Strategic management case study

1. Strategic management case study Sylvia LaBrie, Ashley Cleary, Andrea Baril, and Marie-Michele Lachance

2. Overview • Company Overview: • History • Sustainability • Growth • 2009 events and issues • Avon market locations • Existing Vision & Mission Statement • New Vision & Mission Statement • SWOT Analysis • Internal Audit • Organizational map • Board of directors • Financial trends • IFE Matrix • Balance Sheet • Income Statement • Financial Ratios • External Audit • Positioning map • EFE Matrix • CPM Matrix • Strategic Formulations • SWOT Matrix • Space Matrix • Grand Strategy Matrix • BCG Matrix • IE Matrix • Matrix Analysis • QSPM • Recommendations • Implementation • Financial assumptions • EPS/EBIT • Projected Income statement • Projected Balance Sheet • Projected Financial Ratios • Evaluations: • Balance Scorecard • Avon Update • Stock price History • Questions • Sources

3. History • Bookseller David H. McConnell • Founded Avon in1886

4. 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

5. How doesitwork ? • How do representativesmake money? • Eachpersonthatyourecruit, youearn $20 • If youwant to make money fromyour sales team's volume, you have to reach the position of whatiscalled a Unit Leader. The qualifyingfactors 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 yourrecruits, and also, 0.5 to 1% on the ordersfrom the people theyrecruit. • Advantages to be a representative: 1.    Flexible home based business 2.    Unlimitedearningspotential 3.    Lowcost to start a business.

6. Growth 1906 Already 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 1914 CPC 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. 1920 By 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

7. 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

8. Ethically, Sustainability, and Socially Responsible Violence AgainstWomen InternalEnvironmental Management The Business Ethics Magazine has rated Avon for 6 consecutive years as one of the “100 Best Corporate Citizens” Breast Cancer EmergencyRelief External ‘’Green’’ Mobilization Avon Foundation for Women

9. 2009 • 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.

10. Avon location map

11. Existing Vision & Mission Statement

12. Vision • To be the companythat best understands and satisfies the product, service and self-fulfillmentneeds of women - globally.

13. Mission • The Global Beauty Leader Wewillbuild a unique portfolio of Beauty and related brands, striving to surpassourcompetitors in quality, innovation and value, and elevatingour image to become the Beauty companymostwomenturn to worldwide. The Women'sChoice for Buying Wewillbecome the destination store for women, offering the convenience of multiple brands and channels, and providing a personalhightouch shopping experiencethathelpscreatelifelongcustomerrelationships. The Premier Direct Seller Wewillexpandourpresence in direct selling and lead the reinvention of the channel, offering an entrepreneurial opportunitythatdeliverssuperiorearnings, recognition, service and support, makingiteasy and rewarding to beaffiliatedwith Avon and elevating the image of ourindustry.

14. Mission Cont. • The Best Place to Work Wewillbeknown for our leadership edge, throughour passion for high standards, our respect for diversity and ourcommitment to createexceptionalopportunities for professionalgrowthsothatassociatescanfulfilltheirhighestpotential. The LargestWomen'sFoundation Wewillbe a committed global champion for the health and well-being of womenthroughphilanthropic efforts thateliminatebreast cancer from the face of the earth, and thatempowerwomen to achieveeconomicindependence. The Most AdmiredCompany Wewilldeliversuperiorreturns to ourshareholders by tirelesslypursuing new growthopportunitieswhilecontinuallyimprovingourprofitability, a sociallyresponsible, ethicalcompanythatiswatched and emulated as a model of success.

15. New Vision & Mission Statement

16. Proposed Vision Avon strive to be the best foundation for women by offering a widevariety of productsthatappeals to anywomen’sneed and taste.

17. Proposed Mission Our mission as a companyis to provide a unique portfolio of beauty, fashion, and home brands to satisfywomenworldwide. We encourage the personalrelationshipbetweenemployees and clients by providing a door-to-doorexperience. Weexpectouremployees to beprofessional, and in return weofferthem a flexible workschedule. We are constantlylooking to increaseour sales throughourrepresentatives as well as throughour online market, whichwould help maintainourgrowth and profitability to ourstockholders. As an expandingcompany, ourpurposeis not only to sellourproducts, but also to remainsociallyresponsible by contributing to our causes related to women.

18. SWOT Analysis

19. StrengthsWeaknesses 1. Home segment experiencing loss 2. No physical location 3. Avon has a poor brand loyalty 4. Advertising cost overly expensive 5. Expensive products reputation 6. Lack of control over representatives 7. 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) 1. Strong brand 2. Avon is the market leader in its industry 3. Unique portfolio 4. The largest women’s foundation 5. Innovating brand 6. Socially responsible and ethical with strong values (trust, respect, belief, humility, and integrity) 7. World’s largest direct seller 8. Avon has a great adaptation to diverse culture 9. Strong and steady growth revenue

20. Opportunities Threats 1.Buy out other smaller companies 2.Online markets becoming increasingly popular 3.Diversification of products 4.Offers employment opportunities 5.Intensify brand development overseas 6.Emphasize direct selling in emerging markets 7.Promoting the company by utilizing inexpensive outsourced marketing (social media, word of mouth, etc.) 1.Fierce competition 2.Economic recession 3.Easily substituted 4.Reputation smeared by investigations 5.Currency Fluctuations 6.Large market to compete in

21. InternalAudit

22. Organizational map

23. Financial Trends

24. Sales by ProductsCategories

25. Sales by Competitors Avon: 10 billion Mary Kay: 2.6 billion Revlon: 1.3 billion

26. IFE Matrix

27. Income Statement

28. Balance Sheet

29. Financial Ratios

30. ExternalAudit

31. Positioning map

32. EFE Matrix

33. CPM Matrix

34. StrategicFormulation

35. SWOT Matrix

36. SWOT MatrixCont.

37. Space Matrix Data

38. Space Matrix -Marketpenetration -Marketdevelopment -Productdevelopment -Backwardintegration -Forwardintegration -Horizontalintegration -Related diversification -Unrelated Diversification -Horizontal diversification

39. Grand Strategy Matrix -MarketDevelopment -MarketPenetration -ProductDevelopment -ForwardIntegration -BackwardIntegration -HorizontalIntegration -Related Diversification

40. BCG Matrix Avon: 6% Mary Kay: 5% Revelon: 4% Mary Kay Avon Revelon -Forwardintegration -Backwardintegration -Horizontalintegration -Marketdevelopment -Productdevelopment

41. IE Matrix • MarketPenetration • MarketDevelopment • Product Development • Backwardintegration • Forwardintegration • Horizontal integration

42. Matrix Analysis

43. QSPM

44. QSPM Cont.

45. Recommendations - 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.

46. Implementation

47. Assumptions • 10 stores at $5 million each • Increase advertising of 10% • Increase of 10% in the net sales

48. EPS/EBIT

49. Projected Income Statement

50. Projected Balance Sheet