Strategic management case study

Strategic management case study

Sylvia LaBrie, Ashley Cleary, Andrea Baril, and Marie-Michele Lachance

OverviewCompany Overview:• History• Sustainability• Growth• 2009 events and issues• Avon market locations • Existing Vision & Mission

Statement• New Vision & Mission

StatementSWOT AnalysisInternal Audit• Organizational map• Board of directors• Financial trends• IFE Matrix• Balance Sheet• Income Statement• Financial Ratios

External Audit• Positioning map• EFE Matrix• CPM MatrixStrategic Formulations• SWOT Matrix• Space Matrix• Grand Strategy

Matrix• BCG Matrix• IE Matrix• Matrix Analysis• QSPM• Recommendati

ons

Implementation• Financial

assumptions• EPS/EBIT• Projected

Income statement

• Projected Balance Sheet

• Projected Financial Ratios

Evaluations:• Balance

Scorecard• Avon Update• Stock price

HistoryQuestionsSources

HistoryBookseller David H. McConnell

• Founded Avon in1886

1886 David H. McConnell founded Avon previously named “The California

Perfume Company”

He founded Avon because he realized his female customers were far more interested in the free perfume samples he offered than in his books.

He chose female sales representatives because:

They were lonely at home because there husband were gone to work

They had the natural ability to network with and market to other women, and a passion for his products.

Limited employment options for women and he wanted the Avon earnings opportunity was a revolutionary concept

How do representatives make money?• Each person that you recruit, you earn $20• If you want to make money from your sales team's

volume, you have to reach the position of what is called a Unit Leader. The qualifying factors for Unit Leader are $250 in personal sales, and at least 5 recruits, whose sales total is $1200.00. You earn 3-7% on the orders made by your recruits, and also, 0.5 to 1% on the orders from the people they recruit.

Advantages to be a representative:1.    Flexible home based business2.    Unlimited earnings potential3.    Low cost to start a business.

How does it work ?

Growth1906Already CPC had 10,000 representatives and Depot Managers in 117 different articles in 600 styles  In October of that year, the company produced its first color brochure 1914CPC opened its first office outside the country, in Montreal, Canada.  When World War I broke out across Atlantic, 5 million units a year of CPC’s product were sold in North America.

1920By this time, 25,000 representatives in the United States. The company’s office moves to Fifth Avenue in New York City The first product was offered under the name of Avon

1937 David McConnell died, and his son, David Jr. became the new President on the

company 1938 The company’s name officially changes to Avon 1946 The company became public

1954 Avon launched its very successful television advertising campaign entitled “Avon

Calling” http://avon.thedigitalcenter.com/assets/show/9581-ding-dong-avon-calling-1956 Moved to Puerto Rico, Caracas, and Venezuela

1956 Avon enters Cuba

1970 First Asian Avon business

Avon Foundation for Women

Breast Cancer

Violence Against Women

Emergency Relief

Internal Environmental Management

External ‘’Green’’ Mobilization

Ethically, Sustainability, and Socially Responsible

 The Business Ethics Magazine has rated Avon for 6 consecutive years as one of the “100 Best Corporate Citizens”

5.4 million representatives in over 100 countries worldwide

Employed 42,000 people throughout the world

Avon’s customers are not only women now but they have emerged into a youth market and a men’s market as well as internationally.

2009

Avon location map

Existing Vision & Mission Statement

To be the company that best understands and satisfies the product, service and self-fulfillment needs of women - globally.

Vision

The Global Beauty LeaderWe will build a unique portfolio of Beauty and related brands, striving to surpass our competitors in quality, innovation and value, and elevating our image to become the Beauty company most women turn to worldwide.

The Women's Choice for BuyingWe will become the destination store for women, offering the convenience of multiple brands and channels, and providing a personal high touch shopping experience that helps create lifelong customer relationships.

The Premier Direct SellerWe will expand our presence in direct selling and lead the reinvention of the channel, offering an entrepreneurial opportunity that delivers superior earnings, recognition, service and support, making it easy and rewarding to be affiliated with Avon and elevating the image of our industry.

Mission

The Best Place to WorkWe will be known for our leadership edge, through our passion for high standards, our respect for diversity and our commitment to create exceptional opportunities for professional growth so that associates can fulfill their highest potential.

The Largest Women's FoundationWe will be a committed global champion for the health and well-being of women through philanthropic efforts that eliminate breast cancer from the face of the earth, and that empower women to achieve economic independence.

The Most Admired CompanyWe will deliver superior returns to our shareholders by tirelessly pursuing new growth opportunities while continually improving our profitability, a socially responsible, ethical company that is watched and emulated as a model of success.

Mission Cont.

New Vision & Mission Statement

Avon strive to be the best foundation for women by offering a wide variety of products that appeals to any women’s need and taste.

Proposed Vision

Our mission as a company is to provide a unique portfolio of

beauty, fashion, and home brands to satisfy women worldwide. We encourage the personal relationship between employees and clients by providing a door-to-door experience. We expect our employees to be professional, and in return we offer them a flexible work schedule. We are constantly looking to increase our sales through our representatives as well as through our online market, which would help maintain our growth and profitability to our stockholders. As an expanding company, our purpose is not only to sell our products, but also to remain socially responsible by contributing to our causes related to women.

Proposed Mission

SWOT Analysis

Strengths Weaknesses1. Strong brand 2. Avon is the market leader in its industry3. Unique portfolio4. The largest women’s foundation5. Innovating brand6. Socially responsible and ethical with strong values (trust, respect, belief, humility, and integrity)7. World’s largest direct seller8. Avon has a great adaptation to diverse culture9. Strong and steady growth revenue

 1. Home segment experiencing loss2. No physical location3. Avon has a poor brand loyalty4. Advertising cost overly expensive5. Expensive products reputation6. Lack of control over representatives7. Complicated process through representatives to have products 8. Representatives on credit (the representative do not pay the company until they get paid by their customers)

Opportunities Threats1.Buy out other smaller companies2.Online markets becoming increasingly popular3.Diversification of products 4.Offers employment opportunities5.Intensify brand development overseas6.Emphasize direct selling in emerging markets7.Promoting the company by utilizing inexpensive outsourced marketing (social media, word of mouth, etc.)

1.Fierce competition2.Economic recession3.Easily substituted4.Reputation smeared by investigations5.Currency Fluctuations6.Large market to compete in

Internal Audit

Organizational map

Financial Trends

72%

17%

11%

2009

Beauty Fashion

Home

Sales by Products Categories

73%

18%

9%

Avon

Mary Kay

Revelon

Sales by CompetitorsAvon: 10 billionMary Kay: 2.6 billionRevlon: 1.3 billion

IFE Matrix

Income Statement

Balance Sheet

Financial Ratios

External Audit

Positioning map

EFE Matrix

CPM Matrix

StrategicFormulation

SWOT Matrix

SWOT Matrix Cont.

Space Matrix Data

Space Matrix

-Market penetration-Market development-Product development-Backward integration-Forward integration-Horizontal integration-Related diversification-Unrelated

Diversification-Horizontal

diversification

Grand Strategy Matrix

-Market Development-Market Penetration -Product Development-Forward Integration-Backward Integration-Horizontal Integration-Related Diversification

BCG Matrix

Mary Kay

RevelonAvon

Avon: 6%Mary Kay: 5%Revelon: 4%

-Forward integration-Backward integration-Horizontal integration-Market development-Product development

IE Matrix•Market Penetration•Market Development•Product Development•Backward integration•Forward integration•Horizontal integration

Matrix Analysis

QSPM

QSPM Cont.

- To increase their customers range, Avon should start a new product line that would be less expensive.

- Avon should build a minimum of 10 physical stores at $5 million each to be more accessible for customers, and also to generate more profit.

- They should increase their marketing budget of 10%, to intensify advertising as well as employee training.

- Avon should completely eliminate the home segment of their company, and concentrate on their successful beauty products.

Recommendations

Implementation

Assumptions

- 10 stores at $5 million each- Increase advertising of 10%

- Increase of 10% in the net sales

EPS/EBIT

Projected Income Statement

Projected Balance Sheet

Projected Financial Ratios

Evaluation

Balanced Scorecard

Stock Price History

Questions

“Avon Company, Corporate Citizenship “ April 2012, http://www.avoncompany.com/corporatecitizenship/index.html »

Avon Home parents, by Amanda, April 2012, http://homeparents.about.com/cs/homebusiness/a/avon.htm » Your Avon Representatives, April 2012, http://www.youravon.com/REPSuite/become_a_rep.page?

p=PSBRGGL&c=iProspect&s=PSBRGGL  Avon Finances, Forbes, April 2012, http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?

tkr=AVP » Founder of Avon, August 18th 2011, http://yahsuccessblog.com/avon-review-a-legitimate-network-

marketing-mlm-opportunity » Avon products financials, Thompson Reuters, 2012, http://www.4-traders.com/AVON-PRODUCTS-INC-

11723/financials/ » Avon Home business opportunities, Alexandra Nowack, June 15th 2010,

http://homebusinessopportunities.typepad.com/home-business-opportunities/2010/06/how-can-you-make-money-with-avon.html »

Avon stock price, investors, 2012, http://investor.avoncompany.com/phoenix.zhtml?c=90402&p=irol-stockquote »

Avon current vision and mission statements, July 10 2005, http://manonamission.blogspot.com/2005/07/avons-avp-mission-statement.html »

Avon stock history, April 2012, http://investing.money.msn.com/investments/company-report/?symbol=AVP »

Avon financial ratios informations, April 2012, http://investor.avoncompany.com/phoenix.zhtml?c=90402&p=irol-fundRatios »

Avon, financial information, April 2012, http://investing.money.msn.com/investments/key-ratios?symbol=AVP&page=FinancialCondition »

Sources