Republic of the Philippines

Davao Oriental State College of Science and Technology

Guang-Guang, Dahican, City of Mati Davao Oriental
Institute of Business and Public Affairs

AVON PRODUCTS INCORPORATED

CASE STUDY ANALYSIS

Ms. Anna Mae Teoxon

Faculty

Marjon A. Limot
Student

Bachelor of Science in Business Administration 3B

December 22, 2020

I. INTRODUCTION

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Avon products is one of the biggest cosmetic companies and a pioneer of the direct sale
strategy. In recent years, Avon has faced increased challenges from competition,
globalization, and changes within the retail environment. Executives and management have
taken the corporate through recent restructuring efforts to cause innovations, integrate
technology, better train employees, and regain its foot hold on the cosmetic direct sale
industry. Avon hopes to realize majority market share within the developing markets of South
America and Pacific Asian by expanding overseas operations, that specialize in other retail
methods, and employing a team of diverse skilled busines professionals. Avon believes that
these new directives will help the corporate operate in line with its vision and mission while
ethically increasing its revenue.

II. BACKGROUND
In 1886. David H. McConnell founded a company named The California Perfume Company
(CPC) when he was only 28 yrs. old. The first company office was in New York, and the
manufacturing and shipping office operated from a room that was 20 feet by 25 feet.

The extraordinary San Francisco earthquake of 1906

devastated CPC's California office: however, before
long the company was able to revive. By this time.
CPC had 10,000 agents and Station Managers
offering 117 distinctive articles in 600 styles and
bundle sizes. In October of that year, the company
delivered its Instant color brochure. In 1914, CPC
opened its to begin with office exterior the United
States in Montreal, Canada. When World War I
broke out over the Atlantic. 5 million units a year of
CPC's items were sold in North America. As the
Roaring Twenties come to its top. CPC had more than multiplied its sales to $2 million
within the years since the end of the war. By this time, there were 25,000 agents within the
United States. The company’s domestic office was presently moved to Fifth Avenue in New
York City. The primary products were presently advertised under the brand title Avon. These
items were toothbrush, talcum, and a vanity set.

In 1937, David McConnell passed on, and his child, David Jr., got to be the president of the
company. By this time, their products were ensured, and numerous of them bore the Good
Housekeeping Seal of Endorsement. In September 1938. the company's title was changed to
Avon Products Inc. after the British town Stratford-upon-Avon. Over half of Avon's Suffern.
New York, plant was surrendered to military back in 1944. In any case, their product sales
proceeded to rise to about $I6 million. With the death of McConnell Jr., J. A. Ewald got to be
the president: and he presented mechanized billing and took the company open in 1946. In
1954, Avon launched its exceptionally effective tv promoting campaign entitled "Avon
Calling." Avon for the primary time moved abroad to Puerto Rico and Caracas, Venezuela.
At that point in 195ft they entered Cuba. The company became a family title within the
United States within the 1960s with its popular tv promotions with the capture phrase, "Ding
dong, Avon calling."

With U.S. sales topping $750 million in 1970 and an abroad trade that was developing at an
average of 25% yearly, Avon was one of Wall Street's "Nifty Fifty" stocks. That year, the
primary Asian Avon trade opened in Japan and throughout Western Europe. To close out this
decade. Avon acquired the jeweler Tiffany's in 1979. James Preston, the CEO of Avon,

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battled in 1990 to protect Avon's freedom from a arrangement of takeover endeavors
(including Amway and Mary Kay). This year, Avon also announced a lasting end to animal
testing—becoming the primary major U.S. corrective producer to do so.

By 1997, there were 2.6 million independent agents around the world gaining $2 billion in
commissions for themselves and their families, Avon had presently moved into the nations of
the previous Soviet Union alliance with its products. In addition, in only five years the Avon
Around the world Support for Women's Wellbeing had raised $50 million. Performance
started to progress only after Andrea Jung got to be the CEO of the company in 1999. Andrea
Jung got to be president and CEO of Avon in 1999 and has completely patched up the
company. Under her administration, the company has upgraded its product line, launched
new promoting, and created a new picture. Avon’s sales have increased
by 30 %, profits 40%, and the stock cost has significantly improved. Jung’s has been able to
adjust the firm’s core capabilities with its strategic targets which has lead to amazing results.
It shows up that Jung has been able to set up a clear vision for the firm that has been
consolidated in each viewpoint of the firm’s working framework.

Andrea Jung, Chief Executive Officer and Chairman of Avon Products, Inc was sitting alone
in her tremendous open office on March 25, 2012 she was composing the Chief official report
on the yearly performance of the company for the year 2011. Tears begun rolling from her
eyes while composing the report for the year 2011 as the performance was not agreeing to the
projections given by her to the stock market .The profitability of the company within the year
has come down by 20% and in USA market profit has decreased by 184.4% . Total income
within the year 2011 has as it were increased by 4% and in consistent dollar terms it was only
1%. In USA, Avon on a sale of $ 2 billion lost 184 million which was extremely
disappointing for the market and the share cost declined by 47% after the declaration of
results. The company was too facing lawful proceedings in USA under foreign corrupt
practices act for bribing in China to secure permit of offering door to door, she knew the time
has come for her to take off the CEO position. She decided that she will leave from the CEO
position and stay the Chairman of the Board and offer assistance the Board to seek for her
replacement.

III. EVALUATION OF THE CASE

Avon utilized a few strategies of assessment to accumulate information that significantly
profited the corporate in its turnaround efforts. the corporate transitioned its leadership from
being opaque to becoming open and transparent. Leaders became proficient in their
awareness of present and potential performance ratings and the way to change those ratings.

Avon differentiated talent within the corporate and equipped each level of talent with the
acceptable experience. High performance leaders are conscious of their value within the
corporate, and lower performance leaders are given the support needed for areas of
improvement.

Avon has become a more disciplined organization as a results of the turnaround. the
corporate presently capacities more deliberately as forms are synchronized to work reliably
on plan around the world.

The major issues facing the Avon Products Inc. are competition from the local brands that are
appealing to the older women; overlying on direct sales that made it challenging for the

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company to stray into other sales avenues; and globalization issues like lines of products and
legalities.

SWOT Analysis of AVON Products Inc.

Strengths
 A Global Market Leader
 World’s Largest direct seller as a Channel of Distribution.
 One of the world’s top Worldwide brands.
 First cosmetic to for all time conclusion to animal testing.
 Owns its major fabricating and distribution centers.
 Offering low-cost domestic care and beauty items, door-to-door and through catalogues in
all 48 states.
Weaknesses
 Competition in markets share due to decrease gaining opportunities.
 Firm still depends intensely on direct sales from sales representatives.
 Avon is struggling to recover from poor management techniques that driven to a CEO
changeover and worldwide bribery investigations.
 Falling of market shares causes of representatives layoffs.

Opportunities
 The direct selling trade show is still reasonable in developing nations.
 The USA market remains one of the best markets within the world.
 Avon solid product inquire about and development history offers a huge source for the
company growth.
 The increase of women's rights in other locales around the world.
 The developing markets in Africa, Asia, Center East and Eastern Europe and the
increasing requesting for the anti-aging skin care fragment, offers an opportunity for the
company development.
 The company’s workforce rebuilding that took place in 2005, driven to creation of more
funds to be given to promotion, which offers an opportunity for it to increase its market
segment.

Threats
 The direct selling business model has warned in the USA.
 Avon's inability to be sold in department stores at the level many competitors’ products
are sold.
 Fierce of competition from multinationals such as Unilever, Proctor & Gamble for its
market share.
 The economic downturn in emerging markets (which Avon derives over 60% of its
revenue) threatens the company profitability.

IV. PROPOSED SOLUTION/CHANGES

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AVON Products Inc. based on their problems the solution or changes have to do is to become
more attractive in working area, becoming more Health Conscious and should change their
fashion & Trends. Expanding the market of Avon Products into Asian countries like Pakistan,
Bangladesh, Malaysia, Taiwan & Russia is a huge market because of the Stability in their
economies, and the Population growth. Avon Products Inc. must build a brand image in
existing markets by the promotions and innovation of new product which is tailored to their
specific needs of such as acquiring the small competitors to gain more Advantage, invest
more in research & development to develop more “Green” products, expand their online
selling strategies, expand the product line, and also focus on men and children, and Change
the brand image through attractive packaging, brand logo and distinguishing its products.

V. RECOMMENDATIONS
Based on the issues or problems said over, the following are the recommendations to Avon
Products Inc problems:
 Increase sales by expanding internet presence.
 Maximize the income within the cosmetics market through promoting and the sales force.
 Manufacture and disperse more products that are eco-friendly.
 Improve marketing techniques to modern and existing customers by repositioning the
brand, coupons, announcements and modern packaging.
 Increase awareness of efforts to ensure the environment.
 Discount products that are not gaining any significant income and faze them off the
market in a timely manner.
 Offer incentives to its customers.
 Motivate the business to promoting its products by advertisements, building up sales
competition for representatives, taking an interest in conventions, and by endorsing
establishment of its products to retail stores.

VI.QUESTIONS

1.What strategy was Avon pursuing until the mid-2000s? What were the advantages of this
strategy? What were the disadvantages?
Answer:
Avon was seeking after a localization technique, which permitted local management to be the
“king or queen of each decision”. Absolutely fulfilling the request of local markets given
certain self-evident advantages, such as higher client satisfaction. However, the
disadvantages to that technique included a need of consistency in marketing strategy from
country to country, extensive duplication of manufacturing operations and supply chains, as
well as a abundance of new products, numerous of which were not profitable.

2.What changes did Andrea Jung make in Avon’s strategy after 2005? What were the
benefits of these changes? Can you see any drawbacks?
Answer:
Jung moved techniques from the localization quadrant more towards worldwide
standardization. Express changes included straightening the organization, decreasing
managers by 30% and management levels to just eight. She, too, solidified a score of regional
centers, and return-on-investment criteria started to be more noticeably utilized. The
preferences were numerous, counting disposing of duplication, suspending non-profitable
products (25%), and eventually decreasing costs (one billion, dollars a year). By saving, so
much cash Jung was able to get Avon back on track, giving brand name and quality products
at a low cost. In any case, with any strategy there are drawbacks. In this instance, it may be

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client satisfaction. Whereas 25% of the products were not profitable, that does not mean 25%
of the products were disliked. Subsequently, the strategy shift, while for the most part
profitable, can be inconvenient to the customer who was trying to find more one of a kind,
localized and specialty products.

3.In terms of the framework introduced in this chapter, what strategy was Avon pursuing
by the late 2000s?
Answer:
As specified already, Avon was seeking after a worldwide standardization strategy. This can
be one in which Avon focuses on expanding profitability through cost decrease, economies of
scale, and a reliable quality compare to a low cost approach.

4.Do you think that Avon’s problems in 2010 and 2011 were a result of the changes in its
strategy, or were there other reasons for this?
Answer:
I am in favor of Avon seeking after a worldwide standardization strategy, since consistency
with brand name with fetched reduction may be a need (particularly for a bigger company), I
do believe the a few of Avon’s short-term issues come about due to the change. With a
modern system, there will definitely be a few pushback from customers. In this way, a switch
away from customized niche products to just the way better selling primary products, might
create a fracture in customer/seller synchrony and a loss in revenue. However, the content
also sites other potential reasons, such as issues executing information systems and a
violation of the Foreign Corrupt Practices
Act which made Jung give up her part as CEO. Thus, changes in strategy and other
unessential reasons were both factors for issues in 2010 and 2011 Avon.

REFERENCES

https://www.avon.ph/avon-ph/about-us/history.html

David, F. R. (2010). Strategic management: Concepts and cases (MyManagementLab series)

(13th ed.). Boston: Prentice Hall.

Jui-Yen, Y., Mei-Liang, C., & Yi- chieh, C. (2008). The Study of Direct Selling Management

Strategies: An example of the Avon cosmetics company in Taiwan. International

Management Studies

MarketWatch. (2016). Avon products Inc. Retrieved 2016, from

http://www.marketwatch.com/investing/stock/avp/financials

Wiley-Blackwell (2007). Avon products, Inc. Mergent’s Dividend Achievers, 4(3), 26–26.

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CASE STUDY GRADING RUBRICS

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