Every day

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avon

Text of Every day

Every day, Avon brings beauty to the lives of women all over the world. At Avon, beauty means finding the right lipstick shade for a customer; providing an earnings opportunity so a woman can support her family; and enabling a woman to get her first mammogram. Beauty is about women looking and feeling their best. Its about championing economic empowerment and improving the lives of women around the world.Avon is a company steeped in tradition, grounded by itscore values and principlesas well as itsvision"to be the company that best understands and satisfies the product, service and self-fulfillment needs of women globally."Aleading global beauty company and one of the world's largest direct sellers, Avon has $10 billion in annual revenue. Its product line includes beauty, fashion and home products, with such well-recognized brand names asAvon Color,ANEW,Skin-So-Soft,Advance Techniques,Avon Naturalsandmark.

BRIEF HISTORY David H. McConnell Travelling Book Seller California Perfume Company (CPC) in 1886 CPCs first office outside United State was opened in 1914 in Montreal, Canada Name Change and Advertising The Companys name was change to Avon Products Inc. after the British town Stratford-upon-Avon in 1938. In 1946 the company become Public and started advertising campaign such as Avon Calling International Expansion During 1950s Avon expanded overseas to countries such as Puerto Rico, Cuba and Venezuela In the 1970s U.S sales top $750 million and the first Avon Asian business was opened in Japan

BRIEF OVERVIEW Avon is a leading global beauty company, with over $10 billion in annual revenue in 2008 World's largest direct seller Operating in 143 countries worldwide through 6.4 million independent Avon Sales Representatives It is the largest micro lender to women Avon is among the world top global brands Increased Investments by $ 120 m in 2007 to develop a new Sales Leadership Changed marketing approach from a homey image and started celebrity promotions Avons largest manufacturing plants, Brazil, China and Poland received the ISO14001 certifications in 2008 The Clean Industry Certificate to the manufacturing plant in Mexico During the same period Avons revenues increased 7.5 percent Avon implemented reconstructing programs in 2009 There is heavy investment in online search engines and internet carrier sites Andrea Jung is the Chief Executive Office who is leading the management team of thirteen Organizational Structure

INTERNAL ASSESSMENT

Financial Ratio Analysis

Net Sales by Product Category200820072006

Beauty72 %70 %69 %

Fashion18 %18 %18 %

Home10 %12 %13 %

Total100 %100 %100 %

STRENGTH1. Avon is a Global Market Leader2. Committed and dedicated workforce - 6.4 million Avon representative in over 100 countries making Avon the largest sales force3. Worlds Largest Micro lender for women - extending some $1 billion in product and credit each year to help women start their own entrepreneurial businesses4. Channel of distribution worlds largest direct seller 5. Manufacturing operations match ISO 14001 standards6. Avon owns its major manufacturing and distribution centers7. Increased in revenue in most geographic area. Due to increase in internet presence. (Revenues increased 7.5% from year 2007 to 2008)8. Avon is one of the worlds 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

WEAKNESSES1. Decrease in North American Sales Revenue by 129.4 million2. Weak Brand Image3. High advertising costs Companies advertising spending went from $136millions in 2005 to $249 million in 2006 to $368 million in 2007 and 14%higher in 20084. Poor brand loyalty5. Does not target urban trendsetters6. Beauty Sales in the first quarter 2009 were 12% lower compared to sales revenue in previous year 20087. Avon lagged behind seven of their cosmetic companies in customer loyalty

Internal Factor Evaluation Matrix (IFE)

EXTERNAL ASSESSMENTList of Competitors

1. Procter & Gamble 2. LOreal S.A. 3. Unilever PLC 4. Johnson & Johnson 5. Kimberly-Clark Corporation 6. Colgate-Palmolive Company 7. Kao Corporation 8. Estee Lauder Companies In9. Mary Kay10. Revlon 11. The Body Shop

MAJOR COMPETITORSREVLON Revlon was founded in 1932, by Charles Revson 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 Revlon attributes the loss to the weak global economy and Sales fell by 3.8% Revlon is the second largest color cosmetics company in the United StatesMARY KAY In 1963 Mary Kay Cosmetics was founded in Dallas, Texas In 2009 sales of Mary Kay products reached $2.6 billion There are more than 37,000 women across the world who has become Independent Sales Directors Mary Kay products are expensive versus Avon Mary Kay seems to be targeting older women 90% of the companys revenue is now generated through online orders It entered in Pakistan in 1984 while in India in 2007

AVONs Comparison with Closest Competitors

Avon is seven and half times larger than Mary Kay and approximately eight times larger than Revlon Its Competitors distribute their products to resellers but Avon sells its products solely through its direct-selling channel Avon brand products are now recognized all over the world due to the success of their international campaign Avon also has a Representative development program that focuses on the professional training of Representatives

Pie Chart of Revenues 2008

Competitors Financial Strength 2008AVONREVLON

Market Cap$ 9,710 M$ 242.84 M

Employees42,0005,600

Revenues$ 10.37 B$ 1.34 B

Gross Margins63.03 %63.48 %

EBIT% 1,440 M$ 171.40 M

Operating Margin12.07 %11.42 %

Net Income$ 807.9 M$ 28.5 M

Growth7.5 %5.6 %

EPS$ 4.72$ 1.422

OPPORTUNITIES1. 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 market3. The cosmetics industry tends to be countercyclical..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 markets6. Geographic growth enormous growth opportunities existed in countries populations such as China, Indonesia and India and other Asian countries.7. Demand for cosmetic products normally remains constant and unaffected by economic distress.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.THREATS1. Competition such as Mary Kay and Revlon and many others2. Rejection of internet selling by sales representative3. 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 rate6. Rising cost of commodities7. 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 lines10. Decreased earning opportunities

SWOT Matrix

Balanced Score Card

Possible Alternative Strategies

Extension in the main products:The sales of the personal care products are increasing in the main sectors because of the following reasons. To become attractive in working area. Becoming more Health Conscious Due to change in fashion & Trends. Expand In Asia and Africa: Asian countries like Pakistan, Bangladesh, Malaysia, Taiwan & Russia are a huge market because of the two reasons:1. Stability in economies2. Population growthBuild a brand image in North American and Generation Y in existing markets by promotions and innovation of new product which are tailored to their specific needs: The Generation Y is the second largest population segment which is not focused by Avon and due to the lack of a proportion Avon has not a good image in North America. But Avon has a competitive advantage to expand in these markets.

RECOMMENDATION Expand the Market to South Asia, Central Asia and Africa Acquire the small competitors to gain more Advantage Invest more in R & D to develop more Green products Invest in departmental and online selling Expand the product line and also focus on men and children Repositioning the brand image through attractive packaging, new brand logo and distinguishing its products Enhance Brand Loyalty