In every industry, competition if forcing companies to evolve and discard old practices. Firms must now conduct research to identify the specific needs of customers in order to develop products that best satisfy the needs. Market orientation recognizes that the customer is the most important person for any business.
Companies must make products tailor-made to satisfy customers’ needs. Avon employs a multi-faceted marketing orientation. This paper will demonstrate that effective market orientation has contributed to the company’s success.
Internationally, Avon decentralized its operations to empower managers make decision to develop and sell products tailored for the local customers (Cherunilam, 2010). In Brazil, for instance, country managers have opted to concentrate on sunscreen and moisturizer. In Asia, a large market population has a proclivity for creams that make the skin lighter.
European country managers have opted for fragrances and personal care products while those in South America have gone for health products. Avon has allowed Japan to employ technology that produces skin-hydrating creams. Through market research, the company has realized that Asian countries like Thailand prefer beauty products from foreign companies. Avon has capitalized on culturally based behavior to penetrate such markets.
Avon depends more on its foreign operations than on its U.S. operations for various reasons. Through market intelligence, the company forecasted that America’s market is likely to stagnate (Daniels, Radebaugh & Sullivan, 2010). The many cosmetics and fragrance companies had saturated the market making competition very stiff. This necessitates rigorous advertising and lowering prices in order to win and retain customers.
The resultant effect is increased cost of production and hence decreased profits. Avon therefore sought to avoid competition at home by venturing into untapped international market. Additionally, the company’s sales approach favors a global market more than the local market. Avon relies on direct sales to reduce the cost of advertising and number of employees, and therefore lower prices for customers.
In U.S., the company depended on part-time women to sell to their friends. With an increasing number of women taking up full time jobs, direct sales became infeasible for Avon. In contrast, women in developing nations still find it difficult to access cosmetics because of poor infrastructure. Avon’s direct sales strategy is their only means to access beauty products.
Several socioeconomic and demographic changes could affect Avon. The first change is increase or decrease in disposable income. If more people have little disposable income, Avon will be compelled to produce products tailored for this market segment. Market researchers argue that even as the number of poor people increases, their collective purchasing power does not decline (Ajami, 2006).
Avon can therefore harness this potential by developing products that cut across socioeconomic boundaries. Economists predict that in many countries of Asia, South America and Africa, the number of people moving from poverty to middle income category will increase (Ajami, 2006). People who have recently become rich are more materialistic and cosmopolitan than those who have always been rich. Avon can tap the potential presented by this new category of income earners.
A global recession can affect Avon’s operations in several ways. A booming U.S. economy in the 1980s and 1990s put many jobs into the economy (Cherunilam, 2010). Avon suffered because it relied on part-time women distributors. With the 2008 global recession, many people are finding it hard to find jobs. Avon has benefitted by gaining more distributors for its products. However, recession reduces disposable income for many families.
Effectively, therefore, it becomes difficult for customers to buy products that they previously bought with ease. While Avon may benefit from many jobless distributors, it may also suffer when the customers cannot afford its products. In transitional economies, a large part of the customers will spend their low income on necessities such as food and shelter.
Avon has competitive advantages that make it a big force in the cosmetics and beauty products industry. The direct sales approach the company adopted enables it to reach many people with a minimal budget. Distributors advertise the company’s products through word of mouth thus saving advertisement cost. Avon is therefore in a position to retail its products at a lower price than the market rates.
By choosing to go global early, the company has established its presence in less competitive markets. It is difficult for other companies to duplicate Avon’s advantages. To do so, it would require them to dismantle their entire marketing strategies, something that is risky for any company (Jansson, 2007). Avon has won a loyal clientele through direct sales. Any other company will have to incur many resources to outdo an already established competitor.
In the U.S., Avon does not sell in retail establishments except in kiosks handled by some of its representatives. This is beneficial to the company in many ways, but it also presents several challenges. The U.S. market is saturated and there is little prospect for growth. It is wasteful to invest where returns will be low.
Setting up retails will require additional cost that would force the company to increase prices. This will deny the company its most important competitive advantage. This approach may however present some challenges in future. Foreign markets are volatile because they depend on government policy and political stability (Jansson, 2007).
Reliable and consistent suppliers are very important for any business. It is vital that Avon engages firms that have a reputation for delivering their end of the bargain. The most effective criterion is to investigate the supplier’s corporate integrity. If the supplier has reneged on its contacts with other companies, it should be a red flag for Avon. Most importantly, Avon should investigate whether the supplier is reliable. Suppliers who are not reliable can bring the company to an abrupt halt.
Avon faces various challenges in maintaining and expanding its global manufacturing and supply chain. The market is becoming more competitive and dynamic. The direct sales method adopted by the company has led to tremendous success especially in the global market.
It however makes it hard for customers to get products any time and anywhere they need them. Continued reliance on catalogs has sidelined customers who find it difficult to discern colors (Paul, 2011). Despite these challenges, the company’s growth is assured by infiltration into less competitive markets. By selling bulk, the company’s future is looking up.
References
Ajami, R. A. (2006). International business: Theory and practice. Armonk, N.Y: M.E. Sharpe.
Cherunilam, F. (2010). International business: Text and cases. New Delhi: PHI Learning Private Limited.
Daniels, J. D., Radebaugh, L. H., & Sullivan, D. P. (2010). International business: Environments and operations. Boston, Mass: Pearson.
Jansson, H. (2007). International business strategy in emerging country markets: The institutional network approach. Cheltenham [u.a.: Edward Elgar.
Paul, J. (2011). International business. New Delhi: PHI Learning.