UNIVERSITY

OF

PETROLEUM & ENERGY STUDIES CONTINUING EDUCATION

(OIL & GAS)
SEMESTER V

CENTRE

FOR

EXECUTIVE MBA

YEAR: 2013

SESSION: JULY

ASSIGNMENT 2 FOR Strategic Management ! Tec"n # g$ &

Inn %ati n &M' ()*D+

&TO BE FILLED BY THE STUDENT+

NAME, SAP NO.REGN NO,

S-SU'RAMANIAN /)))0()10

Section A (20 Marks) Write short notes on any four of the following: 1. Competitive advantage of a firm Competitive advantages give a company an edge over its rivals and an ability to generate greater value for the firm and its shareholders. The more sustainable the competitive advantage, the more difficult it is for competitors to neutralize the advantage. There are two main types of competitive advantages: comparative advantage and differential advantage. Comparative advantage, or cost advantage, is a firm's ability to produce a good or service at a lower cost than its competitors, which gives the firm the ability sell its goods or services at a lower price than its competition or to generate a larger margin on sales. A differential advantage is created when a firm's products or services differ from its competitors and are seen as better than a competitor's products by customers. 2. 3 Cs of strategy implementation To successfully execute an organization s strategy, it must be the focus of every person in that organization. !t is up to the leaders to create, monitor, and reward that focus as it is expressed. "e should pay attention to the Three Cs of strategy to be successful in this endeavor. Clarify your strategy: All too often, strategies are expressed as high#level statements that resonate with board and executive levels but fall flat with mid#level and frontline personnel.

$nfortunately, if people don t understand the strategy, they are unable to connect with it. %o the first step is to clarify your strategy in a way that people in your organization can rally to support its implementation. Communicate your strategy: ! ve never encountered an organization where ! heard from people that we communicate too often or with plenty of clarity. %o then, communication is the second C. Cascade your strategy: !f strategy is &what' you do then tactics are &how' you do it. And if you want your strategy implemented well, you need to cascade it throughout the organization and get to the practical and tactical components of people s (obs every day. !deally, you will involve your managers in this process, and they will help to translate the elements of the strategy for your organization to their own functional areas. )oing this allows them to develop and own the process of cascading the strategy and designing implementation plans with high li*elihood of execution. 3. Divergent thinking
Thin*ing that moves away in diverging directions to involve a variety of aspects and which sometimes lead to novel ideas and solutions+ associated with creativity

4. Strategic

usiness !nits

". S#$% &nalysis A tool that identifies the strengths, 'ea*nesses, opportunities and threats of an organization. %pecifically, %",T is a basic, straightforward model that assesses what an organization can and cannot do as well as its potential opportunities and threats. The method of %",T analysis is to ta*e the information from an environmental analysis and separate it into internal -strengths and wea*nesses. and external issues -opportunities and threats.. ,nce this is completed, %",T analysis determines what may assist the firm in accomplishing its ob(ectives, and what obstacles must be overcome or minimized to achieve desired results.

Section B (30 marks) (Attempt any three) 1. Discuss the components of strategy selection process 'ith diagrams. 2. (o' 'ill you differentiate )et'een strategy formulation strategy implementation* /ollowing are the main differences between %trategy /ormulation and %trategy !mplementation# Strategy +ormulation Strategy ,mplementation

%trategy /ormulation includes planning and %trategy !mplementation involves all those decision#ma*ing involved in developing means related to executing the strategic organization s strategic goals and plans. plans.

!n short, %trategy /ormulation is placing the +orces )efore the action.

!n short, %trategy !mplementation is managing forces during the action.

%trategy /ormulation is an -ntrepreneurial %trategic !mplementation is mainly &ctivity based on strategic decision# an &dministrative %askbased on strategic ma*ing. and operational decisions.

%trategy /ormulation emphasizes on effectiveness.

%trategy !mplementation emphasizes on efficiency.

%trategy /ormulation is a rational process. %trategy !mplementation is basically an operational process.

%trategy /ormulation re0uires co#ordination %trategy !mplementation re0uires co# among few individuals. ordination among many individuals.

%trategy /ormulation re0uires a great deal of initiative and logical skills.

%trategy !mplementation re0uires specific motivational and leadership traits.

%trategic /ormulation precedes %trategy !mplementation.

%Trategy !mplementation follows %trategy /ormulation.

3. #hat are the steps involved in strategic control process* asic steps in the control process

The basic control process, wherever it is found and whatever it controls, involves the following four steps : 1. 2stablishment of standards, 3. 4easurement of actual performance, 5. Comparing actual performance to standards, and 6. !n case there is deviation, corrective action is ta*en. To control effectively, these four steps should be followed in the se0uence specified. These steps are explained in the following paragraphs: 1. 2stablishment of standards. The first step in control is closely lin*ed with and is an integral part of the planning process. The standards, defined as guides for evaluating performance, become the criteria by which performance is measured in the control process. 7ecause the variety of specific goals of an organisation is so large8overall ob(ectives are bro*en down into specific goals relating to production, production cost, sales 0uota, 0uality, etc. 8 the average enterprise will have a multitude of standards. These standards may be tangible and easily 0uantified or intangible and difficult to 0uantity. %tandards dealing with physical units, cost, revenue, and capital considerations are generally easy to 0auntify. %tandards dealing with physical units, cost, revenue, and capital considerations are generally easy to 0uantity. %tandards dealing with relationships, attitudes, morale, public difficult to 0uantify. !t is a matter of common agreement that standards which are 0uantifiable are the best.!n a large organisation, the number of standards often becomes very large. !t is, therefore, necessary for firms to be very selective in their use. !t is impractical to chec* the performance of each activity against all of the possible standards which might be applied to it. 4anagement must, therefore, concentrate on certain strategic control points against which performance is measured. 9ere a word about the methods of determination of standards must be said. :uantitative standards may be determined by statistical methods, cwch as sampling. 7esdies statistical methods, standards may also be c .termine from past experience. %tandards ae also based on industrial or association or similar

organisation s figures and statistics: :ualitative standards can be ascertained indirectly expectancy theory of motivation budgeting etc. 3. 4easurement of Actual ;erformance. ;ossibly one of the most difficult steps

in the control process is that of measuring performance. !n the measurement of actual performance, management may guess or have a &feeling' that standards are beingm et or it can ob(ectively measures performance. ,bviously, the latter approach leads to more effective control. !n this second step, wor* is observed, output is measured, ancl figures, and reports are compiled. !n some activities, however, precise measures can be ta*en, while in others it is virtually impossible to come up with any measurement at all. /or example, to control the performance of the personnel manager is not easy because definite standards to measure his performance are not easily developed. /or such activities, the methods, employed are indirect such as number of stri*es, man#days lost, etc. 9ere too word about the methods of measuring performance should be written. The most common measures are derived from personal observation, statistical data, oral reports, written reports, accounting information, and the li*e. /or intangible activities, the measurement is done through indirect measures, as specified above in the case of a personnel manager. <egardless of the measurement problems, however, performance must be continuously evaluated if is to contributed to overall managerial effectiveness. 5. Comparing Actual ;erformance to %tandards. ,nce standards have been established and performance measured, the next step is to compared actual results against standards. Comparison, at this of cuses on determining the amount of agreement between finished standards and actual results. At this point, the manager must what is to be regarded as =deviation . ,therwise, minor and deviations may get most of the time of the manager and significant deviations may remain unattended. Thus, determining the actual significance of any deviation is an important responsibility of the manager of the particular

activity being measured. /or example, a manager is responsible for determine whether differences when the sales budget and actual sales are meaningful. >i*ewise, a supervisor must *now whether the 0uality of inputs into a given manufacturing process confirms to standard, as well as what actions should be ta*en if there are deviations that fall beyong tolerance limits. A deviation is significantly large, to must be reported to the superior more authority than the immediate superior. This concept of segement is referred to as the exception principle. As a matter of management by exception is the most appropriate and practical each for carrying out the control function effectively+ otherwise, significant deviations would surround the executives for most of their with little gain. 6. Ta*ing Corrective Action. The fourth and the last step in the control process is to ta*e corrective action, where necessary. A step is really needed only when the actual performance is at variance planned performar.ee. 7asically, corrective, action is concerned either correcting unfavourable deviations from planned performance future performance criteria. Thus, corrective action. The answer is simple. ,ne would expect the manager responsible for certain performance to ta*e this action. !n this way, managers also *eep in close contact with their subordinates and reduce the overall volume of information flow. Control process and feed)ack. These elements of control8setting standards, measuring performance and the li*e8are tied together by the concept of feedbac*. /eedbac* aims at suggesting the deviation between the actual and planned 4. -.plain the various approaches to implementation of strategy. 2xperience shows that regions which achieve the greatest benefits from integrated, multi modal transport systems are those that establish and follow a

long#term transformation plan. The phased approach that provides the basis for delivering the vision in a manner that is manageable, cost effective and minimally disruptive to ongoing business operations as follows: i. ;hase 1 # /oundation: This phase will be the initial step in the transformation plan and will consist of a range of enabling pro(ects that will provide a foundation for more strategic initiatives. !t will focus on getting the basics right by establishing core functionality, consolidating the !T environment and addressing the complexity associated with a number of existing public transportation systems. %uch pro(ects include addressing passenger information data 0uality, improving the reliability of real time information provided to 4etro passengers and establishing a 4anagement !nformation %ystem. This phase will also include those =0uic* wins that are expected to build momentum and bring high return for customers in the short term -e.g. provision of real time information via text message and mobile applications.. ii. ;hase 3 # 2nhance: The purpose of this phase is to leverage the foundation established in phase one by providing an additional layer of enhancement to public transportation systems. This phase will deliver functionality that facilitates a move from single mode operation to more sophisticated multi#modal transport services through systems such as networ* planning applications and e#tic*eting. This phase will also deliver functionality that enables the proposed Agency to collect better data, analyse it more intelligently and connect it through more effective networ*s -e.g. automated data collection through A?>.. The end result will be more efficient,effective and targeted services for customers. iii. ;hase 5 # Transform: This final phase will focus on achieving optimised technology service applications in order to support integrated transport delivery. !ts scope will include those applications that will deliver the most

profound and radical changes that will ta*e public transportation systems in a new direction and ta*es it to an entirely different level of effectiveness. %uch systems include a replacement tic*eting system and a more up#to#date transport model that will impact every facet of operations, leading to new benchmar*s in revenues, costs and in delivering value to the customer. The complex nature of pro(ects delivered in this stage will re0uire an integrated approach involving strategy, leadership, organisational structure, finance and operations. Section C (50 marks) (Attempt all questions. E ery question carries !0 marks) Read the case Avon case in Strategic Management (SCM) and answer the following questions: Case Stu"y # A on case in Strate$ic Mana$ement (SCM) Avon Products, Inc. (Avon) is ased in !ew "or#. $he fir% engages in the %anufacture and %ar#eting of eauty and co%&li%entary &roducts &ri%arily in !orth A%erica, 'atin A%erica, (uro&e, and Asia Pacific. Avon)s &roducts are classified into three &roduct categories: *eauty, *eauty Plus, and *eyond *eauty. $he *eauty category consists of cos%etics, fragrances, s#in care, and toiletries+ *eauty Plus includes fashion ,ewelry, watches, a&&arel, and accessories+ and *eyond *eauty co%&rises ho%e &roducts, gift and decorative &roducts, candles, and toys. $he co%&any sells and %ar#ets its &roducts through a co% ination of direct selling, %ar#eting y inde&endent Avon re&resentatives, and via its consu%er We site, avon.co%. Avon was one of the &ro%inent direct sales co%&anies in the eauty &roducts industry. -tarted in the late ./00s y 1avid 2c3onnell, the co%&any sold a wide variety of eauty4related &roducts to ho%e%a#ers through its direct sales agents. 5owever, y the .6/0s, the co%&any had lost its luster and &erfor%ance egan to falter. A failed diversification strategy %ade it the target of several ta#eover atte%&ts. $urnaround efforts were initiated in the .660s under then 3(7 8a%es Preston and continued y his successor 3harles Perrin, however, they failed to %a#e a significant i%&act. Perfor%ance egan to i%&rove only after Andrea 8ung eca%e the 3(7 of the co%&any in .666. Andrea 8ung eca%e &resident and 3(7 of Avon in .666 and has totally reva%&ed the co%&any. 9nder her leadershi&, the co%&any has u&dated its &roduct line, launched new advertising, and created a new i%age. Avon)s sales have increased y :0 ;, &rofits <0;, and the stoc# &rice has dra%atically i%&roved. 8ung)s has een a le to align the fir%)s core ca&a ilities with its strategic targets which has lead to &heno%enal results. It a&&ears that 8ung has een a le to esta lish a

clear vision for the fir% that has een incor&orated in every as&ect of the fir%)s o&erating syste%. $his vision is shared y all e%&loyees and re&resentatives of Avon &ri%ing the co%&any for continued success. 7ther strategies of 8ung include cost cutting y reducing nu% er of raw %aterial su&&liers, shifting &roduction fro% s%aller &lants to larger ones, %oving %anufacturing fro% high cost nations li#e =reat *ritain to lower cost countries such as Poland. As %entioned in the Avon case study, the e4re&resentative initiative also has hel&ed Avon cut costs. $he direct sellers are as#ed to fill in the order online. Avon)s rand has definitely resonated for wo%en through the years. 1uring the .6/0s, the co%&any egan to diversify y investing in retire%ent &ro&erties and healthcare &roducts, and launching catalogs for %en and children. 1uring the initial stages of this strategy, Avon started to re%ove itself fro% its core %ar#et of selling to wo%en. $he results were downward revenue trends and slow growth throughout the .660>s which resulted in several ta#eover ids. 9nfortunately, -ears Roe uc# and 83 Penny do not really resonate well with eing a carrier of wo%en)s eauty su&&lies. $he na%e -ears? have een associated with a&&liance and not eauty &roducts. $he %ove of aligning with this co%&anies and trying to sell higher end eauty &roducts will only &ush Avon in the o&&osite direction that it should e heading, which is to %ove ac# towards tailoring to wo%en do%estically and glo ally. 7ver the years, Avon has e@&erienced several &ro le%s leveraging its rand in %any of its &roduct lines. As a result, &ositive net sales and earnings growth for the &ast five years have een in single digits and steadily declining year after year. -&ecific &ro le% areas are stagnated sales, slow earnings growth, li%ited distri ution ca&a ilities and shift in &ersonal care &references and s&ending ha its. Andrea 8ung)s &ro&osal to e@&and into certain retail %ar#ets will only &er&etuate Avon)s trend of declining net sales. $he &ro&osed &lan will indeed create an additional distri ution outlet and cater to this %ar#et seg%ent. 5owever, the question to e@a%ine is at what e@&ense or cost will Avon endure %a#ing this decisionA Avon has faced tre%endous &itfalls %ar#eting its &roduct lines to effectively increase rand loyalty and recognition. (@a%&les of this include the hair care &roduct line. Avon did not effectively develo& &roducts for ethnic hair ty&es. Additionally, Avon did not have a hair coloring &roduct line. As a result, Avon suffered in uilding rand awareness and loyalty with the younger generation as well as the older generation that also de%anded this &roduct. Avon has lost loyalty and rand recognition as a result of its decision to diversify into different industries and different &roduct lines. $his has resulted in a loss of %ar#et share drastically affecting annual &rofit %argins. $o e@a%ine the &revious question of what cost will Avon endure deciding to %ove into the retail %ar#etsA It is clear and evident+ the cost will e a further e@tension of the e@isting internal &ro le%s that Avon faces. 1eciding to %ove into the retail

%ar#et to create a store inside a store is not in Avon)s est interest. $his %ove would e a further e@&ansion of Avon)s &revious decisions to diversify into %ar#ets that do not have synergy and thus will hurt the overall randing of the co%&any. Binally, i%&le%enting Andrea 8ung)s &ro&osal to enter the retail %ar#et would e detri%ental to the already fragile state of Avon)s rand awareness, recognition and loyalty. Another factor for the under&erfor%ance of Avon in the late .660s is its failure to develo& the online usiness. Bor the fear of alienating its la or force, Avon down&layed the i%&ortance of develo&ing the e4 usiness. A co%&any cannot ignore the environ%ent and e@&ect to e successful in the long run. 1ue to its internal struggle with the internet strategy, Avon fell ehind other less esta lished co%&anies in ta#ing advantage of the e@&losive growth of the internet Avon)s a&&roach should uild on original direction and i%&le%entations however e@&anding as necessary to fit current trends and environ%ental assess%ents. $he focus should e on e@isting internal structures to uild, create and advance current &roduct lines. Avon)s focus should also e@ist in the field of technology to increase online selling o&&ortunities, u&date internet technology and to re4 rand the%selves to e a leader of online sells. $o acco%&lish this, strategy should focus on e@&anding #ios#s glo ally and do%estically. $he e@&ansion will leverage Avon y a&&ealing to the %ar#et seg%ent requesting additional distri ution channels. $his strategy will allow for trained eauty consultants to offer advice, education and sa%&les thus increasing rand awareness and loyalty. Cios#s will have %ini%al start u& cost and lower overheads. Bocusing on &roduct lines and catering to the needs and wants of each de%ogra&hic grou& will &revent the &revious &itfalls of lac# of integration and decreased rand awareness and loyalty. Cee&ing Avon)s &roduct offering se&arate and distinct will hel& e@isting challenges of randing. Bocusing on technology i%&rove%ents and online sales, Avon will have an o&&ortunity to e%erge as a leader in this area, thus adding additional channels of distri ution and a&&ealing to the overwhel%ing need. 9nder Andrea 8ung)s leadershi&, Avon has faced a nu% er of challenges. -o%e of these challenges were addressed successfully and others were not. In the early &art of D000, the %anage%ent tea% had the daunting tas# of choosing an a&&ro&riate strategy for the i%%ediate and long4ter% future for the co%&any. 7ne set ac# was a decrease in the fir%)s growth rate to single digits and stagnated earnings. Avon)s 3(7, Andrea 8ung, was &resented with a %ultitude of o&tions that ranged fro% distri uting through other de&art%ents stores, esta lishing #ios#s, to overhauling the fir%)s e4 usiness. 8ung was right in ac#nowledging that Avon)s core co%&etency is direct selling and its %a,or strength is its rand na%e. *y refocusing on the core co%&etency, i%&roving efficiencies, and ada&ting to the environ%ent with new initiatives, Avon could overco%e the hurdles of the &ast and turn the co%&any in the new direction. %uestion

1. #hat is your assessment of &ndrea /ungs performance as chief strategist at &von 0roducts* #hat has she done 'ell* #hat overall grade 'ould you give &ndrea /ung for the 1o) she has done as C-$*

Andrea @ung s performance as chief strategists at Avon products is that she has done excellent (ob. 9er first tas* was to hit the streets of her neighborhood, ringing doorbells, to better understand the desires of customers and needs of sales agents. %he pushed for the addition of attractive new products to Avon and its sales representatives. Andrea listened to the customers and grew global beauty category sales by new product development, sampling and more up#to# date advertising. The company was in serious trouble with annual sale growth of less than 1.A percent and a crashing stoc* price during the general economic boon in history. @ung too* the role of Avon lady to better understand what customers thought about company s product and within field of direct sales model. Avon s grand strategy under the leadership of Andrea @ung has its merits and is the grand strategy is properly focused and directed. Andrea @ung has clearly directed the successful transformation of Avon ;roducts !nc. by defining its vision as the company for women. "ith grand strategies in#place she is revitalizing Avon s reputation as the world s foremost direct seller of beauty products while leading the company into exciting new lines of businesses, launching a series of bold and image enhancing initiatives, and expanding career opportunities for people around the world. The strategic plan in place has its merits and the grand strategy is properly focused and directed. Currently, Avon is the world s leading direct seller of beauty and related products, with BC.C billion in annual revenues. Avon mar*ets to women around the world through 6.D million independent sales representatives. The evidence shows that @ung s grand strategies were sound. The argument that the grand strategies were not optimal and needed to be refocused was wea* due to the overall improvement of company performance and increase in shareholder wealth. Andrea @ung s charismatic communication s*ills and

management direction has catapulted Avon as a leader in the global beauty and cosmetic mar*et. ! would li*e to give Andrea @ung an &A' for the (ob as she has done her (ob well as C2,. %he developed great strategy for Avon that helped to increase in sales. Andrea @ung outlined new vision and strategic plan for Avon that call for highly innovative new products, build new line of business, critical lin* as internet in direct selling model and update its direct sales model to better fit 31st century. At age 6E @ung become C2, and in 3EE1, at age 63 she listed fourth on /ortune s ran*ing of the AE most powerful "omen in American 7usiness.

2. #hat is &ndre /ungs strategic vision for &von* Do you approve of the companys ne' strategic direction* /ustify your ans'er.

Andrea @ung s strategic vision for Avon was for them to be the company that understands and satisfies the product, service and self fulfillment needs for woman globally. ! thin* their new strategic direction made sense. %he *new products had to be made to fill the needs of different age group and races. !t was time for Avon to become more modern and up#to#date. @ung s view of new Avon was that of a company beyond selling cosmetics as trusted product which is needed by any women. %he was in customer convenient strategy in beauty and financial services. %he insisted that supporting women touches not only beauty, but health, fitness, self empowerment and most important financial independence. Fes, Avon s new strategic direction would launch an entirely new line of business, the development of innovative products, new pac*aging, new channels to the distribution, a new approach to supply chain management, new sales models and new approaches to image building. "hen Andrea @ung became Avon s new C2, in Govember 1DDD, the company s annual sales growth had slowed to less than 1.A percent and its stoc* price had fallen from a high of BAA to a three year low B3A. The strategies initiated by Charles ;errin had resulted in some improvement in 1DDH with modest sales

growth, but in late 1DDD Avon was in need of bold direction. "hen ;errin resigned because of his lac* in direct sales limitation, Andrea @ung need a fundamental change in direction. @ung understood the desires of customers and needs of sales agents. %he heard the customer grips over product colors, mishandled orders, unattractive pac*aging, lac* of innovative products and confusing promotions. $ltimately she discovered the structural obstacles to achieve in success. ;olicies for placing orders made difficult for sales agents to increase sales volume and commissions. "hen Andrea @ung stepped in as C2, of Avon, she brought with her many new, fresh ideas that helped ma*e Avon what it is today. 9er strategy didn t agree with what consultants thought, but she willingly too* ris*s to enforce what she believed to be the best strategy for Avon. "e believe that her strategy was good, solid foundation that will continue to *eep Avon at the top as America s number one selling Cosmetic and 7eauty Company.

3. #hy 'as it time for &von to fundamentally change direction*

/or promoting direct#sales through consumer and the business+ one is to offer incentives to its customers and second is to motivate the business to promoting its products by advertisements, establishing sales competition for employees, participating in conventions, and by endorsing franchise of its products to retail stores. ;romoting Avon s products and high chance of increasing direct#sales is to offer incentives to its consumers. !ncentives provide a positive motivational influence to encourage and excite buyers to buy the products. %uch incentives, appropriate for this situation, are coupons, rebates, product samples and awards. Coupons can be attached in mail, beauty magazines, newspapers, and advertisements on mail or on the internet company s official website. <ebates

can be offered also to attract more buyers to buy the products. <ebates can be advertised also on coupons through mail or the internet. Another successful way of attracting consumers is by offering samples of Avon s cosmetic products, which can be done door#to#door or attached on an advertisement through mail. /inally, awards through prizes, contests or sweepsta*es can offer consumers the chance to win something small or big li*e cash or free#trips. Also, prizes can be offering a free gift whenever a consumers purchase one of Avon s products. This last incentive option attracts more attention from consumers than the three other options. 4otivate the Avon business to reach its goals of promoting its products and gaining sales through advertisements, sales competition, participating in conventions and endorsing franchise. Advertising is the *ey to attracting consumers and the outcome is high sales. %uch advertisement is done through media -television., mail, or the internet. The more awareness from the public of the company li*ely to attract more buyers and the outcome is high sales. The next option is to encourage Avon s sales representatives with awardsIprizes that reached their sales goals within a period of time. Another is participating in conventions and this is more li*ely to increase sales through direct contact with customers. >ast is to endorse franchise of Avon s products with small and big cosmetic#related retail stores, such as 4acy, @C ;enny, etc. This option can be most li*ely increase sales and in turn profit which is any company s ultimate aim.

4. ,lluminate fe' challenges came in front of &ndre's leadership time.

Jey elements to Avon s strategy under previous C2, were set to sell directly to consumers via independent sales representatives wor*ing on commission. Avon catered to mostly upper middle income females and focused almost exclusively on $% cosmetic mar*et. Andrea @ung initiated expansion into mar*ets outside $% ma*ing Avon products available online, and began selling Avon products through retail channels. %he also instituted a more upscale pac*aging to match the loo* of prestige cosmetic

brands. %he focused on a low costI low price strategy and focus to sale to low and middle income families. Andrea s new strategy was li*ely to improve Avon s financial performance and help build a competitive advantage. 9er approach is sensible in light of what competitors are doing and the position they hold in the mar*et place. Avon is highly bac*ward integrated, self#manufacturing many of the items that they sell. This causes the competitive pressures of suppliers to be wea*. Avon can get supplies from many parts of the world because they have entered foreign mar*ets and produce products in different countries. A lot of Avon s supplies such as pac*aging, may be easily substituted if a supplier raised prices. $nder Andrea @ung s direction, Avon is focusing on developing nations especially China. 4any developing countries are more receptive to direct selling by women since (obs with Avon are opportunities for women who want to be independent in the male dominated cultures. Avon has also recognized that the demographics has changed and recruiting younger women to sell to the younger customer base. Competitive pressures stemming from customer buying power is moderate because switching costs are low and customers have the ability to fulfill their needs by switching brands. 7uyers tend to be well informed about Avon s product prices and costs largely due to the !nternet and this put customers at a position of higher bargaining power. Customers do not pose a threat of integrating bac*wards, because it would not be easy for women to develop their own ma*e#up, perfume or s*in care products. )ue to the direct selling business model, there is an extremely large number of buyers. Another Avon ob(ective that aims to alleviate pressures coming from competing sellers includes consists of reinventing their anti0uated image. <ealizing this, @ung endorsed the "illiams sisters. ?enus and %erena "illiams were popular teen icons that portrayed the image where @ung hoped to achieve for Avon+ young, powerful, and ambitious.

". Conclude the case in )rief.

Andrea @ung represents a great strength to Avon ;roducts !nc. <egardless of gender, any C2, who can ta*e a company with a AE percent drop in share price and raise company stoc* by 1K6 percent in five short years shows insightful leadership and effective management. !n addition to the financial success, 4s. @ung has also played a vital role in Avon s public relations arena. %he shows an amazing ability to connect with a variety of shareholders and the public. 9er ability to communicate with all levels of an internationally diverse Avon staff and public contribute to Avon s ability to successfully implement strategic changes in direction. Fes, Andrea @ung s vision of what she wanted to accomplish as C2, of Avon included a strategy to+ improve brand image, introduce new products, increase use of the internet as a channel of distribution, provide greater incentives and opportunities for the sales force, reduce unnecessary costs in the value chain, and continue to expand into global mar*ets. ;roduct innovation was a large part of @ung s strategy for Avon. !n fact, in 1DDD she challenged Avon s <L) team to develop a new product within two years. !n less than one year Avon introduced Anew <etroactive, an anti#aging s*in cream. !t achieved record sales for Avon and led to the development of other successful lines of business. !n less than one year Avon introduced Anew <etroactive, an anti#aging s*in cream. !t achieved record sales for Avon and led to the development of other successful lines of business. /or example, Avon "ellness products exceeded sales estimates by 5EEM. ,ne problem that Avon faces is the strong competition within fields they are trying to expand into. Avon is mar*eting a nutritional product line called "ellness, which includes vitamins, supplements, bars, etc. This mar*et is competitively strong. 7eing ahead of the industry in introducing new products combined with the company s already strong mar*et position could further improve Avon s brand e0uity and therefore revenues. !n particular, Avon should continue to integrate sales representative into all aspects of sales. This is Avon s own *ey success factor and what sets them apart from their competitors.

"ith the growing popularity of the internet as an outlet of commerce, @ung was compelled to implement internet sales into her strategy, realizing that the &Avon >ady' is the distinctive core competency for Avon in new pro(ects.

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