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AVON Calls on Foreign Markets
Avon believed that having regionalized new product development centers, supply chain operations, marketing and sales divisions would make them more competitive in foreign markets. Ironically the exact opposite happened, as the case illustrates. Avon's performance was drastically reduced and the duplication of effort crippled the organization. Unfortunately the highly decentralized, market-driven organizational structure that Avon had such high expectations for failure to deliver the results needed to keep the company growing. The net outcome of the highly decentralized organizational structure was a massive duplication of effort and cost overruns; the organizational structure turned into more of a liability than strategic asset. The goal of this case analysis is to explain and recommend how Avon can regain profitability while also attaining a higher level of internal new product development, production and selling efficiency. Another objective of this analysis is to evaluate how Avon can attain a higher level of performance and profits through better alignment of their research & development (R&D), new product development, marketing and global supply chain operations into a unified strategic marketing platform for growth.
Marketing Strategy and Segment Definitions Need Greater Accuracy
Like many consumer packaged goods (CPG) companies who are multinational (MNC) in scope, Avon faces...
There are very wide variations in the cultural, religious and national aspects of each of these cultures that Avon competes in. Attempting to meet all expectations across all cultures will lead to none being met as focus and consistent effort will be lost. Exacerbating the lack of focus is the conflicting demographic segments the company sells to as well. Avon's core target market of Gen X and Baby Boomer women are the most potentially profitable given the preoccupation with looking younger. Of these two segments, the Baby Boomer age group is of particularly of interest on a global scale, as demographic and psychographics studies suggest they are the most focused on the appearance of being younger than they chronologically are. Avon must also confront and overcome the dilemma of their Millennial and Gen Y women customers wanting to appear older and mature. Psychographic studies completed by the company highlight the fact that Millennial and Gen Y women have an urgent need to appear older and more mature, as they see themselves competing for more prestigious, higher-paying jobs.
These insights into customer behavior and preferences are just one of the many facets of the challenges Avon is facing in the context of this study. The orchestration of new product development, strategic sourcing and supply chain management…
As is the case with MNCs that have a global brand yet lack governance frameworks, the brand began to atrophy and lose relevance in core markets. When highly decentralized operations that include region-specific product development, supply chain and marketing strategies begin showing a negative Return on Investment (ROI) it is time to re-evaluate the strategy and seek to create a more unified strategic framework (Cohen, Roussel, 2004). Despite all of these regional variations in the core aspects of their value chain, the sales organization continued to attain sales levels necessary for the company to at least stay in business (Hill, Still, 1990). The lack of governance framework coupled with insights into the regional requirements of customers from a cultural, religious and ethnocentric level however stopped sales from being as potentially profitable as they could have been however.
Case Analysis
The decision to initially decentralize new product development, supply chain management and marketing initially appear to be an insightful one based on the broad differences between market segments Avon serves (Grammenou, 2009). There are significant differences between each of the markets
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The company's founders and senior managers however feared this would make the company less agile and able to respond to market requirements (Grammenou, 2009). Demographic Analysis There have been many socioeconomic and demographic changes that have affected Avon's business model in the last two decades. The greatest socioeconomic force affecting them today is the need for many women to work full-time jobs to contribute to their household's income. This has drastically
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