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 - – wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, geopolitical disruptions,
increasing commodity prices, talent flight as more people leaving formal jobs, 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 -
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.
Diverse revenue streams
– Avon Direct is present in almost all the verticals within the industry. This has provided firm in Future of Avon's China: Direct Sales, Retail Sales or Both case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Analytics focus
– Avon Direct is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Zhigang Tao, Dongya Li, Isabella Chan can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
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.
Ability to recruit top talent
– Avon Direct is one of the leading recruiters in the industry. Managers in the Future of Avon's China: Direct Sales, Retail Sales or Both are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
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.
Training and development
– Avon Direct has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Future of Avon's China: Direct Sales, Retail Sales or Both Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
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.
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.
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 -
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.
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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Future of Avon's China: Direct Sales, Retail Sales or Both, is just above the industry average. Avon Direct needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Interest costs
– Compare to the competition, Avon Direct has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Avon Direct needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Low market penetration in new markets
– Outside its home market of Avon Direct, firm in the HBR case study Future of Avon's China: Direct Sales, Retail Sales or Both needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
Increasing silos among functional specialists
– The organizational structure of Avon Direct is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Avon Direct needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Avon Direct to focus more on services rather than just following the product oriented approach.
No frontier risks strategy
– After analyzing the HBR case study Future of Avon's China: Direct Sales, Retail Sales or Both, it seems that company is thinking about the frontier risks that can impact Sales & Marketing strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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 -
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Avon Direct can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Future of Avon's China: Direct Sales, Retail Sales or Both, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
Using analytics as competitive advantage
– Avon Direct has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Future of Avon's China: Direct Sales, Retail Sales or Both - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Avon Direct to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Avon Direct to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Avon Direct can use these opportunities to build new business models that can help the communities that Avon Direct operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Better consumer reach
– The expansion of the 5G network will help Avon Direct to increase its market reach. Avon Direct will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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.
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.
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.
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 -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Avon Direct.
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.
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.
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.
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.
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.
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.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Avon Direct needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Avon Direct will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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 .
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.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Avon Direct can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.