Avon Products SWOT Analysis / Matrix

Essays, Term Papers & Research Papers

SWOT analysis is a vital strategic planning tool that can be used by Avon Products managers to do a situational analysis of the company . It is an important technique to evalauate the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Avon Products is facing in its current business environment.

The Avon Products is one of the leading companies in its industry. Avon Products maintains its prominent position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the organization such as – marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Avon Products to develop four types of strategies:

SO (strengths-opportunities) Strategies
WO (weaknesses-opportunities) Strategies
ST (strengths-threats) Strategies
WT (weaknesses-threats) Strategies

SWOT Matrix Strategies Objective

The primary purpose of SWOT matrix is to identify the strategies that a firm can utilize to exploit external opportunities, counter threats, and build on & protect Avon Products strengths, and eradicate its weaknesses.

Step by Step Guide to Avon Products SWOT Analysis

Strengths of Avon Products – Internal Strategic Factors

As one of the leading companies in its industry, Avon Products has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Avon Products are –

Highly successful at Go To Market strategies for its products.
Superb Performance in New Markets – Avon Products has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
Successful track record of developing new products – product innovation.
Strong Brand Portfolio – Over the years Avon Products has invested in building a strong brand portfolio. The SWOT analysis of Avon Products just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
Automation of activities brought consistency of quality to Avon Products products and has enabled the company to scale up and scale down based on the demand conditions in the market.
Highly skilled workforce through successful training and learning programs. Avon Products is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.

Weakness of Avon Products – Internal Strategic Factors

Weakness are the areas where Avon Products can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

The profitability ratio and Net Contribution % of Avon Products are below the industry average.
Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Avon Products needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
Investment in Research and Development is below the fastest growing players in the industry. Even though Avon Products is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Avon Products has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Avon Products

Opportunities for Avon Products – External Strategic Factors

Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Avon Products to capture new customers and increase its market share.
The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Avon Products to increase its profitability.
New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Avon Products to drive home its advantage in new technology and gain market share in the new product category.
Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Avon Products’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Avon Products. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Avon Products in other product categories.
Government green drive also opens an opportunity for procurement of Avon Products products by the state as well as federal government contractors.
The market development will lead to dilution of competitor’s advantage and enable Avon Products to increase its competitiveness compare to the other competitors.

Threats Avon Products Facing - External Strategic Factors

Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
Rising raw material can pose a threat to the Avon Products profitability.
New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
Liability laws in different countries are different and Avon Products may be exposed to various liability claims given change in policies in those markets.
Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.

Limitations of SWOT Analysis for Avon Products

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.

Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Avon Products
SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.

Weighted SWOT Analysis of Avon Products

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Avon Products managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.

Limitation of Weighted SWOT analysis of Avon Products

This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.

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Example of Weighted SWOT Analysis

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SWOT Worksheet & Template

If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.

References / Citations & Bibliography

M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)