PEST Analysis and Avon’s Competencies

Discuss about the Beauty Technology Interactive Computing Platform.

Avon is an American company that manufactures and sells beauty products globally. The company started the operations in 1886. The products of the company are categorized into beauty, fashion, and in the household sector. The beauty division has categories related to skin care, color cosmetics and also fragrances. Fashion consists of footwear, accessories, Jewelry and children products. In the category of the household products, the company offers decorative products, gifts and also nutritional products. The company conducts the operations in 65 countries and also offers products in 42 countries. In the first phase of the report, the main focus is given on the PEST analysis and also on the competencies of the Avon Company. Pest analysis elaborates about the political, economic, social and technological factors.

In this report, the discussion will be made on the strength and weakness of Avon Company and also Porter’s five forces Model will be explained.  In the last phase of the report, the focus will be given on the strategies of growth that should be taken into consideration by Avon to survive in the competitive market. Ansoff’s strategies like market penetration, product development and market development are also taken into consideration.

In the beauty industry there are various opportunities that are available for the company. Avon has an opportunity to restructure the initiatives for attaining the effectiveness. Innovation is considered as an important aspect that helps the company to enhance the products and profitability of the organization. The new and effective products should be invented by the company. Avon has the opportunity to develop more natural products and also to acquire large market that enhances the profitability of the organization (Burkhart, 2014). The pest analysis is conducted to analyze the threats and opportunities that the industry is facing:

Political factors play an important role in conducting the day to day operations of the company. Avon conducts the activities that are related to the personal and beauty products. To attain success in the industry of personal products it is essential to consider the political factors that can enhance the smooth working pattern of the organization. The company has used the website for marketing its products globally and also it has followed the copyright policy of the United Kingdom. There are many regulations that are applied on online purchasing and also that have no control with the seller. There are various regulations that are applied when the purchase is made by the consumers from the business (Wolf, 2013).The company also has a trademark that needs legal documents which gives permission to conduct the activities of the organization. Avon has also protected the trademark so that the consumers can buy without any difficulty and with proper safety. The product of the company covers many countries and also gives many approaches to women, to achieve financial independence and good performance. The products are provided at low cost and also various discounts are offered by the company.  If political differences are taken into consideration among the countries, then it can give direct influence on the corporate strategy of the company (Rothaermel, 2015).

Porter’s Five Forces Model

It is one of the dominant factors that give direct impact on the buying behavior of the customers for Avon products. The economic condition, inflation and also interest rate are taken into consideration at this point. The company is also affected by the fluctuation in the currency rate. This is considered as one of the important factors that give direct impact on the operations of the company (Fayol, 2016).There are 5.3 million representatives employed by the company and it offers products to sell in the market. The demands of the products are also affected by the economic ups and down. For example: In U.K the demand for the cosmetic products has increased. It clearly shows that at the time of recession the demand for the products increases. In this, the labor cost and productivity are also taken into consideration by the company (Vega and Fuks, 2013). In this factor, the impact is also given on the economic growth rate and on the unemployment rate. Economic factors take into consideration inflation rate, interest rate and the cost of labor and productivity in the economy.

The taste and preferences of the consumers keep on changing from time to time and also they are concerned with the local culture and personal working conditions. In different countries, just because of climate and environmental circumstances the need of the product also goes on changing. The company offers different cosmetic products for the consumers and this is one of the big concerns for the company to attain the goal that not only contains the similarities among various customers but also value the differences of their needs.

 The main objective of the company is to serve women all over the world by offering products that enhance the satisfaction level. Shared beliefs and attitude of the individual plays a great role to enhance the productivity and profitability of the company. In this factor, the focus is on the interest of the consumers. If the product satisfies the needs of the consumer, then it can be easily accessed, that the profitability can be enhanced in an effective manner (Daniels and Ganitsky, 2014).

The revolution and innovation of the technology give direct influence on the individuals. In the process of creating and developing the product the cosmetic industry always offers new products to the consumers. The strategy of the company is to increase the competitiveness of the brand by giving focus on developing the products. To enhance the success, the company also gives many advertisements of its products by using various channels of media. Technology also gives impact on the products that are offered to the consumers. If the latest technologies are used by the company, then it can be very easy to enhance the productivity and profitability of the company. For example: Earlier if the company produces 10 products in an hour. Now with the use of latest technology the company can easily produce 20 products in an hour. So, the latest technology has given positive impact on the productivity level.  With the use of latest technology, the direct impact is given on the value chain structure in consumer sector goods (Jordan, Hewitt and Beech, 2016). With the use of the latest technology like internet, it is easy for the business to conduct their activities in a proper manner. The company has an opportunity to reach a large audience with the help of the internet facility.

Strategies for Growth in the Competitive Market

If skincare products are considered of Avon, then it is seen that the company has a high market demand .To maintain the leadership position, Avon has introduced the radiance range in the market. In the hair care segment it has also developed the technology through which the consumers will get vibrant colors without damaging the health of the hair. The company understands the research that is required to be a leader of the industry.

 Strength is one of the important aspects of the organization, to survive in the competitive environment. Avon is considered as one of the largest company in the cosmetic industry.  It offers quality products to the consumers that give direct impact on the satisfaction level of the customer’s. The company is present in 100 countries and it covers a large geographical coverage. The company gives the main emphasis on individual branding that assists the consumers about the product in the market. The company also has an effective distribution channel that helps the customers to buy the products and services in a proper manner. Avon has a differentiated business model that emerges as a prominent player in the market. The company gives support to the sales activities by having the proper understanding of the customer needs and wants (Meihami and Meihami, 2014).

The main benefit to the organization is that it has a large workforce that helps to conduct the day to day operations of the business in a proper manner. The workforce is considered as an essential element for conducting the activities of the organization. The company also has a strong brand image in the market that induces customers to buy the products. Financial stability is also one of the strengths of the Avon Company through which the activities can be smoothly conducted.

It is evaluated that every organization consists of the weaknesses. By taking into consideration the Avon Company it is evaluated that the organization gives various products that come under the same group. It creates a huge problem for the organization to manage the products in an effective manner. Next weakness that is evaluated is related to the market share of the company. The company has a small market share in many areas that gives direct impact on the profitability of the organization (Yeon Kim, and Chung, 2011). The company should give focus on attaining the large market share in some areas so that the growth and profitability can be attained in a proper way. The cosmetic industry is also lucrative and innovative that has a short product life cycle for the Avon make up. The safety related with the cosmetic products is always under the scrutiny and it gives focus on the higher standards. The company should also give focus on eliminating confusing promotions, outdated catalogs and also the complaints of the customers should be resolved on the highest priority (Rani, 2014).

Opportunities and Threats in the Beauty Industry

Core competencies are considered as the resources and also the capability that gives competitive benefit to the organization. It is evaluated that in many cases the competencies of the company are compromised. Like manufacturing, financing, and marketing. The competency values of Avon consist of trust, respect, belief and also integrity. This is one of the mission statements to become the leader globally in the distribution of beauty products. The customers trust the products that the company offers and it is one of the core competencies of the company. As the company uses a door to door services,  it has given a great advantage and benefit to survive in the competitive environment (Vega and Fuks, 2014).The company trusts the products that are offered in the market (Caldwell, Floyd, Taylor and Woodard, 2014).

The company attains the sustainable competitive advantage, as it is evaluated that the customers give more preference to the Avon products as compared to other brands. The VRIN model is used by the company in which the resources of the company are used in an effective manner. The capability of the organization is related with enhancing the trust between the customers. Just because of the trust and believe the organization has attained growth and profitability. The positive impact is given on the operations of the organization. It is evaluated that the wise management and allocation of resources gives focus on attaining the high performance. It also asserts the significant role of the internal capabilities of the organization in creating a strategy. The strategy helps to attain the sustainable and competitive advantage (Huang, Dyerson, Wu and Harindranath, 2015).

• Brand name: Avon build good image in the market, so it is difficult to imitate the goods with the other products. It gives competitive advantage to Avon.
• Organizational culture: Company gives proper care to its customers by giving emphasis on enhancing the satisfaction level of the customers. So the culture of the company provides competitive advantage.
• Human resources: The population increases and also the company require employees to conduct the activities. The training is given to maintain competitive advantage.
• Capital resource: Avon conducting the activities in the market since long time and also the strong financial position is enhanced. The image of the company has enhanced the relations with various agencies. Avon capability is very rare and also the company has a sustainable competitive advantage.
• Distribution network: Avon has built huge distribution channels and also there are many offices globally. The resource of the company is valuable and also the company has sustainable competitive advantage.
• Leadership: There is a proper leadership in the organization and also the company has attained success in the market.
• Technology: The Company takes into consideration latest technology and also the products that are offered are safe for use. The resources are made by considering thee competitive parity.
• Physical resources: The Company has a large building and there are many offices. For conducting production the company has huge number of machines. The company has temporary competitive advantage.

The competitive industry gives direct focus on attracting consumers towards the company and also gives emphasis on capturing the large market share. By this, the impact is on the profitability of the company which is present in the industry. If the firm attains the customer loyalty, then it will not give effect on the entry of new firms. The company should give focus on enhancing the customer loyalty by innovating new products that meet the needs and wants of the customers (Brown and Gillespie, 2016).

In the cosmetic industry, the main threat is due to the new entry of the firms. The first factor is related to the huge cost of entry. It covers a huge cost as it requires a lot of resources to develop different cosmetic products. There are few firms that have enough funds and experts to conduct the operations of the organization. The second factor that reduces the entry of new firms in the industry is related to the high level of competition. Like Revlon, Lakme is the competitors that have a large market share and also gives direct impact on the profitability of other companies (Scranton, 2014).

Political Factors

The bargaining power of the consumers evaluates the power that the customers possess. It is concerned with the prices that keep on changing. The factor evaluates the power that the customers possess in considering the change in price level due to the change in the demand. When the consumer has a high bargaining power, then the manufacturer and seller cannot predict the future demand. It can create problem to attain long-term profits due to the unpredictable demand patterns. Cosmetic products have a high bargaining power of the consumers. This is only due to the enhancement in the rivalry of the cosmetic products from various manufacturers. These are the products that have a high substitute, so by this, the manufacturers keep the price of the product by evaluating the prices of the competitors. This is the major challenge that is faced by the manufacturers dealing in the cosmetic products (Johnston and Marshall, 2016).

This factor evaluates the control possessed by the suppliers. It is related to the change in the price of the products. Suppliers who have a high bargaining power do not influence the change in the price by using the techniques like hoarding and restraining supply. There are many strategies that are not legal in many countries but the suppliers still considers it, when they want to give direct impact on the change in the price level. The cosmetic industry is considered as an industry that has a low bargaining power of suppliers. This is just because of the reason that the number of players is high in the market and there is a large supply of the various products. There are various cosmetic products that are introduced by both the small and large manufacturers. Just because of the high supply, the consumers have the power to consider the prices of the market that are opposed to the suppliers (Racolta-Paina and Luncasu, 2014).

This factor arises when the products are similar in nature and are introduced by the competitor that enhances the satisfaction of the customer needs. When the customers have substitute products that satisfy the needs and wants, then the manufacturers and suppliers lose their bargaining power. The customers purchase the competitor product when they are not satisfied with the products that are offered by the company. To manage the challenge of the threat to substitute, the organization has to give focus on enhancing the innovative products that fulfill the needs and wants of the target market segments. In the cosmetic industry, there are a huge number of competitors that are present in the market (Cervellon and Carey, 2011).

Economic Factors

The high level of threat is analyzed in the substitute products. If the producers offer their products at high price or the product of the quality is low then the consumer will get attracted towards the substitute products that are available in the market. So it is important for the market players to be innovative so that they can survive in the market in an effective manner (Maurino, Reason, Johnston and Lee, 2017).

This factor is connected to the challenges that are faced by the firms. In this industry, the huge cost is associated. It consists of the costs for developing the products and also the research costs. There are many rivals who minimize the overall profits of the industry that makes a barrier to the entry. Due to the high cost that is related with developing the cost of production. There are various machines and equipment that are considered for developing the cosmetic products. The competition level is high, so to sustain in the market the company should adopt effective strategies (Hill, Jones and Schilling, 2014).

Due to increase in the competition level in the cosmetic industry, it is essential to apply a cost leadership strategy. It consists of pricing of cosmetic products that are lower than the competitors.  The cost leadership strategy will give focus on ensuring the cosmetic products that are cheaper than the competitors’ products (Kaur, Arumugam and Yunus, 2013).

In this strategy, the company can easily introduce innovative products by considering the dimensions that gives value to the buyers. It considers various features that the buyers can perceive as essential and unique to meet the requirements. It is concerned with uniqueness with a premium price.

This strategy should be taken into consideration by the company so that the cost focus that seeks an advantage of cost in the target segment can be attained. Next is differentiation focus that the company should consider to differentiate in the target segment.

The strategy of market penetration gives focus on the customer base of the company.  The company gives focus in enhancing the sales performance by taking into consideration various strategies like direct selling, internet marketing. By using these strategies the company competes in an effective manner in the existing market by using the products. The company also uses this strategy to enhance the sales without any shift in the original product market. Avon also gives emphasis on maintaining the quality of the products and also to attract the open market of non-users (Daniluk, 2016).

Social Factors

It is one of the essential elements of the company’s natural growth. By considering the recent scenario, innovation is the important aspect that helps the organization to sustain in the competitive environment. Avon introduced many products like lipsticks and also many skincare products, so that the large market share can be achieved. The company innovative products enhance the satisfaction level of the customers. Product development strategy is also taken into consideration by the company so that the customers get attracted towards the products. The company considers the strategy so that the market share can be protected and also the image can be maintained in the market (Jaiswal and Gupta, 2015).

Avon gives focus on identifying the new market for the existing market so that the growth can be attained in a proper way. The strategy gives direct impact on exploring the new use of the products and also adds customer base.

The company is trying to move into new territories so that the profitability can be enhanced.  Avon has taken into consideration many strategies and the present strategy is related to direct marketing and internet marketing. The expansion will also be analyzed in the product offering and in the market segment of the company. The company moved the jewelry of the market through its door to door sales force that is engaged in marketing of new products through the use of existing channels of distribution.

Conclusion

By examining the report, it is concluded that Avon is one of the largest industry that gives various products to the customers. The industry competitiveness is evaluated by using porter five force model and also the strategies related with the company is studied by considering Ansoff’s Model. It is also evaluated the company should give focus on enhancing the satisfaction level of the customers and also introduce innovative products in the market. It is essential to implement effective strategies, so that the company can easily attain the goals and objectives. To survive in the competitive background the company should give emphasis on introducing new products in the market.

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