- To be the Women’s choice for buying
We will become the destination store for women, offering the convenience of multiple brands and channels, and providing a personal high touch shopping experience that helps create lifelong customer relationships.
This objective is specific as it is aimed for the research area of Avon, which regularly creates new brands and channels. It is achievable with extra effort, and again, does not have a time restraint as new brands can be created most of the time, which will help create lifelong customer relationships.
- To be the Premier direct seller
We will expand our presence in direct selling and lead the reinvention of the channel, offering an entrepreneurial opportunity that delivers superior earnings, recognition, service and support, making it easy and rewarding to be affiliated with Avon and elevating the image of our industry.
I think this objective is SMART, but is ongoing. I think it will take a long time for this to happen. However, when looking at the graph, it seems it won’t be long before Avon becomes the premier direct seller. Comparing Avon’s figures of almost half a $billion increase in the year with their competitor Boots, whose cash flow decreased from 60.3 million to 52.3 million in the last year.
- To be the best place to work
We will be known for our leadership edge, through our passion for high standards, our respect for diversity and our commitment to create exceptional opportunities for professional growth so that associates can fulfil their highest potential.
This objective is achievable, as by looking at the graph below the number of workers at Avon has increased in the amount of representatives and if the pattern continues, Avon’s high work standards will remain and staff will continue to increase.
- To be the largest Women’s foundation
We will be a committed global champion for the health and well being of women through philanthropic efforts that eliminate breast cancer from the face of the earth, and that empower women to achieve economic independence.
This is one of Avon’s main objectives and the company is very supportive of the health of women, and especially work towards raising money for breast cancer. This is a SMART objective because it is specific and can be done with effort. This objective can be ongoing as there will always be a need to raise money for charities such as the women’s foundation.
- To be the most admired company
We will deliver superior returns to our shareholders by tirelessly pursuing new growth opportunities while continually improving out profitability, a socially responsible, ethical company that is watched and emulated as a model of success.
I think this objective is realistic because it is achievable by giving enough effort. It is specific as it is focusing on one department.
‘For nearly half a century, the Avon foundation has been committed to improving the lives of women. Our goal is to continue this mission and become the world’s largest foundation for women. We want to make a genuine difference in the lives of women everywhere, by removing barriers to better health, women’s empowerment and personal self-fulfilment. Our goals are high, our commitment unwavering’.
I believe all of Avon’s objectives are SMART objectives. None of them include a time restraint or deadline, but this is because they can all be used for many years and do not need a time period in which they need to be completed. If the statement above is how Avon works, I think all the objectives will be completed and Avon will continue to work towards them.
Principles that guide Avon
Written by founder, David H. McConnell
- To PROVIDE individuals an opportunity to earn in support of their well being and happiness
- To SERVE families throughout the world with products of the highest quality backed by a guarantee of satisfaction
- To RENDER a service to customers that is outstanding in its helpfulness and courtesy
- To GIVE full recognition to employees and representatives, on whose Avon’s contributions Avon depends
- To MEET fully the obligations of corporate citizenship by contributing to the well-being of society and the environment in which it functions
- To MAINTAIN and cherish the friendly spirit of Avon.
How Avon is doing now
Avon has been successful in meeting its objectives and aims to continue to meet their objectives.
To be the global beauty leader
This objective is being met because Avon is the world’s leading director of beauty and related products. It is the world’s larges manufacturer of fragrance, which also meets part of the objective.
To be the largest woman’s foundation
Avon has met this objective because the company has raised $300 million to fight breast cancer.
To be the best place to work
This objective has been met as Avon was named a best place to work for working mothers and executive women in 2002.
In 2003 in Europe, Avon received sales of approximately $750 million. Avon reports from 2/3/2004 show sales increased a record 14% and beauty sales climbed 18%. Operating profit in the quarter increased 24% to $288.4 million.
Competition
Competition is very important in business. A company without competition will find it hard to set targets for themselves as they will have no one to compare their profits or number of customers with. Another problem would be the hardly improving labour productivity. This problem can be solved by encouraging foreign competition, and by enhancing market transparency.
Avon’s competitors are stores such as Boots, Body shop and Superdrug. These are not entirely the same, as they are shops, whereas Avon’s customers order by catalogue. This may cause Boots to have more customers as they can see the product and test it before it is purchased. Boots also have a wider range of products, such as electrical, food, clothes and also departments for photography, opticians and chemist.
I have chosen to compare Avon to Boots, a company also selling cosmetics. I will also compare it to Maybelline, a manufacturer of makeup.
Compared with Avon’s mission statement, Boots is a lot broader. Boots – ‘Our goal is to make Boots a more modern, competitive and efficient retail business in order to deliver value for our shareholders’. This statement is broader and refers to more things because Boots sells many other products other that cosmetics ad has branches of shops all over the country. Avon is aimed more at a female audience, although they sell men’s items too. ‘That best understands and satisfies the needs of women’. The mission statement for Avon ends with ‘globally’, showing that the quality of service if the same all over the world.
Task D
Types of business
Sole trader
A sole trader is the simplest form of business. There is only one owner, who has total control over the decision making and running of the business. The owner is self-employed. It is very easy to set up a sole trader business, as there are not many legal processes to go through.
Private limited companies
These have the word. ‘Limited’ after their name, indicating that the company is owned by shareholders who have limited liability. They are often abbreviated to Ltd.
Liability: the shareholders’ personal assets are protected if the business falls. You can only lose what you have put into the business.
Management: The business is controlled by the board of directors. They are each held personally responsible for it’s management and must act in the company’s best interest.
Finance: Capital is raised by the sale of shares, although not to the general public.
Profits: Dividends are paid to the shareholders.
Taxes: The directors are employed by the company through the PAYE tax system.
Continuity: The Company is a legal entity in it’s own right and can be sold, or buy shares in other companies. It has ‘perpetual existence’.
Public limited companies
The main difference between private and public limited companies is that public limited companies have no restriction on the number of shareholders or on the freedom to buy and sell shares. Shares in public limited companies can be bought and sold on the stock market at any time by individual members of the public, other companies or organisations. The company is generally the same as Private limited companies.
There are four main types of company:
Private company limited by shares – member’s liability is limited to the amount unpaid on shares they hold
Private company limited by guarantee – member’s liability is limited to the amount they have agreed to contribute to the company’s assets if it is wound up.
Public limited company (PLC) – the company’s shares may be offered for sale to the general public and member’s liability is limited to the amount unpaid on shares held by them.
Private sector consists of 3 parts:
- The personal sector deals with the economic decisions of individuals and households. For example, how much they receive, how they spend their income and how much they save. The amount of people that spend and save will directly affect the economy by producing demand for goods and services.
- The corporate sector covers businesses that are privately owned including sole traders, partnerships, companies and franchises. With the exception of charities, most businesses are in the private sector
- The financial sector consists of financial institutions such as banks. In addition to making and receiving payments on behalf of customers, they act as a link between those groups that have money to save and who needs money to borrow.
Public sector covers all activities carried out by central and local government or are publicly funded.
To set up in business, decisions will need to be made firstly about which goods or services will be provided and also which form of business organisation is the most appropriate.
Avon is a Limited company. All limited companies are incorporated, meaning they can sue or own assets in their own right. The ownership of a limited company is divided up into equal parts called shares. Whoever owns one or more of these is called a shareholder.
A Public Limited Company, like Avon gives the freedom to buy or sell shares. By selling these shares, they can raise a vast amount of capital.
To become a limited company, applicants have to give in a Memorandum of Association, which states the business' name, address and main purpose. The internal workings of the company including the number of directors, how they are elected and what their roles are described. This also describes how profits will be divided.
When the Memorandum of Association has been submitted the Registrar of Companies issues a Certificate of Incorporation, which allows a limited company to begin trading.
The advantages of being a limited company are:
Shareholders have limited liability
The sale of shares enables larger sums of money to be raised
While the company has this money permanently, the individual owners can recoup their money by selling their shares to others
Directors may be brought in as experts in certain fields
The disadvantages to this type of company are:
There are a number of legal requirements to fulfil in setting up a company
Regulations mean that a company is more expensive to set up than a sole trader or partnership
The accounting of a company is less private than for other forms of organisation.
Directors need to report back to the shareholders at the annual general meeting.
However, this type of organisation is appropriate for Avon because it is a large business and therefore needs a few people to be involved in decision making rather than just one, e.g. major shareholders, directors and senior management. The major shareholders are through the board of directors, so there is control over the company. Profits are distributed to shareholders, owners and plough back.
The company is a legal unit distinct from the shareholders and, for example, be sued in it’s own name.
Task E
Functional areas
Marketing – Research
Identify new markets
Promote/advertise
Pricing
Human Resources - Train
Develop
Recruit
Motivate
Research and Development - Improving product via research
New product (innovate)
Variety of product/services
Reduce costs
Finance - Offer discounts to customers
Reduce costs
Administration - Communication
Know everyone
Admin matters
Letters
Production - Improve quality
Customer awareness
Product cheaply
Improve
The marketing department at Avon has recently started a new advertising campaign, in which actress Salma Hayek is included. Ms. Hayek will appear to advertise the new colour and fragrance launches. She will begin appearing in print and television advertisements for the products later in the year. She will also feature in the company’s brochures, public relations and the Internet.
New beauty businesses from Avon announced four new strategic marketing groupings aimed at increasing the range of the business as a many-sided, lifestyle brand. New associations have been formed with: Loews Cineplex Entertainment, Nextel Communications, New Line Cinema, and MTV. Mark was named so in celebration of young women making their 'mark' in the world today, and is the makeup you can buy and sell. The marketing team predict that, "The mark buyer and seller is probably the most intelligent and marketing- savvy consumer out there today".
Avon’s Human Resources team are dedicated to attracting and retaining the best possible talent to join Avon Products. At Avon, to stay ahead of the competition, our associates receive the best training and development available. Jobs in human resources at Avon include, Recruiting, Organisational Development and Employee Relations.
The Research and Development department at Avon help Avon to commit to strengthening its brands worldwide. To make this happen, this year Avon is increasing this department by 15%. In 1999 Avon introduced a number of new, innovative brands that broke the mould. Research and Development’s mission is to deliver a competitive advantage to Avon by tactically being first to market with products that meet customer needs with quality and superior performance benefits. Avon provides scientific excellence needed for accessing, developing and influencing technology that expects future trends and opportunities in placement with marketing strategies.
Avon’s production team continually strive towards our operations mission: "To deliver innovative and high-quality products and services, defect-free, on time, every time, and at the lowest total delivered cost." Avon holds high standards in production. Because of these standards, customer growth is supported, and innovative new products are continually brought to market.
In 1997, the finance area helped Avon brake the $5 billion revenue mark, making Avon the number 1 direct selling company in the world. Currently, Avon is increasing their annual revenue by $1 billion every three years. The scope of employees work at Avon impacts investments, operational strategies and new business opportunities. Each month, he finance area set budgets for the month, which show how much they can spend on each department. The money is then distributed to each department. Areas in the finance department include: Financial Analysis, Product Cost and Inventory Accounting, Planning and General Accounting. This area works with all other areas, which is important, as they need to finance each other area correctly.
All functional areas at Avon help the company to achieve its aims and objectives. The marketing department and research and development departments work towards Avon becoming the ‘women’s choice for buying’ by offering multiple brands and channels and creating lifelong customer relationships. New brands and advertising will help Avon achieve this aim.
‘To be the global beauty leader’ is an objective that is worked towards by all functional areas because it involves all areas of work. To become the global beauty leader all functional areas need to work together to exceed their competitors in quality, innovation and value.
The Human recourses team work towards the objective ‘to be the best place to work’ by setting high standards of employees to work at Avon.
‘To be the premier direct seller’ is an objective, which involves the marketing, production and research and development teams. The products need to be advertised in order to become the direct seller. There also needs to be new products and ideas to keep customers returning.
Task F
Organisational Structure
A business consists of people working together in different functional areas to achieve common overall goals. In order to achieve these goals and make sure employees work together, the goals must be communicated to employees and individual activities must be coordinated. If this is not done efficiently, it can result in:
Repetition of effort, with some jobs being done twice
Jobs not being done because everybody thought someone else were doing it
Poor quality, with work not being done to the appropriate standard.
A business must plan and organise the work and functional areas of its workforce. The business should develop an organizational structure that creates:
Job roles – employees will know what is expected of them
Levels of authority – employees know who they are responsible to
Channels of communication – all employees know what the business is trying to achieve
How structure can affect performance
There are different types of organizational structure.
Hierarchical structures
These are the most traditional type of structure and are shown in the form of a pyramid.
This structure is based on levels of authority and responsibility. Each person in the organisation has a clearly defined position that sets limits on the amount of authority and responsibility they have. Employees at each level, except the top and bottom are responsible to a manager or supervisor at the level above and have authority over a number of employees at the level below.
Span of control
The number of employees a manager or supervisor has authority over is called their span of control.
Narrow span Broad span
Flat structures
To overcome the disadvantages of hierarchical structures, some organizations have reduced the number of management levels, which brings the senior managers closer to the operatives.
Matrix Structures
This type of structure is often used for running specific projects. Specialists are brought together from different departments to share knowledge and give advise about the work. When the project is finished, the group is usually disbanded and the regrouped for the next project.
Avon’s organizational structure is hierarchical. The structure is hierarchical because each level is controlled by the level above it. The person at the top, Andrea Jung, has overall responsibility. The director is responsible for communicating company policy and making sure it is carried out. Managers are in charge of each departments and are responsible for carrying out the director’s decisions. Their role is to organize staff and motivate them. They must be good at communication.
This organisational chart is a visual image of the company. The structure indicates the flow of communication, with the director above who gives information to the various other departments with the communication flow moving down. It also shows the responsibility of individuals and who they are responsible to. For example, the sales division is responsible for the project manager section, and are accountable to the legal department, and at a higher level, the director of the company.