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Strategic Management (MBSA1213)

Avon Product, Inc.2013:


Internal Analysis

Submitted by (Group 2):


Tamil Selvam (MBS141095), Seah Angel (MBS141085), Lee Choar Yee
(MBS141084)
PhangJiaQian (MBS141091), Toh Cindy, (MBS141093), Nur Fathia Binti Saleh
(MBS141087),
Izzatul Binti Idris (MBS141088)

To: Associate Professor Dr. Mas Bambang Baroto

April 3rd , 2016


1

Defining key success factors of Avon

Avon

Distributi
Loreal
on
Channel

Avon uses both door to door sales people


and brochures to advertise its products.
( pg 557, par 3)
Consumer products are market under Loreal
Paris, Garnier, and Maybelline New York.
Proffesional Products are marketed under
Redken, Matrix and Loreal Professional. Luxury
products sold under international brands. Active
Cosmetics sold in pharmacies. (pg 560, par. 1)

Mary Kay Direct selling company. (pg 560, par 2)


Estee
The company sells its products consisting of
Lauder
upscale departments stores, specialty retailers,
upscale perfumeries and pharmacies and
prestige salons and spas.(pg 560, par 4)
Revlon
Walmart is Revlon biggest single customer.(pg
560, par 5)

Coty Inc. Coty product moderately priced scent sold

Defining key success factors of


Avon (Cont)

Avon

Produ
ct
Variet
y
Loreal
Mary Kay
Estee
Lauder
Revlon

Coty Inc.

Cosmetics, fragrances, toiletries, jewellery,


apparel,
home
furnishings,
watches,
footwear, childrens products, skin care and
decorative products, nutritional products,
housewares, and entertainment and leisure
products. (pg 556, par. 2)
Cosmetics, The Body Shop and Dermatology. (pg
560, par.1)
Cosmetics and fragrances (pg 560, par. 2)
Skin care, makeup, fragrance and hair care
products. (pg 560, par. 3)
Cosmetics, womens hair colour, beauty tools,
anti-perspirant deodorants, fragrances, skin care,
and other beauty care products. (pg 560, par.4)
Nail care, nail polish, and fragrances. (pg 561,
par. 1)

Defining key success factors of


Avon
(cont.)

Avon
Latin America, Europe, Middle East & Africa,

Global
Expansion

Financial
Position

North America, and Asia Pacific. (pg 559,


exhibit 2)
Loreal

LOral is a large global cosmetic conglomerate. (pg


560, par.1)
Mary Kay
Mary Kay is the sixth largest direct selling company
in the world.(pg 560, par 2)
Estee Lauder Sold in more than 150 countries. (pg 560, par. 3)
Revlon
Distributed in more than 100 countries. (pg 560,
par. 4)
Coty Inc.
-Not mention in the case-

Avon

Annual sales $10.7 billion


Net income ($42.5 million)(pg 557, par 1)
Loreal
Annual sales $30 billion
Net income $3.5 billion(pg 560, par 1)
Mary Kay
Annual sales $3 billion
Net income not mention in the case studyEstee Lauder Annual sales $10 billion
Net income $1 million(pg 560, par 4)
Revlon
Annual sales $1.4 Billion

Competitive profile matrix (CPM) of Avon

CRITICAL
SUCCESS
FACTORS

AVON

WEIGHT

RATING

L'OREAL

SCORE

RATING

ESTEE LAUDER

SCORE

RATING

REVLON

SCORE

RATING

SCORE

DISTRIBUTION
CHANNEL

0.20

3.7

0.74

3.3

0.66

3.4

0.68

3.5

0.70

PRODUCT
VARIETY

0.30

1.2

2.8

0.84

3.1

0.93

3.5

1.05

GLOBAL
EXPANSION

0.22

0.88

3.2

0.70

3.4

0.75

0.66

FINANCIAL
POSITION

0.28

0.56

1.12

0.84

2.5

0.70

TOTAL

3.38

3.32

3.2

According to the key successful table, LOral and Estee Lauder is having major
strength. Due to the lack of information, Coty and Marry Kay cannot be analysed in
the competitive profile matrix.

3.11

Group maps : Description for Group Maps


PRODUCTS

- Y-AXIS
MARKET GEOGRAPHIC
World largest direct seller firms

REVENUE ($)

AVON

X-AXIS
NO. OF PRODUCT LINE
15 Products

LOREAL

3 Products

Large global cosmetic conglomerate

30 Billions

ESTEE LAUDER

4 Products

More than 150 countries

10 Billions

REVLON

7 Products

More than 100 countries

1.4 Billions

10.7 Billions

According to the CPM and group map, LOreals the large


global cosmetic conglomerate had achieved the highest
revenue in the competitor list with 30 billion revenue. Thus,
we believed that LOreal was qualified mostly to be set as a
benchmark for comparison among the list

Table of Financial Analysis Avon


Product, Inc., 2013
N Ratio
o

Company within
industry
Avons
Avons
2012
2011

Streng
th

Weakness

1.

Liquidity Ratio

a.

Current Ratio

1.45

1.42

b.

Quick Ratio

1.03

1.02

2.

Leverage Ratio

a.

Debt to total asset ratio

0.83

0.80

b.

Debt to Equity Ratio

4.99

3.88

c.

Long Term Debt-to equity

2.79

2.06

d.

Time Interest Earned

3.02

9.20

3.

Activity Ratio

a.

Inventory Turnover

9.44

9.72

b.

Fixed Assets Turnover

3.10

3.11

c.

Total Assets Turnover

1.45

1.46

Table of Financial Analysis Avon


Product, Inc., 2013
N Ratio
o
4.

Profitability Ratio

a.

Gross Profit Margin


Operating Profit
Margin
Net Profit Margin
Return on Asset
Return on Equity
Earnings Per Share
Price/ Earnings
ratio
Growth Ratio
Sales

b.
c.
d
e.
f.
g.
5.
a.

Company within
industry
Avons
Avons
2012
2011

Strengt Weakness
h

0.61
0.03

0.63
0.08

(0.00)
(0.01)
(0.03)
(0.10)
N/A

0.05
0.07
0.32
1.18
N/A

10,717.10 11,291.60

Table of Financial Analysis Avon


versus Rival Firm ( LOreal)

LOreal
(2012)
68.3K

Strengt Weakn
h
ess

10.7B

27.7B

Net income ($)

(42.5)M

3.36B

Profit Margin (%)

12.1

406k

1.12

83.1B

Number
Employees
Revenue ($)

Avon(2012)
of 39.1K

Revenue($)/empl 273K
oyee
EPS, earning per (0.10)
share
Market
10.5B
capitalization

Key summary number of strength


of weaknesses
Internal
Strength
Analysis
Cultural
9
Management
4
Marketing
9
Financial
2
Operation
3
R&D
1
MIS
0
TOTAL
28

Weaknesses
0
2
5
23
0
0
nil
30

Table of Strengths
NO
5
9
19
20
23
24
6

11
15
22

Case Fact
Priority
The company received China's first license for direct selling
1
in 2006.(pg557, par1)
Avon operates from a divisional-by-geographic region
2
organizational structure. (pg 557, par 8)
Avon's Asia-Pacific sales fell 9 percent, but the company's
3
sales in Latin America and Europe, the Middle East and
Africa rose. (pg 556, par 3)
Brazil is the companys largest market,(pg 557, par 1)
4
Current Ratio
5
Quick Ratio
6
Avon is one of the world's largest direct-seller firms, and is
7
by far the largest direct seller of cosmetics and beautyrelated item. Avon is the fifth- largest cosmetics and
fragrance firm in the world .(pg556, par1)
There are classroom areas in which the representatives
8
learn about the products and sales techniques. (pg 557, par
3)
use door-to-door sale person (pg 557, par 3)
9
Avon's Asia-Pacific sales fell 9 percent, but the company's
10

Table of Weakness
NO
4

Case Fact
Avon products include cosmetics, fragrances, toiletries, jewellery, apparel,
home furnishing, watches, footwear, children's products, skin care, and gift
and decorative products, nutritional products, housewares, and
entertainment and leisure products. (pg 556, par 2)

Priority
1

Avon's sales in North America during Q2 2013 declined 12 percent, (pg


556, par 3)
Avon closed its Alanta distribution center in 2013 and is closing its
Pasadena distribution center in 2014. (pg 557, par 1)
Avon spent $253.6 million on advertising in 2012, down from $311.2
million the prior year (pg 557, par 4)
There has been no COO at Avon since 2006, a potential strategic mistake by
CEO Jung (and McCoy). (pg 557, par 8)
There is no chief operations officer (COO) so apparently all top executives
report to the CEO. (pg 557, par 8)
Debt to total asset ratio
Debt to Equity Ratio
Return on Asset
Return on Equity

7
5
2
1
8
9
20
21

3
4
5
6
7
8
9
10

IFE Matrix
NO

Case Fact

Weight

Strengths
5
The company received China's first license for direct selling 0.15
in 2006.(pg557, par1)
6
Avon is one of the world's largest direct-seller firms, and is
0.02
by far the largest direct seller of cosmetics and beauty-related
item. Avon is the fifth- largest cosmetics and fragrance firm
in the world .(pg556, par1)
9
11

15
19

20
22

23
24

Rate

Weight Score

0.6

0.06

Avon operates from a divisional-by-geopraphic region


organizational structure. (pg 557, par 8)
There are classroom areas in which the representatives learn
about the products and sales techniques. (pg 557, par 3)

0.15

0.6

0.01

0.03

use door-to-door sale person (pg 557, par 3)


Avon's Asia-Pacific sales fell 9 percent, but the company's
sales in Latin America and Europe, the Middle East and
Africa rose. (pg 556, par 3)
Brazil is the companys largest market,(pg 557, par 1)

0.005
0.1

3
4

0.015
0.4

0.05

0.2

Avon's Asia-Pacific sales fell 9 percent, but the company's


sales in Latin America and Europe, the Middle East and
Africa rose. (pg 556, par 3)
Current Ratio
Quick Ratio

0.005

0.015

0.025
0.02

3
3

0.075
0.06

IFE Matrix
NO

Weight

Rate

Weight
Score

Weakness
1
There is no chief operations officer (COO) so apparently all
top executives report to the CEO. (pg 557, par 8)

0.02

0.02

There has been no COO at Avon since 2006, a potential


strategic mistake by CEO Jung (and McCoy). (pg 557, par
8)
Avon products include cosmetics, fragrances, toiletries,
jewelry, apparel, home furnishing, watches, footware,
children's products, skin care, and gift and decorative
products,nutritional products, housewares, and
entertainment and leisure products. (pg 556, par 2)

0.025

0.025

0.15

0.3

Avon spent $253.6 million on advertising in 2012, down


from $311.2 million the prior year (pg 557, par 4)

0.03

0.03

Avon's sales in North America during Q2 2013 declined 12


percent, (pg 556, par 3)
Avon closed its Alanta distribution center in 2013 and is
closing its Pasadena distribution center in 2014. (pg 557, par
1)
Debt to total asset ratio
Debt to Equity Ratio
Return on Asset
Return on Equity
Total

0.15

0.15

0.05

0.05

0.02
0.01
0.005
0.005
1.000

2
2
2
2

0.04
0.02
0.01
0.01
2.71

8
9
20
21

Case Fact