085- Ramirez, Erika May G.

1180085
BME 90- Strategic Management
2021-2022 1st Semester Thursday 3:00-5:00 pm
Written Case #7: Avon
Required Written Case Assignment no. 7
November 20, 2021

I. Case Objective
1. To apply the concepts of strategic management and demonstrate the
interaction between the components of strategic management: strategic
analysis, strategic formulation, and strategic implementation.

II. Management Dilemma

How will AVON bring back the loyalty of its customers and find effective
marketing strategy in the new era?

III. Brief Background

AVON is a New York-based beauty and household company that has
operated in the industry since 1886. It is one of the biggest direct selling companies
in the world and aims to become a leader in global beauty in satisfying women's
needs by delivering the best product to its customers. The company used the women
empowerment strategy from the beginning to create its brand image and also uses
both door-to-door salespeople and brochures to advertise its products to the users.
However, these selling strategies were weakened by e-commerce and the company
needs to find a strategic solution that will give them a sustainable competitive
advantage. Furthermore, it needs an effective leader that will resolve the decreasing
sales and customer loyalty of the company.

IV. Strategic Analyses

Avon like every business venture within the market is implicated by
opportunities and threats. The preceding analysis uncovers and exploits the
opportunities that can be used to enhance its business operations. In addition, it also
identifies weaknesses of the organization that will help to eliminate and manage the
threats that would catch the attention of the management.
Strengths
 1. AVON is one of the leading global beauty companies.
2. It is one of the largest direct-selling beauty and personal care brands in the
world.
3. It has a share in emerging markets that are underdeveloped with a large
population
4. The company has diversified and affordable products.
Weaknesses
1. The company has weak advertising in comparison with its competitors.
2. It lacks marketing and strategic focus for non-beauty products.
3. The company is not proactive in changes in the technology and marketing
environment.
Opportunities
1. The company may take advantage of the demand for international beauty and
skincare brands.
2. Internet and phone applications can help the company to expand in new
markets and increase customer convenience.
3. The company may introduce more organic beauty products,
Threats
1. There is intense competition, especially with e-commerce websites.
2. There is a changing consumer buying behaviour.
3. There are vast changes in technology.

Moreover, Porter's Five Forces is also used to understand how the five
competitive market forces influence the profitability of the company. This analysis will
further explain how forces in the industry environment might affect Avon’s choice of
strategy.

Threat of New Entrants- Low

The threat of new entrants for AVON is low due to the high start-up cost in the
cosmetic industry. Developing unique and quality cosmetic products requires a lot of
resources and there is huge competition present in the industry.

Bargaining Power of Buyers- High

Buyers have high bargaining power because customers can exert power over the
business by forcing them to reduce the product price since there are many beauty
products available in the market.
Bargaining Power of Suppliers- Low
Suppliers have low bargaining power because AVON produces its product. The firm
can easily find a new supplier when the price of raw materials increases because
there is a high number of market players and a large supply of diverse products.

Threat of Substitute Products- High

Consumers can easily find a substitute good because nowadays many online shops
and cosmetic brands offer more affordable and quality products than AVON.
Furthermore, the threat does not only pertain to competitors' products but also from
the home practices.

Rivalry among Existing Competitors- High

The degree of rivalry is quite high because AVON has to compete with well-
established brands like MAC and Maybelline. Due to many cosmetics brands, the
firm could make less market share in the beauty industry.

Alternative Courses of Actions

ACA #1: Combine Direct Selling with Social Media Internet Tools
One alternative for QVC is to start to improve its online presence to compete
with other beauty product brands. Without shifting too much away from its initial
business model and strategy, coping up with the trends in online shopping can
increase the sales of the company.
Advantages:
1. It can increase customer convenience.
2. There can be a new customer engagement.
3. It can increase market share.
Disadvantages:
1. It requires capital requirements.
2. There is a need for continuous updates to mitigate poor customer reviews.

ACA#2: Accelerate Product Development and Improve Loyalty Rewards

The company may consider to accelerate its creative effort in product
development such as improving its product packaging and introducing more organic
products. Also, AVON may improve its customer rewards system to regain its lost
customer brand loyalty.
Advantages:
 1. It allows growth.
2. It gives more customer satisfaction.
3. It can improve band image and market competitiveness.
Disadvantages:
1. It requires capital requirements.
2. The revenue increase is not guaranteed because the company will be
exposed to currency fluctuations.

ACA#3: Increase Marketing Campaign

The third alternative for AVON is to improve its marketing strategies to create
better brand recognition, attract new customers, and retain the current customers’
interest. In this manner, the company will not move away from its initial business
model and strategy.
Advantages:
1. It will promote the business to a target audience. Thus, marketing may create
more sales.
2. It can improve the understanding of the current market.
Disadvantages:
1. It requires capital requirements.
2. The time and effort may not yield a justifiable return.

ACA#4: Do Nothing
Simply maintaining the company's current strategies and focusing on known
strengths can still give AVON a good competitive shape relative to other cosmetic
brands. It is because the company has established itself as an industry leader and
already redefined its ways of doing business in beauty and household products.

V. Recommendation
AVON should consider combining its direct selling strategy with e-commerce to keep
pace with the evolving technology, customer needs, and marketplace. The company
may do this without moving away from its traditional marketing strategy because this
alternative complements its original business model and gives more customer
convenience that directly addresses the problem of how will the company bring back
the loyalty of its customers. Furthermore, this strives to create a unique culture of
efficiency, quality, and excellence which will help the company establish a
sustainable competitive advantage and gain untapped profits from international
efforts.
VI. References
Sman, T. (2018, January 18). Avon case study solution. Slideshare.Net. Retrieved

November 20, 2021, from https://www.slideshare.net/tairossman/avon-case-

study-solution?

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