Avon Calls on Foreign Markets - Case Study Example

Avon Calls on Foreign Markets Founded in 1886 as California Perfume Company, Avon is today, perhaps, the oldest and a global leader in marketing beauty and related products. Originally, the Avon lady was a man, who formed the company with the idea of selling and offering women cosmetics in the luxury of their home. He employed a door to door marketing strategy to reach the customers, a strategy which was successful especially in areas where potential customers had poor access to stores. Avon’s brand has been created around the Ad; “Ding Dong Avon calling” but later, after changing its market strategies, it adopted the ad “ Hello Tomorrow”, so as to reflect its new marketing strategies and cleanse its image. Though headquartered in United States of America, most of its sales and employees are outside its North American division (Daniels, Radebaugh, and Sullivan, 2011). In the recent past, Avon’s marketing strategies have been focused on the international plane rather the United States’ market because of the stiff competition it facing from other beauty manufacturers. Avon approach to marketing in the international arena, in production, is that they gave the country’s managers latitude to decide what type of products is apt to their jurisdiction. Once the determination is made, either the local or the U.S based R&D develops it until it is ready for dissemination. This strategy guarantees increased sales because it captures the local customer needs. Given that the operation of the company is spread to different regions, this strategy captures the needs of people with different skin sensitivity to beauty products. Additionally, another marketing orientation is the customer. Avon’s approaches in marketing are that it targets women. It takes into contemplation the age group of cosmetics users and the places where the women population propagates more rapidly. This strategy employs independent sales persons or Avon representatives, who places sales orders with Avon and deliver the same to customers. Another orientation employed by Avon is social marketing orientation that entails; a breast cancer crusade that creates a global awareness on breast cancer and community outreach and education. This strategy is core, because it targets its leading customers: the women. A horde of reasons made Avon concentrate on more on the foreign operations than the U.S market. First, it was due to a forecast of a slow growth rate in the U.S market given that most of the market had been permeated already, and there remained no virgin market for its products. Therefore, any growth or increased sales would entail Avon competing to grab its competitor’s market share and given the nature of competition prevalent in the U.S market, Avon chose to direct its energy on less competitive arenas. Secondly, Avon chose to redirect its energies away from the U.S market due to the changing nature and dynamism of its main market which affected its distribution strategies. Avon has been built around direct marketing whereby the Avon ladies sell directly to households and giving beauty advice. Therefore, direct sales were the backbone of the company for a long time. However, it the 20th century, many U.S women were making forays into the workforce. This had twin effect in that access to the women in their homes was hampered. Secondly, the number of women seeking part time employment with Avon reduced. On the other hand, there existed untapped markets elsewhere, for example, in inaccessible and remote part of Brazil and Philippines. A global recession like the one that happened in 2008 is not likely to curtail Avon activities materially. Indeed, it increases the number of people willing to work part time and independently, on which Avon marketing strategy is built. To add, since Avon has diversified its market to capture the foreign market is not likely to affect all the markets negatively at once. In fact, when things were gloomy in the United States, the foreign markets looked bright. Avon derives competitive advantages due to its direct marketing strategy. The sales representatives would only place orders with Avon after getting the same from customers. This mode of marketing is cost effective as it enabled Avon to save on its advertising budget and avoiding paying for physical shelf stores. To add, it gives Avon an edge in that it relies on word-of –mouth, which made its customers loyal as they develop a relationship with Avon ladies and befriends who in addition to the sales, give the customer’s useful advice. Moreover, at the international market, Avon has given the country managers latitude to elect what products to sell in their markets. Once the products are developed, Avon disseminates information to its facilities elsewhere. Consequently, this has given customers opportunities to choose from the products that they want. To add, Avon has maintained global branding, for example, brands like Anew, Rare Gold and far away fragrances. As a result of standardized branding, Avon creates relentless, global images at the same time saving on costs through the use of uniform ingredients and packaging. To add, global branding helps to portray the company as international and, therefore, improve sales in countries such as Thailand, where consumer prefer foreign beauty products. In United States, Avon does not sell within retail establishments with the exception of some kiosks in line with its strategy of direct marketing. As stated earlier, this mode is advantageous in that it saves Avon on costs related to actual physical shelf, with regards to cost of establishment and maintenance, as the reps order from the company after getting orders from customers. To add, it also creates customer loyalty because of relying on the word of mouth. While releasing Avon Second-Quarter Results for 2009, Avon’s CEO m/s Jung stated, "Our bold strategies to counter the recession are working. We've been successful at gaining Representatives and consumers during these tough economic times. This confirms our belief in the inherent advantage of our direct-selling business model. As women around the globe are seeking income and smart value products, Avon is there to meet their needs”. Historically, direct sales work well even on a down economy since even in such times, people do have disposable income. Nevertheless, this mode lacks the advantages of fixed establishments. For example, customers cannot obtain a product whenever they want it To add, it heavily relies on availability of its customers at their home, should the womenfolk join full time employment it shall not only be hard to access them but also to get Avon ladies willing to work part time. Finally, it is difficult for Avon to capture new clientele in higher-price category while endearing to maintain value-for-money clientele. While looking for suppliers, Avon should consider a number of factors. First, they should consider whether the supplier can provide high quality at a good price and in the required volumes. They should also be flexible enough to respond to the firm’s demands and their employees and staff should have ethics. Finally, it should be somebody not over dependent on them financially. Looking forward to the future, Avon faces several obstacles and challenges for its global expansion program and maintaining its global manufacturing and supply chain network. One of them is legal obstacles, for example, China passing a law that prohibited house to house sales, the backbone of Avon marketing strategy. Though the restrictions were relaxed in 2005, there was a horde of restrictions, for example, putting a cap on commissions for salesperson and preventing them to recruit others on shared commission basis. To add, its reliance on catalogues as the primary mode to promote its products is facing challenges because the increased product line means that the catalogues becomes too bulky and therefore the Avon ladies do not know how to sell the products more effectively. Sources Avon Product Inc. - Investor Relations-Earnings/News Release. Available at http://investor.avoncompany.com/phoenix.zhtml?c=90402&p=irolnewsArticle&ID=1660731&highlight= Jui-Yen, Mei-Liang, Yi- chieh. The Study of Direct Selling Management Strategies: An Example of the Avon cosmetics company in Taiwan. Available at http://www.jimsjournal.org/26ChenMeiLiang.pdf Read More