Lesson-4

Discussion Questions(DQs)

4.1. Read: "Strategic Management in Action: Making Over Avon”

a. What went wrong with Avon? What went right

b. Is the independent sales representative still the most appropriate means for distribution for this company?

c. What do you think about the leadership changes? Should Jung completely remove herself from the company?

Be sure to support your work with specific citations from this week's Learning Resources and any additional sources.

Making Over Avon

Avon being the world’s top direct seller of cosmetics and beauty-related stuffs, it has been building a global brand and striving to get focused on youngsters for selling its products (Coulter, 2013). The company is selling and distributing its products over 100 countries with a sales force of 6.5 million representatives. The company did very well and got a remarkable result till 2010, but onward that, it started to face many challenges. This paper is likely to discuss about the Avon’s right and wrong, its sales representatives, and the leadership changes.

a)      The things that went right /and wrong with Avon

The things that went right for Avon include the increasing a global recognition, presence, good network of independent representatives, and a wide array of product lines for beauty items. Doing these things effectively would help the company to survive even in the global recession with an escalating profit margin, and as a result, the company achieved a remarkable result in 2010 (Coulter, 2013).

Despite these, the things that went wrong with Avon include the increased price of raw materials, operational inefficiencies and inability to execute its appropriate strategies. The company did not able to cope with these changes or challenges so its net income is reduced to $513.6 million and share price also dropped by 45 % in 2011 (Coulter, 2013).

For example, when Andrea Jung was hired as the first woman to operate the woman-oriented company, her first 6 years entailed a double digit growth. However, the company did not invested in other business/products lines during that period and as a result, the company began lowering its blemishes then after.

b)     The appropriateness of independent sales representative for distribution of this company

It is said that the company sells and distributes its products over 100 countries and territories along with a sales force of 6.5 million representatives (Coulter, 2013). It seems that Avon run outstandingly with a double digit growth before 2010 when the company was growing by increasing its independent sales representatives for the distribution of beauty-related items. It is true that direct selling is quite outdated in the U.S., but the channel remains hot in emerging markets like Brazil.

However, things changed abruptly after that, and the company lost its share price by 45 % and its income by 15.29 % so that considering these facts into account, I think that independent sales representative can still be the most appropriate means for distribution for this company. But now what can be done is that company should encourage its sales representatives along with awards/prizes that reached their sales goals within a stipulated time period. In addition, they should be motivated for participating in conventions and this is more likely to improve its sales through direct contact with customers. Last but not the least; the company should be able to endorse its franchise with small and big cosmetic-related retail stores, such as Macy, JC Penny, etc. Doing all these together would likely to increase sales and in turn a remarkable profit.

c)      The leadership Changes

It seems that the role of leadership would play the most important while formulating, implementing and directing the company’s strategies to win the success in the marketplace. The same things happened when Andrea Jung was hired as the first woman CEO to woman-oriented company. At the beginning of first six years, the company did very well, with a double-digit growth, but then after, it started to lose the market share. Then she tried to restructure its strategies by laying off 25% of Senior staff, streamlining global manufacturing and cutting costs in all activities except adverting and promotion (Coulter, 2013).

However, these strategies did not work because apart from these internal factors, there were external factors affecting the company as well. Considering these facts into account, I personally think that Jung as CEO should be replaced and new leadership structure should be formed by hiring new ones, but Jung should be placed as a full time chairman so that she would help to the management of the company as per the necessary because her knowledge, experience and skills would be an added advantage for making strategic decisions as she is also once considered as the best CEO of the company.

References

Coulter, M. (2013). Strategic Management in Action (6 ed.). New Jersey, USA: Pearson Education, Inc.

Pearce II, J.A.,& Robinson, R.B. (2014(14th Edition)). Strategic Management: Competing for Domestic and International planning. New York: McGraw-Hill Irwin.

(n.d.) Retrieved from http://fortune.com/2012/04/11/avon-the-rise-and-fall-of-a-beauty-icon/

4.2. Read: Strategic Management in Action Cases: Case #1 Out of Focus

a. Comment on the following: "Meeting customers' changing needs versus market share is how companies need to measure themselves against their competitors.”
b. What are the implications for doing an internal analysis?
c. What is the value of performing a value chain analysis?
d. Are there customers an organization might not want? Explain.

Out of Focus

Eastman Kodak Co. founded in 1884, struggled to cope up with changing technologies. While it is true that Kodak invented a digital camera in 1975, they were reluctant to introduce it into the market due to the fact that they became the fear of cannibalizing photographic film sales (Coulter, 2013).

a)      Meeting customers’ changing needs Vs. Market Share

When it comes to measuring the performance of any company, then there are two things that should be kept in mind-meeting customers’ changing needs and market share.  It is believed that companies which are most likely to meet the customers’ changing needs will always be ahead in positioning them in the marketplace than its competitors. When customers’ changing needs are identified, and satisfied then there is higher possibility of attaining higher market share. For instance, Kodak always used to identify their customers’ changing needs before 1990 so that it was better than its competitors in securing more market share but when it was unable to do the same after 1990 then there it started to lose the market share as new digital technology emerged and used successfully by other competitors. Therefore, it is necessary for companies to measure themselves in terms of meeting customers’ changing needs and market share by focusing on rare, valuable, and inimitable products or services.

b)     The implications for doing an internal analysis

The main purpose of doing an internal analysis is to identify an organization’s strengths and weaknesses so as to improve the strategic decision making. Internal analysis helps the company to locate its specific assets, skills, abilities and work routine or processes. With the help of this information from internal analysis, strategic decision makers can make sound or intelligent judgment about what competitive advantage the company may currently have, what might be developed into competitive advantage, and what could be preventive measure for its weaknesses. In case of Kodak, It did an internal analysis effectively but it refused to adopt the digital technology at the right time so the company is about to collapse.

c)      The value of performing a value chain analysis

Value chain analysis is a systematic way of examining all the organization’s functional activities in order to create more customer value (Coulter, 2013). This analysis, indeed, helps to identify the customer services that are not being offered in the marketplace but they perceive more valuable. It consists of five primary activities-inbound logistics, operations, marketing and sales, outbound logistics and customer services, and four supporting activities-procurement, technology, Human resources, and company’s infrastructure. While it is true that primary activities add value directly to the production process, they are not necessarily more important than supporting activities. In case of Kodak, for example, when it invented digital technology but unfortunately it did not go for it. Later on, other companies such as Fujifilm were becoming more successful, but Kodak’s photographic film started to decline and now it is almost about to be bankrupt.

Nowadays it seems that a competitive advantage will be derived from technological improvements or innovations in business models or processes.  Therefore, supporting activities such as information systems, R&D, and general management skills are considered as the most important source of differentiation advantage. On the other side, primary activities usually can be a source of cost advantage, where costs can be easily identified for each activity and properly managed. Having said these, hence, performing a value chain analysis provides the ways to be a different and low cost provider that would definitely bring a competitive advantage to the company and superior customer value to their ultimate users.

d)     Are there customers an organization might not want?

It is true that an organization can only survive when customers buy the products or services and pay in exchange of products or services. When we look from this perspective, there is no any organization that does not need any customers. Having said this, however, there always can be a priority setting like 80/20 rule says. As this rule said, we focus only 20 % of our perspective customers who can generate 80% sales or profits in return. It entails that there are no totally redundant customers for any companies but true to be told that there can be potential customers who are highly prioritized an organization must identify their needs, address them and satisfy their wants as soon as possible than other less prioritized customers.

References

Coulter, M. (2013). Strategic Management in Action (6 ed.). New Jersey, USA: Pearson Education, Inc.

Pearce II, J.A.,& Robinson, R.B. (2014(14th Edition)). Strategic Management: Competing for Domestic and International planning. New York: McGraw-Hill Irwin.

(n.d.) Retrieved from https://hbr.org/2014/03/choosing-the-right-customer

The Case Study of "McDonald's Corporation"

 Overview of the case-“McDonald’s Corporation”

This case is likely to present the different strategic challenges and opportunities faced by the largest fast-food restaurant in the world, McDonald’s Corporation. As the 21^st century turned, the company suffered from big challenges such as sudden deaths of two CEOs, Jim Cantalupo in 2004, and Charlie Bell in 2005, economic crisis of 2008/9 and ineffective operations. But the company would able to resolve these issues, when CEO, Jim Skinner formulated, implemented and evaluated the 7 customer-centric plans, and in effect, it could establish itself as the best fast-food company as it is doing better day by day (Coulter, 2013).

Strategic Issues

The major strategic issues that McDonald suffered from are weak implementation of functional actions, plans and policies, poorly designed marketing plans, fast changing customers’ needs, wants and demands, Sudden death of two competent CEOs (Coulter, 2013).In addition, the company is affected by other strategic problems such as consumer concern over safety, healthier food alternatives, and intense competitions.

Analysis & Evaluation

As part of analysis and evaluation, McDonald’s SWOT analysis and Value Chain analysis are being shown in the following paragraphs.

a)      Constructing a SWOT Analysis of McDonald

Strengths (S):

·         The largest fast-food company: As we know, the McDonald is the largest fast food company in the world so that it supplies its fast foods to 71 million customers from more than 119 countries.

·         Most Valuable brand Recognition: McDonald has been consistently considered as the most well-known and valuable brand in the world. Having a global brand, the company does not need to promote it, it can promote itself.

·         Global Commitment, Local Approach: It can be known that McDonald is not highly committed to serve their local people only; it is focusing globally with a customization strategy to fit the each specific requirement of local people.

·         Huge investment in Marketing and Advertising: As the world’s largest fast food company, McDonald spends approximately $2 billion dollars annually. It mainly focuses on its marketing mix- product, price, place and promotion- to attract new and existing customers towards their restaurants all over the world.

·         Doing business with CSRs: The Company believes in managing corporate social responsibilities at its most priority so that it focuses on major activities in terms of environment, community, marketplace and its people.

Weaknesses (W):

·         Negative Publicity: McDonald’s foods are heavily criticized as unhealthy or low nutritional quality like fries and burgers that are supposed to simulate obesity and marking more on children.

·         Low quality restaurants: Many people in the U.S. still believe that McDonald is low quality restaurant so that they would go there when there were no other alternatives to eat for.

·         High employee turnover: It is true that there is high number of employee turnover due to higher number of low jobs and lower payments.

Opportunities (O):

·         Healthier foods: As the concern for health rises, the company started to produce the healthy foods on its menu so that children and adults easily accept the products and services offered by the company.

·         Home/Office delivery: McDonald is striving to increase its home/office delivery services to all its restaurants in the world as its franchises go up.

·         New and better practices: It is true that company could change its design and business practices as soon as market change occurs. Hence, there is higher chance of getting new and better practices fast food restaurants.

·         Innovation/R&D: McDonald always focuses on its market research to bring some new products such as MacCafe, mcStop and McExpress restaurants (David, 2011 (13th ed.). Company invests its money on developing new products options and delivers these products to right customers at the right price.

Threats (T):

·         Matured fast-food markets in the developed economies or countries: It is fact that fast food companies are already overcrowded in most of developed countries so that there will be potential growth in these countries.

·         Currency fluctuations: Multinational companies have to play with different currencies of different countries so that fluctuations in these currencies could be detrimental effect on the profit of the company.

·         Health Awareness & Trends towards nutritional eating habits: Some companies might go against unhealthy eating habits due to increased health awareness and government restrictions.

·         Pressure from local fast food restaurants: It is true that McDonald has to operate its operation all over the world but there can be pressure from local restaurants because these restaurants are likely to address exactly the customers’ problems and satisfy their needs as they want.

b)     Constructing a Value Chain Analysis of McDonald

a. Primary Activities:                                         

·         Inbound Logistics: McDonald realizes that how important its inbound logistics are while providing customer value efficiently. Thus, it collaborates with its key suppliers to ensure a reliable delivery of high raw materials at right time and at a right price.

·         Operations: The operation of McDonald is excellent-driven because it highly focuses on the efficiency and performance of all 33,000 restaurants worldwide. The company has been continuously providing an operational excellence through consistent process and restaurant-specific reviews.  The company made many changes to enhance the quick service by taking various actions such as organizing the kitchen, parking areas,  front counter, and by eliminating unwanted sizes and slow selling items. In addition, it encompasses on customer hospitality, cleanliness and accurate information through employees incentives and trainings.

·         Outbound Logistics: It seems that Company is highly committed to provide the quality foods to their customers at a reasonable price. To save the time of customers, computerized systems have installed in many locations so that price-adjustments become easier than ever before. It has added a variety of food options on its menu to according to different locations of its restaurants all over the world.

·         Marketing & Sales: It is true that company believes in engaging the real people on its promotional package as they are concern on reality, and connect them to the company’s brand. As a part of campaign, it has added the lagline of “Now more than ever” which helped the company to counteract its recession in 2008 (Coulter, 2013). Apart from brand promotion, the company also continues to be a leader in innovative products so that customers would have more choices on their menus to eat for, e.g. McCafe Coffee, Big Mac, Franch fries. Furthermore, once its foods were criticized as low nutritional quality by publics, but company responded as quickly as possible to its publics by making customers informed about foods’ nutritional information in an easily readable format on its packaging.

·         Customer Service: McDonald’s first priority would be to provide the customers what they want effectively and efficiently. Recognizing the importance of different time schedules, the company has introduced the 24/7 service in which lunch hours, breakfast hours, and midnight hours were divided to offer the customers more quickly and effectively (Coulter, 2013). It seems that company has been providing various gift cards which can be used to make payment in its other outlets and it will never expire, indeed. In most places, the restaurants also have been delivering the foods order to the customers’ homes or offices as quickly as possible.

b. Supporting Activities:

·         Firm Infrastructure: McDonald’s infrastructure is quite modern, supported by IT and best system in the world. The company has sufficient space, materials, friendly workplace and art-of-the-state technologies to support its core fast food activities.

·         Human Resource Management: The human resources are the heart of any business. McDonald has started a new initiative to manage its people by deploying five principles such as learning for life, growth and development, resources available to all employees in respected manners, value and leadership behavior at workplace, providing flexible work schedule, training and work-life balance, and offering competitive salaries and benefits to its people (Coulter, 2013).

·         Technology: The Company has started to use computerized systems to adjust the price as demanded by their valuable customers. It has been continuously giving its most priority to innovate something new in terms of tools and techniques used for creating customer value.

·         Procurement: It is true that company is using its e-Procurement system to facilitate and know the raw material deliveries at the right time from suppliers to each of the restaurants in the world. To minimize the cost and maximize the efficiency, McDonald is managing its logistics and supply chain strategically by collaborating with the best partners around the world.

Summary, Conclusions and Recommendations

           In conclusion, McDonald has been continuously considered as the most successful fast-food restaurant in the world as it is expanding more quickly and effectively. With the help of SWOT and Value chain analysis, it is known that there are lots of areas where company is doing better at and also there are other areas that the company can improve and evolve to gain a sustainable competitive advantage. Having said these, hence, here are some of major recommendations as follows:

·         McDonald should even strive to build effective relationships with people around its business i.e. its stakeholders and publics. By doing so, company never get criticized from its own people and can be successful for longer period.

·         As the company is continuously expanding and evolving, there is much more complication for managing its supply chain and operations so that it should look for partnering with other expert or renown companies to collaborate to increase the efficiency and productivity.

·         Last but not the least; McDonald should try to meet the global customers even in local approach so it would not be afraid from its local restaurants in the respective counties. For this, it has to focus on market research, innovation and operational efficiency.

References

Coulter, M. (2013). Strategic Management in Action (6 ed.). New Jersey, USA: Pearson Education, Inc.

David, F. R. (2011 (13th ed.). Strategic Management: CONCEPTS AND CASES. New Jersey: Pearson Education,Inc.

Pearce II, J.A.,& Robinson, R.B. (2014(14th Edition)). Strategic Management: Competing for Domestic and International planning. New York: McGraw-Hill Irwin.

(n.d.) Retrieved from https://www.strategicmanagementinsight.com/tools/value-chain-analysis.html