Products, Inc.: The Personal-Care Industry
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Problem:
Which strategy should be chosen for business development to guarantee companys growth, prosper, and triumph against competitors in the near, intermediate, and longer-term future?
Competition:
Rivalry among competing sellers in the beauty products industry is strong. The creation of innovative products is vital to success. This industry focuses on continually developing cutting edge products using the latest science and technology. Rivalry is stronger when customers costs to switch brands are low. Switching costs in the personal care industry are very low, due to the large amount of different brands of similar products. This cost is due to the higher number of competitors in the personal care industry and their tendency to copy new products in order to stay competitive.
While there is strong competition in the beauty products industry, there is a weak threat of new entrants and an even lesser threat of substitute products. The market is comprised of major players who have the ability to invest millions in marketing and R&D. This makes keeping up with innovative products extremely difficult. These organizations also have established relationships with retailers and suppliers and hold a certain amount of control within the industry. New company products are viewed as fads and are short lived. Small companies cannot compete in store with the bigger companies for shelf space.
Symptom:
In November of 1999 Avon was experiencing economic troubles. Avons growth rate of annual sales was less than 1.5 percent during the greatest economic boom in history
Alternatives:
Nonexclusive partnership with Sears and J C Penney Department stores
Pros:
New distribution network (very important factor for success)
Financially appropriate because expenses will be carried by partnership stores
Cons:
Risk of weakening of its brand image
Global market coverage and sufficient financial resources are essential to supporting extensive advertising
disappointment of sales representatives
Online sales through the sales representatives or directly through the company