Strategic Analysis of Avon: Opportunities, Threats, and Strategies

This report provides a comprehensive strategic analysis of Avon, a prominent direct-selling beauty product company. It begins with an introduction to strategic management and its application to Avon. The analysis includes a PESTLE analysis to assess political, economic, social, technological, legal, and environmental factors impacting Avon, followed by an examination of opportunities and threats. A SWOT analysis evaluates Avon's strengths and weaknesses. The report also applies the VRIN framework to analyze resources and capabilities, and Porter's Five Forces model to assess industry competitiveness. The report then discusses Avon's generic strategies, including cost leadership, differentiation, and focus strategies. Finally, it explores growth strategies using the Ansoff Matrix, including market penetration, market development, product development, and diversification. The report concludes with a summary of the findings and a list of references.

Running head: STRATEGIC MANAGEMENT
Strategic Management
Name of the Student:
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Author’s Note:

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Table of Contents
1.0 Introduction................................................................................................................................3
2.0 Opportunities and Threats through PESTLE.............................................................................3
2.1 Opportunity of Avon in Industry...........................................................................................5
2.2 Threats of Avon in Industry...................................................................................................6
3.0 SWOT Analysis for Strength and Weakness.............................................................................7
4.0 Resource and Capability Analysis through VRIN.....................................................................8
5.0 Industry Competitiveness through Porter's Five Forces Model.................................................9
5.1 Threat of New Entrants..........................................................................................................9
5.2 Threats of Substitutes..........................................................................................................10
5.3 Competitive Rivalry.............................................................................................................10
5.4 Bargaining Power of Suppliers............................................................................................10
5.5 Bargaining Power of Buyers................................................................................................11
6.0 Generic Strategic.....................................................................................................................12
6.1 Cost Leadership...................................................................................................................12
6.2 Differentiation......................................................................................................................12
6.3 Focus Strategy.....................................................................................................................13
7.0 Growth Strategies....................................................................................................................14
7.1 Market Penetration...............................................................................................................14
7.2 Market development............................................................................................................14

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7.3 Product Development..........................................................................................................14
7.4 Diversification.....................................................................................................................15
8.0 Conclusion...............................................................................................................................15
Reference List................................................................................................................................16

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1.0 Introduction
Strategic management is related to development of major goals and objectives of an
organization through assessing its external and internal markets (Daspit et al. 2017). This study
will select Avon Cosmetic Company for analyzing its strategic marketing. It is the most popular
direct selling beauty product company in the world (Avoncompany.com 2017). The study will
assess the opportunities and threats of Avon through PESTLE analysis and assess its strength and
weakness through SWOT analysis. Furthermore, the study will also analyze the industry
attractiveness through porter’s five force analysis. The study will discuss the generic strategy of
the Avon for industry competitiveness. Apart from that, Avon should discuss the Ansoff Matrix
for demonstrating the growth option of the organization.
2.0 Opportunities and Threats through PESTLE
PESTLE ANALYSIS OF AVON
POLITICAL
FACTOR
 Political stability of the developed country leads to business
growth
 The levels of corruption in some developing countries hamper the
growth of business
 Free trade agreement policy can help in international expansion of
Avon
 Industrial safety regulation regarding beauty products may hamper
business
 Political support for industry growth often foster business growth

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of Avon
ECONOMIC
FACTOR
 Developed and growing economic condition of developed and
developing countries enhances the profit potentiality of Avon
 Frequent fluctuation in inflation rate in global market may hamper
business
 Currency fluctuation among international countries often hamper
the profit level the business
 Reduced labor cost in developing countries reduce overall business
cost
 Growing economic condition often reduce the interest rate of the
bank loans
SOCIAL FACTOR  Sophisticated lifestyle of people enhance the scope of beauty
products
 Growing trends of the women towards being beautiful has
enhanced business scope of Avon’s beauty products
 Increasing disposable income has enhanced the spending power of
the people
 Growing leisure interest of the people also increase business
growth
 Changing consumer demands and needs often hamper business
progress
TECHNOLOGICAL
FACTOR
 Advanced technology usage facilitates in smooth production of
Avon’s products

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 Incorporation of advanced digital and social media facilitate in
effective brand promotion
LEGAL FACTOR  Highest tax rate of USA can increase overall business cost
 Product leveling laws imposed by Government can hamper
business growth
 Reduced tax rate of developing countries can enhance business
growth
 Health and Safety
ENVIRONMENTAL
FACTOR
 Waste management laws often hamper the business growth
personal product industry
 Environmental protection laws often hamper business growth
Table 1: PESTLE analysis of Avon
(Source: Bettis et al. 2016)
2.1 Opportunity of Avon in Industry
 Stable political condition of the developed global countries leads to stable government
rules and regulations. It leads to smooth business operation of Avon in global countries.
 Free trade agreement policy of USA has increased the scope of business expansion of
Avon in International markets
 Government in both developed and developing countries are highly inclined towards
supporting businesses organization towards growing industrialization. Higher level of
government support helps in business growth (Chen, Delmas and Lieberman 2015).
 Developed economic condition of the developed condition has increased the return on
investment of Avon

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 Reduced labor cost of employees helps in reducing overall organizational cost
 Growing economic condition can reduce the interest rate of the banks, which helps Avon
to avail business loans at much lower interest rate
 Increasing disposable income and growing trends of women towards being beautiful has
increased Avon’s beauty products (Durand, Grant and Madsen 2017)
 Advanced technology has enhanced the effectiveness of business process and promotion
 Less business tax rate increases the opportunity of Avon towards reducing overall
business cost
2.2 Threats of Avon in Industry
 The levels of corruption in some developing countries hamper the business growth of
Avon
 Frequent fluctuation in inflation rate and currency fluctuation among the international
countries impose threats on business (Vogel and Güttel 2013)
 Changing consumer demand impose threats on business of Avon’s business
 Higher tax rate of USA increases the overall business cost of Avon (Mitchell and
Leiponen 2016)
 Health and safety standard often hamper business process of Avon
 Waste management and environmental protection laws impose threats on Avon
3.0 SWOT Analysis for Strength and Weakness
SWOT ANALYSIS OF AVON
Strength  Higher brand value attracts huge customers towards Avon products
 Steady revenue growth of Avon form strong business base

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 Differentiated business model of Avon helps it in emerging as a prominent
player
 Leading position leads Avon to attracts customers
 Supporting sales activities through understanding business letters of
customers
 Affordable prices of the products
 Global expansion of the Avon has enhanced business growth
Weakness  Declining operations in North American countries limits the business profit
level
 Avon still suffers from low market share as compared to other bigger brands
 Lack of talented employees can limit product innovation of the organization
 Frequent changes in consumer buying pattern can reduce business growth
Opportunity  Restructuring the organizational initiatives for enhancing organizational
effectiveness
 Scope for entering in more emerging international countries
 Re-branding strategy drives to higher level of consumer demands
Threats  Strong competitive pressure from the competitors like Loreal, Lakme,
Oriflame and others
 Distribution network and competitive advertising of the competitors impose
threats of Avon
 Higher dependence of third party suppliers often seems to be threats on Avon
Table 2: Strength and Weakness of Avon through SWOT Analysis
(Source: Gans and Ryall 2017)

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4.0 Resource and Capability Analysis through VRIN
Resource and Capabilities Valuable Rare Imitable Non-
Substitutable
Competitive Advantage
Strong Financial Strength Yes Yes Yes No Comparative Parity
Worldwide and Extensive
Distribution Network
Yes Yes Yes Yes Sustained Competitive
Advantage
High Quality of Beauty
Products
Yes Yes Yes Yes Sustained Competitive
Advantage
Lang Lasting Formula of
Beauty Products
Yes Yes Yes Yes Sustained Competitive
Advantage
Vast Range Of Beauty
Products
Yes Yes Yes Yes Sustained Competitive
Advantage
Global Technological
Capabilities
Yes Yes No No Temporary Competitive
Advantage
Wide Ranges of Product
Agents
Yes Yes Yes No Comparative Parity
Table 3: Resource and Capability Analysis through VRIN Framework
(Source: Sakas, Vlachos and Nasiopoulos 2014)
Rosenberg Hansen and Ferlie (2016) pointed out that strong financial strength is
extremely valuable for Avon for investing in research and development department. Therefore,
such strong financial capability fosters to high level of innovation leading to competitive
advantage for the organization. On the other hand, Greco, Cricelli and Grimaldi (2013) stated
that extensive and worldwide distribution channels of the organization leads to smooth
manufacturing process of beauty products leading to low production cost. In this way, such

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extensive distribution channels leads to sustained competitive advantage for Avon. The high
quality and long lasting formula of the beauty products of Avon are rare and non-substitutable by
the competitors. Therefore, such unique product quality leads to sustained competitive advantage
for the organization. Furthermore, Kenworthy and Verbeke (2015) stated that vast ranges of
beauty products meet all types of beauty needs of the customers. Global technological
capabilities also help the organization in gaining temporary competitive advantage.
5.0 Industry Competitiveness through Porter's Five Forces Model
5.1 Threat of New Entrants
According to Ketchen, Ireland and Baker (2013), new entrants in the personal care
industry need adequate investment for starting up new business. Such huge investment cost
seems to be threats for the new entrants. However, investment cost is not extremely high so that
it is impossible to enter in the industry. Therefore, Avon can face little competitive pressure from
local personal care companies. On the other hand, Shen and Gentry (2014) opined that new
entrants in the personal care industry also face tough competitive pressure towards beating the
high brand value of the reputed personal care companies like Avon, L’Oreal and many others.
Therefore, it can be said that Avon face moderate competitive pressure from the new entrants.
5.2 Threats of Substitutes
The substitutes of Avon’s products are some ranges of herbal beauty products in the
industry. However, Theriou (2015) opined that the qualities of those substitute products are not
quite satisfactory to the customers. Therefore, it can be said that Avon is less likely to face
threats of substitute products in the personal care or cosmetic industry.

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5.3 Competitive Rivalry
According to Ramli (2015), Avon faces tough competitive pressure in the personal care
industry. Moreover, there is tough competition among the major market players of the industry
like L’Oreal, Lakme, Oriflame, Avon and others. However, large size of the industry facilitates
in effecteively sharing the market share of the industry. On the other hand, Castelli, Battini and
Bettucci (2014) opined that Avon also face tough competitive pressure in regards to huge price
war in the industry. Therefore, it can be said that Avon face tough competitive pressure from the
companies like L’Oreal, Lakme, Oriflame and others in this industry.
5.4 Bargaining Power of Suppliers
Khojastehpour, Ferdous and Polonsky (2015) pointed out that Avon needs unique source
of suppliers for getting high quality materials in manufacturing high quality beauty products.
Therefore, the organization needs to highly dependent on the suppliers, which can increase the
bargaining power of the suppliers. On the other hand, Ertimur and Coskuner-Balli (2015) opined
that the huge competitive rivalry among the personal care companies has increased the
bargaining power of the suppliers. Therefore, it can be said that Avon face high bargaining
power of the suppliers.

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5.5 Bargaining Power of Buyers
The availability of substitute products has increased the bargaining scope of the
customers with Avon. Furthermore, Bader and Enkel (2014) opined that strong competitive
rivalry among major market players provided the opportunity to the customers towards being
price sensitive. However, the unique quality of the beauty products of Avon provides less scope
to the customers towards bargaining their price. Therefore, it can be said that Avon faces
moderate bargaining power of the customers in personal care industry.
Figure 1: Competitiveness of Avon through Porter’s Five Force Model
(Source: Ramli 2015)
CmpetitiveRivalryHighThreatsofNewEntrantsModerateBargainingPowerofSuppliersHighThreatsofSubstitutesLessBargainingPowerofBuyersModerate

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6.0 Generic Strategic
6.1 Cost Leadership
According to Kenworthy and Verbeke (2015), cost leadership strategy suggests to be the
low cost producer in the industry for gaining high level of competitive advantage over the rivals.
It suggests an organization to offer its products and services at lower prices for gaining high
market share in the industry. Likewise, Avon offers its beauty products at much lower cost than
its competitors for gaining high market share. From the starting to till 2017, the organization is
following same cost leadership strategy for maintaining its market share in the industry. As per
Shen and Gentry (2014), the low cost of the products helps Avon in reducing the bargaining
power of the customers through beating the price war in the industry.
6.2 Differentiation
Castelli, Battini and Bettucci (2014) pointed out that differentiation strategy suggests for
adding unique values to the products and services of an organization towards gaining
competitive advantage over the rivals. During 200-2015, Avon used to incorporate high and
unique quality in all their beauty products. Moreover, the beauty products have long lasting and
instant effect on the women, which enhances the unique value of products. Such unique quality
of the products also reduces bargaining power of the customers through beating the market
competition with unique value. On the other hand, Theriou (2015) opined that premium quality
of some products also allow Avon towards enhancing their prices for those particular products.
Such enhanced price range also assists the organization in coping up with barging power of
suppliers with enhanced profit level. After that, the organization is using unique business model
of direct sales till this year for the convenience of customer delivery. Furthermore, the

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organization will use both unique quality of products and business model for gaining high level
of competitive edge over the rivals.
6.3 Focus Strategy
Focus strategy suggest for performing niche marketing and concentrate on a specific
target customers for meeting their core needs and demands. Rosenberg Hansen and Ferlie (2016)
pointed out that Avon effective follow the focus strategy through focusing on only women
customers toward meeting their beauty needs and demands. Furthermore, the organization also
use cost leadership strategy among the focused customers for gaining high market share. In
future, such strategy can also help the organization in reducing the bargaining power of the
customers through beating the price competition in the industry.
Figure 2: Porter’s Generic Strategy of Avon
(Source: Kenworthy and Verbeke 2015)

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7.0 Growth Strategies
7.1 Market Penetration
According to Theriou (2015), market penetration strategy seeks for achieving business
growth with existing products and services in the existing market. Such strategy expects to
increase market share in the existing market, when the rival organizations have reached their
capabilities. Ertimur and Coskuner-Balli (2015) pointed out that Avon uses its existing beauty
products in its existing markets for enhancing its market share. This strategy is the least risky
strategy for the organization, as it offers its existing product ranges to the existing customers.
7.2 Market development
As per Theriou (2015) market development strategy is associated with seeking business
growth through offering existing product ranges in the new markets. While considering the
business of Avon, it can be said that Avon should expand beyond its exiting 100 countries for
offering existing ranges of beauty products. This strategy would have moderate risk for the
organization regarding the acceptance of existing products in the new markets. However, the
unique quality of the beauty products will be highly acceptable in the new market places like
Japan, Bangladesh and some more countries in UAE.
7.3 Product Development
According to Bader and Enkel (2014), product development strategy seeks for business
growth through offering new products in the existing markets. This strategy is best suited in the
situation, where the organization mostly relies on its customers rather than the products. Avon
can use this strategy through offerings new types of products beyond their beauty products in the
existing markets. This strategy will also be associated with moderate risk regarding product

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acceptance. The new products of the organization will be highly accepted to the existing
customers because of high customer loyalty.
7.4 Diversification
Shen and Gentry (2014) pointed out that suggests for offering new product ranges in the
new markets for the growth of business. Avon should adopt this strategy through offering new
product ranges beyond beauty products in the new markets like Japan, Bangladesh and some
more countries in UAE. This strategy can be highly risk for the organization regarding the
acceptability of new products ranges in the new markets. However, high brand value of the
organization will enhance the acceptability of the new products in the new markets.
Figure 3: Ansoff Matrix
(Source: Theriou 2015)

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8.0 Conclusion
While concluding the study, it can be said that Avon gets the opportunity of Government
support and developed economic condition of the developed countries towards its business
development. Growing tends of the women towards marinating their beauty has increased the
business scope of the organization. High brand value of the organization attracts huge customer
groups across the global markets. However, the organization has declining business operation in
North America, which limits its overall business profit. The organization has scope of entering in
more emerging countries for getting business growth. Unique quality of Avon’s beauty products
leads to sustained competitive advantage. From the industry competiveness, it can be seen that
Avon faces tough competition from the competitors like Lakme, L”oreal and may others. Avon
follows cost leadership strategy for gaining high market share over the competitors. Apart from
that, the organization uses niche marketing and unique quality of beauty products for meeting the
beauty needs of the women.

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