Avon Calls on Foreign Market Essay
SUMMARY OF THE CASE STUDY Avon, started its journey in the early 1886 is now the oldest and the largest marketers and manufactures of the beauty products. The advertisements from “Ding dong, Avon Calling” to “Hello Tomorrow” and from “You never looked so good” to the latest one “The Company For Women”, always helped Avon to improve its image and enhance the marketing strategies to serve the purpose.
One of the amazing facts about Avon includes that it’s headquarter is situated in USA but major portion of its sales comes from outside North America.
Avon has captured a huge market all over the world and its distributing the beauty solutions to almost all parts of the world. With Avon being a part of 112 countries, the company has approximately 6 million independent sales representatives. These representatives go door-to-door for selling these products. Fig 1 shows Avon business worldwide. Fig1. Avon Business Distribution Worldwide
Avon decisions to create a highly distributed organization with regional and national new product development and supply chain operations was initially designed to increase time-to-market and speed of response to regional customers preferences.
While that vision of decentralized efficiency and customer focus was a good one at the time, its actual performance is far below expectations and the duplication of effort is slowing down the entire corporation. The case shows how a highly decentralized marketing, new product development and merchandising organizational structure can become more of a liability than an asset however.
The intent of this case analysis is to explain and recommend how Avon will be able to attain a higher level of efficiency and profits through more effective alignment of their research & development, new product development strategies, marketing, and ongoing supply chain operations to create a unified, global marketing strategy that will succeed. QUESTION 1 The chapter describes different marketing orientations. Discuss the applicability of each to Avon’s international operations. The five common marketing orientations are production, sales, customer, trategic marketing, and social marketing. The production orientation does not apply to Avon. Initially when Avon entered its first foreign market, it went to nearby Canada probably focusing on a sales orientation with little product adaptation. Today, Avon utilizes aspects of customer, strategic marketing, and social marketing in its global strategy. Avon modifies its products to meet specific customers’ needs such as technology-driven skin care products in Japan and including insect repellent in the Brazilian skin cream.
Avon modified its distribution method, particularly in China, as part of the overall strategic marketing orientation. Avon’s social marketing orientation is part of its global image supporting women and their needs. Specific programs include fighting breast cancer and domestic violence. This is basically the different business approaches that a company uses to meet the hidden needs of its customers. As per the definition Avon has used some global operations which has helped them meet their customers’ needs which are: the use of global products.
This has boosted Avon market orientation in a way that the company is able to manufacture beauty products as per a certain country needs. For example; In Brazil, Avon manufacture moisturizers, sunscreen and insect repellent, but for Asia Avon manufacture skin lightening creams and in Japan they manufacture technology driven skin products. This helps Avon meet the needs of their clients comfortably. The other marketing orientation that Avon uses is the aspect of global branding.
This helps the company to inform consumers that their company is international thus increasing their credibility. It also helps the company to create global quality image while using uniform ingredients and packaging. This helps the company to cut on cost of manufacturing. In addition, the company uses local language to brand it products. This makes the consumer associate with the product thus ends up buying it. Avon also uses the aspect of global pricing and this is determined by the state in a certain country local market and strategic objectives.
This affects the country in the way that the country with the higher price ships the same products from the country with the lower price this making the company to count loss. The company also uses the aspect of global promotion where Avon used brochures and catalogue to make their product known. It also uses advertising as a way of promotion they accomplish this by the use of media and billboards. These helps them to sell newly launched products, accelerate sales in some of its fastest-growing markets, and recruit reps in places like China.
Finally the Avon uses global distribution. The company does this to independent representatives who have taken orders from customers they have either communicated with or visited. This helps Avon to cut on cost of manufacturing excess goods which will not have an order. QUESTION 2 Why is Avon so much more dependent on its foreign operations than on its US (home) operations? Avon is so much more dependent on its foreign operations than on its home operations for many reasons. First, Avon realized that the level of competitiveness in the United States market has grown vastly.
Furthermore, there is almost no “remaining untapped market for cosmetics, fragrances, toiletries. To grow rapidly in the United States would mean taking sales from competitors, and the U. S. beauty market is very competitive”. A consumer can go into almost any department store and purchase a cosmetic or fragrance whenever they want. Therefore, unless a consumer is unable to travel to purchase their own cosmetics, they may be less willing to buy from Avon unless they are familiar with the same and seek a representative for purchase.
Furthermore, the United States only makes up 5% of the world’s population. Therefore, there are so many more potential consumers. Avon originally creates its sales pitch by providing door to door sales. People no longer enjoy someone coming and knocking on their door to sell them a product. It is unsafe in today’s society and is much of a burden. Therefore, the original concept of Avon has diminished here and in foreign countries, where services are less competitive, they can use that thought process and provide services to remote places, that other cosmetic companies may not.
QUESTION 3 Discuss socioeconomic and demographic changes that could affect Avon Socioeconomic Changes The socioeconomic changes that could affect Avon are the vast majority of individuals that do their shopping online. This is a positive and negative for Avon. Avon needs to tap further into the internet market so that they too can be a successful online sales company. Previously Avon was a company that did direct sales and now has the capability to provide services through online stores, which can increase their sales.
Avon rebounded in the 1990s, posting annual sales of $5 billion in 1997, most coming from the company’s worldwide sales force of 2. 6 million women and men. It also launched its Web site that year, allowing customers to buy products on-line. The move, however, made many of the company’s half-million U. S. sales representatives angry. Avon also continues to expand its product line. In addition to makeup and beauty products, the company now offers nutritional supplements, exercise equipment, and “stress management” products. Avon is also, however, a business and remains dollar conscious.
In early 2002, the company laid off nearly four thousand workers in the United States, Mexico, and Puerto Rico in a move to increase its profits. Demographic Changes In terms of demographic changes, Avon now realizes that not just middle aged women seek the purchase of cosmetic products. Younger women now too seek the purchase of cosmetic products. These women comprise of teenage years to more mature adult women. Therefore, Avon has undergone a makeover that is more than cosmetic. Its products are designed for a younger, hipper, and more diverse customer base.
Looking forward, Avon plans to tap into the vast teen market by launching a separate teen division and enlisting teenage girls as sales representatives. Other demographic changes include the salespeople that Avon employed. Many women could no longer stay home and sell Avon products due to the economy. There were less and less women seeking employment with Avon. This was also because of the economy and the fact that more women were going back to work and simply could not stay home and wait for a representative to come to their home and offer products to them.
QUESTION 4 How might a global recession, such as the one that began in 2008, impact Avon’s operations? What types of products and company strategies would be impacted differently? Some Avon products are considered by women as essentials and they will continue to purchase these products even in difficult financial times. However, many products sold by Avon are categorized by their customers as nonessentials. As the family budget tightens, customers reduce their purchases of the nonessentials.
As profit reduces for the company at large, global expansion might be scaled back or new product introduction might be delayed. Many companies are looking very hard at cost structures and making major modifications to maintain profit levels. Prior to 2008, many women did not have the desire to provide direct sales. However, after the global recession, many women lost their jobs and became more available for part time employment. Therefore, there has been some increase it seems in a more direct selling approach. However, it has also caused fewer women to have the affordability to purchase products.
Avon representatives in other countries would be more successful if the economy is thriving more so then in the United States. Further, a global recession may impact a company’s way of handling business. A global recession brings to light many concerns that a company did not know they had prior, such as operations concerns, management concerns, and financial concerns. To ensure this is resolved, a business should, Responsible businesses and their leaders can continue to be the drivers of economic growth by: Affirming their commitment to responsible and sustainable business practices.
Balancing the need to reduce costs with the importance of maintaining the long-term health of the company, its stakeholders and the communities in which the company operates; Contributing to strategic social, economic and environmental investments for sustainable development by drawing on core business competences and resources; Demonstrating determination to act collectively to set new standards of acceptable corporate practice and governance QUESTION 5 What are the major competitive advantages that Avon has? How easily might other companies duplicate these advantages?
Avon has name recognition globally. They also have a global organization, not just sales, but product development and distribution. Avon has proven it can adjust its model to meet country-specific requirements specifically in China. Mary Kay Cosmetics has recently entered the Chinese market and has very similar models. Avon has also used brand marketing in its “Hello Tomorrow” campaign and uses celebrities when that ad strategy is attractive to their customers. Although costly all of these things can be imitated with the exception of the brand loyalty.
Some of the major competitive advantages that Avon has are their demonstrated superior customer service. They have a large customer base and people are familiar with their products. Furthermore, Avon has products that have lasted the test of time; they are reliable and seem to be made well. Furthermore, Avon has expanded their services to a wider geographic area. Due to the technological upgrades that Avon has made in recent years, they are now also able to design products quicker and provide them to the market for use. Finally, Avon has a very strong brand name.
People are quite familiar who Avon is and their good reputation. This would be a great advantage compared to other companies. Other countries might easily duplicate these advantages by also providing their products to those in remote areas. Avon has tried to expand their customer base in these areas. However, it is difficult for them to expand but so far. These other competitors should consider working with a company in these areas that is familiar to the consumer, and working together to create products and sales that these consumers would purchase from.
Furthermore, if the company is a local company, consumers may choose to purchase from their local vendor as opposed to a vendor who is established in another country. QUESTION 6 Avon does not sell within the United States in retail establishments (with the exception of kiosks handled by some of its reps). What are the pro and cons of distributing that way? Pros of not selling retail Some of the pros of not selling in a retail establishment include the cost savings that this provides Avon that they can then pass along to their consumers; including the cost of “avoid having to pay for shelf space in stores”.
Furthermore, “the lower costs have facilitated Avon’s maintenance of generally lower prices than those that competitors charge in department stores”. Finally, direct selling also provides additional marketing advantages because word of mouth customers tend to be quite loyal. Cons of not selling retail The cons of not selling in retail establishments include the fact that customers cannot just go into a store and purchase the products that they desire. Consumers are unable to go into a department store and purchase Avon products.
Many consumers enjoy Avon products such as Barbie’s, jewellery and clothing that Avon creates. These products are unsustainable in the department store arena. Therefore, for those customers who are looking for a product right now, are unable to purchase these products and is a loss for Avon. This may deter clients from Avon and require them to purchase a product from a competitor. QUESTION 7 Avon’s effort toward improving women’s health and safety are enormous.
How much of this effort do you think is motivated by altruism versus building its image to improve performance? Does it make any difference? Avon’s company is building its image to be the largest world’s direct selling organization and merchandiser of beauty and beauty related products. They are continuing doing research on improving women’s health and safety in producing good and quality products by understanding their needs and preferences. Both can motivate Avon to keep on improving their performance to achieve their vision and mission.