Analysis of Avon Company

Avon is a well-known beauty and household products company dealing mainly perfumes with their target market being women. Avon made use of the direct selling approach to reach out to its customers base which grew over the years. Performance of the company has varied over the years and here is a brief analysis of the company.

Financial ratio analysis

Generation of revenue at Avon has been on a constant decline since the year 2014 as shown in the balance sheet. Reduction in income is attributed to by the low sales recorded. Each year the net sales declined. Avon only had one method of boosting their sales which were direct selling; a method which eventually proved ineffective since it did not lead to any increase in sales. Avon should have employed other ways to reach out to customers. Strategies such as business promotion activities or advertising would have boosted sales. Direct selling method only reaches out to the few people in contact with the sales representatives. Advertisements, on the other hand, reach out to more customers including those who were not intending to make any purchases. Adverts would help create awareness to a broader market, boosting sales in return. As per the balance sheet, interest expense increased every year, contributing to the low total revenue. Avon made a massive loss in 2015 compared to the other years. In that year the company had a considerable amount of accounts payable and other accrued liabilities. They had too many payments to make from their income. Such expenses often reduce income and eventually lead to losses (Walter et al., 2013).

Balance scorecard

A balanced scorecard works on four areas or perspectives in an organization. These are the financial performance, customer, internal process and organizational capacity. Financial performance of Avon is not pleasing since their total revenue has decreased over the years as shown in the balance sheet. The company should devise ways of improving their sales. Customers at Avon however, have been served well over the past years. The method employed by Avon, direct selling gave the customers firsthand experience and a personal touch with the sales representatives. Customers had the opportunity to ask questions or clarifications and lodge their complaints. Most customers love such treatment as was offered by the company. They like to be made to feel special. Avon through direct selling won the hearts of many of its customers, a move which proved sufficient to the company. In recent years, the management in Avon did not have a stable/ consistent balance scorecard. Most of their plans and ideas did not go to the end. The new employees who probably came in with new ideas often left before the ideas could even be implemented. Some of the plans would have ideally worked. Avon should have taken time to select its expertise and give them a timeline to deliver, say five years. Viable ideas, in this case, would have grown into more and more profit. The company concentrated a lot on one line of product, perfumes. Diversification would have helped improve their sales and widen their customer base. Avon in 1998, changed their business tactics and stopped relying on direct selling alone. They ventured into retailing and marketing which worked well for the company (Delen, Kuzey & Uyar, 2013).

Intellectual Assets: Human Capital, Social Capital, and Technology

Avon often made drastic changes in the management structure, a strategy that cost the company a lot of losses. In 2005, the layers of management were cut down from 15 to 8. Consultants were hired in a bid to bring positive changes to Avon. Four years later another restructuring took place leaving the employees more devastated than before. There was a lot of friction between the managers since all had ideas that could not be merged into something positive. The leadership structure and the future of the company became questionable, leaving room for employee turnover. High turnover works against the company concerning the cost of hiring, training and the time lost in between. The frequent changes in the management were not practical since it did not give room for new ideas to be implemented. Avon had a five-year plan whose funding was cut short, leaving the whole plan and ideas to crumble. Such moves have an adverse effect on the general operation of the business, causing it to lag. The technology used in the company was up to standard, but they should have employed some state-of-the-art technology to improve their efficiency. New and better technology gets its way into the markets and should be embraced by Avon for better performance. Social interaction is for human beings as well as companies. Avon got into various partnerships which assisted with the funding and expansion of sales. Partnerships helped Avon launch and market their new line of products. The company partnered with celebrities and designers as brand ambassadors, further boosting the sales and awareness of their products into the markets. The increased awareness of the company gave it the confidence to enter into new and emerging markets (Moullin, 2017)

References

Delen, D., Kuzey, C., & Uyar, A. (2013). Measuring firm performance using financial ratios: A decision tree approach. Expert Systems with Applications, 40(10), 3970-3983.

Moullin, M. (2017). Improving and evaluating performance with the Public Sector Scorecard. International Journal of Productivity and Performance Management, 66(4), 442-458.

Walter, J., Kellermanns, F. W., Floyd, S. W., Veiga, J. F., & Matherne, C. (2013). Strategic alignment: A missing link in the relationship between strategic consensus and organizational performance. Strategic Organization, 11(3), 304-328.