Global Analysis- Avon s1

GLOBAL ANALYSIS- AVON

MGT 795: Section G1

Professor: Patrick Saparito

Jennifer Callaghan

J.R. Longino

Rasa Navickaite

Meghan Quinn

Lia Torre AVON- A GLOBAL COMPANY FOR WOMEN

Executive Summary

History and Background

In 1886 a visionary entrepreneur named David H. McConnell had the extraordinary idea to found a business based on the premise of giving women an opportunity to earn money outside of the home and build financial independence. This was 34 years before women in the U.S. had even won the right to vote. But there is no stopping a great idea. From one Representative to now over six million…from one product to thousands…from one country to now over 100 across the globe, for 124 years the company has grown and prospered. (Annual Report). Currently, Avon is a leading global beauty company, with over $10 billion in annual revenue. As the world's largest direct seller, Avon markets to women in more than 100 countries through 6.2 million independent Avon Sales Representatives. Avon's product line includes beauty products, as well as fashion and home products, and features such well-recognized brand names as Avon Color,

Anew, Skin-So-Soft, Advance Techniques, Avon Naturals, and Mark. (avon.com) Ticker AVP.

Mission Statement

The Global Beauty Leader We will build a unique portfolio of Beauty and related brands, striving to surpass our competitors in quality, innovation and value, and elevating our image to become the Beauty company most women turn to worldwide. The Women's Choice for Buying

We will become the destination store for women, offering the convenience of multiple brands and channels, and providing a personal high touch shopping experience that helps create lifelong customer relationships. The Premier Direct Seller We will expand our presence in direct selling and lead the reinvention of the channel, offering an entrepreneurial opportunity that delivers superior earnings, recognition, service and support, making it easy and rewarding to be affiliated with Avon and elevating the image of our industry. The Best Place to Work We will be known for our leadership edge, through our passion for high standards, our respect for diversity and our commitment to create exceptional opportunities for professional growth so that associates can fulfill their highest potential. The Largest Women's Foundation We will be a committed global champion for the health and well-being of women through philanthropic efforts that eliminate breast cancer from the face of the earth, and that empower women to achieve economic independence. The Most Admired Company We will deliver superior returns to our shareholders by tirelessly pursuing new growth opportunities while continually improving our profitability, a socially responsible, ethical company that is watched and emulated as a model of success

(Avon.com).

Business Analysis

Current Objectives

Fourth Level Heading (Indented in paragraph)

Current Long Term Objectives

As more and more Representatives discover the power of the Avon Earning Opportunity,

Avon’s Long Term Objective goal is to retain them and increase their productivity by continuing to innovate their business model. Avon also plans to leverage technology and the viral power of the Internet to build communities that connect Avon to the Representatives and the

Representatives to their Customers. With more and more consumers discovering the smart value of Avon’s store, Avon plans to broaden shopping opportunities with new product categories that reinforce their beauty image and strengthen their customer relationships. Current Short Term Objectives

In November 2005, Avon launched a comprehensive, multi-year turnaround plan to restore sustainable growth. The following are the company’s short term-objectives.

 Committing to brand competitiveness by focusing research and development resources on

product innovation and by increasing advertising;

 Winning with commercial edge by more effectively utilizing pricing and promotion,

expanding the Sales Leadership program and improving the attractiveness of

Representative earnings opportunity as needed;

 Elevating organizational effectiveness by redesigning the structure to eliminate layers of

management in order to take full advantage of their global scale and size; and

transforming the cost structure so that costs are aligned to revenue growth and remain so.

Current Strategy

Institutional-based considerations (BRIC)

Industry-based considerations (BRIC)

Porter’s Five Forces

SWOT Analysis

Resource-based considerations Recommendations

 There should be a separate page(s) for a list of references at the end of the paper. You can use any standard format with which you are comfortable. However, be sure to be consistent throughout your reference list.

 Please cite things by using the author’s last name and the year it was published. For instance if you cite the Barney article in this course you would put (Barney, 1991). If you are quoting a particular page you would put (Barney, 1991: page # of quote in article). Since the custom text book does not give you the authors of individual chapters, use (SJU Perspectives Custom Text, 2009) for citing the course text.

Corporate Strategies 1) Advertising and Representative Value Proposition (“RVP”)

Investing in advertising is a key strategy. Advertising investments also included advertising to recruit Representatives. Avon continued to invest in their direct-selling channel to improve the reward and effort equation for Representatives.

2)Product Line Simplification

Avon developed the PLS program in order to develop a smaller range of better performing, more profitable products. The continued goal of PLS is to identify an improved product assortment to drive higher sales of more profitable products.

3) Strategic Sourcing Initiative

Avon launched the SSI in 2007. This initiative is expected to reduce direct and indirect costs of materials, goods and services. The goal of this initiative is to shift purchasing strategy from a local, commodity-oriented approach towards a globally coordinated effort which leverages Avon’s volumes, allows suppliers to benefit from economies of scale, utilizes sourcing best practices and processes, and better matches our suppliers’ capabilities with our needs. Beyond lower costs, our goals from

SSI include improving asset management, service for tatives and vendor relationships. 4) Enterprise Resource Planning System

Avon is in the middle of rolling out a multi-year global enterprise resource planning (“ERP”) system, which is expected to improve the efficiency of their supply chain and financial transaction processes.

5) Zero-Overhead-Growth

Avon institutionalized a zero-overhead-growth philosophy that aims to offset inflation through productivity improvements.

These improvements in productivity will come primarily from SSI and our restructuring initiatives. We have defined overhead as fixed expenses such as costs associated with our sales and marketing infrastructure, and management and administrative activities.

6) Restructuring Initiatives

2005 Restructuring Program

We launched our original restructuring program under our multiyear turnaround plan in late 2005. We have approved and announced all of the initiatives that are part of the 2005 Restructuring Program.

The costs to implement restructuring initiatives during 2005 through 2009 are associated with specific actions, including:

• organization realignment and downsizing in each region and global through a process called “delayering,” taking out layers to bring senior management closer to operations;

• the phased outsourcing of certain services, including certain finance, information technology, human resource and customer service processes, and the move of certain services from markets to lower cost shared service centers;

• the restructure of certain international direct-selling operations;

• the realignment of certain distribution and manufacturing operations, including the realignment of certain of our North

America and Latin America distribution operations;

• the automation of certain distribution processes;

• the exit of certain unprofitable operations and product lines; and

• the reorganization of certain functions, primarily sales-related organizations.

2009 Restructuring Program

In February 2009, Avon announced a new restructuring program under their multi-year turnaround plan. The restructuring initiatives under the 2009 Restructuring Program focus on restructuring the global supply chain operations, realigning certain local business support functions to a more regional basis to drive increased efficiencies, and streamlining transaction-related services, including selective outsourcing. Core Competencies

Stronger brand.

Avon’s iconic brand has 90% awareness across the globe and sells four lipsticks every single second of the day. To maintain that advantage, Avon has elevated their focus on innovation and sustained advertising investment at almost triple the rate of 2005, even in the face of macroeconomic challenges.

Stronger channel

Avon’s Sales Leadership — through which Representatives earn by both selling and recruiting — has been rolled out to approximately 50 countries worldwide. They have also launched our global Internet platform to help Representatives manage their business online.

Stronger cost management Due to the restructing plans of 2005 and 2009 and cost transformation programs delivering well ahead of initial expectations, and a constant turnaround mentality is now fully embedded in the organization. Avon is expecting and operating margin improvement in 2010.

Stronger organization The company has made significant progress in its evolution from a confederation of local businesses to a fully integrated matrix of global and commercial business units. Avon has effectively leverage its global strength in marketing, sales and supply chain, while also remaining flexible and responsive to local consumers and Representatives.

Management Structure HR/Organizational Analysis

Avon’s primary distribution channel is direct selling by more than 5.8 million Avon Sales Representatives. The recruiting or appointing and training of Representatives are the primary responsibilities of district sales managers and zone managers. Depending on the market and the responsibilities of the role, some of these individuals are our employees and some are independent contractors. Those who are employees are paid a salary and an incentive based primarily on the achievement of a sales objective in their district. Those who are independent contractors are rewarded primarily based on total sales achieved in their zones or downlines.

The Executive Team

ANDREA JUNG Chairman and Chief Executive Officer, Avon Products, Inc.

CHARLES CRAMB Vice Chairman, Chief Finance & Strategy Officer, Avon Products, Inc.

LUCIEN ALZIARI Senior Vice President, Human Resources and Corporate Responsibility, Avon Products, Inc.

GERALYN R. BREIG Senior Vice President & President, North America, Avon Products, Inc.

JERI B. FINARD Senior Vice President, Global Brand President, Avon Products, Inc.

BENNETT R. GALLINA Senior Vice President, Asia Pacific, China, Western Europe, the Middle East and Africa, Avon Products, Inc.

NANCY GLASER Senior Vice President, Global Communications, Avon Products, Inc.

DONAGH HERLIHY Senior Vice President, Chief Information Officer, Avon Products, Inc.

CHARLES M. HERINGTON Executive Vice President, Latin America and Central & Eastern Europe, Avon Products, Inc. JOHN HIGSON Senior Vice President, Global Direct Selling and Business Innovation, Avon Products, Inc.

JOHN F. OWEN Senior Vice President, Global Supply Chain, Avon Products, Inc.

KIM RUCKER Senior Vice President and General Counsel, Avon Products, Inc.

MIKE SCHWARTZ Senior Vice President, Global Insights & Marketing Intelligence Avon Products, Inc.

Social/Corporate Responsibility

Avon’s core values—trust, respect, belief, humility and integrity

Avon has been committed to advancing women since the company was founded in 1886, and philanthropy has always been a strong part of their heritage. In 1955 the company formalized philanthropic efforts with the creation of the Avon Foundation, which advances the mission to improve the lives of women and their families.

The Avon Foundation’s first grant, more than half a century ago, was a single scholarship of $400. The Foundation’s main efforts are today focused on the critical issues of breast cancer and domestic violence, and Avon global philanthropy is advancing these causes in more than 50 countries. As committed global citizens, Avon and the Avon Foundation also support emergency and disaster relief, while a scholarship program for Avon associates and Sales Representatives maintains the tradition of supporting education.

Avon’s commitment to the environment has been deeply rooted in Avon’s principles for more than a century. At locations worldwide, they remain committed to reducing our global environmental footprint, including the issue of climate change, by recycling, reducing waste, conserving energy and water, and monitoring and reducing greenhouse gas emissions. New Avon facilities are developed using green building standards.

To help drive institutional and individual “green” behavior, Avon launched Hello Green Tomorrow in 2009 to empower a global environmental movement to nurture nature.

In 2004, they established environmental goals and targets for 2008 and have made progress in pursuit of these goals. A Director of Corporate Responsibility is based in the Avon global headquarters in New York City, and collaborates with management in a wide array of relevant departments that support the many pillars of corporate responsibility, including human resources, environment, supply chain, research & development, the Avon Foundation and much more, both in the United States and around the world.