus could aid
the firm to enhance their operation through higher number of sales.
Corporate strategy of diversification used by the Avon:
As the corporate strategy of diversification of the Avon it can be seen from the case
study that the brand depends upon the three strategic diversification which are direct selling,

25STRATEGIC MANAGEMENT
women empowerment and expansion of the firm in other industries. First two of the strategies
of the firm represent the concentric diversification strategy, where as the next on represent
the conglomerate diversification (Yang, 2017). Through the direct sales channel and women
empowerment model it has enhanced the employment as well as scaled up the sales value of
the brand. Thus bundling has allowed the firm to operate as per the requirement of the market
and lead to rise in the revenue of the same.
On the other hand, with the rise in the expansion in different region around the world,
the brand has tried to focus on the product enhancement and the rise in their revenue through
capturing foreign market and controlling the cosmetic industry on the foreign land.
Additionally, it also has controlled the market by the purchasing out the foreign firms who
are comparably small and has limited market share in order to diversify their business
strategy.
Conclusion:
From the above discussion it has been found that Avon is one of the oldest cosmetics
and fashion products producer in the world. The firm has recently faced various slugs in its
operation due to the strategic management issues, however, presently the firm is trying hard
to become where it was three decade ago. From the external and internal environmental
analysis of the firm, it can be seen that it has large scope to enhance its business in future and
with effective strategic management it can earn much higher than as of now.

26STRATEGIC MANAGEMENT
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