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 - – competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, increasing energy prices, digital marketing is dominated by two big players Facebook and Google,
customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, 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 -
Ability to lead change in Sales & Marketing field
– Avon Direct is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Avon Direct in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
Innovation driven organization
– Avon Direct is one of the most innovative firm in sector. Manager in Future of Avon's China: Direct Sales, Retail Sales or Both Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
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.
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.
Operational resilience
– The operational resilience strategy in the Future of Avon's China: Direct Sales, Retail Sales or Both Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
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.
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.
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.
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 -
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Future of Avon's China: Direct Sales, Retail Sales or Both has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Avon Direct 's lucrative customers.
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.
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.
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.
Capital Spending Reduction
– Even during the low interest decade, Avon Direct has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Future of Avon's China: Direct Sales, Retail Sales or Both HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Avon Direct has relatively successful track record of launching new products.
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.
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.
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.
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 -
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.
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Avon Direct to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Avon Direct is facing challenges because of the dominance of functional experts in the organization. Future of Avon's China: Direct Sales, Retail Sales or Both case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
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.
Creating value in data economy
– The success of analytics program of Avon Direct has opened avenues for new revenue streams for the organization in the industry. This can help Avon Direct to build a more holistic ecosystem as suggested in the Future of Avon's China: Direct Sales, Retail Sales or Both case study. Avon Direct can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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 -
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.
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.
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.
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.
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 .
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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Avon Direct business can come under increasing regulations regarding data privacy, data security, 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.
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.
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.
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.
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.
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.
