In analyzing Avon business model using the five competitive forces reveals that Avon is loosing revenue and market share to competitors with revenues only climbing 3 percent in 1998 over 1997. To identify as to why Avon is failing a framework of Competitive Forces, Support Activities and Value Chain are used to analysis their business model. When the problems are identified then a solution can be offered.
The case study does not reveal that the bargaining power of suppliers or the bargaining power of customers is the major threat. To a degree these two bargaining powers could benefit Avon’s competitor if Avon’s competitors are able to effectively mine customer data thus producing a negative effect towards Avon because the competitors is able to ascertain product demand whereas Avon lacks data mining knowledge, has a disparate system of both in application and hardware, are order prone in fulfillment, have high turnover rate of sales representatives, and have an extremely high overhead.
However, the customers may have bargaining power if orders for products continue to increase in cost due to Avon’s continual increase in overhead and their decline in revenue. The customers could demand that products costs should be lower comparable to competitors products and this indirectly influences both the supplier bargaining power as well as the bargaining power of the customer. Ironically, the sales representative could also wield this barging power because the sales representative is the one placing orders in bulk and could use this leverage towards their revenue and still allow the customer their usual product cost.
The additional problem with Avon is that a threat of new entrants has entered in to their market causing the industry to change with respect to prices, customer loyalty, marketing channels, distribution channels, and along with other existing market players.