AVON Calls on Foreign Markets

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.

Case Analysis

Avon initially believed that having new product development decentralized, with locations in each of the geographic markets it operates in, would lead to competitive advantages including time-to-market and being more aligned to customers' preferences (Grammenou, 2009). As a result, the company continued to make major investments in R&D, further driving up the revenue required to achieve break-even based on these investments. Avon learned that the pace of new product development was significantly different in each country, so were the length of product lifecycles as well (Tozzi, 2010). This translated into a costly series of new product introductions every season (Grammenou, 2009). It also led to a proliferation of product options and stocking units as part of the company's supply chain operations, further driving up inventory costs over time (Cohen, Roussel, 2004). The need for centralizing and consolidating the supply chain function and also moving product development back into a centralized location would have saved significantly on supply chain costs (Tozzi, 2010). 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 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.