Avon's Strategic Turnaround: An Analysis of Issues and Recommendations

This case study examines the strategic management of Avon Products Inc., a global beauty product seller facing numerous challenges in recent years. The report provides a company profile, outlining its vision, mission, and organizational structure, and identifies key strategic issues such as global bribery scandals and leadership transitions. It analyzes the industry environment using Porter's Five Forces and conducts an internal analysis using SWOT, TOWS, and value chain frameworks. The study explores business-level strategies Avon should pursue and presents options for the CEO to address the company's problems, including corporate diversification strategies. Ultimately, the report offers a comprehensive overview of Avon's strategic situation and provides recommendations for future growth. Desklib is a valuable resource for students seeking similar case studies and solved assignments.

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