Future of Avon's China: Direct Sales, Retail Sales or Both SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Sales & Marketing
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Future of Avon's China: Direct Sales, Retail Sales or Both
On 9 April 2005, the leading global direct-sales cosmetics company, Avon, gained exclusive rights from the Chinese government to test the direct-selling model in China. This provided Avon a rare opportunity to expand its business, especially given that the demand for cosmetics in China had skyrocketed in the past decades. Since China banned the direct sales model in 1998, Avon had successfully adopted the traditional sales model of boutique and counter stores. Although the direct sales model had worked well for Avon in almost all other markets in the world, the traditional sales model had proved to be very successful in China. How should Avon exploit this opportunity of direct selling in China?
Swot Analysis of "Future of Avon's China: Direct Sales, Retail Sales or Both" written by Zhigang Tao, Dongya Li, Isabella Chan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Avon Direct facing as an external strategic factors. Some of the topics covered in Future of Avon's China: Direct Sales, Retail Sales or Both case study are - Strategic Management Strategies, Emerging markets, Marketing, Sales and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Future of Avon's China: Direct Sales, Retail Sales or Both casestudy better are - – digital marketing is dominated by two big players Facebook and Google, technology disruption, increasing commodity prices, talent flight as more people leaving formal jobs, increasing transportation and logistics costs, increasing energy prices, there is backlash against globalization,
customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Future of Avon's China: Direct Sales, Retail Sales or Both
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Future of Avon's China: Direct Sales, Retail Sales or Both case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Avon Direct, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Avon Direct operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Future of Avon's China: Direct Sales, Retail Sales or Both can be done for the following purposes –
1. Strategic planning using facts provided in Future of Avon's China: Direct Sales, Retail Sales or Both case study
2. Improving business portfolio management of Avon Direct
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Avon Direct
Strengths Future of Avon's China: Direct Sales, Retail Sales or Both | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Avon Direct in Future of Avon's China: Direct Sales, Retail Sales or Both Harvard Business Review case study are -
Highly skilled collaborators
– Avon Direct has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Future of Avon's China: Direct Sales, Retail Sales or Both HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Avon Direct has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Future of Avon's China: Direct Sales, Retail Sales or Both - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Avon Direct has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Low bargaining power of suppliers
– Suppliers of Avon Direct in the sector have low bargaining power. Future of Avon's China: Direct Sales, Retail Sales or Both has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Avon Direct to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Sales & Marketing industry
– Future of Avon's China: Direct Sales, Retail Sales or Both firm has clearly differentiated products in the market place. This has enabled Avon Direct to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Avon Direct to invest into research and development (R&D) and innovation.
High brand equity
– Avon Direct has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Avon Direct to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Avon Direct has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Avon Direct has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Organizational Resilience of Avon Direct
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Avon Direct does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Avon Direct is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Avon Direct is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Future of Avon's China: Direct Sales, Retail Sales or Both Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Avon Direct is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Avon Direct are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Superior customer experience
– The customer experience strategy of Avon Direct in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses Future of Avon's China: Direct Sales, Retail Sales or Both | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Future of Avon's China: Direct Sales, Retail Sales or Both are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Avon Direct is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Future of Avon's China: Direct Sales, Retail Sales or Both can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Need for greater diversity
– Avon Direct has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Skills based hiring
– The stress on hiring functional specialists at Avon Direct has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Future of Avon's China: Direct Sales, Retail Sales or Both, it seems that the employees of Avon Direct don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Lack of clear differentiation of Avon Direct products
– To increase the profitability and margins on the products, Avon Direct needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– It come across in the case study Future of Avon's China: Direct Sales, Retail Sales or Both that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Future of Avon's China: Direct Sales, Retail Sales or Both can leverage the sales team experience to cultivate customer relationships as Avon Direct is planning to shift buying processes online.
High bargaining power of channel partners
– Because of the regulatory requirements, Zhigang Tao, Dongya Li, Isabella Chan suggests that, Avon Direct is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Products dominated business model
– Even though Avon Direct has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Future of Avon's China: Direct Sales, Retail Sales or Both should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As Future of Avon's China: Direct Sales, Retail Sales or Both HBR case study mentions - Avon Direct takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Avon Direct supply chain. Even after few cautionary changes mentioned in the HBR case study - Future of Avon's China: Direct Sales, Retail Sales or Both, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Avon Direct vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Future of Avon's China: Direct Sales, Retail Sales or Both, in the dynamic environment Avon Direct has struggled to respond to the nimble upstart competition. Avon Direct has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Future of Avon's China: Direct Sales, Retail Sales or Both | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Future of Avon's China: Direct Sales, Retail Sales or Both are -
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Avon Direct in the consumer business. Now Avon Direct can target international markets with far fewer capital restrictions requirements than the existing system.
Loyalty marketing
– Avon Direct has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Avon Direct to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Avon Direct to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Avon Direct can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Sales & Marketing segment.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Avon Direct can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Avon Direct can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Avon Direct can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Low interest rates
– Even though inflation is raising its head in most developed economies, Avon Direct can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Avon Direct can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Avon Direct can develop new processes and procedures in Sales & Marketing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Avon Direct in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
Leveraging digital technologies
– Avon Direct can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Avon Direct can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Avon Direct can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Threats Future of Avon's China: Direct Sales, Retail Sales or Both External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Future of Avon's China: Direct Sales, Retail Sales or Both are -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Environmental challenges
– Avon Direct needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Avon Direct can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Consumer confidence and its impact on Avon Direct demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Stagnating economy with rate increase
– Avon Direct can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Future of Avon's China: Direct Sales, Retail Sales or Both, Avon Direct may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Avon Direct in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Increasing wage structure of Avon Direct
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Avon Direct.
Regulatory challenges
– Avon Direct needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Shortening product life cycle
– it is one of the major threat that Avon Direct is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Avon Direct high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Avon Direct with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology acceleration in Forth Industrial Revolution
– Avon Direct has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Avon Direct needs to keep up with the evolution of technology in the Sales & Marketing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Weighted SWOT Analysis of Future of Avon's China: Direct Sales, Retail Sales or Both Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Future of Avon's China: Direct Sales, Retail Sales or Both needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Future of Avon's China: Direct Sales, Retail Sales or Both is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Future of Avon's China: Direct Sales, Retail Sales or Both is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Future of Avon's China: Direct Sales, Retail Sales or Both is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Avon Direct needs to make to build a sustainable competitive advantage.
