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Examine the competitiveness of Avon cosmetics in the UK market with respect to its internal and external environment; identify its main issues/problems and make recommendations for future strategy for the business.

Extracts from this document...

Introduction

EXECUTIVE SUMMARY Avon Cosmetics is the second largest beauty company in the UK; started in 1959, it was the first subsidiary of Avon Products Inc. The company develops, produces and sells all types of beauty and women care products. Until recently, Avon UK enjoyed a sustained growth in women's beauty markets and its share was steadily increasing over the past few year and until year 2005 (Avon Student Pack, 2005). This report seeks to examine the company's competitiveness in the UK market with respect to its internal and external environment; identify its main issues/problems and make recommendations for future strategy for the business. The main issue facing the industry today is the fierce competition, which Avon has to take into consideration, should it want to keep its market share in the following 3 years. The company is operating in a very fragmented industry, having to deal with both direct and indirect competitors. Avon has based its success all these years on its unique resources and core competencies; these are its network of "Avon ladies", the strong R&D department and the corporate ethics - Avon was one of the first companies in the industry to forbid animal testing for its products and ingredients and replace them with alternative testing methods, given the strict regulations on cosmetics and the environmental sensitivity of its customers. The company's competitive advantage derives from the above. Subsequently, a number of feasible future business options have been generated, leading to what the group would suggest as the most vital business recommendations. Given the saturated UK cosmetics market and its core competences, Avon should consider for the oncoming 3 years catering for new markets, especially men's which is at the growth stage of the product life cycle, as well as using its know-how of door-to-door selling to diversify its business and introduce the selling of insurance to households. To enable the carrying out of this analysis, some off-the-shelf techniques, such as Rent model, Porter's Five Forces model, PEST and SWOT analysis, ...read more.

Middle

It is seen as a cheaper alternative (no frill strategy) to the costlier brands and is also offered online to increase accessibility. 3. Internal Environment Analysis Avon Cosmetics UK has a number of resources which are not unique but uses them in a way that gives the company a competitive advantage over its competitors. Its 'Avon Lady' network gives the company the ability to manage customer relationships as there is an Avon Lady for every area that keeps close contact with its customers (Rigby R., 1997). It also gives Avon first hand information about the market trends, whereas its rivals depend on secondary sources. This network gives an added advantage of having an option to pursue other opportunities to increase its product portfolio. Avon products are only sold directly through the online store, catalogue orders and Avon Ladies. This helps to maintain a 'good value for money' image among its customers due to absence of huge investment and running costs of having physical stores. It has a very efficient R&D department which ensures all its products do not contain any animal by-products and also not tested on animals, which differentiates itself from its competitors, as they do not pay so much attention to addressing these issues. The company is also involved with a lot of women organisations and other charities to keep an image of being socially responsible and promoting the idea of women empowerment. The ability to maintain this brand image is in itself a core competency as it strikes a bond with its target market and helps identify themselves with Avon's organisational values. 4. Options and Recommendations 4.1. The Ansoff Matrix As already mentioned previously in this report, cosmetics is a highly competitive industry approaching the stage of maturity (keynote.co.uk, 2005). For Avon to remain in profitable territory and increase its market share it has to consider producing new products for its existing markets, increase its market penetration by providing the same kind of products to new markets while at the same time consider producing new kind of products for new markets altogether. ...read more.

Conclusion

damage to the company's reputation and brand image will not be of relative importance and, moreover, the Avon's capital loss from the project will be minor, for the reasons explained above. 5. Conclusion The UK cosmetics industry seems to be currently suffering intense competition mainly emanating from a) consolidation (as a prevailing trend) and b) new entrants (as the largest threat the past 5 year). In addition, the increasing popularity of unconventional cosmetics (cosmetic surgery, spa & solarium centres) suggests the future market for traditional beauty care companies might start declining therefore posing a further threat to the long term existence of their businesses. As one of the major players in the cosmetics industry, Avon UK is in need to react to the environmental changes to avoid losing business from competitors (both direct and indirect) and to grasp any opportunities that may occur in the near future. Avon UK would be able to maintain and possibly increase its profitability by increasing its product portfolio to cater new market opportunities. Of all the options considered within the scope of this report, given the time restrictions and the trade-off that applies to the way Avon uses its scarce resources, we recommend opening up to the Men's market and selling insurances as the two most profitable and feasible options the company should implement at this particular point. APPENDICES APPENDIX A: PORTER'S 5 FORCES APPENDIX B: SWOT ANALYSIS Strengths Weaknesses * Encourages teenagers to buy and sell cosmetics ("mark" product line) * CRM * E-marketing * Disintermediation * Strong brand * No animal testing * Global reach. * Strong R&D * Doesn't reach all women - few products in retail stores * Customers cannot physically examine the product before buying it * Shipment of products takes time. Opportunities Threats * Can enter the life/household insurance business * Cosmetics as part of modern lifestyle * Brand loyalty * Men's market is growing * Both young and older people purchase cosmetics * New markets emerging * Internet as distribution channel. ...read more.

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