Avon's supply chain inefficiencies from decentralized product development

AVON Calls on Foreign Markets Case Study

Avon's approach to new product development that suits the needs of regional markets has led to inefficiencies in their supply chain operations and a lack of consistency in their selling efforts.

Marketing Orientation Is Causing Confusion

This was made even more challenging given their differences in marketing orientations, with a generational focus being different in each regional and national market they competed in. For example, in the U.S., Avon is focused on the Gen X and baby Boom-aged women who care more about rejuvenating their skin and appearing young. In other nations, the focus is on the exact opposite, as the case study suggests. For Gen Y and Millennial women they strive to appear more mature and older, thinking this gives them a chance to compete more effectively in their careers. Complicating this is the fact that Avon allowed product development to proliferate within regions and countries as well, looking to capture demand for ethnic and culturally-based products. This dual market orientation of concentrating on demographic segments and attempting to create or at least capture culturally successful products is what caused chaos in their supply chains and marketing execution strategies.

Their decision to allow new products to be so regionally focused increases their sales, yet not enough to underwrite the costly inefficiencies in the company overall by not having consolidation supply chain operations (Cohen, Roussel, 2004). Avon has had to continually work to bring its sales teams and operations departments into alignment with their product development strategy to keep the company viable (Hill, Still, 1990). Avon Calls on Foreign Markets, the case study assigned in class, forms the basis of this paper's analysis and assessment of supply chain implications for the company.

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 changed the company's distribution model as there are fewer women to work as part of their sales force. The shift in socioeconomic status is also one that has made competition with stores even more focused and aggressive, as retailers have the advantage of being more of a product aggregator than product developer. Their distribution model is shifting significantly as a result.

Increasing the urgency of the decision was the fact that demographic markets were changing rapidly, as were the preferences and wants of women for beauty care products. This pace of demographic change was occurring at varying levels within the nations Avon operates in, yet all of them combined sent a clear message that Gen X and baby Boomer product needs could far outpace any other category for the foreseeable future (Tarquinio, 2004). In addition, the fact that more women than ever before were going back to work was quickly changing the company's distribution model; many women simply did not have the time to be an Avon Lady anymore (Grammenou, 2009). What made all of the demographic and socio-economic changes so challenging to navigate was the fact that preferences for cosmetics were changing too. Younger, more educated Gen Y women wanted environmentally responsible or "green" cosmetics, as sustainability is very important to them as a value (Prior, 2010). The development requirements in this market of Gen Y consumers however is significantly different than the major cash source of the company today, which according to the case study are women from the Gen X and Baby Boomer generations (Grammenou, 2009). What Avon has had to do is concentrate on how to create effective marketing programs for each of these divergent markets while at the same time attempting to standardize on product components to streamline their supply chains (Tozzi, 2010). Of all factors that the case alludes to, this dynamics is what makes their supply chain operations the most difficult to manage over time. The company has created a very strong word-of-mouth campaign and has an exceptional level of trust in the industry for its products. Attempting to chase