Andrea Jung’s Make-Over Of Avon Products, Inc

The main problem faced is the lack of experience and expertise by the manager where by company significantly lack of innovative strategy to attract customers and achieve organizational goal. Furthermore sales and stock price is declined.

Other than the main problem, Avon also faced some secondary problems:

1. Turnover rate in term of employee leaving the company was high and in the same time difficulty to recruit new sales representatives.

2. Limited outlets for the customer, thus far strategy only concentrated using the sales representatives.

3. The inefficiency order procedures which require 40 pages order forms to be filled.

4. There is confusing promotions, out-of-date catalogs, unattractive packaging, poor quality of product, customer complains of the image of Avon.

Analysis of Business

Business description: Avon is marketer of beauty and related products. The Company’s products fall into three product categories: Beauty, which consists of cosmetics, fragrances and toiletries; Beauty Plus, which consists of fashion jewelry, watches, apparel and accessories, and Beyond Beauty, which consists of home products, gift and decorative products and candles. Avon’s business primarily consists of one industry segment, direct selling, which is conducted worldwide. The Company’s segments are based on geographic operations in four regions: North America, Latin America, Europe and the Pacific. In 2003, Avon launched in the United States a new global cosmetics brand, mark, focusing on the market for young women.

SWOT analysis:

Strength:

1. The world’s largest direct sellers of beauty and beauty-related products.

2. The new redesigned packaging of Avon’s product.

3. Improvement on the new website for the convenient customers to access purchase product online.

4. It’s new “Let’s Talk” advertising campaign.

Weaknesses:

1. Avon’s product has limited focus on teenagers.

2. The products it’s just too expensive for the lower-income women.

3. Most women view Avon’s products as old fashioned brand image that suitable for the older one.

Opportunities:

1. The reengineering programs offer a return of $120 million to develop new products, advertising and buy back the outstanding shares.

2. The benchmark program in Japan to allow the sales force to order more by setting up telephone, fax, and interactive computer voice ordering and speed up delivery system.

3. The new vision and strategic plan that emphasize in the product and the relationship with customers.

Threats:

1. The decrease in the number of middle-class homemakers who willing to work on the part-time sales job basis and began to work full-time.

2. The threats of competitors such as: L’Oreal, Procter & Gamble, Revlon and so on.

3. Decline in the sales growth and stock price during the relatively economic growth.

Observation in the financial performances:

1. Sales growth less than 1.5 % and crashing of the stock price during the economic growth.

2. Annual sales average more than $ 3 million in 1980s.

Industry Environment

The market for cosmetic and toiletry chemicals will grow 5.1 percent annually through 2008. Gains will be driven by growing use of active ingredients designed to enhance appearance and counter the effects of aging, and by plant-derived and specialty additives that protect from sun, wind, smoke, heat and pollution. (Chris, 2003)

Products that predicted to booming are, by product (e.g., surfactants, aroma chemicals and blends, fats and oils, botanical extracts, proteins, silicones, silicas and silicates, biocides, alcohols, mineral oil); by function (e.g., cleansing agents and foamers, emollients and moisturizers, fragrances and flavors, propellants); and by market segment.

However, this industry would present unprecedented threat from competitors including Dow Chemical, Rhodia, Imperial Chemical Industries, International Flavors & Fragrances, BASF. Clariant International, Ciba Specialty Chemicals, Cognis, Croda, Crompton, and International Specialty Products. (Tarquinio, 2004)

Recommendations

1. Develop new innovative product, new packaging, and new channel of distributions, new sales models and practices and also build a new image (FT.com, 2004).

2. Develop a hair care line that apparently attractive to younger customers on the cosmetic industry. (Tarquinio, 2004)

3. Build up global brands recognition by develop line extension on blockbusters product such as a new retroactive. (Howard, 2004)

4. Expand the Avon’s products to the international markets in order to compete with the other brands base on good quality product. (Howard, 2004)

5. Considering the concern of the baby boomers who wished to fight against the ageing process on skin care and on hair products, Avon should cater for those specific needs.