Avon Calls on Foreign Markets
Avon Calls on Foreign Markets Scholarly Activity 3 – Unit VII Kayla J. Jackson Columbia Southern University Marketing Orientations Avon’s entrance into Canada, its first foreign market, was based on a sales orientated marketing scheme and had little to do with product orientation. When the company developed “skin-lightening creams in Asia and long-lasting citrus fragrances in Mediterranean countries,” it exemplified a customer orientation, tailoring its products to meet specific consumer tastes (Daniels, Radebaugh, & Sullivan, 2011, p. 622).
In China, the company changed its distribution channels from direct selling to making “products available in virtually every corner of the country” as part of a strategic marketing orientation (Daniels et al. , 2011, p. 624). Lastly, Avon’s social marketing orientation reflects its reputation as a company that supports women’s causes, particularly in the philanthropic fight against breast cancer and domestic violence (Daniels et al. , 2011). Foreign Operations In the U. S. , Avon predicted very slow sales growth because there was no longer an available market for beauty products to tap into and competition was steadily rising.
The company’s direct selling distribution system failed because “U. S. women were entering the workforce full time, which made them less receptive to door-to-door salespersons” (Daniels et al. , 2011, p. 622). Avon also realized that “less than 5% of the world’s population lives in the U. S. ,” making the outlook for foreign expansion very promising (Daniels et al. , 2011, p. 621). Socioeconomic & Demographic Changes Socioeconomic, demographic, and cultural factors “influence a company’s decisions on where and how to do business internationally” (Daniels et al. , 2011, p. 34). For example, Avon must monitor the growing number of women entering the U. S. workforce and each global market’s pool of sales representatives and consumers. The “global recession has since increased the availability of people to sell independently,” so Avon can recruit more part time workers into its direct sales force (Daniels et al. , 2011, p. 622). The company must also examine if women are accessible at home to meet with salespeople. Additionally, the rising middle class sector in developing countries could help broaden Avon’s client base (Daniels et al. 2011). Global Recession A country’s “economic environment shapes its foreign” investment appeal (Daniels et al. , 2011, p. 173). For instance, a global recession could affect the “ability of Avon’s broad-based geographic portfolio to withstand a downturn in a particular region” (“Avon,” 2008, para. 9). This is because customers view many of Avon products as nonessential luxuries and will not purchase such items during financial hardships. As a result, worldwide profit decreases, which could halt international growth and impede new product development.
In situations like these, the firm must reevaluate cost structures and make significant changes to its organizational and competitive strategies in order to maintain gross profit margins (Daniels et al. , 2011). Competitive Advantages A corporation’s “competitive strategy influences how and where it can best operate” (Daniels et al. , 2011, p. 28). Not only is Avon one of the most powerful and recognizable brands in the world, it also has attractive earnings opportunities for sales representatives and leading technological innovations (“Why,” 2011).
The new “Hello Tomorrow” ad campaign has a new brand-marketing concept and uses celebrities to attract consumers. Avon has been very successful in adapting its product line to fit the needs of customers in foreign markets, especially in China. However, Mary Kay just recently expanded into Asia as well, selling very similar cosmetic brands. Even though Mary Kay and others competitors have managed to emulate the firm’s strategic moves without much difficulty, Avon still possesses one advantage that cannot be easily duplicated: brand loyalty (Daniels et al. 2011). Distribution Direct selling reduces labor, marketing, and maintenance costs. These savings are passed down to Avon consumers as low prices. Avon representatives create special bonds and relationships with patrons, another key advantage retail establishments usually do not have. However, one drawback of this method is that people cannot buy items off the shelf in a timely manner like in a department store. Customers tend to return more items purchased from direct sellers because of order mix-ups or dissatisfaction with the product (Watrous, 2010).
Choosing New Suppliers & Manufacturing When evaluating and selecting new potential suppliers, one chief concern would be the firms’ financial ability to assure sufficient inventory as well as to support a long-term producer-distributor relationship. Other key concerns include if the firms’ other business commitments would interfere with Avon’s requirements, if competitive or complementary goods are supplied, and whether the personnel, facilities, and equipment are equipped for distribution.
Gauging the firms’ potential life span as distributors and good connections with customers, assessing the histories and images as reliable businesses that can be trusted to enforce performance, ensuring quality control, and after-sales service options would also be in question (Daniels et al. , 2011). The decision on where Avon should manufacture products depends on the “compatibility, configuration, coordination, and control” of its operations (Daniels et al. , 2011, p. 635).
Global Manufacturing & Supply Chain Network Avon’s existing supply chain IT system is inadequate, creating a poor integration among its country-based entrepreneurial models of operation. Swapping the company’s process-driven system to a systems-driven one, restructuring inefficient supply chains by using fewer suppliers, utilizing local sources, and engaging in supplier partnerships and group effort can reduce manufacturing costs, increase efficiency, and triple Avon’s savings (Cohen & Roussel, 2004).
Besides Avon products still not being accessible by a large segment of women, some future business challenges include, customers’ inability to acquire products at will, excessive product returns due to dissatisfaction, and Avon’s inability to garner consumers in a higher price class while sustaining its value-for-money customers (Daniels et al. , 2011). Other challenges will also arise, such as closing cost-prohibitive manufacturing facilities, streamlining other factories to share production, and employing different across-the-board centralized production strategies to save on manufacturing costs (“Highlights,” 2009).
References Avon Statement on Voluntary Disclosure. (2008). Earning/news release. Retrieved from http://phx. corporate-ir. net/phoenix. zhtml? c=90402&p=irolnewsArticle&ID=1214457 Cohen, S. , & Roussel, J. (2004). Avon gets its (supply chain) makeover. Retrieved from http://www. prtm. com/uploadedfiles/books/avon_gets_its_supply_chain_makeover. pdf Daniels, J. D. , Radebaugh, L. H. , & Sullivan, D. P. (2011). International business, environments & operations (13th ed. ). Upper Saddle River, NJ: Prentice Hall.
Highlights Restructuring Plans & Jobs Supply Chain Impacted. (2009). Announcements. Retrieved from http://www. gcimagazine. com/business/marketers/announcements/51407 827. html Watrous, L. (2010). Advantages and disadvantages of a direct sales home based business. Retrieved from http://www. brighthub. com/office/entrepreneurs/articles/43249. aspx Why Sell Avon? (2011). Earnings opportunity. Retrieved from http://www. avoncompany. com /earningsopportunity/whysellavon. html