Avon Company - Research Paper Example

?Running Head: COMPANY REPORT Avon Company, Inc Avon Company, Inc. Section I Avon Company, Inc is a global organization that has subsidiaries all over the world (see Appendix 1, Fig. 1). The current CEO is Andrea Jung, ironically the first female CEO for the company who was appointed in 1999. The company is a public company and was incorporated in 1886 as the California Perfume Company when it was founded. The company has 43,000 employees, is on the New York Stock exchange with the ticker symbol AVP and the NAIC is 32562 Toilet Preparation Manufacturing and 45439 Other Direct Selling Establishments. The company has recently made efforts to go back to its originating sales model where sales representatives are given a career opportunity through selling their products (Reference for Business, 2011). A new sales Leadership Model, a formation of the Direct-Selling Model, however, has been put into place as the former pyramid model has been a cause for concern with a reputation of impossible goals. The company currently has over 650,000 sales representatives in the United States, however, 70-75% of the sales are still from international subsidiaries. There is a poor retention rate, however, so therefore the three level Leadership Model has provided for a structure of mentorship where each salesperson recruits others and mentors them towards the next level. In the Leadership Model, each sales person must sell themselves, rather than living off of the sales of others as is done in the pyramid model. (Willet, 2010). According to Avon Company, Inc. (2011), “Avon has a proven history of delivering first-to-market beauty technologies, making the company a perennial game-changer”. Avon divides its primary business under the Avon name into six divisions. The first division is under the title Color Cosmetics, which has brands within it which include the name Avon, Jill Dempsey Professional, Smooth Minerals, Avon Color, ExtraLasting, Healthy Makeup, Ideal Shade, Nail Experts and Anew Beauty. The second division is under Skin Care and includes the brands Anew Skincare, Avon Skinclear, and Avon Solutions. The third division is under the Fragrance designation and includes In Bloom by Reese Witherspoon, Outspoken by Fergie, Patrick Dempsey Unscripted, and relationships with Christian Lacroix, Herve Leger, and Ungaro. As the first product offered by the Avon company, perfume and fragrance products are a central part of the Avon line. Personal Care products are defined by the older, well-respected and popular line Skin-so Soft, as well as newer lines such as Avon Naturals, Liiv Botanicals, Moisture Therapy, and Foot Works. The Haircare lines are an important part of the company as well and are under the brand Advance Techniques, Color Protection, Daily Shine, Damage Repair, Frizz Control, Keep Clear, Volume, Toni Brattin, and Conair. The final division is under the heading Jewelry which has the brand Inspirational Treasures under the general Avon brand. Avon also sells clothing with the brands Curves and Slim Wear as two of the brands underneath the overall basic Avon heading. Avon also sells divisions of goods under the headings home, children, which includes bath and body, fashion, room decor, and toys, men, which highlights a line of skincare and fragrance under the celebrity name Patrick Dempsey (Avon Company, Inc., 2011). Avon also sponsors several lines of products that are associated with fundraising and dedicated to the betterment of the world. The products that are purchased through these divisions go towards contributions to individual organizations that have social relevance. Avon Walk Products are dedicated towards breast cancer awareness and research. Pink Ribbon Products are dedicated towards the same goals as the Avon Walk Products. The Empowerment Collection is dedicated towards women’s empowerment issues and supports various causes that are relevant to the advancement of women’s issues. Finally, Hello Green Tomorrow, which currently only includes an aluminum water bottle, is intended to support green issues and the Hello Green Tomorrow Fund has “planted 2 million trees & restored 5,000 acres” (Avon Company, Inc., 2011). Section II The three principal competitors as listed by Reference for Business (2011) are L’oreal SA, Mary Kay, Inc., and Revlon, Inc. According to Saxena (2019), L’oreal, Estee Lauder Companies, Inc, Proctor and Gamble, and Revlon, Inc are the four companies currently out distancing the company in the cosmetics industry, placing them in the number five position of the competition. However, it should be noted that there 37.9% of the market is split between numerous small companies that have developed and sold products, many of which individually out-distance the products created by Avon Company, Inc. (see Appendix 1, Fig. 2). Avon outdistances because of a wide variety of diversified products which must then compete with the individual markets. During the year 2010, the third quarter earnings rose 7% to 166.7 million dollars from the earlier earnings of 156.2 million dollars. However, this still represented a lower than expected overall earnings for that quarter. Overall revenue from the year was shown at an increase of 2% at 2.66 billion dollars. The third quarter showed an earnings per share of .38 cents. The average share earnings is .47 cents with a revenue of 2.68 billion dollars. The year 2009 saw a fall in shares by 10%. The total number of sales representatives rose by 4%, however in North America the number of representatives fell by 6% with the revenue seeing a decline of 2% with 531.1 million dollars in revenue for the year. The overall earnings for 2008 was 10.8 billion dollars, with 10.2 billion dollars being seen in 2009, and an increase to 10.9 in 2010, but that increase was primarily seen through the sale of the Japan subsidiary. The company sees 71% of its revenue from its cosmetic products, with 18% coming from fashion, 9% coming from home goods, and 2% coming for other types of products. The 71% of the beauty products sold represents 7.7 billion dollars in revenue for 2010 (see Appendix 1, Fig 3). For the year 2010, 2 billion dollars revenue, which represented 20% of the overall revenue was earned in North America. The largest share of the revenue was earned in South America where 4.6 billion dollars was earned, which represents 42% of the overall revenue (see Appendix 1, Fig 4). In February of 2011, Avon released that they would divide the company into two units, one to address needs in developed markets and the other to attend to needs in undeveloped markets. One of the new product lines that would be released is called Avon Care, a value priced line that will be put into emerging markets in order to provide a more cost effective line from which the sales representatives will have a stronger position from which to sell their goods. This came after a disappointing showing in Brazil, which is one of the strongest generating regions. The problem was targeted as being associated with a governmental requirement for electronic receipts systems which left many of the Brazilian sales representatives without being able to get their orders efficiently (Wohl, 2011). Avon Company, Inc. has an aggressive global objective and without strong showings in markets outside of North America, as shown by the distribution of earnings, the company would have very little strength in the market. In 2010, Avon Company, Inc. sold 74.57% of their Japan based subsidiary to Private Equity. The sale represented a 90 million dollar pay out to Avon for the lion’s share of the company. The Japan unit only provided less than 2% of the overall revenue for Avon, thus the company stated during their official press release that the sale would have little impact on the overall earnings of the company. There are a series of image objectives that the Avon Company, Inc. has put into place that are a powerful and successful set of parameters. The Avon Company represents itself as a haven for women, a place where they can find a sense of control through financial stability that is not that easily found elsewhere. As a result, the company has an image that is based upon empowerment and with the economic crisis still raging; women have become damaged through the loss of jobs by themselves and/or their husbands. Historically, while women are the least paid, they are often the only provider for themselves and their children. Avon is continuing and reviving their position within the culture as a resource for income and empowerment for women. While the position as a sales representative for Avon has become a bit of a ’dinosaur’ in the minds of American women, this offer is having a powerful impact in Latin America (Wohl, 2011). One of the problems with being a company that has been in existence for 125 years is that it will continually combat the idea that it carries products more suitable for the ‘mothers’ of potential clients, rather than for each rising generation. The most current issue in regard to the out-dated image is that the Avon image is that of the 1950’s housewife, the idea of the woman waiting at home for the visit from her neighborhood Avon lady. In trying to combat this image, CEO Andrea Jung began a “thoughtful transformation” in which the packaging and look of the advertising was updated to reflect a higher end product (Wit, 2005, p. 119). In trying to combat this image problem, the company has developed products that are cutting edge and hold a higher quality level than has been seen before within their product lines. One of the problems that Avon faces is through the impact of its direct-selling model on its global markets. China, as an example, banned the idea of direct-selling because of too many corporations that were perpetuating scams through the model. The ban was put into place in 1998 and was only lifted in 2006, allowing Avon back into the Chinese market. The example of the costly event of Brazil requiring electronic receipts and the time it took to upgrade the system shows that the company must be vigilant in making sure that their global relationships are kept in line with regional requirements. Section III On 8 August 2011, the stock price was at 23.21. According to Wikinvest (2011), “Avon Products (NYSE:AVP) closed Friday's frenetic trading session at $23.21. In the past year, the stock has hit a 52-week low of $22.60 and 52-week high of $36.20. Avon Products (AVP) stock has been showing support around $22.10” (see Appendix 2). According to Zacks (2011), the stock is a neutrally recommended stock that should be considered carefully before investing (see Appendix 3). The company has a firm hold in Latin America and that market is not showing signs of deterioration, however, the North American markets are deteriorating rapidly. Where the overall number of sales representatives increased by 4%, the North American sales representatives dropped by 6%. Without a stronger showing in the United States, the company is in jeopardy of losing more ground. In comparison to the industry, on five point scale on whether or not to buy the stock, the information from Zacks (2011) suggests that the recommendation is at a 2.19, where as the industry is at a 2.03, thus Avon is above the average in performance. The projected growth rate is at a higher level than is projected for the rest of the industry, which is more than likely due to the roll out of the lower price point products and the targets of expansion into new markets across the globe (See Appendix 4). The unique sales model provides an added dimension that other companies do not have available. The company offers an economic advantage to women through the possibility of becoming a sales representative, which provides for an economic incentive in a world where this incentive is very much needed. Through this additional dimension, the concept of the ‘Avon lady’ provides for added marketing advantages. When looking at the overall growth rates of the past few years, a high volatility has been observed since 2008, which is to be expected considering the economic declines that have been seen since that time period (see Appendix 5, Fig. 7). However, in looking at Fig. 7, the revenue growth has been consistently in the positive within the ten years, with the one notable exception being 2009, likely due to the fall of the overall global economic stability that occurred in 2008. This places Avon Company, Inc. as a long term investment with small increments of growth in which profit can be appreciated over a period of time. However, even 2005, there was suspicions that the weakness in the US market would be a problem. Slatter (2005) suggests that this weakness is the primary problem that is faced in regard to the financial health of the company. Resource-based theory supports the idea that a firm’s competitive advantage lies in what is “rare and difficult to imitate” and that “The firm’s ability not just to possess, but to grow and acquire more assets of this kind, affords it a sustainable advantage over other firms” (Dunning and London, 120). The method of distribution is one of the things that the company has that is ‘rare and difficult to imitate’ for the company. Through forward vertical integration, the company controls the manufacture, the distribution, and the sales of its products through independent seller who are integrally involved in the Leadership Model so that despite their independence, they are towing the company objectives. The company was built upon the ability of its representatives to build relationships. McConnell understood the concept of the door to door salesman and he took that and extended into the interpersonal relationship that women can build with each other over conversations. The key to these conversations is the idea that they can buy items to enhance their beauty, a topic of fear, pleasure, and intimacy. This is a unique type of relationship building that most companies do not attempt to create. Avon has seventeen manufacturing plants positioned around the world. The raw materials that are used for manufacturing their products consist of “essential oils, chemicals, containers and packaging components” and come from a variety of places, creating a system in which the loss of any one supplier would not significantly impact production (Slatter, 2005, p. 79). Through diversifying both locations and resources so that the production is enabled at all times, the company has secured its manufacturing capacities against any problems that might arise. Though backward vertical integration is limited, the company assures that its production is reliable and consistent. Research objectives are some of the most important aspects of the company. Without bringing to the forefront innovations that are considered breakthroughs in the cosmetic industry, the company would not be able to compete. With an image that still tends to suggest that it is outdated, it is crucial for the company to present new and innovative products to the buying public. As an example, in the 1980s, the company was one of the first to introduce UVA/UVB protections within its moisturizing lines. Through research that brought about a stabilized vitamin A, the product BioAdvance was introduced which was a retinol product for skin care. Anti-aging products which included the stabilization of vitamin C were launched in the early lat 1980s, with Alpha Hydroxy products being launched in the early 1990s. The last few decades have been about innovation, an emphasis on anti-aging which is a focus on one of their primary demographics, which is the older woman. While the Direct-Sales Model is the primary model of sales, there are three types of sales that are utilized by the Avon Company. Sales are accomplished through independent sales representatives, online sales, and through some limited retail outlets. The main form of sales, through Direct-Sales, consists of a system in which the sales representatives take the order; they make a purchase of the order from the company, who then mails them their products to be distributed to their customers. The individual sales representatives provide the entire front line relationship to the consumers. The Avon Company has a distance between themselves and the buyers. Because it is the intermediary sales representative that is buying the products, the company has a responsibility up to the point of delivery to the sales representative, who is then responsible for getting the product into the hands of the consumers. Through this type of distribution, the manufacture and distribution becomes streamlined without product languishing in multiple retail outlets. Inventory can be controlled through warehousing rather than in multiple locations. Adjusting to demand can be made more easily, while downsizing inventory that is not moving as quickly can be adjusted. Through centralized control of the inventory, the overstocking problems that can be observed in the retail situation are not as prominent. While some sales representatives will carry stock and will often find themselves with unsellable stock, this does not blowback onto the company. Part of the methods of sales that some representatives indulge in include flea markets, trade shows, and internet sales which often require a backlog of product as any other retail situation. The restructuring that has occurred in the last few years has been with the intention to address scale economies and costs. According to Hitt, Ireland, and Hoskisson, (2011), “One of the purposes of changing strategy and structure is for Avon to control its costs and gain additional scale economies as paths to performance improvements” (p. 337). The company has released information that the restructuring should result in a savings of 430 million dollars during 2011-2012, with the additional intended changes to result in 450 million dollars worth of savings in 2012 (Hitt, Ireland, and Hoskisson, 2011). Section IV The competition within the cosmetics industry is high, having the differentials between products concerning technology, fashion, and ease of access. Using Porter’s five forces, the nature of competition, barriers to the entry for new firms, and the threat of alternative products can be analyzed. Porter’s theory of five forces is a form of analysis which helps a company to assess the ways in which opportunities and threats are observable once put into context. According to Hill and Jones (2010) “Porter argues that the stronger each of these forces is, the more limited is the ability of established companies to raise prices and earn greater profits” (p. 43). Porter contends that a stronger competition will create a situation where profits are depressed. Weak competitive forces will provide for an opportunity to raise prices. The analysis will change periodically and opportunities will open up that allow for a company to emerge through and gain a profitable advantage. Through the example of the possible analysis as given in Appendix 6, the threat to Avon Company, Inc. is high, the power of the company proving that through a highly developed global system has allowed for a competitive advantage over all of the perceived threats that are possible within Porters model. The nature of competition within the cosmetics business is high. Avon must compete with long standing companies, companies that specialize, and companies that emerge from small startups. In assessing the ‘threat of new entry’, the nature of the cosmetics industry in the form of a business venture emerges as a relatively low cost enterprise that can provide for a great deal of profit. The website www.cosmeticsbusiness.com provides resources such as research companies and development, laboratories, and raw materials that an entrepreneur can easily access in order to start up a cosmetics company (Barrow, 2011, p. 279). As an example, Maureen Kelly started Tarte, a cosmetics brand in 1999 for an investment of 18,000.00 for packaging and product. Through shrewd and inventive ways of saving money, such as using her apartment for storing inventory for the beginning few years and by filling the cosmetics containers using her friends and family as labor, she managed to create a business that brought in 12 million dollars in 2008. While this business is small in comparison to Avon, it is still a threat because every container of eye shadow or nail polish sold by Tarte is one less sold by Avon. Calculate that over the thousands of small cosmetics companies across the world and it constitutes a strong competition, to the event of 37.9 percent of the overall cosmetics sales in comparison to 4.7% that is sold by Avon. Therefore, the threat is high, not only from major competitors, but from start-ups who are utilizing low start-up costs to enter the industry. The powerful truth of the proposition of creating a cosmetics company is that innovation is not necessary in order to create the product. Great color and innovative packaging can create a fashionable statement that attracts new customers. Price is not the issue that it might be with other products. Price of the final product for an industry that depends on fashion for its sale is not concerned just with costs of manufacture and profit margins. Profit margins are important, however, in the fashion industry, which cosmetics is also a part of, retail price is a part of a package that promotes an image. If the price is too low, the elitism of the product is negated. According to Easey (2009), price is associated with quality, therefore if a price is too low, the product will not be perceived to have any type of quality associated. Competition is focused on image, not as much on price point and price value. Therefore, in order for Avon to compete, it must find prices that reach its most common demographic, but also balances the prices that are on the same types of products in the market. This also lends to the power of the buyer. The buyer is in a position to choose products based more on fashionable attractions rather than value attractiveness. Continuing to use Tarte as an example, perusing the Sephora website which sells the brand Tarte, it can be observed that Tarte is selling a product line that is inspired by the HBO television series True Blood. The lip gloss for this collection sells for 24.00 (Sephora, 2011). The highest price on a lip gloss from Avon is 10.00 (Avon Company, Inc, 2011). One might believe that purchasing the Avon lip gloss would be a more attractive prospect, however, the idea of the exclusivity and the associated meanings that are attached to the Tarte lip gloss will motivate many buyers towards that brand. The problem that Avon has in creating a price point is in targeting the demographic that will not be motivated by fashion, but by price value. In targeting a public that is more interested in price value than social value is that those who are interested in social value will have less interest in the products. The fickle nature of the fashion conscious means that the customer base will be shifting. The glut of products on the market suggests that the products are highly substitutable. The focus on interpersonal relationships where the Avon lady brings the samples to the home has slipped from fashion as the average woman is either working outside of the home or is fully mobile in a vehicle to go shopping and have the immediate gratification of buying what she desires at a retail outlet. Having the salesperson come to the door is an outdated form of sales, gone with the door to door vacuums, books, and the Fuller Brush salesman. The model may still be working, but the nature of the business for the sales representative has changed with fewer women responding to the door to door sales model. The threat of substitution is very high. Just as the buyer has a high level of power to go to a multitude of outlets in order to get the specific types of products that they desire, there is a great variety of brands and types from which to choose. The nature of those products will vary, but the basic nature of each product holds the same type of result. While the types of products hold different properties, the purposes are very similar and in a fairly finite group of results. Therefore, the nature of the product substitutability is highly competitive and is a high threat to the company. As well as the replication of types, the replication of formulations can provide a high level of competition. As an example, the innovation of the Alpha Hydroxy formulas for skin care has been replicated throughout the industry and is now readily available through a large number of different manufacturers. The area that is strongest for the Avon Company is that of Supplier Power. Through this analysis, it can be seen that the Avon Company has a broad basis for manufacturing their products that are spread throughout the world. With seventeen manufacturing companies and a multitude of suppliers with replications on raw materials, the company can create the advantage of inspiring competition among its suppliers in order to gain their orders. Orders from Avon, because of the global presence and the large numbers generated by the company, create high volume that supports lowering the prices of raw materials. In creating high quality products at lower prices, Avon has an advantage in the market place. However, because of the negating factors of fashion and image, the price point can hurt the company as much as help. The type of prices charged, however, do not have to fully reflect limits set at a position of supplier power, but a position in which Avon can choose to pick buyers that provide them with the best possible value in order to increase the overall profits. From the standpoint of Porter’s analysis, Avon Company suffers from high competition and from fickle swings in the fashion tastes of the consumers. The costs of creating boutiques sized companies that can capture the imagination of the consuming public, that present a unique fashion statement merely by using the brand, creates a problem for the company. From a business standpoint, the company is strong in relationship to its sales model and manufacturing logistics, however, the standpoint of sales within the United States has suffered from the image issues. The dependence on international sales gives the company a competitive value that is not common among all of the company’s competitors. The diversification into a multitude of markets has provided a stability that would not have existed had the company maintained a presence within the United States. Section V The external environment in which the company must operate is defined by the volatility of popular culture and trends. Despite this environment, the company has been successful through entering into a wide variety of international markets. However, as shown in the example of China, the international markets come with problems where law is concerned. When China passed laws against the use of the Direct-Sales Model that had been the backbone of the Avon operations, the company had to adjust and be within the market through a few select retail outlets. By keeping a presence in the country, they were able to help shift the political tide towards allowing them to go back to their original model, opening up an outlet for increased profits and sales. As well, the problems in Brazil can be seen for the implementation of laws that provided for the need to change some of their infrastructure. The ways in which orders were taken and how they were provided to the customers through a paper trail was influenced by the new laws that were passed. The company had to be willing to change their operations and invest in the new structure in order to continue doing business in Brazil. Within the domestic market, one the trends that is currently affecting the company is a turn towards natural and holistic formulas for cosmetic use. The ‘naturalites’ as they are called by Dayan and Kromidas (2011) comprise approximately 19% of the population, making this trend an important and influential part of the cosmetics industry. The turn from chemicals that cannot be pronounced to natural extracts that can be named and identified provides the consumer with a sense that they are using a product that will not harm them. Cosmetics have evolved over the centuries, once heavily laced with lead products which caused harm in the long term. Unfortunately, lead is still found in much of the makeup products available on the market. As an example, 61% of thirty-three top brands tested for lead showed trace amounts within the formulation (Cerazy & Cottingham, 2009, p. 47). This type of available information has turned the consumer attention towards a desire to be aware of what is in the products that they are purchasing. Another trend that is affecting the nature of the business is the emergence of cosmeceuticals, a term that has been created to describe cosmetics that have a pharmaceutical property and is usually oriented towards anti-aging products. The purpose of this type of product is to improve the condition of the skin. According to Alam and Pongprutthipan (2010) “Cosmeceuticals will produce an improvement in skin functioning by modifying texture, roughness, pigmentation, erythema and desquamation” (p. 226). Both of these trends impact the industry through the necessity to turn towards technologies to innovate products that have a higher level of discovery involved than cosmetics chemistry has faced in the past. Avon has addressed both of these types of trends through the creation of product lines that address the consumer trends. The Anew line, in particular, is designed towards the consumer looking for affects of a cosmeceutical product. The desire for more natural products is addressed through the creation of the line Naturals which promotes the idea of natural elements within the products. Ironically, the products have a whole list of ingredients that are not natural and reflect an image brand, rather than a brand that is truly natural (Avon Company, Inc., 2011). In 2007 and again in 2009 the company went through a restructuring process. The restructuring in 2009 cost 3,000 jobs throughout the company. The reason for the restructuring was in part due to returns from international markets that were lessened by a strengthened dollar. The reaction also promoted the opening of the manufacturing plant in Brazil and phasing out the San Paulo distribution center. However, in order to cut manufacturing costs, the company began a process of outsourcing much of its manufacturing. The result of this reaction to the international struggles with the dollar is that the restructuring, while showing that sales had decreased by 9%, actual profits increased by 80%. The aggressive actions taken resulted in helping the company to show a turnaround, even when sales were lagging. Because the majority of the profits are found overseas, the Avon Company must address global concerns in such a manner that provides for the highest possible success. The division of the company into two units, as previously discussed, has been in response to the various needs that a global presence requires. Through aggressive restructuring and selling shares of businesses that require more than what is being received, as in the partial sale of the Japan subsidiary, the company has survived through surgical decision making. The Latin America market is the primary concern for the company with such a high percentage of profit coming from that area of the world. Section VI The major threat that the company is facing is defined by the declining US division. The company faces a culture in which price value is not associated to fashion, where the product diversity in the cosmetics industry is such that competition is very high. American women equate spending larger sums of money with quality, thus the lowered price points in the Avon lines makes the American consumer wary. Entry into the cosmetics industry, as exampled by the brand Tarte, is a low investment, high return endeavor, thus the smaller companies are devouring the market share of the larger company due to the high volume of choices. This is one industry where lower pricing is not necessarily a plus, while variety of choices and substitutions are widely available. Along with the threat of the competition from other companies and the price disadvantage, the company is in peril because of a perception that it is outdated and outside of the current popular trends. Despite the high level of technological advancement within the company and the innovations in skin care, the company still suffers from an image that it the products are more suited for an older population of women – a population with whom not even older women want to associate themselves. In a culture that is youth oriented and trend conscious, a company within the fashion industry that is at a lower price point and has not reached icon status is going to struggle keeping pace in the North American market. The opportunities that best present themselves are in emerging markets where the opportunity of direct sales would have a more potent appeal to women in order to improve their socio-economic status. Avon has aggressively spread their product to other countries, which has provided stability within the company. Continuing to open new markets is the strongest opportunity available to Avon as the economic challenges of the world continue to create the need for better financial opportunities women. Section VII The primary problem facing the Avon Company, beyond the volume of competing companies and price point problems, is in the image that the ‘Avon Lady’ now evokes. The idea of the ‘Avon lady’ is associated with the idea of the stay at home wife and mother, a woman chained to her home through domestic servitude. With a company that is founded on the idea of financial independence for women, the antiquated notion of the female presence that is associated with the structure of the sales paradigm creates a conflict for the image problem that has emerged. Even though cutting edge technologies are coming from the Avon laboratories, the image is that of cheap, antiquated merchandise that belongs to a demographic that is swiftly dying out. Revamping the Avon image might mean a restructuring of the way in which the brands are developed. When looking at the catalog, one sees a high level of diversification in products, all of which are centered on the Avon name. It might be necessary to dissect some of the higher end products and repackage them outside of the Avon name in order to re-penetrate the market. An example of this type of re-imaging can be seen in the Amway story. As the Amway name became associated with pyramid schemes and sullied by the disappointments that sales representatives felt because the promises of success were not being fulfilled and the high pressure associated with the pyramid scheme sent people running, the company revamped its image by discarding the Amway name and becoming Quixter. The Quizter business model included the opportunity to launch an internet business. The combination of the new name and new business model revitalized the company (Jones, 2011). Avon has created two divisions that have the opportunity to revitalize their direct sales program under new names. A brand name that is emerging within the Avon framework is mark., a company that has a fresh, young look and is attempting to be launched as an individual direct selling opportunity. The brand is promoted with a very young feel, and the name Avon is not listed on the advertising. The line carries cosmetics, clothing, and jewelry under the banner of the mark. name (the name is not capitalized and has a period, insinuating the use of e-commerce as a part of the sales design). The second division is Silpada, a line of jewelry that is intended for the Direct-Sales Model and promotes the in-home party model of sales. Through these two side enterprises, the Avon name has been divorced from these products. In order to support the higher end products under the Anew line, this same type of thinking might promote a higher success rate within the North American markets. Avon claims that 2,400 jars of Anew product is sold every hour throughout the world (Avon Company, Inc., 2011). Therefore, the product has some influence within the industry and has made a success worldwide. The packaging is slick and modern, and presence with the expense and price point that would suggest that the products have cosmeceutical value. The problem with the line is that it is too highly associated with Avon for women in the United States to contemplate it as a valued resource for skin care. The price point on the line reflects quality. The cleanser averages at around 15.00 with the moisturizers averaging around 35.00, a price that would be seen at the department store make-up counter (Avon Company, Inc., 2011). While Avon has gone back to a better strengthened program for their Direct-Sales Model, the use of this model should be re-examined for its effectiveness in the North American market. With women working more outside of the home and preferring the perception of mobility, even when working as stay at home moms and wives, the home to home sales structure is no longer as popular. Therefore, taking lines like the Anew system and repackaging them for a retail situation may be necessary in order to more deeply penetrate the market. There are no reported plans for this type of a move, but it may be necessary in order to advance the brand within the market. The opportunities in other countries for the use of the Direct-Sales Model are highly attractive and emerging markets should be continued to be addressed for the potentials for success. The lower price point line that is intended for developing markets is a solid move in which the markets where price value is more relevant will provide an easier sales presentation. Price and fashion are difficult balances to meet, but where the Western influence of high price being equated with status, even among those who cannot afford higher prices. Women in Western cultures often sacrifice necessities to afford items for fashion that they are not always able to afford. Examples of this was shown in the television series Sex in the City where Carrie Bradshaw would buy shoes that were more expensive than her rent and then struggle to find the means to make ends meet. In non-Western cultures, this need to over-spend may not be as prevalent, thus the reason most of the Avon revenue is coming from global resources. Avon is a stronger than average company within the cosmetics industry. According to the stock market reports, Avon is a stronger bet than other companies within the same industry. The recent restructuring has strengthened the profitability of the company and regained a stronger footing for its stockholders. Through aggressive business decisions, CEO Andrea Jung appears to be placing the company in a recession proof position in which the use of all global markets can be seen as a way to bolster the lagging North American sales. Through strategic and surgical level decision making, the company has a better chance than most of surviving the economic struggles of this time period and continuing forward into the next millennia. List of Figures Fig. 1 Avon Markets (Avon Company, Inc., 2011) Fig. 2 Market Share for Cosmetics Industry (Saxena, 2009, p. 762) Fig. 3 Revenue by Product Category for 2010 (Avon Company Inc., 2011 Fact sheet) Fig. 4 Revenue by Region for 2010 (Avon Company Inc., 2011 Fact sheet) Fig. 5 Price and Consensus (Zacks, 2011) Fig. 6 EPS (Zacks, 2011) Fig.7 Revenue Growth (Zacks, 2011) References Acker, D. A. (2009). Brand portfolio strategy: Creating relevance, differentiation energy, leverage, and clarity. New York: Free Press. Alam, M., & Pongprutthipan, M. (2010). Body rejuvenation. New York: Springer. Avon Company, Inc. (2011). Avon. Avon Company, Inc. Accessed at http://www.avonc ompany.com Avon Company, Inc. (2011). Avon corporate fact sheet. Avon Company, Inc. PDF. Barrow, C. (2011). Starting a business from home. London: Kogan Page. Betton, C. I., Lintner, K., & ScienceDirect. (2007). Global regulatory issues for the cosmetics industry. Norwich, N.Y: William Andrew. Buchanan, L. (1 July 2009). Start-ups 2009: How to build your dream company: How to start a beauty company. Inc Accessed at http://www.inc.com/magazine/20090701/how-to-start- a-beauty-company.html. Cerazy, J., & Cottingham, S. (2009). Leadbabies: How heavy metals are causing our children's autism, ADHD, learning disabilities, low IQ and behavior problems. New York: iUniverse, Inc. Cheng, A. (28 October 2010). Avon profit, sales fall short of estimates. Marketwatch. Accessed at http://www.marketwatch.com/story/avon-profit-misses-expectations-shares- drop-2010-10-28 Dayan, N. & L. Kromidas. (2011). Formulating, packaging, and marketing of natural cosmetic products. New York: Taylor and Francis, Inc. Dunning, J. H, & S. M. Lundan. (2008). Multinational Enterprises and the Global Economy. Cheltenham, UK: Edward Elgar. Easey, M. (2009). Fashion marketing. Oxford: Wiley-Blackwell. Forbes.com. (8 November 2010). Private Equity picks up Avon lady in Japan. Forbes.com. Accessed at http://www.forbes.com/2010/11/08/cosmetics-news-avon-sells-japan-stake- estee-lauder-upgraded-marketnewsvideo.html Hill, C. W. L., & Jones, G. R. (2010). Strategic management theory: An integrated approach. Mason, OH: South-Western/Cengage Learning. Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2011). Strategic management: Competitiveness & globalization. Mason, OH: South-Western Cengage Learning. Jones, K. A. (2011). Amway forever: The amazing story of a global business phenomenon. New York: Wiley & Sons, Inc. Pittman, S. (23 February 2009). Avon restructuring could mean 3,000 fewer employees. Cosmetics Design.com. Accessed at http://www.cosmeticsdesign.com/Business- Financial/Avon-restructuring-could-mean-3-000-fewer-employees Reference for Business. (2011). Avon Products, Inc. - Company profile, information, business description, history, background information on Avon Products, Inc. Advameg Inc. Accessed at http://www.referenceforbusiness.com/history2/23/Avon-Products- Inc.html Saxena, R. (2009). Marketing management. New Delhi: Tata McGraw-Hill. Sephora. (2011). Tarte. Accessed at http://www.sephora.com/browse/brand_hierar chy.jhtml?brandId=5648&categoryId=C106 Slatter, John. (2005). The 100 Best Stocks You Can Buy 2006. Avon, Mass: Adams Media. Wikinvest. (8 August 2011). Avon Products (AVP). Wikinvest. Accessed at http://www.wikinvest.com/stock/Avon_Products_%28AVP%29 Willett, J. A. (2010). The American beauty industry encyclopedia. Santa Barbara, Calif: Greenwood. Wit, B. ., & Meyer, R. (2005). Strategy synthesis: Resolving strategy paradoxes to create competitive advantage. London: Thomson Learning. Wohl, J. (24 February 2011). Update 3 - Avon shakes up structure, looks for Latam leader. Reuters. Accessed at http://www.reuters.com/article/2011/02/24/avon- idUSN2424394420110224 Zacks Investment Research. (2011). Avon Products, Inc. Zacks Investment Research. Accessed at http://www.zacks.com/stock/quote/AVP Appendix 1 Markets and Revenue Fig. 1 Avon Markets (Avon Company, Inc., 2011) Fig. 2 Market Share for Cosmetics Industry (Saxena, 2009, p. 762) Fig. 3 Revenue by Product Category for 2010 (Avon Company Inc., 2011 Fact sheet) Fig. 4 Revenue by Region for 2010 (Avon Company Inc., 2011 Fact sheet) Appendix 2 Financials Fig. 5 Price and Consensus (Zacks, 2011) Fig. 6 EPS (Zacks, 2011) Appendix 3 Avon Company, Inc. Stock Market Evaluation Price and Volume Information Zacks Rank Yesterday's Close 20.76 52 Week High 36.20 52 Week Low 20.76 Beta 1.49 20 Day Moving Average 4,074,010.00 Target Price Consensus 31.86    % Price Change 4 Week -26.41 12 Week -31.40 YTD -28.56  % Price Change Relative to S&P 500 4 Week -13.26 12 Week -18.52 YTD -16.25  Share Information Shares Outstanding (millions) 430.19 Market Capitalization (millions) 8,930.70 Short Ratio 2.43 Last Split Date 06/01/2004  Dividend Information Dividend Yield 4.43% Annual Dividend $0.92 Payout Ratio 0.49 Change in Payout Ratio 0.02 Last Dividend Payout / Amount 05/17/2011 / $0.23  EPS Information Current Quarter EPS Consensus Estimate 0.47 Current Year EPS Consensus Estimate 2.05 Estimated Long-Term EPS Growth Rate 11.00 Next EPS Report Date 10/27/2011  Consensus Recommendations Current (1=Strong Buy, 5=Strong Sell) 2.19 30 Days Ago 2.19 60 Days Ago 2.27 90 Days Ago 2.27  Fundamental Ratios  P/E Current FY Estimate: 10.10 Trailing 12 Months: 11.16 PEG Ratio 0.92  EPS Growth vs. Previous Year 2.08% vs. Previous Quarter 32.43%  Sales Growth vs. Previous Year 6.64% vs. Previous Quarter: 8.65%  Price Ratios Price/Book 4.38 Price/Cash Flow 9.10 Price / Sales 0.79  ROE 06/30/11 45.77 03/31/11 50.63 12/31/10 54.26  ROA 06/30/11 10.26 03/31/11 10.65 12/31/10 10.81  Current Ratio 06/30/11 1.47 03/31/11 1.43 12/31/10 1.42  Quick Ratio 06/30/11 1.01 03/31/11 0.99 12/31/10 1.03  Operating Margin 06/30/11 7.18 03/31/11 7.24 12/31/10 7.18  Net Margin 06/30/11 9.62 03/31/11 9.37 12/31/10 8.70  Pre-Tax Margin 06/30/11 9.62 03/31/11 9.37 12/31/10 8.70  Book Value 06/30/11 4.74 03/31/11 4.21 12/31/10 3.90  Inventory Turnover 06/30/11 3.20 03/31/11 3.31 12/31/10 3.43  Debt-to-Equity 06/30/11 1.19 03/31/11 1.30 12/31/10 1.44  Debt to Capital 06/30/11 54.25 03/31/11 56.52 12/31/10 59.02 Appendix 4 Industry comparison Industry / Sector Report Industry: COSMETICS&TLTRS Zacks Industry Rank: Rank in Industry: Recommendations and Estimates Company Industry S&P 500 Average Recommendation (1=Buy, 5=Sell) 2.19 2.03 9.99 Quarterly Estimates       Current Quarter Estimate 0.47 0.58 23.50 Year Ago Quarter Estimate 0.41 0.49 18.40 Next Quarter Estimate 0.72 0.87 24.25 Next Year Estimate 2.29 0.98 19.60 Growth Rates   Company Industry S&P 500 This Year (08/2010) 14.20 9.60 - Next Year (08/2011) 11.30 13.10 9.50 Last 5 Years 1.60 2.70 - Next 5 Years 11.00 10.10 - Financials   Company Industry Price/Earnings (TTM) 11.16 9.65 Price/Book (MRQ) 4.38 1.96 Price/Cash Flow (MRFY) 9.1 13.11 Dividend Yield 4.43% 0% Net Profit Margin (TTM) 6.59% 5.14% Return on Equity (TTM) 45.77% 8.11% Debt to Equity (MRQ) 1.19 15.67 MRQ = Most Recent Quarter    TTM = Trailing Twelve Months    MRFY = Most Recent Fiscal Year Note: Company and S&P 500 ratios relating to share price calculated daily; all others calculated weekly or in accordance with company earnings announcement. Industry medians calculated weekly. Appendix 5 Fig. 7 Revenue Growth (Zacks, 2011) Appendix 6 Porter’s Five Forces Analysis Read More