Strategic Management

Case Study

Group 1
Contributors
22-Megha Dhamal
46- Saurabh Pathak
47- Shailesh Bhosale
48- Shreyas S
49- Shreyas Nirgude
50 -Shubham Singh
Content
1. Company Overview
2. Vision-Mission
3. External Audit
4. Internal Audit
 About company
Avon Products, Inc. or simply known as Avon, is a direct
sales company in beauty, household, and personal
care categories. Avon had annual sales of $5.57 billion
worldwide in 2019.

It is the fourteenth-largest beauty company and, with 6.4

million representatives, is the second largest direct-selling
enterprise in the world (after Amway).

 The company's CEO is Angela Cretu, who was appointed to

the position in January 2020.

In May 2019, the Brazilian company Natura &

Co announced its intent to acquire Avon; the deal closed in
January 2020. Its ownership accounts for a 76% stake
Distribution

Avon is the world’s largest

direct seller
1906: 10.000 reps. @ US
1920: 25.000 reps. @ US
2011: 420.000 reps. @ US
2012: 6,4 M reps @ 100
countries
Product Categories
1. Beauty
2. Fashion
3. Home
Vision

To be the company
that best
understands and
satisfies the product,
service and seff-
fulfillment needs of
women-globally
Mission
1. To be a leader in
global beauty

6. To have the
largest foundation 2. To be women’s
dedicated to choice for buying
women’s causes

3. To be a premier
5. To be a “best
direct-selling
place to work”
company

4. To be a “most
admired” company
External Audit

General Environment

Industry Environment

Competitor
Environment
External Audit
PESTEL Analysis
Political

Legal. Economic

AVON
Environment Social

Technological
External Audit
Industry Environment

Potential Bargaining power of

development of consumers
substitute products
Rivalry among
competing firms

Potential entry of Bargaining power of

new competitors suppliers

Porter’s Five-Forces Model

External Audit
Five Forces Analysis

Potential entry of new

competitors: Low
•Industry growth rate is low
•Very expensive to setup distribution channels
External Audit
Five Forces Analysis

Bargaining power of
suppliers: LOW
•Many suppliers: essential oils, chemicals, containers, packaging components
•Avon is a huge player in beauty industry
•Firm own formulation and brandname
External Audit
Five Forces Analysis

Bargaining power of
consumers: HIGH
•Buyers’ switching cost are low
•Too many sellers
•The world of me-too and replacement products, many choices for consumers
External Audit
Five Forces Analysis

Potential development
of substitute products:
HIGH
•Cosmetics surgery has become more price effective
•The rise of Organic, traditional, cultural beauty treatments trend.
•Other threats: diet and exercise, spas, beauty salons
External Audit
Five Forces Analysis

Intensity of Rivalry
Among Competitors:
High
•Industry growth rate is low
•There are numerous competitors
•Lack of differentiation oppotunities
External Audit
Oppotunities
1. Buy out other smaller companies
2. Online markets becoming increasingly popular
3. Diversification of products
4. Offers employment opportunities
5. Intensify brand development overseas
6. Emphasize direct selling in emerging markets
7. Promoting the company by utilizing inexpensive
outsourced marketing (social media, word of
mouth, etc.)
External Audit
Threats
1. Fierce competition
2. Economic recession
3. Easily substituted
4. Reputation smeared by investigations
5. Currency Fluctuations
6. Large market to compete in
Internal Audit

Resources Capabilties

Competitive Core
advantages competency
Internal Audit
Resources
• Tangible resources
• Financial resources
Internal Audit
Resources
• Tangible resources
• Financial resources
• Organizational resources:
• 39.100 employees (4.800 in US)
• 6.4 million representatives in 110 countries(400K in US)
• Physical resources:
• R&D facilities: 7
• Manufacturing facilities: 13
• Distribution centers: 35
• Administrative offices: 12
• Tecnological resources: Avon global ERP system
Internal Audit
Resources
• Intangible resources:
• 2012: Goodwill $374.9M; other Intangible assets $120M

Hand-crafted sterling silver jewelry firm

(direct selling model)

Skin care firm (Sales generated in stores or by

phone) managed it as a standalone business
(1% Revenue)
Internal Audit
Resources
• Intangible resources:
• 2012: Goodwill $374.9M; other Intangible assets $120M
• Global leader Philanthropy ($1B donated)
Internal Audit
Capability
• Distribution: Effective logistics with 35 centers world
wide
• Human resources: Provide financial and personal
success to representatives
• MIS: Effective global ERP system
• Marketing: Good pre-sale and after-sale activities
• Manufacturing: Design and produce quality products
• R&D: Innovative technology to deliver first-to-market
products
Internal Audit
Core competency
• Core competencies are the resources and capabilities that
comprise the strategic advantages of a business. Avon
company uses modern management theory that a
business must define, cultivate, and exploit its core
competencies in order to succeed against the competition.

• Communication ,shares and develop ideas

• Human resources: Provide financial and personal success
to representative
• Marketing: Good pre-sale and after-sale activities
• Manufacturing: Design and produce quality product
• R&D: Innovative technology to deliver first-to-market
product
Internal Audit
Strengths
1. Strong brand image
2. The largest women's foundation
3. Innovating brand
4. Socially responsible and ethical with strong values
5. World's largest direct seller
6. Avon has a great adaptation to diverse culture
7. Experience of the BOD
8. Product diversification
Internal Audit
Weaknesses
1. Home segment experiencing loss
2. Avon has a poor brand loyalty
3. Expensive products reputation
4. Lack of control over representatives
5. Complicated process through representatives to
have products
6. Low market share as compare to bigger brands
7. Representative on credit
EFE Matrix
EFE MATRIX Weights Rating Weighted Score
Opportunities      
Emerging and expanding it through the small firms and
businesses 0.07 4 0.28
Online markets becoming increasingly popular 0.07 3 0.21
Diversification of Products 0.06 3 0.18
Perceived loyalty about the brand 0.03 4 0.12
The huge demand of the innovative products especially like the
green products 0.08 3 0.24
Emphasize direct selling in emerging markets 0.06 3 0.18
Customer driven demands 0.09 2 0.18
Threats      
Fierce competition 0.1 3 0.3
Economic recession 0.1 3 0.3
Easily subsititued 0.1 3 0.3
Reputation smeared by investigations 0.06 4 0.24
Currency fluctuations 0.06 3 0.18
Large market to compete in 0.12 4 0.48
Total 1  3.19
IFE Matrix
IFE MATRIX Weights Rating Weighted Score
Internal Strengths      
Strong brand image 0.09 3 0.27
The largest women's foundation 0.07 4 0.28
Innovating brand 0.07 3 0.21
Socially responsible and ethical with strong values 0.06 4 0.24
World's largest direct seller 0.07 4 0.28
Avon has a great adaptation to diverse culture 0.08 4 0.2
Experience of the BOD 0.09 4 0.36
Product diversification 0.07 4 0.28
Internal Weakness      
Home segment experiencing loss 0.08 1 0.08
Avon has a poor brand loyalty 0.05 2 0.1
Lack of control over representatives 0.08 1 0.08
Complicated process through representatives to have products 0.06 2 0.12
Low market share as compare to bigger brands 0.05 2 0.1
Representative on credit 0.08 2 0.16
Total 1  2.76
IE Matrix
IFE = 2.76

I II III
EFE = 3.19

IV V VI

VII VIII IX
IE Matrix
Recommened Strategy
1. Integration strategy
2. Market penetration
3. Market development
4. Product development
CPM Matrix

  COMPETITIVE PROFILE MATRIX

(CPM)   Avon L'Oreal P&G
  Critical Success Factor Weight Rating Score Rating Score Rating Score
1 Advertising 0.2 1 0.2 4 0.8 3 0.6
2 Product Quality 0.1 4 0.4 4 0.4 3 0.3
3 Price Competition 0.1 3 0.3 3 0.3 4 0.4
4 Management 0.1 4 0.4 3 0.3 3 0.3
5 Financial Position 0.15 4 0.6 3 0.45 3 0.45
6 Customer Loyalty 0.1 4 0.4 4 0.4 2 0.2
7 Global Expansion 0.2 4 0.8 2 0.4 2 0.4
8 Market Share 0.05 1 0.05 4 0.2 3 0.15
  Total 1   3.15  3.25  2.8
TOWS Analysis
• SO Strategy:
• S1O1,2,7: Buy an Online Cosmetic Distribution company and develop
Avon Store.
• S1O6: Buy a Korean/Japanese Cosmetic Company to reach Asia market
• S5O3: Buy a Functional Food Company to develop a new product line
• WO Strategy:
• O2W4,7: Develop Internet Website/Apps to help the firm communicate
directly to customers, manage representatives and their payment
• ST Strategy:
• S4,7T1,3,6: Develop a new line product that less expensive and
distribute over charity events and promotions
• WT Strategy:
• W4,7T6: Develop a managing system to control all representatives
BCG Matrix
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