The Avon Products Case
Avon Products, Inc. is an international manufacturer and distribution of beauty, household, and personal care company that sells products through representatives in over 140 countries across the world.
As Andrea Jung became CEO of the group in 1999, profits has grown constantly at a 10% rate until 2005. Subsequently, some weaknesses in the business strategy emerged as the company started losing profits, in particular those coming from international markets (which amounted for 70% of Avon total revenues).
In order to react to this significant slowdown, Jung implemented a new business strategy which consisted of four fundamental operations: 1) Hiring of seasoned Mangers from global consumers top firms 2) 30% of Middle managers were fired
3) 25% of Avon products were discontinued As a result of this new policy, Avon started making again considerable profits and even managed to react positively to the crisis (Revenues rose to $ 3.15 bn in 2009, with $ 269 m of Net Profits).
Strategy and the Firm
The fundamental goal of the executives of a firm is to maximize the value of the firm for its shareholders. In order to achieve this goal, managers should focus their attention on increasing the profitability of the firm and the level at which the firmʼs profits grow. Three main factors, if correctly implemented, can substantially increase the firmʼs value: the Strategy, the Operations and the Organization of the company.
1) Strategy: Actions that managers take to attain the firmʼs goals. In this context, particularly important is the strategic positioning of the firm (Low Cost, luxury, Value for Money).
2) Operations: The various value creation activities a firm undertakes. Operations can be divided into Primary activities (R&D, Production, Marketing and Sales, Customer service), and Support activities (Information systems, Logistics, Human Resources).
3) Organizational Architecture: The totality of a... [continues]
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