Avon Strategic Management - Case Study Example

Strategic Management - Avon Case Study. Introduction Avon, a Fortune 500 company, established in 1886 and has grown from strength to strength. The company has been adopting two major strategies as its core of its business. One, the company has been making products exclusively addressing the needs of the women. Two, the company has been taking the direct marketing approach which will help them reach the customer direct. Early on, the company introduced their catch phrase, 'Ding Dong Avon Calling', to emphasize the fact that they are a door-to-door selling company. The company has built its business based on its direct approach. The products of the company also addressed the needs of the women. The company always introduced a new fragrance every month. There was always something different launched by the company on the fragrance sector and they were already known for it. The company had their presence strongly felt in cosmetics and beauty products for women. They also had fashion jewelry in their line of products. The company had its operations spreading from the United States and North America to other parts of the world. The overseas operation of the company has started making more sales than the North American operations. The contribution realized by the company from its overseas operation has grown substantially in the last three years. However, the entry of competitors like Revlon, L'Oreal etc., has been shrinking the market share the company enjoyed in the United States. We need to analyze the situation under this condition and evaluate the options in front of the management. Market Standing The company has a clear standing in the market. They are known for their women oriented products and it is a company for the women of the world. This the company has further reinforced by launching social foundation that would espouse the cause of the women. It has a magazine that circulates the ideas and social commitments of the women and to fight for their justice. In addition to this, the company also provided tips on beauty and other women centric information. Secondly, the company is also known and it has sustained the image that it is a door - to - door selling company. The business of the company was built by the local Avon ladies who were more of consultants to their customers and could also achieve the kind of sale that was happening then. The company and its brand of products, has its own standing in the market. However, the market has a very short memory when it comes to remembering brands! The company has a web site that promotes the thoughts and ideas of the company on the beauty products and other fashion accessories that they are selling. Company has tried positioning their products on the retail market using the JC Penny & Co store chain but was not very successful. However, the company still runs the mail order business from where the customers could get their supplies should they have any difficulty in meeting their individual Avon ladies. They do have an online presence in the growing internet selling market; though not forceful. New products in the fragrance division are done every month. However, it is in line with the idea of the company to have new fragrances on the fly. To ensure that there are new products in every segment of work that is being done, the company has escalated its R&D budget by nearly 46%. Competition In the market place, the share of the market is being taken away by competitors by taking different approaches. Companies like L'Oreal or Revlon, sell through retail outlets and they realize their targets by positioning it appropriately through advertisement campaigns. The presence of these companies in the retail outlets is overwhelming and this has been one of the major causes of market share dwindling. The companies that are present in the direct selling market such as Mary Kay, Amway and Fuller do not compete with the exact products that are sold by Avon. However, Mary Kay is the closest competitor in this sector. It is therefore, important for the company to ensure that its place in the market and the market niche it has created is maintained. Revlon announced an increase in their market share using its standing methods of pushing the retail market. Mary Kay has grown substantially in 34 markets across the world and is growing in the North American market too. This is a direct selling company and the methods adopted by them need to be noted to ensure that there is no major erosion of market share. Shiseido of Japan on the other hand, as adopted the method of establishing personal centers which would provide personalized service to the women. Help them understand the products that are present in their product line. And Shiseido has found that almost every women who went through the experiencing portion at the center, invariably bought the product at the nearest store. The center method seems to have been contributing to their sales as well. Avon, on its part has already tried out the retail stores by setting up shop in JC Penny & Co., as well as setting up centers now for providing support and advice to the women using Avon products. However, the first mission of setting up shops was abandoned about two years back with no major breakthroughs reporting. This could be due to the fact that Avon is more known as a direct selling brand unlike Revlon or L'Oreal. Trying out strategies that does not go well with the company's existing marketing standing or imitating the competitors have not really been giving it great results. Competitors are exploiting the other sectors of market reach. Typically, Mary Kay has a good presence on the web and it is cornering more than 50% of the business on the internet. And this media is one of the major growth areas that are being witnessed in the world today. More and more people seem to like buying products over the internet and are getting confidence to make payments over it as well. Competition is also coming up with new variants of products at all points in time. There are specific competitors who are promoting their own product proximity to nature. This is another area that is building up customers to the competing company. Particularly, middle aged people who have tried out most of the modern day products would subscribe to buying more of natural products that causes least or no side effects to the body. Strategy Now, taking a closer look at the strategy of the company vis--vis that of the competitors, the following can be inferred: 1. The company has a standing in the market and the people expect it to behave in a specific way. Any deviation from it may not be very successful. For instance, direct selling is the forte of the company and it is important that the company strengthens it and not try to indulge in any activity that might dilute its holding on the direct selling market. 2. The company is also a strong contender on the largest women only product maker. Therefore, they cannot think of moving out of their strong hold but continue to be some one who can stay on the top of women cosmetic and accessories suppliers. Neither can this strategy be altered. 3. The US market is flooded with brands that are trying to grow in the market and is contending for their own market share. However, there is no strong player in the direct selling market approach. There are a number of small and medium size players, localized in the specific areas that are in the direct marketing business for similar products. Therefore, it is only right for the company to concentrate more on their own strengths. Increase the overall direct marketing agents, train them appropriately and work on their success at the field. This will ensure that the company is able to bring back its past glory in the North American Market. They should also be provided with matching advertisements, more in line with the 1950s ad on 'Ding Dong Avon Calling'. 4. The rest of the world seems to be growing much faster with the economy shifting towards the east. The countries in the East, typically China and India and of course, Europe needs to be concentrated on. An analysis on the growth in this region shows that it has overtaken the revenues from North America within three years of getting in there. Direct selling could be the thrust of Avon. This would ensure that the company moves faster into all the regions of the entire geographical area. However, while shifting into these countries, localization of the products is essential. They should match with the requirements of the country and the people. Investing on furthering the market share in these locations will be the best way for the company. And then, there is the novelty of the west marked on every product that is made by Avon as far as these countries are concerned. This will certainly motivate people to buy more. 5. The internet based eCommerce has been growing swiftly in the last decade. The growth of the internet business in the last seven years has been very impressive. The company needs to tap this market as well. The direct marketing companies can work on two more fronts. Telephone ordering or mail order process could be one. They can also work on the internet based booking systems which would help the company realize sales at the least cost. The information that can be passed to the customer on the internet will be large and bookings can be done with payments made over the net. This will ensure that the company realizes the money before the shipment is made. To concentrate on the internet based ecommerce business will also be a right approach for the company since that is where the future will be. Conclusion From the discussions presented above, it is clear that the direction of the company should be in line with its existing strategies and there should not be any sudden shift in their approach. The market expects the company of such standing to behave in an appropriate way and therefore, every change in the strategy has to be carefully planned and seamlessly implemented. Therefore, the first strategy in the US market and in the rest of the world will be to ensure that the direct selling strategy is further strengthened and is implemented in all its glory. Secondly, direct selling should also be done through mail order and more importantly over the internet. Creating a very attractive internet based retail mechanism will make the company all the more profitable. Similarly, concentration on growing markets such as Europe, China and India will add the country to the growth path already laid out. Finally, the company should evolve a carefully planned advertising campaign that would support all of these strategies and help create the marketing awareness to make it a success. References 1. Aaron Schiff, 2008, Ecommerce Growth in the United States. Found online at 26econ.com the online economics portal. 2. Camerius JW, 2004, Avon Products Inc. - 2004. North Michigan University Case studies. Read More