Avon Products, Inc. Was a leading global cosmetics company, with over $8 billion in annual revenue in 2005. As the world’s largest direct seller, the company marketed to women in 143 countries via five (5) million independent Avon Sales Representatives. Avon product lines included numerous popular brand names, and an extensive line of costume jewelry and clothing. Although revenues increased in 2003, 2004 and 2005, Van’s net income was $848 million in 2005. The company met with stiff competition in the US market from other cosmetic companies.
In order to maintain its market share in the US while targeting there countries, especially China, the company drastically changed its global operating structure. This brought senior management closer to its key business geographies, strengthened global integration, accelerated information flow and positioned the company for sustainable growth. Avon expected to incur costs to implement these initiatives over the next several years, with a significant portion of the total costs to be incurred during 2006.
Benefits from restructuring helped to fund a notable increase in consumer investment and improved the competitiveness of its direct selling opportunity. Additionally, the company increased investment in advertising, marketing intelligence, consumer research and product innovation. The cosmetics mogul has grown from revenues of $8 billion in 2005 to nearly $11 billion in projected 2009 revenues while delivering strong single-digit earnings growth. The company projected achievement of annulled savings of approximately $430 million once all initiatives are fully implemented for 2011-2012.
Second-Quarter Operating Profit is $127 million and Second-Quarter Revenues are down 9 %. ( media. Panorama. Com). Provide a brief description of the status of the company that led to its determination that a change was necessary. Early in 2006, Avon was faced with declining revenues and operating profits. The company’s talent and total infrastructure was incapable of supporting its rapid growth. (M. Goldsmith & L. Carter, 2010). The dire need for restructuring was imminent and the company embarked on a major restructuring program to radically transform the company’s cost base and elevate organizational effectiveness.
This restructuring program was a crucial pillar of Van’s turnaround plan. Chief Executive Officer (CEO) Andrea Jung accompanied by a team of company executives initiated the restructuring of Avon in January of 2006. Included in the restructuring was the implementation of a Matrix Structure that replaced a Regional Structure, the development of a management-reduction process called Delivering, a significant increase in Executive Talent, and the production of New Capabilities with Brand Management, Marketing Analytics, and Supply Chains? ((M. Goldsmith & L. Carter, 2010). Identify the model for change theory typified in the case study of your choice. Discuss what led you to identify the model that you did. McCauley and Haziest presented a very expansive approach to individual change by combining five (5) general elements: consenting concerning ways an individual needs to change, assisting the individual in recognizing their need for change, sharing in activities that build skills, examining individuals’ responses to skill building activities, and acknowledging that individual growth and development produces positive results.
This is a common approach used in executive coaching. (Silver & Dowel, 2010). I was led to identify McCauley and Hostlers model for change because most researches that are related to teaching in workplace focus on the planning of teaching and assessment of individual learning programs (McCauley, Haziest, 2001). Researchers are constantly emphasizing the value of learning as an ongoing process. It is important that an individual manage his/her own development by updating and expanding his/her skills on a regular basis in order to reach and maintain maximum job performance.
Personal development is often considered a continuous and unintended result of work experience (McCauley, Haziest, 2001). Human source development, however, covers different aspects including self-directed acquisition of knowledge. Individual’s self-directed learning may be linked to several variables and analyzed in different aspects. This type of learning may take place in several settings, for example in the family, workplace or community. There are two parallel levels of self-directed learning in the context of human resource development (HARD): individual level and organizational level.
Individual level self-directed learning deals with learner’s independence, readiness for self- directed learning, personal approach to learning and its goals. Organizational level self-directed learning is largely associated with the role of the leader and organizational culture. McCauley and Hostel’s model for change makes an effective comparison of behavior change, adult development, and self-directed learning. (Silver & Dowel, 2010). Illustrate the types of evaluation that were collected and how they are used to benefit the company.
Avon used several methods of evaluation to collect information that greatly benefited the company in its turnaround efforts. The company transitioned its leadership from being opaque to becoming open and transparent. Leaders became proficient in their awareness of present and potential performance ratings and how to alter those ratings. Avon differentiated talent within the company and equipped each level of talent with the appropriate experience. High performance leaders are aware of their value within the company, and lower performance leaders are provided with the support needed for areas of improvement.
Avon has become a more disciplined organization as a result of the turnaround. The company now functions more methodically as processes are synchronized to operate consistently on schedule worldwide. Decisions related to Van’s talent are derived at through gathering qualitative and quantitative data resulting from the experiences of various leaders. The company has adopted a type of “standard operating procedure” for developing talent that ensures short and long-term success.
Avon has benefited in numerous ways as a result of the compass turnaround: -Ratings of Immediate Managers have increased up to 17% having a near 90% approval rating. -Ratings of HRS and Talent practices increased up to 16%. -Increased transparency enabled Talent to move more rapidly into major markets. Less complicated promotional processes accelerated the development of leaders. -Increased accountability for leaders has improved the work experience for Associates. -All expense savings goals have been met. -Van’s revenues grew from $8 billion in 2005 to nearly $11 billion in 2009. Expected achievement of annulled savings of approximately $430 million by 2011-2012. (www. NASDAQ. Com).
Speculate about the success of the changes within the next five (5) years and how adjustments could be made if the results become less than ideal. Based on demographic data, China holds 20% of the world’s population. Avon should continue to focus on the expansion of retail outlet sales in China. Europe should also be a continued focus for Avon. Avon had a successful growth rate in Europe but only 23% of the total 2003 sales came from Europe.
There is still room to expand in this market. Based on one of the industry’s key success factors, product innovation, Avon should focus even more resources on R especially in the areas of anti-aging products and teen products. For promoting direct-sales through consumer and the business; one is to offer incentives to its customers and second is to motivate the business promoting its products by advertisements, establishing sales competition for employees, participating in conventions, and by endorsing franchise of its products to retail stores.
Promoting Van’s products and high chance of increasing direct-sales is to offer incentives to its consumers. Incentives provide a positive motivational influence to encourage and excite buyers to buy the products. These incentives would include coupons, rebates, product samples and awards. Coupons can be attached in mail, beauty magazines, newspapers, and advertisements on mail or on the internet company’s official website. Rebates could be offered to attract additional buyers. Rebates could be advertised also on coupons through mail or via internet.
By offering samples of Van’s cosmetic products, which could be done through door hangers or attached on an advertisement through mail, consumers could be encouraged to buy products. Awards through prizes, contests or sweepstakes could offer consumers the chance to win cash or free-trips. A free gift could be given when consumers purchase Van’s products. This option might be more attractive to consumers than some other options. Participating in conventions could likely increase ales through direct contact with customers.
