Avon Strategy Analysis

Strategy AnalysisAvon Products

Introduction

All businesses must create strategies that will see them into the next phase of their growth. It is through assessment, generic and grand strategy development, and implementation that a corporation can move beyond just existing in the market, to becoming a powerhouse in their arena, as well as increase shareholder wealth. Andrea Jung, in 2000, faced having to create growth strategies for the 115-year-old company of Avon Products, Inc. This company had shown recent single digit growth in many areas, and this paper will offer analysis as to why we believe Andrea Jung developed a grand strategy for this organization that is properly focused or directed.

Strategy Analysis

Grand Strategy is properly focused and directed

Several things happened once Andrea Jung was named CEO of Avon. First, she decided to reverse the current trend of losing sales. She did this by creating a strategy that would turn the company around. This strategy included the following plans:

Reinvigorating the brand (new products, new packaging, and a new ad campaign)

Instituting beauty-advisory training

Expanding the multilevel sales program

Suggested a strategy to partner with Sears and JC Penney department stores

Jung's suggested strategy to partner with Sears and JC Penney department stores was an idea that would help to promote the strategy she had come up with. It would introduce a new, upscale product line, thus increasing profits, sales and nationwide exposure to the baby boomer segment. Retail selling increased with in-store customer traffic and expected growth of spending power to 16 percent within five years. Face-to-face selling comprised 79.7 percent of direct selling, preferred among senior citizens. The marketing budget would be increased to target customer traffic at Sears and JC Penney. Investment costs were limited to $15 - 20 million to launch retail products, with a bulk of expenses being absorbed by the department stores (Pearce, J. & Robinson, R., 2004, ¶184-186). Diversification channeled through retail was a win-win situation for Avon against its competition Mary Kay and L'Oreal. Mary Kay was simply weak in this market and despite L'Oreal's strong market position in the retail market manufacturers were looking for new product lines, competing brands and consistent price range.

Avon's strengths would help increase global recognition of brand name and image. Jung suggested promoting certified Beauty Advisors in department stores and increased incentives for sales representatives. In addition, having department stores sell via the Internet would increase the channels of distribution, thus increasing consumer loyalty (Pearce & Robinson, 2004, ¶184-186).

The economic factors that Jung used to help create her proposal included:

Slow earning, stagnant sales, limited distribution capabilities and

shifts in personal care preference and spending habits

Single digit growth

Volatile stocks

Limited distribution channels

All these factors would affect Avon's long-term goals by forcing Jung to find new, creative ways to stay fresh in the market. Jung had created a strategic plan that met the vision of Avon; she had created goals that were measurable and geared toward future company growth. The goals seemed to be obtainable in the current business market. In addition, Jung's idea that technology may be the answer was in response to a changing business environment which included movement toward e-business. This ideal would be synergistic and build upon their present success.

Grand Strategy is not properly focus or directed

Upon

...