Marketing Analysis Of Avon Products Inc Marketing Essay

Marketing Analysis Of Avon Products Inc Marketing EssayThe fellowship was founded in 1886 by then 28- stratum-old David H. McConnell who sold books door-to-door and gave out wind to entice women to buy his books. His perfume proved to be much more popular than his books, so he then founded the California Perfume telephoner (CPC) in New York, New York in a 500-squargon-foot (46m2) manufacturing and shipping maculation at 126 Chambers Street. As the smart set grew, he hired his first representative, Mrs. P.F.E. Albee. In 1897, McConnell built a small (3000 square foot) laboratory in Suffern, New York. In 1906, the West Coast office in San Francisco was destroyed in the Great Earthquake. In 1914 the first non-US office was opened in the Canadian province of Quebec. The California Perfume Company was coordinated on January 28, 1916 by David H. McConnell and Alexander D. Henderson (businessman) in Suffern, New York1. By 1918, five gazillion units were sold in northward America, and by 1928, gross gross revenue reached $2 million. In October 1939, the designation was sortd to Avon Products, Inc. The company was taken public in 1946. By 1954, gross sales reached $55 million, and the Avon Calling publicize campaign introduced. By 1971 the lab would grow into the Avon Suffern look for and phylogeny facility. By 1979, sales reached $3 billion, with one million precede sales agents. Today sales exceed $10 billion worldwide. In 2005, the company opened a $100 million clam 225,000-square-foot (20,900m2) RD facility to house its over 300 research and development scientists on the original site in Suffern, NY. Avon also has offices in Luzerne, Pennsylvania and Davenport, Iowa.The company head and CEO is Andrea Jung, who was promoted to the position in 1999. As at December 2009, the company had approximately 41,000 employees22.2 Company Profile2.2.1 Organizational StructureThe Office of the Chairman is responsible for identifying out exploitation initiatives , incorporating global strategies, and apportioning resources to Avon units nigh the world. In addition, as part of the reorganization, the firms triad International regional head depicts were to be phased out, alternated by nine streamlined business units covering sales, market placeing and distribution around the world. Profit and loss accountability rested with them. Managers of these units would report directly to the Office of the Chairman.Also reporting to the chairman are five global staff departments Finance/legal Affairs, charitable Resources, Corporate Affairs and Communications, supplying and short letter Development, and a new-fashioned(a) department Global Product Management. Each department assumes worldwide state for its functionTable 2.2.1 Organizational StructureAVON PRODUCTS INC. ORGANIZATIONAL STRUCTUREOffice of the ChairmanChairman and oral sexExecutive OfficerVice President, Vice Chairman, Chief Financial Executive Vice President garter to the Chairma n and Administrative Officer North AmericaLatin America Northern atomic number 63 North AmericaNorth America President Vice PresidentLatin America Southern EuropeSouth Vice President Vice PresidentAsia/ PacificVice PresidentUnited stateVice PresidentJapanChair and Vice PresidentMexicoVice PresidentGiorgioPresidentHuman Planning and Business Global Product Finance/Legal Corporate AffairsResource Development Management Affairs Communications witness Outlook, Nov-Dec 20092.2.2 Major Lines of BusinessAvons step-ups line complicates skin wield items, makeup, and perfume fragrances for men and women, and toiletries for bath, hair care, in-person care, hand and body care and sun care. Recognizable brand name included Skin-So-Soft, a product in the bath products area, which benefited from wide publicity concerning alternative uses Moisture Therapy and Imari fragrance. Newer products include Avon Color, an entirely new line of more than 350 shades of lip, eye, face, and nail colors. T he product line would assure customers that Avon had further when the right shade for them and that their total look could be coordinated. Anew Perfecting Complex for Face, an early(a) new product, was judged the near successful skin care product in Avon history.Internationally, the companys product line is marketed mainly at throw price points. The marketing strategy empha coatd department monetary fund quality at discount store prices. Avon is the worlds largest manufacturer and distributor of fashion jewelry, and markets an extensive line of gifts and collectibles. A separate division, Giorgio Beverly Hills, manufactures and sells prestige fragrances. These brand name products are sold through study retail department stores, in boutiques, by mail ordinate catalog and by some other means.2.3 Operating StrategiesAvon Products Inc. is uniquely among major corporations, a womans company. The company sells products to, for and through women. The company understands women need s and preferences better than nigh. This understanding guides the basic business and influences the choice of new business opportunities. Avon need to conk out and are becoming, more customer-oriented and more market- driven.Each one of the 18 words in the vision tale has considerable meaning. The three most important elements, however, are the focus on women, on world global, and on the additional opportunities for Avon in self-fulfillment.The Principles That Guide Avon1. To provide individuals an opportunity to earn in support of their wellhead-being and happiness.2. To advert families throughout the world with products of the highest quality backed by a guarantee of satisfaction3. To render a service to customers that is outstanding in its helpfulness and courtesy4. To give full recognition to employees and Representatives, on whose contributions Avon bes5. To division with others the rewards of growth and success6 To meet fully the obligations of corporate citizenship by contributing to the well-being of guild and the environment in which its functions and7. To maintain and cherish the friendly spirit of Avon.Source Avon Representative Success harbour2.3 Operating Strategies2.3.1 Mission Statement and Management ObjectivesAvon Products Inc. aims at being the company that go around baffle the friendship of and satisfies the product, service and self-fulfillment needs of women, globally.The Global bag forerunner intends to build a unique portfolio of Beauty and related brands, striving to surpass competitors in quality, innovation and value, and elevating go for to become the Beauty Company most women turn to worldwide. The Womens quest for Buying Avon products bequeath become the destination store for women, pass the convenience of quaternary brands and channels, and providing a private high touch shopping experience that helps create life spacious customer relationships. The postmortem Direct Seller get out expand the companys 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 the intentness.Avon products leadership edge is through passion for high standards, respect for diversity and commitment to create especial(a) opportunities for professional growth so that associates send packing fulfill their highest potential.The company is committed to global champion for the wellness and well-being of women through philanthropic efforts that eliminate breast cancer from the face of the earth, and that empower women to achieve scotch independence. The Most Admired Company delivers superior returns to shareholders by tirelessly pursuing new growth opportunities enchantment continually upward(a) profitability, a socially responsible, ethical company that is watched and emulated as a model of success.2.3.2 Business Models and StrategiesAvon Products, Inc., is one of the worlds largest direct selling organization and merchandiser of beauty and beauty related products. From corporate office in New York City, Avon markets product lines to women in 112 countries through 1.6 million active independent contractors (sales representatives) that receive a percentage commission for their sales but do not enjoy employment benefits, they sell primarily on a door-to-door basis. The idea behind the direct selling model is to eliminate the nerve man (department and cosmetic stores) and get its products directly to consumers which will be able to cut costs and outgrowth profits.November 2005, Avon products launched a comprehensive, multi- year turnaround plan to restore sustainable growth. The four-point turnaround plan includesCommitting to brand competitiveness by focusing research and development resources on product innovation and by attach our advertisingfetching with commercial edge by more effective ly utilizing pricing and promotion, expanding our Sales Leadership program and improving the attractiveness of our Representative earnings opportunity as neededElevating organizational effectiveness by redesigning our complex body part to eliminate layers of management in prepare to take full advantage of our global scale and size andTransforming the cost structure so that our costs are aligned to our revenue growth and remain so.Source 10-K (Feb 25, 2010)One of the goals of the 2005 Turn-around Plan was to add the number of Representatives paid in 2007 when the company had 13% increase in net sales as a result of the increase in the number of RepresentativesPrimarily, Avons revenues come from three main categories2009 2008 2007 2006Beauty Products 72% 72% 70% 69%Fashion Products 17% 18% 18% 18%Home Products 11% 10% 12% 13%Source http//www.wikinvest.com/stock/Avon_Products_(AVP)Beauty Products Cosmetics, fragrances, and personalized care.Fashion Products are Jewelry, watches, ap parel and accessories.Home Products Home products and decorative products.2.4 SWOT Analysis2.4.1 StrengthsPresence in dynamic sectorStrategic focus on uphill marketsvariegation through acquisition big brand appealFinancial stabilityStrong brand image2.4.2 WeaknessesOver opinion on Beauty Products (72%)Limited outlets for the customersConfusing promotions, out of date catalogs, unattractive packaging and customer complains of Avon image.Over reliance on Sales Representatives2.4.3 OpportunitiesGeographic exploitation Enormous growth opportunities exist in countries with huge populations much(prenominal) as China, Indonesia and India. In Eastern Europe, management is excited about the potential in Poland, Czechoslovakia, and Hungary. In the Pacific Rim area, countries homogeneous Vietnam, Cambodia, and Laos are targeted as market opportunities.Emerging and Developing Markets In those markets, the retail stand was undeveloped, especially in the interiors of those countries. The Avo n representatives provide consumers with opportunities to buy a wide range of quality products at pleasurable prices2.4.4 holy terrorsAvons dependence on the productivity and profitability of the representative direct-selling model exposes it to cost and litigation risks. It is likely that AVP will incur future costs through litigation and resolution of the lawsuit, which may include terms that would increase costs and decrease profits for Avon.Large Presence in Global Market Exposes AVP to Currency hesitation Risks 80% of Avons sales revenues come from markets outside of the United States, making the company very sensitive to gold fluctuations and the strength of the horse. A weakening of the dollar against foreign currencies would allow Avon products to become more competitively priced in global markets, thus positively affecting sales revenue from foreign markets however, a weak dollar would also mean higher costs for products manufactured overseas.2.5 Core CompetenciesOver the last three years, Avon Products have been implementing its turnaround plan through various strategic initiatives, including restructuring plan, product line simplification program (PLS), strategic sourcing initiative (SSI) and investment in advertising and sales representatives.Among other things the company does well areDiversification through acquisitionDistribution strategy and brand imageHigh technology and innovation economical EmpowermentPhilanthropy3. manufacturing Analysis3.1 Industry Definition, structure and major competitorsThe US personal care products industry includes about 800 companies with combined annual revenue of $50 billion. Major companies include Estee Lauder, Johnson Johnson, and Procter put on the line. The industry is slopped the 50 largest firms account for about 70 percent of industry revenue. There are28,001companies in this industry with the US personal income driving consumer demand for personal care products3.Company Sales LocationThe Protec ter Gamble Company 78,938.00M Cincinnati,OHLOreal SA 25,041.73M Clichy,FranceKimberly-Clark Corporation 19,115.00M Irving,TXColgate-Palmolive Company 15,327.00M New York,NYKao Corporation 12,777.13M Tokyo, JapanSource http//www.hoovers.com/industry/personal-care-products/1192-1.html3.2 Industry Growth and ProfitabilityMarket moves over the last two years have clearly been extraordinary. The forecast band for a continued, gradual recovery in demand from developed markets with emerging economies faring better.The personal and disposable personal incomes are the main drivers of this sector. According to the Bureau of Economic Analysis, July 2010, personal income change magnitude $30.0 billion, or 0.2 percent, and disposable personal income (DPI) increased $17.6 billion, or 0.2 percent, Personal consumption expenditures (PCE) increased $44.1 billion, or 0.4 percent.Table 3.2 Personal and Disposable Personal IncomePersonal income, current dollars 0.4 0.5 0.3 0.0 0.2Disposable persona l incomeCurrent dollars 0.4 0.5 0.3 0.0 0.2 arrange (2005) dollars 0.3 0.6 0.4 0.1 -0.1Personal consumption expendituresCurrent dollars 0.5 -0.1 0.1 0.0 0.4Chained (2005) dollars 0.3 -0.1 0.2 0.1 0.2Source Bureau of Economic Analysis, US Department of Commerce. July, 20103.3 Pest Analysis of External Factors Affecting the Industry3.31 Political FactorsThese includes legal and regulatory elections, employment law, consumer protection, environmental regulations, industry-specific regulations, competitive regulations, inter-country relationships/attitudes, war, terrorism, political trends, governmental leadership, taxes, and government structures. government tax and industry specific regulations are the major factors that can affect Avon Products. Different countries have various regulations with taxes.Political and legal systems of different countries have important implications for Avon Products. Sometimes, the political system changes quickly, throwing the company into crisis and a t other hand, it evolve more slowly.3.3.2 Economic FactorsEconomic growth trends (various countries), taxation, government spending levels, disposable income, job growth/unemployment, exchange rates, tariffs, inflation, consumer confidence index, import/export ratios, and production levels.Avon has experient volatile growth, its said to largely depend on weather fluctuating economic conditions and disposable household income levels. A higher disposable income will definitely increase revenue.3.3.3 Social FactorsAge, gender, race, family size, lifestyle changes, population shifts, education, trends, fads, diversity, immigration/emigration, health, living standards, housing trends, fashion, attitudes to work, leisure activities, occupations, and earning capacity.Since Avon major source of Revenue is on Beauty products which is mainly used by women, the company stands the chance of increasing revenue all things being equal. A higher taste or lifestyle to substitute products like blood y shame Kay may affect the company revenue.3.3.4 Technological FactorsInventions, new discoveries, research, energy uses/sources/fuels, communications, rates of obsolescence, health (pharmaceutical, equipment, etc.), manufacturing advances, data technology, internet, transportation, bio-tech, genetics, agri-tech, waste removal/recycling, and so on, all these and many more need to be improved upon continually. As technology advances, there is need to ensure compliance and engage in more research in an attempt to increase the quality of the products.A common error is to try and devise a atomic number 53 analysis to try and cover the entire history of a firm and an industry. Therefore, the company must honor the analysis of past developments separate from that of the present situation and future trends.3.4 Porters five forces of Analysis Competition3.4.1 Threat of new Entrants depressedBeing a household name for some years, the threat of new entrants can be said to be low. Consumer s who are serviced in this industry tend to stick with long and experienced3.4.2 Threat of Substitutes HighThere are several substitutes to Avon products by its competitors in the market. A slight change or below standard can promote customers to buy other products.3.4.3 Bargaining Powers of supplier depression3.4.4 Bargaining Power of Customer LowCustomers who are mainly women often dont mind price(s) as long as they have value for money spent. Rather than customers fixing price, Avon does.3.4.5 challenger among Competing Firms HighThis is really high. Mary Kay among several others is in high competition with Avon.3.5 SummaryBargaining power of buyers LowCompetitive Rivalry within an Industry HighThreat of Substitute Products HighThreat of new Entry- LowLowBargaining power of suppliers Low4. Economic Outlook4.1 Global OutlookThe companys in operation(p) performance has been strong in the past six months, and its key credit measurements are improving. Avon is expected to cont inue to have conservative stances with its liquidity and share repurchases.Avon has performed very well relative to its consumer products peer group and remains one of the best geographically positioned companies to benefit from emerging market growth over the next several years.The New York Company is in the midst of a restructuring that includes cutting jobs and trimming overhead. It has focused on recruiting independent sellers, as well as broadening its assortment of less-expensive items, including products under $5, to drive sales. It is also growing sales in emerging markets.Manufacturers of beauty products weathered the recession fairly well, due in large part to their vast product range. While demand for cosmetics stumbled some are considered essentials and were mostly impervious to the downturn. The economic recovery will push the industry back to steady growth, as improving disposable incomes allow consumers to spend more on nonessentials like makeup. Meanwhile, manufactur ers will expand both their product lines and geographic reach to take advantage of new market opportunities4.4.2 Regional OutlookAvon is on track to deliver strong quarterly growth, although the US market is likely to prove the exception to regional growth in view of the tough conditions there.The worlds leading direct sales cosmetic company increased revenue by 8 per cent for the first quarter in dollar terms, while the continuing weakness of the dollar will mean that revenues will face lifting by 5 per cent in local currencies.On a regional basis, Avon revenue is project to increase mid-single digits and operating profit forecast to be up. Internationally, Latin Americas revenue is communicate to increase at a double-digit rate and operating profit forecast to grow in line with or meagrely ahead of revenue, reflecting a strong performance in both the Brazil and Argentina markets.Europes revenue and operating profit are expected to increase in the ranges of 10 per cent and 15 pe r cent, respectively. Growth in this region is continuing to focus on the central and eastern European markets.The Asia Pacific regions revenue is projected to advance at a double-digit rate, with operating profit expected to improve more than 25 per cent.4.3 topical anaesthetic OutlookAvon attributes overall sales growth to being driven by sales of beauty products, which are expected to increase 11-13 per cent, including a double-digit increase in the US. It feels it is also a reflection of its successful new product launches and continuing commitment to invest significant resources to support its brand-building strategies.Also, driving sales is an expected double-digit increase in the number of active representatives.4.4 SummaryThere is strong growth and improving profitability as the global outlook becomes Stable from Negative.5. Ten-year pro forma forecast5.1 Underlying AssumptionsAvon had $650 million Agreement with Silpada. The company designs is the worlds largest and fastes t-growing superior silver jewellery home party company which is expected to generate revenue from 20155.Focus on emerging markets such as Brazil, China, Colombia, Russia, Turkey, and Venezuela, aiming for high market share and brand recognition in these markets. The only positive regional revenue growth the company had been in the Latin America and China at 5.6% and 0.7%6. For example, China re-licensed Avon for direct-selling, which allowed Avons revenues from China to increase rapidly from 2006 to 2008. The total revenue from China rose from $212 million in 2006 to $353 million in 20097. Similar situations may arise in Avons other emerging market segments.increase cost of production and Companies are also focused on controlling their operating margins in order to maximize their profits. While advertising and commodity costs have been rising, efficient production has been useful in reducing margins.A takeover Rumour by LOreal expand in emerging markets, particularly in Latin Ameri ca8First quarter for the year ended March 31st, 2010.9Avons net income was $43 million, a 64% decrease from Q1 FY 2009 net income of $117 million. The decrease was mainly caused by AVPs effective tax rate being a 66.1% due to the devaluation of Venezuelan currency. Excluding this negative impact, net income was actually $144 million. Total revenue increased 14% to $2.5 billion. The number of active representatives grew by 6% as the recessionary environment attracted many inactive people to Avons independent selling business strategy. Additionally, the companys Beauty segment grew by 14%.Avon had mixed sales results internationally, as it had a 2% sales decline in North America, a 22% sales increase in Latin America, a 31% sales decrease in China, a 28% sales increase in Eastern Europe, and a 23% sales increase in occidental Europe and Africa. The company spent $96 million on advertising a 23% increase from the same quarter last year.Second quarter for the year ended 30th June, 20 10, Q2 FY 2010.10The companys Net Income was $167.6 million more than double the year-ago quarter value of $82.9 million. Net sales rose 8% to $2.68 billion. Sales in all of the companys product categories increased with 16% growth in perfume and 12% growth in color cosmetics. Avon increased advertising in the quarter to $97 million, up 19% from the prior year quarter. The company increased advertising mainly in Latin America. Geographically, Avons revenue increased 16% in Latin America from strength in Brazil and Mexico. Sales in North America remained flat. fundamental to note is Other Income for the quarter in review shows a deficit of usd 100m.11Third quarter for the year ended September 30th, 2010Avons net income increased 7% to $167 million. The higher costs are due to advertising and weak sales from markets like china and Brazil.Net Revenue increased 4% to $2.66 billion, compared to $2.56 billion in the prior year quarter. The company benefited from higher sales in Latin Amer ica (8% growth) and Western Europe, the halfway East, and Africa (11% growth). However, sales in North America remained stagnant with a 2% decline in growth and sales in China fell by 30% as Avon tries to transition away from retail stores in the region in favor of a direct selling method that it uses in its other markets.Advertising costs increased 36% as the company promoted its fragrances as well as its two new product categories hair and acne12.