Why is Avon so much more dependent on its foreign operations than on its home (U.S.) operations?
Today Avon is present in many countries around the world, although international expansion of the company began not so long ago. Speaking about the reasons for entering the international markets, it is possible to name numerous reasons. The first and main argument is the limits of the American market, since Avon company faced with a slow growth potential in the U. S. market. The second reason is that the U.S. market is highly competitive, it is saturated with beauty brands and companies. In any case, the search for an answer to the question of whether to go to international markets is not an easy decision, as it is connected with huge growth opportunities on the one hand, but with enormous risks and difficulties of the other. (Sullivan et al, 2007)
3. Discuss socioeconomic and demographic changes that could affect Avon.
The main socio economic threat that has affected Avon in the past, is the changing role of women in the workforce, and not only in the U.S., but all over the world. Avon in its activities relies on women who can work part time as sales representatives, but now more and more women are full time employed, and they don’t have time and wish to work as beauty consultants. Avon in its strategy must consider this factor and evaluate availability of salespeople and customers in different countries. The number of women, who want to work part time as sales representatives, is the main factor in company’s successful activities. (Klepacki, 2005)
4. How might a global recession, such as the one that began in 2008, impact Avon’s operations?
If we talk about the financial crisis and recession in the world, there are several aspects to discuss. First, the reduction in customer’s incomes, of course, reflected on sales of the company, particularly in the U.S. and Europe. But it is also worth noting that the company’s policy has always been “value for money”¯, and Avon offers inexpensive cosmetics for women. Therefore, during the crisis it can be said that some women refused more expensive brands in favor of Avon. Second, the company has many products that are essential, and women can not refuse them.
5. What are the major competitive advantages that Avon has? How easily might other companies duplicate these advantages?
Entering the international market provides additional possibilities, but at the same time poses new challenges in terms of competition. Competition in international markets makes more strict requirements for the development of strategies than the competition in national markets. Particular attention should be paid to organization of marketing activities and global promotion, new distribution channels, consumer needs and new products development, which may differ from the existing national market. The main competitive advantages of Avon include:
– its distribution system, while allowing company’s representatives and customers to communicate and have contact, that help not only to promote Avon products, but to gain customer’s loyalty and to keep Avon’s brand image.
– AVON launches many new products and product lines, that helped the company to make certain innovations in the beauty industry;
– AVON differs from competitors with the organization of its work, and its corporate values, making the emphasis on that it is a “company for women”¯, and its main task is to “make women’s life better”¯.
6. Avon does not sell within the United States in retail establishments (with the exceptions of kiosks handled by some of its reps). What are the pros and cons of distributing that way?
Talking about distribution, it must be said that Avon has been successful in the United States, using the method of distribution “house-to-house”¯. During the spread of the company’s operations to markets in Europe and Latin America, the marketing policy has been successfully replicated – with some modifications due to national characteristics, the local income distribution, etc. for example, the biggest deviation from direct selling occurred in China, where in 1998 Chinese government enacted the law prohibiting house-to-house sales. There Avon had to open special beauty boutiques, independent stores and beauty counters. But as the results, Avon products are now available in every part of the country. (Sullivan et al, 2007)
7. If you were advising Avon on the selection of new suppliers, what would be your major concerns as you evaluate firms that are potential suppliers? What criteria should the company use to make decisions on where to manufacture their products?
Nowadays most of Avon products are made in manufacturing sites in North America: in Morton Grove, Illinois; Springdale, Ohio; Montreal, Canada; in Suffern, New York. This production is based on research in the laboratory, a careful analysis and quality control of products. With the expansion on the international market, the company, of course, must expand its network of suppliers and manufacturers, but above all they must meet high quality standards of the company.
8. Identify the challenges Avon faces in both maintaining and expanding its global manufacturing and supply chain network given the dynamics of today’s competitive environment.
It is possible to point some threats and challenges that Avon may face while expanding its global manufacturing and supply chain network. Most of challenges are connected with the direct sales method of distribution, as this method is very controversial and has many opponents. Also it is possible to point the inability to capture the high income segment of population, while maintaining the image of “value for money”¯.
In conclusion it is necessary to say that nowadays Avon company international activity is successful and very fast developing, which gives good prospects and growth opportunities.