The Newest Avon Lady—Barbie! Selling Tradition "Ding-dong, Avon calling." With that simple advertising message over the past 112 years, Avon Products built a $4 billion worldwide beauty-products business. Founded in 1886, and incorporated as California Perfume Products in 1916, Avon deployed an army of women to sell its products. These "Avon ladies," 40 million of them over the company's history, met with friends and neighbors in their homes, showed products, took and delivered orders, and earned sales commissions. Through direct selling, Avon bypassed the battle for retail space and attention waged by its competitors in department stores, and later in discount drug stores and supermarkets. Direct selling also offered convenience for the customer, coupled with personal beauty-care advice from a friend. Avon's plan worked well. Most members of its up to 500,000-member U.S. salesforce were homemakers who needed extra money but did not want a full-time job outside the home. They developed client lists of friends and neighbors whom they called on from time to time. Customers could also call them between visits. Recruiting salespeople was easy, and a good salesperson could develop a loyal core of customers who made repeat purchases. Avon paid the salespeople a commission based on their sales, and a successful salesperson could earn an attractive income. Times Change However, during the 1970s and 1980s, the environment changed. First, more women found that they needed to work outside the home. As a result, when Avon ladies rang the doorbell, often no one answered. Second, many Avon ladies decided that they needed more than part-time jobs, and Avon's annual salesforce turnover rates soared to more than 200 percent. Third, because of high salesforce turnover, many Avon customers wanting to see a salesperson could not find one. Fourth, more competitors, such as Amway, Mary Kay Cosmetics, and Tupperware, were competing for the pool of people interested in full- or part-time direct selling jobs. Finally, in addition to all those factors, increasing mobility of the U.S. population meant that both customers and salespeople were moving. This made it difficult for salespeople to establish loyal, stable customer bases. A New Strategy To deal with these issues, in 1988 Avon Products tapped James E. Preston to serve as its chair and chief executive. Preston decided that Avon needed to overhaul its marketing strategy. First, he refocused the company on its core business—selling cosmetics, fragrances, and toiletries—and sold unrelated businesses. Next, he drastically cut prices on Avon products. Finally, he tried a new compensation program called "Leadership" that allowed sales representatives to earn up to 21 percent in bonuses based on the sales of new representatives they recruited. Such multilevel selling is common among direct-sales companies. However, by late 1991, Avon killed the program, arguing that it did not fit Avon's culture. Preston believed that Avon had left as many as ten million former or potential customers stranded. These customers wanted to buy Avon products, but salesforce turnover meant that they did not know how to find a salesperson or order products. Fourteen percent of American women accounted for one-third of Avon's sales. Another 62 percent were fringe customers. These customers viewed Avon positively but did not buy regularly. Another 15 percent of American women were potentially receptive to Avon but were not necessarily interested in dealing with a traditional Avon sales representative. Thus, Preston decided to develop another program he called "Avon Select." The program featured a catalog and toll-free telephone number that allowed direct-mail selling. Avon's research revealed that its median customer was 45 years old and had an average household income of under $30,000. The catalog would reach younger, higher-income customers. Preston believed that, with a catalog, the company could cut the median customer age to 38 and increase average household income to more than $30,000. Avon supported the catalog program by kicking off a national advertising campaign that featured the slogan "Avon—The Smartest Shop in Town." To fund the advertising, the company cut sales commissions and incentives and laid off scores of executives. As you might imagine, all these changes created lots of turmoil at Avon including three different heads of the U.S. operation in a short period. However, Preston vowed to keep pursuing changes. To keep customers, "change we did, change we must, and change we will," Preston asserted. To make good on his promise, he launched a $30 million ad campaign in 1994 with the theme, "Just Another Avon Lady." Market research showed that, despite all Avon's changes, consumers still thought of "Ding-dong" and the Avon lady when asked what they associated with the company. Observers wondered if the use of the term lady in the mid 1990s would cause negative reactions among many women. After all, even Avon had avoided using the term in advertising for 20 years. Between 1992 and 1996, Avon's sales and profits rose slowly but steadily, driven primarily by sales in international markets. Then, in late 1997, Avon announced what might be its most radical change yet. It announced that it would soon test the idea of selling its products through retail stores. Although the company had been using retail stores in some foreign markets for years, this approach would be new to the U.S. market. Preston argued that no matter how great Avon's products were, many customers just weren't interested in buying from Avon ladies in a one-on-one situation. To pacify the company's 440,000 U.S. sales reps, Avon said it would consider giving them a share of the new business either through franchising or referrals from the stores. It also announced that it would cut its product line by 30 percent in order to put its marketing resources behind fewer products, pursue the creation of global brands out of several of its skin care and cosmetics products, and standardize its promotion efforts using the same promotions for its products around the world. Global Reach The value of Avon's global reach and it 2.3 million sales representatives worldwide had not gone unnoticed by other firms wanting to crack international markets. Mattel, Inc. announced in 1997 that it would partner with Avon to allow its salespeople to begin selling its Barbie dolls. In a 1996 test, Avon sold $43 million worth of two versions of Barbie, including more than one million of one version in just two weeks. Andrea Jung, Avon's president of global marketing noted that, "Our powerful distribution channel combined with their powerful brand is a huge opportunity." Companies like Mattel are attracted to direct salesforces like Avon's for several reasons. In international markets, the companies do not have to wait for retailers to build stores if they use a direct salesforce. Further, in many developing economies, being a direct sales rep may be the most attractive job for many women, thus making recruitment easy. However, there are problems. Turnover is often high, and many sales representatives are not really committed to the company. Further, many don't have formal business training or basic skills needed to perform their duties. Although Avon and Mattel limited distribution to the U.S. market initially, they planned to have Avon ladies selling Barbies in China as early as spring 1998. Mattel would introduce an "international Barbie," but she did not look Asian. In an earlier test in Japan, Mattel found that Asian girls preferred the standard American Barbie. Avon also planned to introduce a Barbie-branded line of toiletries and fragrances for girls in the U.S. and abroad. However, in early 1998, the Chinese government threw a monkey wrench into Avon's plans. The government announced that it was banning direct sales throughout the country. Government officials were responding to news reports of bogus sales schemes in which salespeople duped unsuspecting customers into spending their savings on over-priced, inferior goods. Further, officials believed that the direct-selling companies used their sales meetings to start secret societies and sell smuggled or fake goods. The ban prompted protests from the affected companies, like Avon, Mary Kay, and Amway, as well as the U.S. government. In addition, thousands of salespeople rioted in several Chinese cities, protesting the loss of their jobs. By mid-June 1998, however, Avon had successfully negotiated with the Chinese government to restart its business. Avon agreed to operate as a wholesaler, selling its products to retail stores and converting its 75 branch centers into retail outlets. The new arrangement meant that Avon's 50,000 sales representatives would lose their jobs. Despite the obstacles, Avon and other companies are committed to opening the Chinese market. China accounted for only about 1.5 percent of Avon's sales in 1998, but the potential was huge. Most Chinese consumers have little money, no credit cards, no telephones, and no direct way to get merchandise. The most common means of distribution are the China Post Office, hand-delivered door drops, and on-street distribution. There are also few customer lists available that direct-marketing firms can use. However, the Chinese population is developing into a discerning group that prefers quality products that meet their needs. Chinese customers believe that aggressive promotions cheapen a product. They like American-made products that companies promote tastefully. They particularly like cosmetics, jewelry, and entertainment products, especially if they are associated with celebrities. Direct marketers are also learning that they should not view China as a single market. The stereotype of 1.3 billion, low-income people living in rural areas is simply not true. China has the largest urban population in the world. By 2000, savvy marketers realized that the true Chinese market is the 400 million consumers living in a set of urban centers along the Chinese coast. Avon has shown its willingness to make changes and face challenges. Taking Barbie to China is just the latest challenge.
Questions:
3.1 With the help of the CAGE framework, discuss the challenges and opportunities that Avon is likely to encounter in entering the Chinese market. [15]
3.2 With the help of Porter’s Five Forces framework, analyse the chances of Avon’s succeeding in going global/ international market and provide recommendations to the company executives. [15]
In: Operations Management
Completion is only granted for questions that require a graph if your answer includes:
A clear and completely labeled graph.
A clear statement of what curve(s) are changing.
Why those curve(s) are changing.
A clear statement of what is happening to the equilibrium values of the variables in the model.
1) A survey indicated that chocolate is the most popular flavor of ice cream in America. For each of the following, indicate the possible effects on demand, supply, or both as well as equilibrium price and quantity of chocolate ice cream.
a. A severe drought in the Midwest causes dairy farmers to reduce the number of milk-producing cattle in their herds by a third. These dairy farmers supply cream that is used to manufacture chocolate ice cream.
b. A new report by the American Medical Association reveals that chocolate does, in fact, have significant health benefits.
c. The discovery of cheaper synthetic vanilla flavoring lowers the price of vanilla ice cream.
d. New technology for mixing and freezing ice cream lowers manufacturers’ costs of producing chocolate ice cream.
2. In a supply and demand diagram, draw the shift of the demand curve for hamburgers in your hometown due to the following events. In each case, show the effect on equilibrium price and quantity.
a. The price of tacos increases.
b. All hamburger sellers raise the price of their French fries.
c. Income falls in town.
d. Hot dog stands cut the price of hot dogs.
In: Economics
Using an excel spreadsheet to present your work, calculate the projected revenue collected from federal income taxes, state income taxes, and the local payroll tax for FY 2014 and prepare a revenue estimate for the City of Newark’s Public School System for FY 2015 based on the following information. Assume that no other deductions came from the employee’s salary other than what is listed here. Hint: New employees are not eligible for raises, which are based on performance from the previous fiscal year. (See Table below for format. You are to prepare two spreadsheets (projected revenue and revenue estimate))...Show formulas for calcualtions
FY 2014 Facts:
1 The school system currently has 34 full-time employees. There is one superintendent, two principals, three janitors, ten kitchen staff, and eighteen teachers (including coaches).
The superintendent has a salary of $95,000
Each principal has a salary of $70,000
Four of the teachers (Teacher A) had salaries of $55,000; six teachers (Teacher B) had salaries of $45,000 and six teachers (Teacher C) had salaries of $40,000
The remaining two teachers (A Level) are also coaches. The football coach receives and additional $5,000 in salary and the basketball coach receives and additional $7,000 in salary each year.
Mrs. Jones manages the kitchen. Her FY 2014 salary was $45,000
The remaining kitchen staff made $28,000 each in FY 2014
The three janitors made $25,000 each in FY 2014
Use these federal income tax rates: $0 - $8,700.99 = 10%; $8,701 - $35350.99 = 15%; $35,351 - $85,650.99 = 25%; $85,651 - $178,650.99 = 28%; $178,651 - $388,350.99 = 33%; >$388,351 = 35%. The tax rates were the same in FY 2014 and FY 2015.
The state income tax rate is 4% for the first $3,000 of employee salary and 5.5% on everything above that amount. The rate is the same in both years.
The local payroll tax is 1.75% in FY 2014 and 1.85% in FY 2015.
FY 2015 Facts:
In FY 2015, the school system hired two more teachers at the Teacher D level. They will begin work in FY 2015 at a salary of $35,000.
In FY 2015, each school employee received a 5% raise except the principals and superintendents. They received a 2% raise. Note, new employees, do not receive a raise.
Position Description # in Grade FY 2014 Salary Fed Inc. Tax State Inc. Tax Payroll Tax Total Taxes
Superintendent 1
Principal 2
Teacher (A) 4
Teacher (B) 6
Teacher (C) 6
Janitor 3
Kitchen Manager 1
Kitchen Staff 9
Football Coach 1
Basket Ball Coach 1
Total 34
In: Accounting
Most motivation theories in use today were developed in the
United States by Americans and about
Americans. Of those that were not, many have been strongly
influenced by American theories. But
several motivation theories do not apply to all cultures. For
example, Maslow’s theory does not often
hold outside the United States. In countries higher on uncertainty
avoidance (such as Greece and Japan)
as compared with those lower on uncertainty avoidance (such as the
United States), security motivates
employees more strongly than does self-actualization. Employees in
high-uncertainty-avoidance
countries often consider job security and lifetime employment more
important than holding a more
interesting or challenging job. Also contrasting with the American
pattern, social needs often dominate
the motivation of workers in countries such as Denmark, Norway, and
Sweden that stress the quality of
life over materialism and productivity.
When researchers tested Herzberg’s theory outside the United
States, they encountered different
results. In New Zealand, for example, supervision and interpersonal
relationships appear to contribute
significantly to satisfaction and not merely to reducing
dissatisfaction. Similarly, researchers found that
citizens of Asia, Canada, Europe, Latin America, the Republic of
Panama, and the West Indies cited certain
extrinsic factors as satisfiers with greater frequency than did
their American counterparts. In other
words, the factors that motivate U.S. employees may not spark the
same motivation in employees in
other cultures. Some of the major differences among the cultural
groups include the following:
1. English-speaking countries such as England and the United States
rank higher on individual
achievement and lower on the desire for security.
2. French-speaking countries and areas such as France and the
province of Quebec in Canada,
although similar to the English-speaking countries, give greater
importance to security and
somewhat less to challenging work.
3. Northern European countries such as Sweden have less interest in
getting ahead and work towards
recognition goals and place more emphasis on job accomplishment. In
addition, they have more
concern for people and less for the organization as a whole (it is
important that their jobs not
interfere with their personal lives).
4. Latin American and Southern European countries find individual
achievement somewhat less
important; Southern Europeans place the highest emphasis on job
security, whereas both groups of
countries emphasize fringe benefits.
5. Germany ranks high on security and fringe benefits and among the
highest on getting ahead.
6. Japan, although low on advancement, also ranks second-highest on
challenge and lowest on
autonomy, with a strong emphasis on good working conditions and a
friendly working environment.
Critical Thinking Questions
1. In today’s global business environment, with its
diversity of perspectives, can a manager ever
successfully use equity theory? Why or why
not?
2. What impact, if any, do these cultural differences have
on managers managing an entirely American
workforce? Explain.
I need help with both questions
In: Operations Management
AugRealElectronics is a midsized electronics manufacturer. The company president is Shelly Couts, who inherited the company. The company originally repaired radios and other household appliances when it was founded over 70 years ago. Over the years, the company has expanded, and it is now a reputable manufacturer of various specialty electronic items. You, a recent business school graduate, have been hired by the company in its finance department.
One of the major revenue-producing items manufactured by AugReal is a smart phone. AugReal currently has one smart phone model on the market and sales have been excellent. The smart phone is a unique item in that it comes in a variety of tropical colors and is preprogrammed to play Jimmy Buffett music. However, as with any electronic item, technology changes rapidly, and the current smart phone has limited features in comparison with newer models. AugReal spent $750,000 to develop a prototype for a new smart phone that has all the features of the existing one but adds new features such as Pokémonluring and capturing. The company has spent a further $200,000 for a marketing study to determine the expected sales figures for the new smart phone.
AugReal can manufacture the new smart phone for $205 each in variable costs. Fixed costs for the operation are estimated to run $5.1 million per year. The estimated sales volume is 64,000, 106,000, 87,000, 78,000, and 54,000 per year for the next five years, respectively, and no sales after the fifth year. The unit price of the new smart phone will be $485. The necessary equipment can be purchased for $34.5 million and will be depreciated on a seven-year MACRS schedule (see Table 6.3, p. 175). It is believed the value of the equipment in five years will be $5.5 million.
Net working capital for the smart phones will be 20 percent of sales and will occur with the timing of the cash flows for the year (i.e., there is no initial outlay for NWC). Changes in NWC will thus first occur in Year 1 with the first year's sales. AugReal has a 35 percent corporate tax rate and a required return of 12 percent.
Shelly has asked you to prepare a report that answers the following questions:
QUESTIONS
REPORT STYLE
Remember that your boss is a smart business person, but she is not a financial analyst like you. You should lead her through the logic of your analysis to your conclusions. Be sure your report is accurate and professional: your job (grade) is on the line!
The report should be single-spaced within paragraphs and double spaced between paragraphs. Use headings for major sections. Include page numbers. Use Times 12-point font. Pay attention to grammar and writing style. Write your report in third person, active voice. Include Excel Worksheet Objects as tables in the body of your report that show the numbers involved in your analysis. Include a memo to your boss as the cover/transmittal page. The memo should present your primary conclusions in a bullet list.
Your submission should be a single Word document (maximum of 6 pages) uploaded into Canvas. I will use the attached rubric in the grading process. “Paste object” to put your cash flows from Excel into your Word file. This allows me to simply click on your tables to see the match behind your calculations. DO NOT USE EXCEL LIKE A TYPEWRITER. That is, let Excel do the calculations. Don’t do the calculations with pen and paper or a calculator and then simply type in the numbers into an Excel sheet. I want to see that you can use Excel for this assignment and that you understand the concept of pasting an object rather than a picture from Excel to Word. Failure to use Excel in the manner described will result in a significant grade penalty (50%?) even if your numbers are technically correct.
In: Accounting
(EBIT-EPS analysis) Bill and Kate Theil are not only husband and wife but entrepreneurs who have established three successful businesses. The proposed plan for their latest effort involves a series of international retail outlets to distribute and service a full line of ingenious home garden tools. The stores would be located in high-traffic cities in Latin America such as Panama City, Bogotá, São Paulo, and Buenos Aires. The entrepreneurs have proposed two financing plans. Plan A is an all common-equity structure. Five million dollars would be raised by selling 200,000 shares of common stock. Plan B would involve the use of long-term debt financing. Three million dollars would be raised by marketing bonds with an effective interest rate of 15 percent. Under plan B, another $2 million would be raised by selling 80,000shares of common stock. With both plans, $5 million is needed to launch the new firm's operations. The debt funds raised under plan B are considered to have no fixed maturity date, because this portion of financial leverage is thought to be a permanent part of the company's capital structure. The two promising entrepreneurs have decided to use a 22 percent tax rate in their analysis, and they have hired you on a consulting basis to do the following:
a. Find the EBIT indifference level associated with the two financing proposals.
b. Prepare income statements for the two plans that prove EPS will be the same regardless of the plan chosen at the EBIT level found in part a.
In: Finance
Assume you are a manufacturer of small kitchen electrics, and you want to determine if some innovative feature designs with unusual shapes and colors developed for town up –scale household dwellers could be successfully marketed even in the neighboring countries.
[10 Marks]
In: Accounting
The water works commission needs to know the mean household usage of water by the residents of a small town in gallons per day. Assume that the population standard deviation is 2.2 gallons. The mean water usage per family was found to be 15.8 gallons per day for a sample of 669 families. Construct the 90% confidence interval for the mean usage of water. Round your answers to one decimal place.
In: Statistics and Probability
"The Role of the Room Rate" Analyze the hotel market in your state and determine if the room rates for the majority of hotels is elastic or inelastic. Explain your rationale and identify contributing factors (e.g., tax rates, competition, etc.). Imagine opening a small hotel in the town in which you attend class, Briefly describe the hotel and determine how you would determine the proper room rate.
In: Operations Management
Consider the following advertising game between two restaurants in a small town in Raub.
| Do Not advertise | Advertise | |
| Do Not advertise | 3,3 | 0,4 |
| Advertise | 4,0 | 1,1 |
a) Find the Nash equilibrium if the restaurants need to make
their decision
simultaneously.
b) If the game is played repeatedly for an infinite number of
times, calculate the discount
factor that will make cooperation sustainable if the restaurants
are using grim trigger
strategy.
In: Economics