Strategic Management
Amyn Jessa
Shahmeena
Khan
Hafizuddin Halim
Muhammad Iqbal
M. Hanif Fatani
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3640
3738
3449
3445
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Table of Contents
EXECUTIVE SUMMARY
INDUSTRY ANALYSIS
STRUCTURAL ANALYSIS OF THE INDUSTRY
STRATEGIC GROUP ANALYSIS
KEY DRIVING FORCES
KEY SUCCESS FACTORS
SWOT ANALYSIS
EFAS
COMPANY ANALYSIS (MISSION, OBJECTIVE, STRATEGY)
VALUE CHAIN ACTIVITY
FINANCIAL ANALYSIS
IFAS
Table of Contents
BCG, GE AND GRAND STRATEGY MATRIX
SPACE
IDENTIFICATION OF KEY ISSUES FACED BY THE COMPANY
TOWS MATRIX
LONG TERM STRATEGIES
ANNUAL OBJECTIVES
PROFORMA STATEMENT
IMPLEMENTATION
Executive Summary
Avon has a three distribution channel: Direct Selling, Limited
Retailers, Online. Avon has a large number of sales representatives
due to which it is the largest selling brand.
From a few years there is a slow growth in the sales because
change in the customer preferences and customers habit. The
mobility of people are increasing, more women are working and
many men now coming towards personal care products in order to
make their personality attractive in the work environment.
The older citizens like to shop in convenient place so that is why
Avon is successful in this market. At the other side due to the lack of
the new innovation for Generation Y and men, they have bad image
in these markets.
They need to improve their brand image by promotion in these
areas. Baby boomers prefer high quality and they are the core
customers of Avon but due to the lack of providing information and
education about their products, the satisfaction of these customers.
Avon needs to develop new products according to the specific
needs of the specific customer segment.
Executive Summary
The website of the company is not fully
advertised and due to the decentralization
system in the website. The brand image of the
company is affecting so they need to have a
centralized website system and providing other
services like free coupon, free sample, price
discounts, and tips of beauty.
Avon needs to expand its business in Asia, and
other emerging economies like Taiwan, Russia
and China.
General Environmental Factors
POLITICAL FACTORS
Federal Food Drugs (FD&C) and Fair Packaging and
labeling act (FPLA )
Present Impact
1. Personal care Industry most of the products are
used in the sensitive areas of the body therefore
testing are important for ensuring the quality of
products.
2. Companies are implementing self inspections
systems and the quality of products remain sustain.
Future impact
In future the key to success will depend upon
1. Good relation with regulation officer
2. Self Inspections
POLITICAL FACTORS
No change in tax since 3 years
Present Impact:
1. The Operating income in personal care industry
is increasing because of no change in the
income tax since 3 years
2. Therefore numbers of new entrants are
increasing.
Future Impact:
1. The Fixed cost would remain same, the industry
will remain profitable and investments will
increase in this industry.
POLITICAL FACTORS
PATENTS
Present Impact
1. The companies are protecting their products and
manufacturing mechanism by patent.
2. They can build their brand image and loyalty by
giving consistent quality of products to
customers.
Future Impact
1. Brand loyalty and image will increase due to
patent of products and techniques.
Economical Factors
Inflation Rate :
% change Inflation
USA
1.9
Present Impact
1.Inflation is increasing due to which profit
margin is decreasing because of
increasing in operating cost.
Future Impact
1.In future Industry will have to face increase
in variable cost.
Economical Factors
GDP
In the third quarter of 2000, according to revised
estimates, current- dollar gross domestic product (GDP)
rose 3.8 %( US).
Present Impact:
1. Personal Care industry shows growth in 2000 due to
which sales of firms continue to grow.
Future Impact
1. Consumption of personal care industry will increase as
result Personal care industry products will become the
necessity.
Economical Factors
NATIONAL INCOME
Present Impact
1. Use of cosmetics is increasing because the
buying power of consumer is increasing in US.
Future Impact
1. Personal care industry will expand and become
more attractive because of increase in the
national Income of working women and Baby
Boomers (expected growth 16%).
Economical Factors
CONSUMPTION PATTERNS
Purchasing % of Personal care Products
1. Baby Boomers 98%
2. Generation X 97%
3. Generation Y 13.1%
4. African Americans 64%
Present Impact
1. In personal care Industry most of the firm are focusing
on the baby boomers because of the purchasing
percentage of the personal care products. Women’s are
their core customer.
Future Impact
1. Generation X, Y and African Americans will be more
attractive and profitable market in future
Socio-Culture Factors
Change in the perception of males
consumers


Influence by services rather than advise of wife.
Men prefer those companies which specifically target
them
Present Impact
1. Companies offering masculine packages,
services and to promote the brand image by
advertising in which they are aimed.
Future Impact
1. The product line of male products of companies
will increase to satisfy their male customers
need
Socio-Culture Factors
WORKING WOMEN
Present Impact
1. Consumption is increasing because currently
more than half % women are working and in
future it will be high.
2. And women are the core customers of the
personal care industry.
Future Impact
1. Personal Care industry will be more profitable
and they have to adopt the various distribution
channels to access the working women.
Socio-Culture Factors
HEALTH AND EDUCATION
Usage of computer is increasing
More health conscious
Present Impact
1. Personal care firms are adding natural ingredients in
their products because people have strong believe
about the benefit of natural ingredients.
2. Trends in online selling is increasing. Companies offer
tips of health and beauty.
Future Impact
1. In personal care Industry those companies will survive
who will educate and inform customers about their
products well.
Socio-Culture Factors
LIFE STYLE CHANGE
Less time for shopping
Fashion and trend follower
Increase in mobility of people
Present Impact
1. Due to above changes in the lifestyle of the people, the
Industry is focusing in various distribution channels to
access the customers
2. They need a strong analysis of fashion and trends, and
innovation of a new trendy product which are tailored to
specific needs of consumers.
Future Impact
1. More innovation will be needed in the products and
distribution channels .
Socio-Culture Factors
Asian Americans prefer quality
Y generation prefer quality with affordable prices
Males are less price sensitive
Baby Boomers prefer high quality
Present Impact
1. The companies which are targeting Baby Boomers ,
Males and Asians Americans they offer average to high
quality products at high prices.
2. The companies focusing on the Y generation they give
products at affordable prices.
Future Impact
1. The companies will have to offer product lines of different
quality to different markets. The selection of distribution
channel will be more important.
Technological Factors
Rapid change
Innovation in products
Present Impact
1. Life cycle of product is very short because of
development of new products.
2. Companies are focusing on research and development
of new products to fulfill the demand of the customers.
Future Impact
1. Industry will be more hyper competition because of rapid
development of products.
2. The innovation of a products will be the corner stone of
success.
Technological Factors
STANDARD OF PACKAGING



Contents of the products
Specification of particular consumer needs( like skin color)
Container filled in standard manner
Present Impact
In personal Care Industry companies apply self testing to
check the packaging and manufacturing up to the
standard.
Future Impact
Companies will focus on the good manufacturing
practices and self inspection to survive in this industry.
Technological Factors

USE OF INTERNET

Online Selling
Present Impact
1. Use of internet is increasing and firms are focusing on
web-based selling because now people like to do
shopping online because of the following reasons:
Increase in mobility of people
Increase in the usage of computers
Convenient distribution channel
Future Impact
1. Online selling will be the most efficient distribution
channel
PORTER’S FIVE FORCES
ANALYSIS
PLEASE REFER TO EXCEL SHEET FOR
APPENDIX ‘A’
Strategic Group
PLEASE REFER TO EXCEL SHEET FOR
APPENDIX ‘B’
INDUSTRY DOMINANT TRAITS
The types of distribution channels used to access
consumers:
1. Direct Selling
2. Retail selling
department stores
specialty stores
drugs stores
Kiosks
3. Online selling
Product innovation : Rapid, due to intense competition
and product innovation
Differentiated Products: Products are differentiated
through features, which tailored to specific needs.
Driver of Change in Industry
Internet ( Online selling):


One of the most important drivers of change is the use of internet
therefore the companies are focusing online selling in order to
success in the personal care industry.
They are offering online samples and trials, tips, advisories for
beauty.
Customer Preference:

The consumer buying habit is changing due to which the
companies have to analyze the market constantly and develop
new products according to the culture and the needs of specific
customers.
Life styles

Men are becoming the important customers of the personal care
industry because they like to build their personality in working
environment. Companies needs to develop product tailoring to
their specific needs.
Key Success Factors
Quality
Price
Distribution Channels ( Relations , various type)
Brand Image and loyalty
Product Innovation (R&D)
Marketing Strategies ( Target Segments)
Products Lines
Services
External Factor Analysis Summary
(EFAS)
PLEASE REFER TO EXCEL SHEET FOR
APPENDIX ‘C’
Internal Factor Analysis Summary
(IFAS)
PLEASE REFER TO EXCEL SHEET FOR
APPENDIX ‘D’
MISSION STATEMENT
The Global Beauty Leader
The Women's Choice for Buying
The Premier Direct Seller
The Largest Women's Foundation
Objectives:
Marketing Transformations
Breakthrough innovation
frequency
Product development
(average)
2000
2004
3 years
2 years
88 weeks
50 weeks
Supply chain improvement
Days of Inventory
Forecasting accuracy
2000
2004
119
8-10
Baseline
+30%
Sales Leadership
Representatives per U.S.
district
Growth in active
representatives
2000
2004
322
440
2%-3%
2%-3%
Objectives:
2002
E-Commerce and Internet
E-Representative
participation
Representative support cost
savings
Geographic market
penetration
2000
13%
50%
$3 million
+$20 million
U.S., Japan,
Taiwan
20 markets
3,463
6,000
International
Sales outlets (China)
Value Chain Activity of the Avon
Inc.
The Value chain activities plays a vital role in the
demand and supply chain of Avon Inc Products
.
The heart of Avon’s strategy implementation
efforts was its ability to eliminate non-value
adding costs from its value chain,
Kropf’s (COO of Avon Inc) business process
reengineering (BPR) efforts achieved great
success in 2000, with cost savings of more than
$150 million delivered.
Supply chain improvement
Supplier management/sourcing savings
Leverage supply chain planning tools to
reduce cost and inventory levels
Consensus-based forecasting
Strong linkages and focus between
marketing and supply chain operations
ABC planning and product segmentation
Centralized inventory distribution hubs
SUPPLIERS
Suppliers
Avon have different suppliers for its different product lines. Using BPR
systems in the supplier Avon Inc saved $56 million annually after cutting its
number of suppliers from
300 to 75.
Strengths:
1. Avon Inc greater bargaining power with its suppliers due
to large number of orders.
Weakness:
1. Threat of Quality standards problem from suppliers side
2. Threat of Inventory problem from supplier’s side.
3. Threat of on time delivery problem from suppliers side
OPERATIONS
Operations The Operations division supports the
development, procurement, manufacturing, and fulfillment of Avon’s
leading-edge products. Continues Information and feed backs are
given by the R&D department to operational Department.
Strengths:
1.On time linking of activities
Weaknesses:
1.Too much work load may disturb the whole
value chain
2.Incorrect data of inventories may lead to
increase costs.
LOGISTICS
Avon Inc, outsourcers different Logistics Companies to handle
and deliver its outbound shipments (materials, supplies,
finished goods) to its different located regions for its
manufacturing zones, warehouses and retailers.
Uses information systems to automate order processing and
logistics to reduce transportation costs by $22 million,
Avon Inc distributes its products directly i.e. by internet
ordering systems its own online stores and by the help of
its direct selling model i.e. sales representatives using
catalogues and brochures.
By Retailing using Avon Beauty centre Kiosks , free
standing mini display stores. Which was designed to
display an upscale beauty image, showcase the beauty
brands and encourage customer trail of product
LOGISTICS….
Strengths:
1. Avon’s Own online store creates a global image for Avon
and its consumption rate.
2. Kiosks increase learning experiences for consumers.
Weaknesses:
1. Threat i.e. too much dependant on Logistic companies
for its transportation of supplies
2. Threat i.e. too much dependant on sales
representatives for its distribution of supplies
3. Non accuracy of sales figures using Kiosks.
4. Weak relationship with retailers
SALES & MARKETING
*According to the current trend of the market Avon Inc trains their own
employees and service contract sales representatives for direct
selling,
*Avon products are marketed through sales campaign brochures(
based on changing fashion trends) frequency of which is 12-26
individual sales campaigns each year.
*Avon publishes 600 Million sales brochures, one idea to target
women (age 20) of cosmeceutical products
*the company was also developing global brand campaign featuring
new themes “Let’s Talk
*Avon has also developed brand image by various charitable activities
such as Breast Cancer Awareness Crusade, the Avon Global Running
Women’s circuit, Women of enterprise programs and the Avon
worldwide Funds for women.
SALES & MARKETING
Strengths:
1.Excessive promotions, good relationship
with customers and brand loyalty
Weaknesses:
1.Imitablility of marketing campaigns
2.Too much cost on advertising and
brochures
R&D
Product R&D Technology and System
Development, Human Resource And General
Administration
Strengths:
1. Supportive and corrective actions
Weaknesses:
1. No action taken, over costs (input) by R&D than
its results in sales,
quality (output)
FINANCIAL ANALYSIS
PLEASE REFER TO EXCEL SHEETS
FOR ALL FINANCIAL DETAILS
BCG, GE AND GRAND
STRATEGY

PLEASE REFER TO EXCEL SHEET FOR
APPENDIX OF BCG, GE AND GRAND
STRATEGY
SPACE MATRIX
PLEASE REFER TO EXCEL SHEET FOR
APPENDIX
Key Issues Faced by the
company
Following are the issues / problems faced by the
company.
Successful internet Presence (Online Selling)
Avon is using direct selling since many years
92% of revenues were generated from direct
selling
but from few decades they had to face drop in
the sales growth rate because of the use of
internet in personal care industry.
It is difficult to switch to online selling rapidly
because of so many reasons. Other reasons to
avoid internet was cannibalization in sales.
Key Issues Faced by the company
Protest of sales representative
Problems were occurring among sales
representatives and company
management and its marketing strategies.
when firms (Avon Inc ) decided to start
online selling through its brochures, sales
representatives did not agree on posting
the web address of the company as result
other competitors gain competitive edge.
Key Issues Faced by the company
Loss Of market share
From few decades Avon Inc is loosing share because of
the success of the less established firms and the
barriers to entry is dropping due to which number of
competitors are increasing.
Weak relation with Distribution Channel
The channels used were Direct selling, Internet, Limited
Retail selling (Kiosk).
Avon has less capability of distribution because it is
weak in good relation with distribution channels therefore
its is difficult for them access the customers.
They have to use various distribution channels to
increase the growth of sales
Key Issues Faced by the company
Financial Problems were face while planning for
expansions
One of the important issues which they faced when they
are planning enhance their market share by specialty
stores, full line discount stores and Kiosks but they
planned to expand gradually rather than simultaneously
because of the financial.
Brand Image /Brand Awareness in Latin and Asia
America
Avon Inc is focusing on African American rather Asian
Americans and Latin Americans, due to which they have
weak brand image and awareness in these areas.
Avon Inc are not providing hair colors according to the
fashion and trend as a result weak brand awareness in Y
generation.
Key Issues Faced by the company
Direct selling no longer effective (Baby
Boomers are more mobile)
The Baby Boomers are the core customers of
Avon Inc most of them are working in offices and
they are more mobile due to which direct selling
is no longer effective.
Low Product Line Extensions for men
Avon Inc was weak in promotions in generating
brand awareness because they did not provide
trial and samples .
Most of the males perceived the image of Avon
products aimed to women products.
TOWS MATRIX
PLEASE REFER TO EXCEL SHEET FOR
APPENIX ‘TOWS MATRIX
Three Alternative strategies
Extension in the main products:

The sales of the personal care products are increasing in the
main sectors because of the following reasons.
To become attractive in working area.
Becoming more Health Conscious
Due to change in fashion & Trends.
So Avon should increase its product line.
Strengths:

Synergies in distribution channel possible.

Aware about the existing culture & trends factors.

Good R & D.
Weakness:

Bad image in men market.

Limited distribution channels

Lack of coordination from sales representative
Three Alternative strategies

Expand In Taiwan, Malaysia & Russia:
Asian countries like Malaysia, Taiwan & Russia are a huge market
because of the two reasons:
1. Stability in economies
2. Population growth
Strengths:
Strong Brand Image
Innovation
Avon’s product qualities are proffered in these countries.
Weakness:
Bad relationship with the retailers
Lack of product promotion in these segments.
Less market share
Changes in Political scenario
Three Alternative strategies

Build a brand image in Latin American and
Generation Y in existing markets by promotions
and innovation of new product which are tailored
to their specific needs:
The Generation Y is the second largest population segment which is not
focused by Avon and due to the lack of a proportion Avon has not a
good image in Latin America. But Avon has a competitive advantage to
expand in these markets.
Strength:
Innovation
Synergies
Existing marketing channels
Brand Image
Quality at affordable price
Weakness:
Lack of awareness
Bad Relationship with the retailers
RECOMMENDED STRATEGY
Build a brand image in Latin American
and Generation Y in existing markets
by promotions and innovation of new
product which are tailored to their
specific needs.
Expand In Taiwan, Malaysia & Russia
Yearly objectives
First year:
In first year we would get the market share 18%
Cost Reduction by 10% in 1st year.
Market share is 40% in 1st year
Second Year:
In 2nd year we would get the market share 20%
Cost Reduction by 15% in 2nd year.
Market share is 45% in 2nd year
Third Year:
In 3rd year we would get the market share 23%
Cost Reduction by 16% in 3rd year.
Market share is 52% in 3rd year
Implementation of Strategy
We need to change the mission of our
organization because till now Avon
considered premium brand for women. So
do due to the environment we have to
change our mission. The new mission is:
“The Premium brand of personal care
products for everyone”
Drawback of Old organization
structure:
Bad image of organization because of
decentralized website
Lack in flexibility in the organization
structure because high number of sales
representatives.
Awards were based on measures, not on
creativity.
Structure & Culture of
Organization:
Recruitment & Appointment of more men
employees
Centralize the website
Online selling
Degrees in number of sales
representatives.
Award should be based creativity.