AVONCase study

Roya Valiyeva201280501

CHRONOLOGY OF THE HISTORY1886 David H. McConnell founded a company namedCalifornia Perfume Company (CPC).1914 First office abroad opened in Canada, Monreal.1937 David H. McConnell died and his son David Jr

became the president of the company.1938 The name of the company changed to Avon

Product Inc.1946 McConnel Jr died and J.A.Eward became the

president and the took the company to the public.1954 First TV advertising campaign entitled ‘Avon

Calling’ came out and the company moved to overseas for the first time.

1960s Very famous television advertisement ‘Ding dong Avon calling’ started.

CHRONOLOGY OF THE HISTORY1970s Sales reached to $750 million. First Asian business

opened in Japan and the in the Western Europe. At the end of the decade Avon purchased the jeweler Tiffany’s.

1990 James Preston, the CEO of Avon fought to save Avon’s independence from a series takeover attempts. Also, Avon announced end to animal testing and became the major US cosmetic manufacturer to do so.

1997 Avon moved into the countries of the former Soviet Union. And Avon Worldwide Fund for Women’s Health had raised $50 million.

2007 $120 million was invested on representatives.2008 Avon’s largest manufacturing plants in Brail, China,

Poland and Philippines received ISO14001 certification.

VISIONTo be the company that best

understands and satisfies the product, service and self-fulfillment needs of women - globally.

MISSION The Global Beauty Leader The Women’s Choice for Buying The Premier Direct Seller The Best Place to Work The Largest Women’s Foundation The Most Admired Company

SWOT ANALYSISStrenghts

1. Strong brand 2. Socially responsible and ethical with strong values (trust, respect, belief, humility, and integrity)3. World’s largest direct seller4. Avon has a great adaptation to diverse culture

Weaknesses

1. No physical location2. Avon has a poor brand loyalty3. Advertising cost overly expensive4. Complicated process through representatives to have products 5. Representatives on credit (the representative do not pay the company until they get paid by their customers)

SWOT ANALYSIS

Opportunities

1. Using online markets

2. Promote the company by inexpensive ways

3. New marketing segments

Threats

1. Economic recession2. Large market to

compete in

FIVE FORCES

Rivalry AmongCompeting Firms inIndustry

HIGH

BargainingPower of Buyers

HIGH

Threat ofSubstituteProducts

HIGH

BargainingPower ofSuppliers

NOT KNOWN

Threat of NewEntrants

LOW

PROBLEMS

Too much spending on advertisement 2005 2006 2007$136million $249million

$368millon

Low profit from non beauty segments2006 2007 2008

Home segment 13% 12% 10%

Net sales from fashion 18% 18% 18%

Beauty 69% 70% 72%

RECOMMENDATION Avon’s spendings on TV ads are getting more and

more each year. In 2007 it was $368 million. I recommend to switch to online ads, as they are a lot cheaper and the chance of being seen is high.

Avon’s net sales from Home segment is going down. In 2006 13%, in 2007 12%, in 2008 only 10% of the sales came from Home segment, while net sales from Fashion segment was stable at 18% during years, unlike net sales from Beauty segment is rising. I recommend to close Home segment, to do a deep marketing research on Fashion segment and increase sales. And instead of Home segment, creating products for Men and Kids.

CASE UPDATE Avon spent $100 million for advertisements.

So more than $300million is being saved each year in compare with previous years. In this order, Avon will be able to pay its long-term debt which is $1.4 billion in 3 years only by saving on advertisements.

Avon made marketing researches on Fashion segment, now sales are going up slowly. The Home segment is closed and instead, Avon is producing for Men and Children. So, from being a company thinking only about women, Avon moved to a company taking care of whole family.