Competitive Strategic Management - Developing Avon in A Global Perspective

QGM6163- CSM- PROJECT PAPER - DEVELOPING AVON PRODUCTS INC.
IN A GLOBAL PERSPECTIVE
AVON PRODUCTS INC. - DEVELOPING IN A GLOBAL PERSPECTIVE
Avon Products, Inc. is the world’s largest direct selling organization and merchandiser of
beauty and beauty related products. From corporate offices in New York City, Avon marketed
product lines to women in 112 countries through 1.6 million independent sales representatives
who sold primarily on a “door-to-door” basis. Total sales in 1992 were $3.8 billion. The
company work force of 29,900 employees staffed divisions of product management,
manufacturing, and sales and service, worldwide.
Avon entered the international marketplace in the 1950s. In 1954, Avon opened sales
offices in Venezuela and Puerto Rico to cultivate the Latin American market. Avon expanded
into the European market in 1957 through its United Kingdom subsidiary, Avon Cosmetics, Ltd.
The company entered the Asian market in 1969, by way of Japan. In 1990, it became the first
major cosmetics company to manufacture and sell products in China. That same year, Avon
became the first American beauty company to enter East Germany. Sales of Avon International,
in 1992, were $2.25 billion, compared to Avon U.S. sales of $1.41 billion. More than three-fifths
of the firm’s direct selling sales and earnings came from outside the United States and the
proportion was growing.
Internationally, the company’s product line was marketed primarily at moderate price
points. The marketing strategy emphasized department store quality at discount store prices.
Avon divided the world into four geographical divisions: The United States, Europe, The
Pacific, and The Americas. In most of international markets, the primary operating arrangement
in each of these divisions was direct ownership by Avon of the foreign country subsidiary. Joint
ventures with foreign firms were used when the culture and the ways of doing business were
significantly unfamiliar to Avon management.
By 1991, Avon management felt that it was time to re-evaluate and map out the long-
term future of the firm’s beauty businesses on a global level. Senior management knew that the
traditional Avon system of door-to-door house calls worked “wonderfully” in developing
nations.
NOR NAZERANAH OMAR DIN

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QGM6163- CSM- PROJECT PAPER - DEVELOPING AVON PRODUCTS INC. IN A GLOBAL PERSPECTIVE
Avon then tried to develop its own global perspective. In developing the market globally,
Avon Management identifies three avenues of growth which are geographic growth, leveraging
distribution channels in emerging and developing markets, and marketing in developed industrial
areas.
The first area was geographic growth. Enormous growth opportunities existed in
countries with huge populations such as China, Indonesia and India. In Eastern Europe,
management was excited about the potential in Poland, Czechoslovakia, and Hungary. In the
Pacific Rim area, countries like Vietnam, Cambodia, and Laos were targeted as market
opportunities.
The second area of growth was to continue to emphasize direct selling in the emerging
and developing markets of Latin America, the Pacific Rim, and other areas. In those markets, the
retail infrastructure was undeveloped, especially in the interiors of those countries. The Avon
representative provided consumers with an opportunity to buy a wide range of quality products at
acceptable prices. In some developing markets, where access to quality goods was particularly
prized, Avon’s direct selling method opened up unprecedented prospects for women.
The third area of international growth was marketing in the United States and other
developed industrial areas like Canada, Western Europe, and Australia. New programs were
designed to complement the existing network of sales representatives and image-enhancing
advertising and promotion programs worldwide to make customers aware of Avon products and
the purchase options available such as on the website and retail outlets.
Avon’s strong presence in the market globally intends to satisfy their customer demand
around the world and shows that Avon has step into the market in a global perspective and vary
from country to country and market to market internationally. This helps Avon in developing its
own image in a global perspective and in achieving their mission of being the Global Beauty
Leader.

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AVON PRODUCTS INC.
Introduction
David H. McConnell founded “The California Perfume Company (CPC) in 1886 with the
first office located in New York. In 1906 the San Francisco earthquake destroyed CPC’s
California office however, before long the company reopened. CPC’s first office outside United
State was opened in 1914 in Montreal, Canada. In the 1920’s CPC sales doubled to $2 million
during this time there were more than 25,000 representatives in the United States. The
Company’s name was change to Avon Products Inc. after the British town Stratford-upon-Avon
in 1938. Avon’s sales increased to about $16 million and in 1946 the company was announced
publicly with advertising campaign such as “Avon Calling”. Avon expanded overseas to
countries such as Puerto Rico, Cuba and Venezuela. In the 1970’s U.S sales top $750 millions
and the first Avon Asian business was opened in Japan. Avon also acquired the Jeweler Tiffany’s
during this period of growth. It was the first major U.S. cosmetics manufacturer to permanently
end animal testing.
Avon adopted five core values which are Trust, Respect, Belief, Humility and Integrity
which are evident in the mission statement to be a Global Beauty Leader, women’s choice of
buying, premier direct seller, the best place to work, largest women foundation and the most
admired company.
Avon success lies within it channel of distribution, it is the world’s largest direct seller
with 5.4 million Avon representatives in over 100 countries. Additionally, it is the largest micro
lender to women and it among the world top global brands. The company increased it’s
investment in 2007 by over $120 million which aided in the development of new sales leadership
opportunity, improved training, technology tools and changes in commission structure.
There are three product categories which Avon distributes, they are beauty, fashion and
home. In 2008, Avon changed its marketing approach of concentrating mostly on a homey image
and is now including celebrities as a part of their promotions. The company advertising cost
increased from $136 million in 2005 to $249 million in 2006 and $368 million in 2007. Reese
Witherspoon is the Avon Foundation first global ambassador and honorary chairwoman who

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appear in advertisement for Avon make up, skin care products and fragrances. “Spotlight” the
new fragrance was launched in 2009 with celebrity Courtenay Cox as the face of the brand.
Avon’s largest manufacturing plants, Brazil, China and Poland received the ISO 14001
certifications in 2008. Various awards were granted during this period such as the Clean Industry
Certificate to the manufacturing plant in Mexico. During the same period Avon’s revenues
increased 7.5 percent and net income increased by 65 percent.
Avon Products Inc. closest competitors are Revlon, Inc and Mary Kay Inc. Mary Kay Inc
uses the same approach as Avon which is direct marketing approach which Revlon sells its
products through cosmetics counters in department stores are pharmacies. Avon revenues far
exceed that of its competitors in 2008 Avon’s revenue was $10.37 billion compared to Mary Kay
$2.40 billion and Revlon $1.35 billion.
Avon implemented reconstructing programs in 2009 which included closing two

manufacturing facilities. In addition, there is heavy investment in online search engines and
internet carrier sites to help increase Avon’s revenue. Andrea Jung is the Chief Executive Office
who is leading the management team of thirteen to achieve its goal.
Vision Statement (Actual)
To be the company that best understands and satisfies the product, service, and self-fulfillment
needs of women globally.
Mission Statement (Actual)
• The Global Beauty Leader - Avon build a unique portfolio of Beauty and related brands,
striving to surpass their competitors in quality, innovation and value, and elevating the image to
become the Beauty company most women turn to worldwide.
• The Women’s Choice for Buying - Avon become the destination store for women, offering the
convenience of multiple brands and channels, and providing a personal high touch shopping
experience that helps create lifelong customer relationships.
• The Premier Direct Seller - Avon expand the presence in direct selling and lead the reinvention
of the channel, offering an entrepreneurial opportunity that delivers superior earnings,

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recognition, service and support, making it easy and rewarding to be affiliated with Avon and
elevating the image of beauty industry.
• The Best Place to Work - Avon is known for leadership edge, through the passion for high
standards, respect for diversity and commitment to create exceptional opportunities for
professional growth so that associates can fulfill their highest potential.
• The Largest Women’s Foundation - Avon committed a global champion for the health and
well-being of women through philanthropic efforts that eliminate breast cancer from the face of
the earth, and that empower women to achieve economic independence.
• The Most Admired Company – Avon deliver superior returns to their shareholders by tirelessly
pursuing new growth opportunities while continually improving their profitability, a socially
responsible, ethical company that is watched and emulated as a model of success.
The five values of Avon are: Trust, respect, belief, humility, and integrity.
Slogan (Actual)
Avon is “the company for women”
Proposed Vision Statement
To be the leading provider of home, fashion and beauty products that will satisfy customers
while preserving the environment.
Proposed Mission Statement
Avon is committed to being the leading global provider of home, fashion and beauty products
that will enhance the lives of customers. Avon will utilize latest technology and will pursue new
growth opportunities that will bring about wealth for all stakeholders. At Avon they firmly
believe in respect: respect for people and respect for the environment.
Proposed Slogan
“Avon: the company for everyone – committed to the enrichment of lives”

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Analysis:
The vision statement was improved to include “customers” instead of women, since the
company is now offering products for women, men and children. Additionally, in light of the
fact that the world is going green, it was prudent to include the environment to emphasize the
responsibility to society as we all work towards a sustainable future.
The proposed mission statement incorporates all nine components that are essential to a
good mission statement. The essential elements are customers, products and service, markets,
technology, concern for survival, growth and profitability, philosophy, self-concept, concern for
public image, and concern for employees. The ‘proposed mission statement also speaks to the
company’s core values of trust, respect, belief, humility, and integrity.
The old slogan for Avon states “the company for women” we have decided to change this
slogan to “Avon: the company for everyone – committed to the enrichment of lives
INTERNAL ASSESSMENT
Financial Ratios Analysis
Ratio 2008 2009 2010

Current Ratio 0.75 1.15 1.22
Quick Ratio 1.1 0.93 0.88
Operating Profit Margin 0.09 0.09 1.25
Net Profit Margin 0.05 0.05 0.08
Return on Stockholders Equity 0.60 0.75 1.29
Total Asset Turnover 1.67 1.73 1.76
Debt / Equity Ratio 5.62% 7.03% 7.99%
Earnings Per Share 2.60 2.87 4.72
Avon Product Inc. Current ratios have increased from 2008 to 20010 which states that they may
not face complications in liquidating its assets, if needed in the short – term. Profitability ratios
have seen an increase which is a clear indication that Avon Products Inc. is much more well in
terms of profitability in 2010 than in previous years. Additionally, more operating income means
that more projects can be undertaken which is in synchronization with strategic management

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processes. Total Asset Turnover ratio has steadily increased over the period which shows that the
business is generating sufficient volume for the size of its asset investment. Debt/equity ratio has
increased from in 2010 compared to 2008 and 2009 which indicates that Avon Products Inc
holds much more financial leverage in terms of debt and equity financing.
Marketing Positioning Map and Analysis
Customer Service (High)
 Avon
 Revlon
 Mary Kay
Quality (Low) Quality (High)
Customer Service (Low)
Analysis:
The top-to-bottom approach was used to narrow down two important variables, customer service
and quality of products. The key feature of a market positioning map is that only key or
immediate competitors should be plotted. The competitors of Avon, Revlon and Mary Kay are
well-established firms with Revlon plotted with higher quality products (Cosmetics). Avon was
strategically plotted to show that they lead in customer service. However, when compared to
cosmetics quality Revlon and Mary Kay are leading far away from Avon.
Superior customer service compared to rivals
Avon has gained an outstanding reputation as the best direct seller of beauty products. Through
the continued efforts and achievements of its Sales Representatives Avon is now known
worldwide. Avon's core competence has mainly been through direct selling, knowing this Jung

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and the management team implemented a Sales Leadership program in its ten largest markets
and provided these markets with incentives to acquire, train, motivate, and retain the number of
active Sales Representatives it needs to sustain significant growth.
Analysis of Marketing Strategies
Superior Customer Service
Avon has gained an outstanding reputation as the best direct seller of beauty products. Through
the continued efforts and achievements of its Sales Representatives Avon is now known
worldwide. Avon also has a Representative development program that focuses on the
professional training of Representatives, which enables them to provide valuable information on
Avon brand products. Avon also keeps its superior customer service in other ways of distribution
such as the Internet and in the department store sales by having a timely and correct order
delivery, one on one information exchange and sincere professional advice and service in
department sales.
Wider Geographic Coverage
Avon's management team decided to achieve growth in revenue by expanding its customer base
into international markets, while continuing to compete based on their reputation as the leading
direct seller of beauty products. Avon brand products are now recognized all over the world due
to the success of their international campaign. The company is in great position to take
advantage on growth in new global markets because of the demand for quality products. Avon
now has operations in 50 different countries outside of the United States, and continues to reach
new markets.
Quicker Design-to-Market Times
The ability to develop and release new products more quickly than rivals will give Avon the first
mover advantage and further associate the name with quality and innovation and hopefully
increase the company's market share in the CFT industry. Product innovation will continue to be
a key factor of sales growth in the future. New product lines such as "Avon Wellness" and
"Becoming" and the most recent "Anew" will attract new consumers, which will also help to
increase revenue growth.

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More Attractive Product Line
Avon's history as a beauty product distribution only enhances their credibility as a company and
quality beauty product distributor. With Avon's ability in research and development they will be
able to develop more new products and introduce them to the Avon product line more quickly
than rivals. New products with the symbol of Avon quality and state-of-the-art technology will
only increase brand image and hopefully sales while acquiring a more loyal customer base by
establishing and providing a more attractive product line.
Improved E-Commerce and Internet Sales Capabilities
Avon's executives realized the company needed a more efficient method to communicate with its
independent sales force, because current newsletters and brochures were not keeping up with the
demands of the sales force. The Internet brings instant global reach, with thousands of products
and prices that can be updated constantly at any time.
Stronger Brand Name than Rivals
Again Avon's history is a big player here because it gives the company credibility and name
recognition. Avon continues to strengthen its image of core beauty products and international
brand product line. In the past few years the company has made several upgrades in imaging and
formulations, packaging, and customer service and the accuracy and speed of order delivery have
also been improved. Avon's development of quality global brands gave them a chance to deliver
a consistent beauty image around the world, as well as improve relationships with suppliers and
become familiar with the most efficient way to get foreign sales.
Stronger Global Distribution and Sales Capabilities
Avon's ability to produce and distribute products in multiple countries enables them to have a
significant amount of international sales. Avon continues to drive their products into new
markets and have always been looking for ways in which they can improve their distribution
channels.
Map Locating Avon Operations in Worldwide

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Avon Products, Inc. markets its products to women in over 100 countries through over 5 million
independent Avon Sales Representatives. This is one of their strategies in developing Avon in a
global perspective. The map below shows the six geographic regions where Avon products are
marketed and sold.
• Albania • Armenia
• Belarus • Bulgaria
• Czech Republic • Estonia
• Finland • Georgia
• Hungary • Kazakhstan
• Kyrgyzstan • Latvia
• Lithuania • Macedonia
• Moldova • Montenegro
• Poland • Romania

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• United States • Canada
• Puerto Rico • Dominican Republic
• Aruba • Antigua & Bahamas
• Barbados • Bermuda
• Curacao • Dominica
• Grand Cayman Island •Grenada
•Guyana •Jamaica
• Argentina • Bolivia
• Brazil • Chile
• Colombia • Costa Rica
• Ecuador • El Salvador
• Guatemala • Honduras
• Mexico • Nicaragua
• Panama • Paraguay
• Peru • Uruguay
• Venezuela
• Australia • Hong Kong
• India • Japan
• Malaysia • New Zealand
• Philippines • South Korea
• Taiwan • Thailand
• Vietnam

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• Botswana • Cyprus
• Dubai • Egypt
• France • Germany
• Greece • Iceland
• Israel • Italy
• Jordan • Kuwait
• Lebanon • Lesotho
• Luxembourg • Malta
• Mauritius • Mozambique
• Morocco • Namibia
• Netherlands • North Cyprus
• Norway • Oman Internal

• Portugal • Reunion Island
Assessment: Avon Strengths
1. Avon is a Global Market Leader
2. Committed and dedicated workforce - 5.4 million Avon representatives in over 100
countries making Avon the largest sales force.
3. World’s Largest Micro lender for women - extending some $1 billion in product and
credit each year to help women start their own entrepreneurial businesses

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4. Channel of distribution – world’s largest direct seller
5. Manufacturing operations match ISO 14001 standards
6. Avon owns its major manufacturing and distribution centers
7. Increased in revenue in most geographic area, improve e –commerce and sales

capabilities.(Revenues increased 7.5% from year 2008 to 2009)
8. Avon is one of the world’s top global brands. Avon has major brand names such as
Anew, skin-so-soft, Avon Color etc with 90% recognition worldwide.
9. First cosmetic to permanently end to animal testing
Internal Assessment: Avon Weaknesses
1. Decrease in North American Sales Revenue by 129.4 million
2. Weak Brand Image
3. High advertising costs – Companies advertising spending went from $136 millions in
2005 to $249 million in 2008 to $368 million in 2009 and 14% higher in 2010
4. Poor brand loyalty and Does not target urban trendsetters
6. Beauty Sales in the first quarter 2009 were 12% lower compared to sales revenue in
previous year 2010
7. Avon lagged behind seven of their cosmetic companies in customer loyalty
Internal Factor Evaluation (IFE) Matrix
Key Internal Factors Weights Rating Weighted

Score
Strengths
1. Global Market Leaders 0.09 4 0.36
2. Committed and dedicated workforce - 5.4 million Avon
representative in over 100 countries 0.08 3 0.24
3. Revenues increased 7.5% from year 2008 to 2009
0.06 4 0.24

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4. Channel of distribution – world’s largest direct seller 0.05 4 0.2
5. Award winning company worldwide

0.05 3 0.15
6. World’s Largest Micro lender for women 0.06 3 0.18
7. World’s top global brands – 90% recognition worldwide
0.06 3 0.18
8. Excellent promotional strategies 0.08 4 0.32
9. Manufacturing operations match ISO 14001 standards 0.08 3 0.24
10. Announced permanent ending to animal testing 0.07 4 0.28
Weaknesses
1. Brand Image 0.06 1 0.06
2. High advertising costs 0.05 2 0.1
3. Misleads representatives 0.03 2 0.06
4. Avon seems like a commodity 0.05 2 0.1
5. Avon lagged behind seven of their cosmetic companies in
customer loyalty 0.09 2 0.18
6. Revenue decreased in North America by 129.4 million 0.04 2 0.08
Total 1.00 2.97
Ratings: 1- major weakness, 2-minor weakness, 3-minor strength, 4-major strength
Analysis:
The overall weighted score of Avon Products Internal factor Analysis (IFE) is 2.97 which
indicated that the internal functions and roles are strong at Avon Products Inc.
EXTERNAL ASSESMENTS
Avon Major Competitors
Mary Kay and Revlon are considered two major competitors of Avon Products Inc. in the
cosmetics industry. Avon Product Inc. is seven and half times larger than Revlon and
approximately eight times larger than Mary Kay. Although the majority of Avon's competitors
distribute their products to resellers such as department stores, drugstores, or cosmetic stores,
Avon sells its products solely through its direct-selling channel of independently-contracted
Active Sales Representatives and through its online website. In contrast to Revlon’s marketing

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strategy of selling through cosmetic counters in department stores and pharmacies, Mary Kay
rivals with Avon Inc. as they both use direct marketing approach.
In 1983 Mary Kay Cosmetics was founded in Dallas, Texas, by Mary Kay (now Mary
Kay Ash). This company is known for providing women with exceptional opportunities for
professional achievement and economic success and rewarding women for their success. In 2009
sales of Mary Kay products reached $2.6 billion in wholesale worldwide. There are more than
37,000 women across the world who has become Independent Sales Directors. Mary Kay spends
millions of dollars and conducts more than 300,000 tests to ensure that Mary Kay products meet
the highest standards of quality, safety and performance.
Mary Kay products are expensive versus Avon which is comparable to store products.
Mary Kay seems to be targeting older women while Avon is branching out to attract women of
all ages with quality affordable makeup, jewelry, shoes, purses and children’s items. Mary Kay
has stayed in touch with the internet age; each independent beauty consultant can buy his or her
own website to sell clients over the internet. In fact 90% of the company’s revenue is now
generated through online orders.
Avon’s revenues far exceed both major competitors. Their revenue is almost four and
half times that of Mary Kay’s and seven and half times Revlon’s. Avon’s revenue exceeds Ten
Billion Dollars (B$10).
Revlon was founded in 1932, by Charles Revson and his brother Joseph, along with a
chemist, Charles Lachman, who contributed the "L" in the Revlon name. In the 1990's, Revlon
revitalized its cosmetics business and strengthened its industry leadership role. Revlon Sales to
Wal-Mart accounts for 23% of the company's total sales. The company earned $1.3 billion in
sales and $950K in net income in 2009. Net sales fell 3.7% to $1.29 billion. Sales in the US fell
4.4% while sales international fell by 2.9%. The company attributes the loss to the weak global
economy. The net sales in 2009 were approximately $1.3 billion, a decrease of approximately
$51 million or 3.8% versus 2008.

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Revlon has a more focused product offering than some companies and when one
considers only color cosmetics sales they are much more comparable. Revlon is the second
largest color cosmetics company in the United States. Competitors Estee Lauder and Avon get
the majority of their revenue outside the United States.
Major Competitors Pie Chart
Revlon; 1.3; 9%
Mary Kay; 2.6;

18%
Avon; 10.38; 73%
Analysis:
From the pie chat above, it shows the overall sales for Avon and its major competitors in 2009.
Avon gains $10.83 billion, follow by Mary Kay $ 2.6 billion and Revlon $1.3billion.
PEST Analysis
Political Factors Economic Factors

• Tax policies • Economic growth
• Employment laws • Interest rates
• Trade restrictions and tariffs • Exchange rates
• Political stability • Fluctuation in oil and gas prices
Social Factors Technology Factors
• Emphasis on safety • Automation

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• No animal testing • Technology incentives

• Green Environment • Rate of technological change
• Philanthropic Issues • Technologies Adaption
Analysis:
Based on the PEST analysis of Avon Products, the company looks into the specific issues that
relates and drives them in penetration in the international market and grows globally.
External Assessment: Avon Opportunities
1. A growing trend in the cosmetics industry is the introduction of “green” products. More
than sixteen percent of beauty products launched in 2008 were certified organic, ethical,
or all natural.
2. Eye makeup market
3. The cosmetics industry tends to be countercyclical. This means that those are industries
for which the demand is either not correlated with the business cycle. The demand for
their products is not much affected by availability of current income, but by other
personal, social or economic factors. The recession also contributes to the industry being
counter-cyclical. There is an upsurge in people joining the industry in the past six or eight
months and there's absolutely no doubt that this is because of the recession and the effect
on employment.
4. Aveda cosmetics found that sixty eight percent of consumers will remain loyal to a
company that has a social and environmental commitment.
5. Urban Trendsetters markets
6. Geographic growth – enormous growth opportunities existed in countries with huge

populations such as China, Indonesia and India.
7. Demand for cosmetic products normally remains constant and unaffected by economic
distress

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8. The baby boomers are aging and they are more conscious on their appearance, beauty and
also improving their looks.
9. Emphasize direct selling in emerging and developing markets
External Assessment: Avon Threats
1. Competition such as Mary Kay and Revlon
2. Rejection of internet selling by sales representative
3. Global economic climate stifled new product development, innovation and sustainability
programs in 2009.
4. In terms of color cosmetics, environmental International Inc. predicted that many of these
markets will see slowdown in volume demand.
5. Inflation rate and Rising cost of commodities
7. Direct-selling becoming more popular - Amid the financial crisis Aussie mums are
increasingly turning to direct selling and at-home product parties to supplement their
household income.
8. They are a multilevel based company that sells inferior quality with a higher price tag
than what it is worth.
9. Avon products outpaced by “jazzier” products to women who favored more exciting
product lines
10. Decreased earning opportunities
External Factor Evaluation (EFE) Matrix
Critical Success Factors Weights Rating Weighted Score

Key External Factors
Opportunities
1. Organic (Green) Products 0.09 4 0.36
2. Eye makeup market 0.07 3 0.21

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3. Increase Internet Presence 0.08 4 0.32
4. Urban trendsetters market 0.09 4 0.39
5. Cosmetic industry tends to countercyclical 0.07 3 0.21
6. Geographic growth 0.09 4 0.36
7. Demand for cosmetic products normally remains 0.05 3 0.15

constant and unaffected by economic distress
Threats
1.Competitors 0.08 2 0.16
2. Rejection of Internet Selling by sales representative 0.07 3 0.21
3.Economic Downtown 0.09 2 0.18

4. Market Slowdown 0.08 3 0.24
5. Inflation Rate 0.07 3 0.21
6. Rising cost of commodities 0.07 2 0.14
Totals 1 3.14
Ratings: 1= the response is poor, 2= the response is average, 3= the response is superior, 4=
response is superior
Analysis:
The table of external factors evaluation shows the opportunities that are available and factors that
threaten the success of Avon in driving the business globally.
Competitive Profile Matrix (CPM)
Avon Revlon Mary Kay

Critical Success Weighted Weighted Weighted
Factors Weight Rating Score Rating Score Rating Score
Price competitiveness 0.10 3 0.30 4 0.40 2 0.20
Global Expansion 0.09 3 0.27 4 0.36 2 0.18
Organizational
Structure 0.04 2 0.08 4 0.16 3 0.12
Employee Morale 0.07 2 0.14 4 0.28 1 0.07
Technology 0.10 4 0.40 2 0.20 3 0.30

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Product Safety 0.10 4 0.40 3 0.30 2 0.20

Customer Loyalty 0.10 2 0.20 4 0.40 3 0.30
Market Share 0.07 2 0.14 4 0.28 3 0.21
Advertising 0.10 2 0.20 4 0.40 1 0.10
Product Quality 0.10 2 0.20 3 0.30 1 0.10
Product Image 0.05 3 0.15 4 0.20 2 0.10
Financial Position 0.08 4 0.32 3 0.24 2 0.16
Total 1.00 2.80 3.52 2.04
Ratings: 1 – Poor, 2 – Average, 3 - Above Average, 4 – Superior
Analysis:
The table above shows the Competitive Profile Matrix of various areas of the major
competitors of Avon which is Revlon and Mary Kay. The table shows the competitive edge in
the cosmetic industry. Leading by Revlon with a total of 3.52, followed by Avon in the second
position with 2.80 and Mary Kay with 2.04. Avon has to improvise in certain factors such as
employee morale and product image to take them further in the international markets to be a
global player in the cosmetic industry. This can be achieved as Avon is financially strong and
working on the Global Expansion Organization Structure with adaption of new technologies.
SWOT Matrix
SWOT MATRIX STRENGTHS WEAKNESSES
1. Global market leader 1. Decrease in North American

2. Largest sales force Sales Revenue.
3. World’s largest micro lender 2. Weak brand image
to women 3. High advertising/budget
4. World’s largest direct seller costs
5. ISO 14001 certification for 4. Poor brand loyalty
largest manufacturing plants. 5. Does not target urban
6. Avon owns its major trendsetters.
manufacturing and 6. Beauty sales in the first
distribution centers. quarter 2009 were 12%

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7. Increase in revenue in most lower compared to sales

geographic area due to revenue in previous year
increase in internet presence. 2008.
8. First cosmetic manufacturer
to end animal testing.
OPPORTUNITIES SO STRATEGIES WO STRATEGIES
1. Organic (Green) products 1. Increase sales by increasing 1. Increase awareness of

2. Eye makeup market internet presence. (S7, O3) efforts to protect the
3. Increase internet presence 2. Maximize on revenues in the environment. (W2, O1)
4. Urban trendsetters market makeup market through 2. Increase market share by
5. The cosmetic industry tends advertising and the sales positioning products to
to countercyclical. force. (S2, O2) attract urban trendsetters
6. Demand for cosmetic 3. Manufacture and distribute (W5,O4)
products normally remains more products that are eco-
constant and unaffected by friendly.(S6,S4,S2,O1)
economic distress
THREATS ST STRATEGIES WT STRATEGIES
1. Competitors such as Mary 1. Educate employees on the 1. Discount products that are
Kay and Revlon benefits of increasing internet not earning substantial
2. Rejection of internet selling presence. revenue and then faze them
by sales representatives 2. Improve marketing strategies off the market in a timely
3. Economic downturn to new and existing manner. (W6,T3)
4. Rising cost of commodities customers by repositioning
the brand, coupons,
billboards, new packaging.
(S4,S6,S7, T1, T3)
Analysis:
Based on the SWOT matrix table above, Avon have to improvise and realize that brand
repositioning in the form of packaging is necessary, in order for Avon to create a stronger brand
image and improve customer loyalty in international markets. Through an aggressive market
penetration Avon will be able to increase revenue, further their strength and gain more
competitive edge and increase profitability mostly in the North American region.
Strategic Position and Action Evaluation (SPACE) Matrix

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FS Y
6

Conservative 5 Aggressive

4

3

2

1
CA IS
-6 -5 -4 -3 -2 -1 1 2 3 4 5 6
X
-2

-3

-4

-5
Defensive Competitive
-6

ES
Strategic - aggressive
(0.8)-y
(1.20)x
Internal Strategic Position External Strategic Position

Financial Strength (FS) Environmental Stability(ES)
Return on Investment 3 Competitive Pressure -4
Leverage 2 Unemployment -4
Liquidity 5 Technological Changes -3
Working Capital 5 Barrier to Entry -4
Cash Flow 5 Price elasticity of Demand -1
FS Average 4 ES Average -3.20
Competitive Advantage (CA) Industry Strength (IS)
Market Share -3 Growth Potential 5
Product Quality -3 Profit Potential 4

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Customer Loyalty -2 Financial Stability 4

Control over Suppliers and Distributors -3 Productive Capacity Utilization 3
Technological Know-How -3 Resource Utilization 2
CA Average -2.80 IS Average 3.60
Financial Strength + Competitive Advantage
Y axis=FS (4) +ES (-3.2) = .08
X axis=CA (-2.8) +IS (3.6) =1.2
FS & IS +1(worst) to +6 (best)
ES & CA -1(best) to -6(worst)
Analysis:
According to the diagram above Avon has a strong competitive position in the market
with rapid growth. Avon is using their internal strengths to:
(1) Maximize on external opportunities
(2) Minimize internal weaknesses
(3) Avoid external threats
Avon should improvise on their strategies of market penetration, improve research and
development to develop a full line of “green” products, reposition the brand in terms of
packaging and forward integration. These are all attainable strategies that Avon have to proceed
with in to the near future to be a global player in the cosmetic industry.

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Both the SPACE and SWOT matrix revealed possible strategies to implement in order to
further grow our customer base create brand loyalty and further extends its competitive
advantage and market leadership status. It also acts as a guide to the areas where more emphasis,
financing and allocation of valuable resources is necessary. Allocation of resources and
commitment by all stakeholders to the outlined objectives are pivotal keys to the success of
Avon to be in the international market.
While the SWOT and SPACE matrix identifies numerous strategies that Avon can
implement in order to increase brand loyalty, product development and increase internet
presence. To become a global player in the cosmetic industry, Avon should work on issues that
relate to brand loyalty.
The Quantitative Strategic Planning Matrix (QSPM)
Quantitative Strategic Planning Matrix (QSPM) for Avon Inc

STRATEGIC ALTERNATIVES
1 2 3
Improved
marketing
strategies Improve Improve
(packaging, R&D to employee
coupons, introduce empowerment
online bill more through regional
boards, “green” training and
discounts product development
Key External Factors Weight AS TAS AS TAS AS TAS
Opportunities
1. Organic (Green) products 0.16 1 0.16 4 .64 2 .32

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2. Growth in eye makeup market 0.09 4 .36 3 .27 3 .27
3. Increase internet presence 0.1 3 0.3 1 0.1 2 .20
4. Urban trendsetters market 0.05 3 0.15 3 0.15 2 0.1
5. The cosmetic industry tends to countercyclical 0.1 3 0.3 3 0.3 3 0.3

6. Demand for cosmetic products normally
remains constant and unaffected by economic
distress 0.11 3 0.33 2 0.22 1 0.1
Threats
1. Competitors 0.1 3 0.3 3 0.3 1 0.1
2. Economic downturn 0.1 2 .20 1 0.1 1 .1
3. Risingcost of commodities 0.09 ― ― ― ― ― ―

4. Rejection of internet selling by sales
representatives 0.1 2 0.20 1 0.10 3 0.20
SubTotal 1 2.30 2.18 1.69
The Quantitative Strategic Planning Matrix (QSPM) for Avon Inc

STRATEGIC ALTERNATIVES
1 2 3
Improved
marketing Improve
strategies Improve employee
(packaging, R&D to empowerment
coupons, introduce through
online bill more regional
boards, “green” training and
discounts product development
Key Internal Factors
Strengths
1. Global market leader 0.12 3 0.36 3 0.36 3 0.36
2. Largest sales force 0.11 4 0.44 3 0.33 4 0.44

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3. World’s largest micro lender to women 0.1 4 0.4 4 0.4 4 0.4
4. World’s largest direct seller 0.15 4 0.6 4 0.6 4 0.6
5. ISO 14001 certification for all manufacturing plants. 0.05 3 0.15 3 0.15 3 0.15
6. Avon owns its major manufacturing and distribution
centers 0.06 4 0.24 4 0.24 3 0.18
7. Increased in revenue in most geographic area. Due to
increase in internet presence. 0.05 4 0.2 3 0.15 4 0.2
8. First cosmetic manufacturer to end animal testing. 0.05 4 0.2 3 0.15 3 0.15
Weaknesses
1. Decrease in North American Revenue. 0.05 3 0.15 3 0.15 3 0.15
2. Weak brand image 0.08 2 0.16 2 0.16 4 0.32
3. High advertising budget/ costs 0.05 ― ― ―
4. Does not target urban trendsetters. 0.05 ― ― ―
5. Poor brand loyalty 0.05 4 0.2 3 0.15 4 0.2

6. Beauty sales in the first quarter 2009 were 12%
lower versus the prior year period. 0.03 ― ― ―
Grand Total 1 5.40 4.87 4.69
Analysis:
Based on the analysis of the QSPM matrix it reveals that improved marketing strategies is
the most attractive strategy along with improvement in research and development to introduce
“green” products for Avon to reach the international markets in a global perspective. Avon has
implemented some new strategies to overcome the existing strategies to boost up their level in
the international markets to be the global player in the cosmetic industry.
New Strategies
1) To increase revenue total revenue by 10% all market segments- This will be achieved
through improved marketing strategies (product placement, mail in discounts, coupons,
online and bill boards ) to benefit both new and existing customers.

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2) To increase and further develop the “green” product line by 10% - this will be done
through investment research and development in order to develop such products.
3) To improve brand image and brand loyalty- Through repositioning the Avon brand in
terms of product packaging to differentiate the product from being just being another
commodity.
Existing Strategies
1) Direct Selling/ Network Marketing
2) Increase internet presence
3) Employee Empowerment
Proposed Strategic Alternatives in the Quantitative Strategic Planning Matrix (QSPM)
An improved market strategy (market penetration)
This is an excellent way to boost sales and promote the brand. Avon is already the market leader
and people are aware of the brand. However, to be a global player in the cosmetic industry, Avon
has to go through more aggressive advertisement campaigns, sales promotions, mail-in
discounts/coupons, increase internet presence and bill boards. Avon will be able to further
heighten brand awareness, build customer loyalty and create appeal for their products by new
and existing customers. This is an important strategy for Avon to be in the international market
to reach the global perspective. Avon looks to achieve this over the first two years with an
estimated amount of 10 million dollars. With 5 million dedicated to further increase internet
presence and the remaining 5 million to cover the other activities.
Improve research and development to introduce more “green” products.
This will be achieved through investment in research and development; to develop these eco-
friendly products through means which are more environmentally friendly. The demand for
“green” products appears to be a very viable market as consumers and distributors are becoming
more conscious about protecting the environment. Thus creating a demand for these products,

KLCP101003 Page 27
this also presents the opportunity to increase brand loyalty. This will be done over the next three
years at an estimated cost of 10 million dollars.
To improve brand image and brand loyalty
Being that Avon lagged behind its major competitors in terms of brand loyalty; and the assertion
by CEO of Brand Key Robert Passikoff that Avon is not associated with anything and Avon
seems to be more like a commodity. Avon has decided to reposition the brand in terms of
packaging and labeling of Avon products. Avon seeks to make the Avon logo more pronounced
on the products. It is believed that consumers will support and be loyal to brands that they can be
identified with. Avon will actively pursue this over the next three years at an estimated cost of 10
million dollars.
To implement the proposed alternative strategies of Avon to be a global player in the

cosmetics industry a total cost of $ 30 million is estimated. The three new alternatives of
quantitative strategic planning matrix that has been proposed for Avon will develop a brand new
image for Avon from the existing major competitors to compete through a competitive edge and
strengthen their base to be a leader in the cosmetic industry in developing Avon in reaching the
global perspective.
FINANCING OPTIONS
Based on the proposed alternatives given in the quantitative strategic planning matrix, the
recommendations can be implanted on a phase basis over the next three years for Avon. The
financing options that will be recommended for Avon for the next three years will be as below:
EPS/EBIT Analysis for Avon Product Inc.
Amount needed: $30 million
Stock Price: $31.90
Tax Rate: 35%
Interest rate: 5%

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# of shares outstanding: $427.5 million
Common Stock Financing
Recession Normal Boom
EBIT 773.83 1018.2 1287.8
Interest 0 0 0
EBT 773.83 1018.2 1287.8
Taxes 249.17 327.86 414.67
EAT 524.66 690.30 873.13
# Shares 428.4 428.4 428.4
EPS 1.22 1.61 2.04
Debt Financing
EBIT 773.83 1018.20 1287.8
Interest 1.5 1.5 1.5
EBT 772.33 1016.7 1286.3
Taxes 248.69 327.4 414.2
EAT 523.64 689.3 872.1
# Shares 427.5 427.5 427.5

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EPS 1.22 1.61 2.04
Combination Financing (Debt 30%/Stock 70%)
EBIT 773.83 1018.2 1287.8
Interest .45 .45 .45
EBT 773.4 1017.8 1287.4
Taxes 249.03 327.73 414.5
EAT 524.4 690 872.9
# Shares 428.1 428.1 428.1
EPS 1.22 1.61 2.04
Combination Financing (Debt 70%/Stock 30%)
EBIT 773.83 1018.2 1287.8
Interest 1.05 1.05 1.05
EBT 772.78 1017.1 1286.75
Taxes 248.84 327.5 414.3
EAT 523.9 689.6 872.5

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# Shares 427.8 427.8 427.8
EPS 1.22 1.61 2.04
Analysis:
Based on the four tables above, the common stock financing, debt financing, combination
financing of debt and stock shows that Avon has chosen Equity for financing the business. This
is because if recession continues and Avon does not make any profit they are not obligated to
pay any dividends. With equity there is the existence of capital gains for Avon.
Avon Projected Financial Statement
Below are the tables of Projected Financial Statement which is income statement and
balance sheet statement made for Avon based on the financial options and recommendation of
the strategic analysis that has been proposed for Avon through the quantitative strategic planning
matrix for the next three years.
AVON'S PROJECTED INCOME STATEMENT FOR 2010-2012 IN MILLIONS
2009 2010 2011 2012

10,284.7 11,313.1 12,444.4
Revenue 0 7 9 13,688.94
98.1
Other revenue Total 0 113.17 124.45 136.90
10,382.8 11,426.2
Total Revenue 0 7 12568.94 13,825.84
3,888.3 4,227.7 4,650.5

Cost of Revenue total 0 2 1 5,115.56
6,396.4 7,198.5 7,918.4
Gross Profit 0 5 3 8,710.28
Cost and Expenses

5,389.8 5,347.5 5,907.4
Selling/General/Administration/advertising 0 0 0 6,433.80
66.7 71.7 74.7
Research and Development 0 0 0 76.70

KLCP101003 Page 31
Depreciation/Amortization - - - -
Interest Expense (Income) - - - -
561.0 21.7 23.9
Unusual Expense (Income) 0 1 0 26.27
Other Operating Expenses, Total - - - -
1,757.6 1,912.4
Operating Income 1018.2 4 3 2,173.51
Interest Income (Expense), Net Non

Operating - - - -
Gain (Loss) on Sale of assets - - - -
(7.1 (9.0 (8.0
Other Net 0) 0) 0) (7.40)
926.5 1,058.8 1,131.2
Income before Tax 0 0 0 1,244.30
298.3 297.0 260.4

Income tax total 0 0 0 170.40
628.9 761.8 870.8

Income after tax 0 0 0 1,073.90
(2.4 (2.0 (2.0
Minority Interest 0) 0) 0) (1.60)
Equity Interest 0 0 - -
US GAAP Adjustment $0.00 $0.00 $0.00 -
868.8
Net Income before Extra. Items 625.8 759.8 0 1,072.30
Total extraordinary items 0 0 - -

868.8
Net Income 625.8 759.8 0 1,072.30
AVON'S PROJECTED BALANCE SHEET FOR 2010-2012 IN MILLIONS
2009 2010 2011 2012

ASSETS
Cash and short term investment 1338.4 1356.4 1364.44 1368.4
Total Receivables net 1219.9 1119.9 1169.9 1219.9
Total Inventory 1067.5 1174.25 1291.68 1420.85
Prepaid Expense 122.8 120.5 110.7 122.8
Other Current Asset 440.7 443 390.7 440.7
Total Current Asset 4189.3 4214.05 4228.38 4572.65
Property/Plant/Equipment total net 1529.6 1529.6 1529.6 1529.6

Goodwill, net 224.8 231.8 233.8 234.8
Intangible, Net 125.8 131.8 134.8 135.8
Long term investment' 49.8 49.8 49.8 49.8
Note Receivables-Long term 0 0 0 0
Other Long Term Assets, total 713.4 713.4 713.4 713.4
other Assets total 0 0 0 0
Total Assets 6832.7 6870.45 6889.78 7236.05

KLCP101003 Page 32
LIABILITIES AND SHAREHOLDERS

EQUITY
Accounts Payable 754.7 754.7 754.7 754.7
Payable Accrued 0 0 0 0
accrued Expenses Ratios 2010 1247.3
1247.3 2011
1247.3 2012 1247.3
Notes Payable/short term debt 0 0 0 0
Current Ratio
Capital Leases 1.84 138.1
138.1 1.8
138.1 1.7 138.1
Other current liabilities total 134.7 241.9 358.88 488.05
Total current
Quickliabilities
Ratio 2274.8
1.3 2382 2498.98
1.2 1.2 2628.15
Total long term debtProfit Margin

Operating 2307.8
0.15 2357.8 2360.8
0.15 0.16 2360.8
Deferred Income Tax 173.8 173.8 173.8 173.8
Minority Net
interest
Profit Margin 40
0.07 40 0.0740 0.07 40
Other liabilities, total 763.7 713.7 710.7 710.7
Total Liabilities
Return on Stockholders’ Equity 5560.1
0.63 5667.3 5784.28
0.79 0.81 5913.45
Redeemable Preferred stock 0 0

Total Asset Turnover 1.66 1.82 0 1.91 0
Preferred stock - non redeemable, net 0 0 0 0
Common Sock 186.1 204.1 212.1 216.1
Debt/Equity Ratio 4.7% 1941 5.2% 4.5
Additional Paid in capital 1941 1941 1941
Retained Earnings (Accumulated Deficit) 4383.9 4383.9 4383.9 4383.9
Earnings Per Share 3.7 - 4.1 5
Treasury - Common -4545.8 4587.45 -4733 -4525.8
Other Equity -692.6 -738.4 -698.5 -692.6
Total Equity 1272.6 1203.15 1105.5 1322.6
Total liabilities & Shareholders’ Equity 6832.7 6870.45 6889.78 7236.05
Project Financial Ratios

KLCP101003 Page 33
Analysis:
• The current ratio and quick ratios show that Avon is in a good position to meet its short
term obligations even without relying upon the sales of its inventories
• The operating profit margin shows that Avon is improving in its efficiency which will
result in greater profit productivity
• The net profit margin shows that profitability will improve thus shareholders can expect
greater return
• The ROE shows that the return on equity is improving
• The total asset turnover shows that the return on the asset investment is good
• The Debt/Equity ratio shows that Avon is using more equity to finance operations
• EPS shows that Avon is becoming more attractive to investors
EVALUATION – BALANCE SCORE CARD
Balance Score Card
Balance Scorecard is the strategic planning and management system that provides a
frame work for measuring performance and assisting managers identify what it is needs to be
measured and completed, while enabling executives in the execution of these strategies
constitutes the makeup of the balance scorecard for the business.
There are four fundamental perspectives from which organizations using this system can
implement their vision and strategies include:
1) Financial Performance Perspective

This element is showing how viable a business appears to shareholders in order to
achieve financial success.

KLCP101003 Page 34
2) Customer knowledge Perspective

Highlights the importance of satisfying customers while focusing on the achievement of
the organization’s vision.
3) Internal Business Processes Perspective
Refers to the internal aspects of the business, wherein managers can analyze the overall
operations of the business to see how well the provision of its goods and services and its
ultimate impact on achieving total customer satisfaction.
4) Learning and Growth Perspective
Includes the training and continuous upgrading of employees knowledge, skills and
abilities that necessitates the advancement of being technologically savvy.
Avon Products Inc. uses the Balance Score Card system to implement the essential link
between business-planning strategies and people plans for greater productivity. This is to ensure
that Avon can achieve increase growth in revenue, increase market share, ensuring the delivery
of quality and timely services, providing the appropriate training and development of employees,
delivering improved services by linking business strategies to people plans. Forecasting
customers need by anticipating changes and adopting various technologies is high demand on the
priority list of the Avon to develop them as a cosmetic leader changing towards a global player
in the cosmetics industry.
AVON BALANCE SCORE CARD EVALUATION
Time Primary
Objectives Measure/Target Expectation Responsibility
Chief Financial
Financial Officer
To succeed Lower customer Shareholders value
financially, acquisition costs. Continuous
Double digit sales Growth in revenue
how we appear to growth
Increase market share Increase profitability
our shareholders for on-line products
Target 10% return on Market share
investment.
Achieve at least 10%
on net profit in 1st year
of new product Net profit on percentage sales
Customers Operations
How to achieve our Ensure on-time Percentage of on- time Continuous

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delivery always delivery.

vision, the Number of customers, email
importance of Increase customer addresses, time duration
retention between purchases
Percentage on return
satisfying our Reward customer Conversion rate
customers loyalty

Internal Business Operations
To analyze
operations and see Supply chain
how products and excellence in order Quick turnaround on the
services achieve confirmation delivery of orders Continuous
total shareholder and Adoption of some Incorporating and engaging
customer satisfaction, social services quality, talented skills
What business
process must we Operations - measures of
excel at? Generating revenue quality, products and costs

Learning & Growth Human Resource
To achieve
continuous training Ensure managers are People - employee retention,
and upgrading exposed to training and skills Continuous
of employees skills Successful penetration of new
and abilities. market changes markets
Always keeping
abreast of new Online service Continuous improvement in
technology innovation CRM
Advancing change
and self- Implement a Increase value in Knowledge
improvement succession plan management system

Analysis:
The main aim to evaluate Avon based on Balance Score Card is to enables Avon to meet
their strategic objectives by identifying the various means of improving workforce productivity.
This is an effective tool in maximizing Avon resources and building capacity in a structured and
planned way. It helps Avon to improvise based on the performance measurement and key
indicators which has been stated. The department officers are responsible in meeting the targets
which leads to Avon’s objectives. A continuous time expectation is needed to ensure that the
structured and planned targets to be achieved. These plans not only look at the strategic and
operational components for Avon to succeed, but also consider the people factor in developing
and delivering Avon business in the international markets to be the global player in the cosmetics
industry.
AVON IN GLOBAL PERSPECTIVE

KLCP101003 Page 36
Avon Being Global
From a global perspective, three avenues of growth were identified by Avon management which
are as below;
1. Geographic Growth
2. Leveraging distribution channels in emerging and developing markets
3. Marketing in developed industrial areas.
The Global Product Management Group
The new multinational Global Product Management Group was an essential factor in the new
organization. The group would support the entire company with “Centers of Excellence” to
increase Avon’s competitive advantage in the marketplace. With a global scope and
multinational staffs, the centers would be located around the world, wherever the appropriate
expertise existed. The Global Product Management group would be responsible for product
management, global brands, global sourcing (raw materials) and logistics, worldwide
manufacturing, product research and development and certain global aspects of sales and
customer service support.
The Global Planning And Development
In addition to the above, the responsibilities of the Global Planning and Development group were
expanded to include new business development. The group would manage Avon’s emerging
market ventures in China, Eastern Europe, Russia, and other parts of the former Soviet Union, as
well as other new market ventures.
Advantages Of A Global Organization
The new slimmed-down global organization will make Avon more responsive to local markets
while providing economies in such areas as global manufacturing, purchasing and research and
development. Avon will also be able to better exchange best practices, growth initiatives and

KLCP101003 Page 37
competitive information more rapidly from market to market and become the embodiment of the
phrase, “Think global, act local.”
The new market-oriented organization was expected to speed decision-making, eliminate

unnecessary levels of management, allow sharing of successful business practices by previously
autonomous divisions, and reduce overhead by centralizing such functions as purchasing and
manufacturing. It would concentrate on discovering what buyers wanted in each individual
market and provide consumers with products in a way that would enable Avon to achieve its
long run growth objectives.
Avon Global Direction
Avon forces to engage the entire company in becoming more customer-oriented and more
market driven. The task forces established the following targets to guide management in
objective setting and strategy development:
1. Improve consumer attitudes toward the attractiveness and accessibility of Avon and its
products, and begin to develop a global image for the company;
2. Improve the quality of the product line, in bringing new products to market and in
weeding out weaker or inappropriate items;
3. Introduce global product planning and the extension of global sourcing (finding the most
appropriate source of raw materials);
4. Improve customer database management and market segmentation; and
5. Establish new ways for customers to shop Avon, and improve in the speed at which
customers and sales representatives could order and receive products.
Having implemented a regimen of operating strategies, financial controls, organizational

changes, innovative leadership, and market-based targets over the past four years, Avon now
favorably positioned to enjoy a period of growth. In a worldwide corporate climate of abrupt
changes and discontinuities, of newly emerging forces and dangers, and of unforeseen influences
at home and abroad, Avon’s leadership could well ask the unanswered question, “Will the

KLCP101003 Page 38
internal organizational and other changes that have been made reposition Avon so that it can
compete successfully in the global marketplace.
AVON STRATEGIC PROBLEMS, TRENDS & FORCES
What to do about new product lines
It would be a good idea for Avon to research into launching new products in different lines than
they are currently in but keep them similar in the industry. In order to continue growing and
obtain bigger cash flows and profits you have to spend before you get a payoff. With Avon's
new research and development plant they should be able to quickly design and market new
product lines without many problems. Having new product lines will help maintain growth and
internal expansion.
How to maintain growth
Avon has been growing globally for decades to continue to do this Avon needs to be aware of
what it will entail. They have taken care of research and development with their new facility but
there are many other factors that could inhibit them. Reluctances to expand internally will hold
them down as well as finances. Avon may have to look into selling totally new products, which
is consistent with what was before mentioned.
How to continue cutting costs
Throughout Avon's business transformation they have done an incredible job cutting costs
mostly thanks to Kropf. How to continue to cut costs may rise a problem because they have
launched new cosmetics that are selling well, put millions into research and development, and do
not want to upset loyal customers by retiring old products that have a loyal customer base. Some
customers may be hooked on a classic product such as Skin-so-Soft and just happen to by other
products every once in a while when they reorder their Skin-so-Soft. Cutting this product out of
the line will not only result in a loss of sales due to the product but all other little buys that each
customer may order in the process. Avon's business transformation may have to look elsewhere

KLCP101003 Page 39
at every part of its value chain to try and cut out expensive virtually unneeded parts to try and
cuts costs.
Internal Expansion
Some may say that there is no room for internal expansion because Avon has done such a good
job in international markets and that it is not needed. I believe that the CFT market is so big that
internal expansion within the company should be a must. I think Avon should continue to grow
within and outside the United States, create more jobs and look into developing more new
product lines in the men's shaving and baby care areas. Avon's strategy wants to diversify and
penetrate new markets and what better way to do it than with new products. Developing alliances
with department stores and more Internets selling will also help with internal expansion.
Direct-Selling Model Dependent on Earnings from Active Sales Representatives
In both domestic and global markets, Avon's sales largely come from direct selling through its
Active Sales Representatives. The 6.2 million Representatives that Avon employs are
independent contractors that receive a percentage commission for their sales but do not enjoy
employee benefits. The idea behind the direct-selling model is that if Avon can eliminate the
middle-man (department and cosmetic stores) and get its products directly to consumers, they
will be able to cut costs and increase profits. One of the goals of the 2005 Turn-around Plan to
increase the number of Representatives paid off in 2007 when the company had a 13% increase
in net sales as a result of the increase in the number of Representatives. Due to its reliance on
direct-selling through representatives, Avon not only competes for the end consumer but also for
representatives that are knowledgeable about the industry and about beauty products. Avon's
dependence on the productivity and profitability of the representative direct-selling model
exposes it to cost and litigation risks. In 2004, four Avon representatives filed a class action
lawsuit against the company for alleged "channel stuffing," where Avon supposedly shipped
products representatives without an order and held representatives responsible for payment for
the unordered shipments. It is likely that AVP will incur future costs through litigation and
resolution of the lawsuit, which may include terms that would increase costs and decrease profits
for Avon.

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Multi-year Cost Restructuring Initiative May be Unable to Reduce Costs and Support
Increased Advertising
In late 2005, Avon launched a Turn-around plan that included several strategic initiatives to
realign costs, improve products, and increase market share through brand competitiveness. Avon
expects annualized savings of more than $430 million when the plan is fully implemented in
2011-2012. However, with the global economic downturn and slowing demand for non-essential
personal care products, Avon may not be able to achieve its savings target. For example, Avon
has dropped its prices so far that at the end of Q2 2009, 70% of its products were prices less than
$5. Falling short of its savings targets would be detrimental to Avon's profitability as it would no
longer be able to support its increased advertising spending. In 2009, Avon decreased advertising
costs by 10% which was in contrast to the 48% increase in 2007 and 83% increase in 2006 - a
sign that the company was cutting back due to the economic downturn to support new product
launches and improve brand recognition as part of the turn-around plan. Although Avon does not
want to reduce advertising spending, which means success of the turn-around plan is vital to
supporting Avon's increased advertising costs as well as costs incurred by the company's entry
and expansion in new global markets, the economic downturn has forced the company to cut
back on advertising. At the end of 2009, the company revised its turn-around plan and now hopes
to save $200 by 2011-2012.
Direct-Selling Business Model Exposed to Regulations in the Global Market
Avon has become synonymous with the direct-selling business model - the process by which the
company hires independent contractors, called Active Sales Representatives, and pays them
percentage of commission to sell Avon products directly to customers. By removing the need for
a middle distributor, such as a department or cosmetic store, Avon hopes to eliminate costs and
increase profits. In 1998, the Chinese government banned direct-selling in response to abuses
perpetrated by some corporations. The company's business in the region was crippled in the
short-term and strongly disadvantaged in the long-term as the company was forced to abandon its
direct-selling strategy and had to open its own retail stores in order to sell products. Not until
2006 did China re-licensed Avon for direct-selling, which allowed Avon's revenues from China
to increase rapidly from 2006 to 2008. Total revenue from China rose from $212 million in 2006

KLCP101003 Page 41
to $353 million in 2009. Similar situations may arise in Avon's other emerging market segments,
which would negatively impact Avon's revenue growth globally.
Large Presence in Global Market Exposes Avon Products to Currency Fluctuation Risks
80% of Avon's sales revenues come from markets outside of the United States, making the
company very sensitive to currency fluctuations and the strength of the dollar. A weakening of
the dollar against foreign currencies would allow Avon products to become more competitively
priced in global markets, thus positively affecting sales revenue from foreign markets; however,
a weak dollar would also mean higher costs for products manufactured overseas.
AVON KEY SUCCESS
Key success factors concern the product attributes, competencies, competitive

capabilities and market achievements with the greatest bearing on company profitability. These
are the things that the company does well and helps them obtain profits.
Ability to get new products out of R&D and into the market
With all the money and time Avon has put into the Research and Development part of the
company it has paid off. In 2002 Avon spent $100 million on a new state-of-the-art research and
development facility. This provides researchers with the materials they need in an easy work
environment, which in turn improves efficiency in every aspect of the process. Having this
facility enables Avon to have their new products out in the market very quickly compared to
other rivals such as Revlon and Estee Lauder. This skill gives Avon an image of superior
technology and quality and provides them with the first mover advantage in many cases as well.
Internet Capability
It was only in the past decade that Avon became familiar with the Internet. When Jung took over
she saw that e-commerce was on a fast rise and that Avon was not capitalizing on this sales
opportunity. It was only a matter of time before Avon had their own website that now has all
kinds of e-commerce activities. Avon's website enables customers to order products, read on the
most recent developments by Avon, informs them of sales and clearances as well as free gift
giveaways and the top ten selling items. Customers can shop by product or category and check

KLCP101003 Page 42
on their account status, review the most frequently asked questions or get assistance all at the
click of a mouse. By making their web site easy to navigate and perform multiple tasks, Avon
has helped reduce ordering costs and increase sales.
Managerial Experience
Andrea Jung, Avon's Chief Executive Officer, has been with Avon since 1994. Before working
for Avon, she graduated from Princeton and joined Bloomingdales where she rose to second in
command before the age of thirty. When she joined Avon she entered as the President of United
States product marketing and continued to impress her upper management. Her bold decisions
made her stand out and she was named CEO in 2001 at the age of forty. Susan Kropf who has
been with Avon since the early 90's moved and Executive Lieutenant, to Executive Vice
President and President of North American operations. Kropf has worked alongside Jung and
was key in the Business Process Reengineering efforts that achieved great success in 2001, with
savings of more than $150 million. The experience and success of Avon managers is un-
teachable, irreplaceable and are definitely a huge factor on why Avon is where it is today.
Accurate Filling of Orders
Only six years ago you would hear customers complain about the inaccuracy of Avon's mail
orders. This is a rare complaint today. New training programs and the implementation of the
Avon website has enable the company to fill orders fast and accurately. The days of human error
with direct selling have almost become obsolete with the new initiatives taken place to eliminate
such error. Incentives implemented by the sales leadership program have also made Avon give
consistent quality service.
CONCLUSION
Avon management has re-evaluated and map out the long-term future of the firm’s business to
develop them in the international market and be a player in cosmetic industry on a global level.
By Customizing Marketing Internationally based on geographical areas, Avon tries to satisfying

the subtleties and intricacies of customer demand around the world meant that the firm’s
business would vary from country to country and market to market. To reach a wider target in
the geographical area over the globe, Avon developed Avon Select, a direct marketing program,

KLCP101003 Page 43
to enable customers to buy Avon products in various settings. Customers could order products
via any one of four methods: through their Avon representative, by mail though special Select
catalogs, by the 1-800-FOR-AVON telephone, or by FAX which were offered worldwide. This
indicates that Avon is playing a major role as a cosmetic leader in a global perspective.
Other than that, new programs were designed to complement the existing network of Avon sales
representatives to reach a wider coverage in developing global direction. Avon spent 2 to 3
percent of annual sales on image-enhancing advertising and promotion programs worldwide to
make customers aware of Avon products and the purchase options available. Even retail stores
were not ruled out by management as a viable alternative for the distribution of Avon products.
It was not easy for Avon in the process to develop a global organization. It affected the firm in a
number of different ways. The product line was rationalized by strengthening and developing a
certain number of global brands that were important and sold on a worldwide basis. Sourcing of
raw materials and the logistics system took advantage of Avon’s strong presence in many
markets in terms of efficiencies in the supply chain. A changing environment which encouraged
lower duty rates suggested that it was no longer necessary to manufacture products in the
countries where they were sold. Underutilized manufacturing plants, from a capacity of view,
could now be consolidated with others plants were also an affecting issue for Avon in being
global.
By implementing a regimen of operating strategies, financial controls, organizational changes,

innovative leadership, and market-based targets has favorably positioned Avon to enjoy a period
of growth in worldwide. The internal organizational and changes that have been made reposition
Avon so that it can compete successfully as the “Cosmetic Leader in Global Marketplace”
REFERENCES
1. David, Fred, R “Strategic Management Concepts and Cases” 12ed. Prentice Hall 2009
2. Retrieved December 3, 2010 www.avon.com
3. Retrieved December 3, 2010 www.wikinvest.com
4. “Avon Calling – For Help” Business Month April, 2010.

KLCP101003 Page 44
5. “Avon Calls – At 50 Times Earnings,” Business Month November, 2006 -2009.
6. Avon Products, Inc., Annual Report, New York, N.Y., 2010
7. Avon Products, Inc., Annual Report, New York, N.Y., 2009
8. “How Avon Rings Their Chimes,” Sales and Marketing Management, November, 2009
9. Avon Products, Inc.: DEVELOPING A GLOBAL PERSPECTIVE
10. Retrieved December 2010 www.yahoo.com/images

KLCP101003 Page 45

Competitive Strategic Management - Developing Avon in A Global Perspective

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Competitive Strategic Management - Developing Avon in A Global Perspective

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QGM6163- CSM- PROJECT PAPER - DEVELOPING AVON PRODUCTS INC.

AVON PRODUCTS INC. - DEVELOPING IN A GLOBAL PERSPECTIVE

NOR NAZERANAH OMAR DIN

NOR NAZERANAH OMAR DIN

AVON PRODUCTS INC.

NOR NAZERANAH OMAR DIN

Avon implemented reconstructing programs in 2009 which included closing two

Vision Statement (Actual)

Mission Statement (Actual)

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Avon is “the company for women”

Proposed Vision Statement

Proposed Mission Statement

“Avon: the company for everyone – committed to the enrichment of lives”

NOR NAZERANAH OMAR DIN

Financial Ratios Analysis

Ratio 2008 2009 2010

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Marketing Positioning Map and Analysis

Customer Service (High)

Quality (Low) Quality (High)

Customer Service (Low)

Superior customer service compared to rivals

NOR NAZERANAH OMAR DIN

Analysis of Marketing Strategies

Superior Customer Service

Wider Geographic Coverage

Quicker Design-to-Market Times

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More Attractive Product Line

Improved E-Commerce and Internet Sales Capabilities

Stronger Brand Name than Rivals

Stronger Global Distribution and Sales Capabilities

Map Locating Avon Operations in Worldwide

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marketed and sold.

• Czech Republic • Estonia

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• United States • Canada

• Puerto Rico • Dominican Republic

• Aruba • Antigua & Bahamas

• Grand Cayman Island •Grenada

• Colombia • Costa Rica

• Australia • Hong Kong

• Malaysia • New Zealand

• Philippines • South Korea

NOR NAZERANAH OMAR DIN

• Netherlands • North Cyprus

• Norway • Oman Internal

Assessment: Avon Strengths

1. Avon is a Global Market Leader

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4. Channel of distribution – world’s largest direct seller

5. Manufacturing operations match ISO 14001 standards

6. Avon owns its major manufacturing and distribution centers

7. Increased in revenue in most geographic area, improve e –commerce and sales

9. First cosmetic to permanently end to animal testing

Internal Assessment: Avon Weaknesses

1. Decrease in North American Sales Revenue by 129.4 million

2. Weak Brand Image

4. Poor brand loyalty and Does not target urban trendsetters

7. Avon lagged behind seven of their cosmetic companies in customer loyalty

Internal Factor Evaluation (IFE) Matrix