Avon Products announced both a change in its business focus and a reduction of its dividend in June 1988. To offset the likely stock price effect of the dividend reduction, Avon announced at the same time an unusual exchange offer, under which it would take up to 25% of its common stock in exchange for an unusual preferred stock. The case traces the history of Avon from 1979-88. Requires students to evaluate Avon's efforts at diversification in the early 1980s, and to relate that effort to the company's dividend history. Also requires students to evaluate an unusual security. Suitable for first-year students or for a second-year capital markets course.
Swot Analysis of "Avon Products" written by Jonathan Tiemann includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Avon Dividend facing as an external strategic factors. Some of the topics covered in Avon Products case study are - Strategic Management Strategies, Financial markets, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Avon Products casestudy better are - – increasing energy prices, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, increasing commodity prices, technology disruption, wage bills are increasing, geopolitical disruptions,
talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Avon Products case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Avon Dividend, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Avon Dividend 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 Avon Products can be done for the following purposes –
1. Strategic planning using facts provided in Avon Products case study
2. Improving business portfolio management of Avon Dividend
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Avon Dividend
Strengths Avon Products | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Avon Dividend in Avon Products Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Avon Dividend in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Avon Dividend has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Avon Products 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 switching costs
– The high switching costs that Avon Dividend 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 Dividend in the sector have low bargaining power. Avon Products has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Avon Dividend to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Avon Dividend 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 Avon Products HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Avon Dividend is one of the leading recruiters in the industry. Managers in the Avon Products are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- Avon Dividend 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 Dividend is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Avon Products Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the Avon Products 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.
Ability to lead change in Finance & Accounting field
– Avon Dividend 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 Dividend in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Avon Dividend 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 Jonathan Tiemann 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.
Cross disciplinary teams
– Horizontal connected teams at the Avon Dividend 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Avon Dividend digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Avon Dividend has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Weaknesses Avon Products | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Avon Products are -
Products dominated business model
– Even though Avon Dividend 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 - Avon Products should strive to include more intangible value offerings along with its core products and services.
Skills based hiring
– The stress on hiring functional specialists at Avon Dividend 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Avon Products 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 Dividend has relatively successful track record of launching new products.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Avon Dividend is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Avon Products can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners
– Because of the regulatory requirements, Jonathan Tiemann suggests that, Avon Dividend 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Avon Products, is just above the industry average. Avon Dividend 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Avon Products, it seems that the employees of Avon Dividend 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.
Slow to strategic competitive environment developments
– As Avon Products HBR case study mentions - Avon Dividend 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.
Interest costs
– Compare to the competition, Avon Dividend 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Avon Products 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 Dividend 's lucrative customers.
Aligning sales with marketing
– It come across in the case study Avon Products 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 Avon Products can leverage the sales team experience to cultivate customer relationships as Avon Dividend is planning to shift buying processes online.
Opportunities Avon Products | 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 Avon Products are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Avon Dividend 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 Dividend to hire the very best people irrespective of their geographical location.
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 Dividend 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Avon Dividend is facing challenges because of the dominance of functional experts in the organization. Avon Products 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.
Learning at scale
– Online learning technologies has now opened space for Avon Dividend 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Avon Dividend 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, Avon Products, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Avon Dividend can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Dividend can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Avon Dividend 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.
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 Dividend in the consumer business. Now Avon Dividend can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Avon Dividend in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Buying journey improvements
– Avon Dividend can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Avon Products suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Better consumer reach
– The expansion of the 5G network will help Avon Dividend to increase its market reach. Avon Dividend 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.
Developing new processes and practices
– Avon Dividend can develop new processes and procedures in Finance & Accounting 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.
Threats Avon Products External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Avon Products are -
Technology acceleration in Forth Industrial Revolution
– Avon Dividend has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Avon Dividend needs to keep up with the evolution of technology in the Finance & Accounting 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Avon Dividend with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Avon Dividend in the Finance & Accounting industry. The Finance & Accounting 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 Dividend
– 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 Dividend.
Stagnating economy with rate increase
– Avon Dividend 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.
Consumer confidence and its impact on Avon Dividend 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 dependence on third party suppliers
– Avon Dividend 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Avon Products, Avon Dividend may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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 Dividend business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Avon Dividend is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Avon Dividend can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Avon Products .
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Avon Dividend in the Finance & Accounting sector and impact the bottomline of the organization.
Environmental challenges
– Avon Dividend 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 Dividend can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Weighted SWOT Analysis of Avon Products 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 Avon Products 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 Avon Products 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 Avon Products 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 Avon Products 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 Dividend needs to make to build a sustainable competitive advantage.