ECON 165 Homework 8 PDF

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ECON 165 Homework 8 What strategy was Avon pursuing until the mid-2000s? What were the advantages of this strategy? What were the disadvantages? Avon’s strategy that grew the company to a multinational company was the direct-sales model. The advantages of this strategy is that Avon had a huge pool o...

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ECON 165 Homework 8 1. What strategy was Avon pursuing until the mid-2000s? What were the advantages of this strategy? What were the disadvantages? Avon’s strategy that grew the company to a multinational company was the direct-sales model. The advantages of this strategy is that Avon had a huge pool of representatives all around the world due to the simplicity of the strategy that allowed anyone to enter the market and start selling beauty products. However the disadvantage of this strategy is that there is lack of control in these representatives and the managers of each area or country they are selling in. Local managers started their own manufacturing and supply chain which furthered the inconsistency. Also, this strategy created many layers of management which made communication and accountability a problem. The main problem of the strategy is its inefficiency. 2. What changes did Andrea Jung make in Avon’s strategy after 2005? WHat were the benefits of these changes? Can you see any drawbacks? Realizing the problem Andrea Jung began to change Avon’s strategy with efficiency in mind. She shrunk the management layers to improve communication, performance visiblity and accountability. Manufacturing was consolidated to regional centers. Also product profitability was introduced and 25% of Avon’s products were cut. These changes made Avon’s complex multinational business model a simpler one where they could maximize the profits gained in each region. It also made it easier for Avon to achieve a more valued reputation as they focused on high quality. 3. In terms of the framework introduced in this chapter, what strategy was Avon pursuing by the late 2000s? By the late 2000s Avon pursued a global standardization strategy by expanding its direct-sales method through the increasing its sales force globally and the high cost reduction pressures to further push its ‘value for money’ idea. However Avon’s strategy is also similar to the transnational strategy because of the need for localization in which each country has its own representatives and therefore would tailor its products to the needs of the locals. 4. Do you think that Avon’s problems in 2010 and 2011 were a result of the changes in its strategy? The slow economies in 2010 and 2011 were a huge factor to Avon’s problems in this period. However, I think that some other internal problems with Avon that attributed to its slowdown include the fact that they did not have a strong enough structure to handle to upgrades/implementation of new technologies. Also the fact that they continued to pursue the direct sales method could have inhibited Avon’s success as their competitors had strong retail presence....