Porter’s Five Forces Model (Porter Analysis) of Avon

Avon is a company that deals with beauty, personal care and household products. The company mainly focuses on selling beauty products on one hand and empowering women on the other hand. Both these missions go hand in hand and Avon is involved in empowering women around the globe even around the time when women were not given the right to vote.

Porter’s model will be applied on Avon to analyze the competitiveness of the company in the market, determining its position in the industry based on five forces acting upon it at the moment.

Threat of New Entrants

Cosmetics and beauty products industry is a very competitive market where companies might have the opportunity of gaining a large market share. Any such industry is vulnerable of entry of new competitor companies in the market. Avon operates at a high market share in the cosmetics industry but has to face many competitors already existing in the form of big brand names available internationally as well as local brands present in local markets that they enter. With such industry, there is a high threat of new entrants. Although there is a chance that their market share is not effected by new entrants, but the threat is still high and Avon should keep that in consideration when it comes to redesigning policies.

Threat of Substitutes

There are various substitutes available internationally and even the local products in several countries that are available for customers to choose from. When it comes to cosmetics or beauty products industry, substitutes are available in terms of price as well as quality and range of products. Customers have too many substitutes available in case they are not satisfied with Avon’s price or quality of any product. It should be kept in mind that when customers become loyal to a certain brand, they do not shift to another brand for very small reasons but the threat of these substitute products still exist for Avon on a medium to high level and this cannot be ignored.

Bargaining Power of Customers

When customers have too many substitutes in the market for a certain product, they can have the opportunity to shift to another substitute product even if they are not satisfied with the product for once unless they are completely loyal to the company. With Avon’s case, customers have medium to high bargaining power as if Avon charges too much they have the power to shift to some other company. Similarly Avon needs to keep the demands of customers in terms of price as well as quality to retain their customers and deal with the bargaining power which is in the hands of the customers.

Bargaining Power of Suppliers

In industries where suppliers are less and the companies are dependent on the supplier’s supplies, suppliers use this power to manipulate the companies and negotiate the price of their choice by restricting the supplies. In cosmetics industry, this is not the case because there is huge number of suppliers available on both large and small scale industries.  Thus, suppliers have low bargaining power and do not have the ability to control the actions of different cosmetic companies. Instead the companies have higher power over these suppliers, especially the companies with a well-established reputation as the suppliers would never want to lose these customers.

Industry Rivalry

With so many competitors existing in the cosmetics industry, the rivalry in the industry is really high and this rivalry is present globally as well as in the form of local competition in various markets in certain countries. This competition and industry rivalry is the reason why Avon has to keep in mind the strategies of competitors before defining its own strategies so that it can compete accordingly in the industry. The rivalry in the industry for Avon is very high, which defines its competitive position in the market for cosmetics industry.

Concluding the competitive position of Avon in the industry based on Porter’s five forces, we can conclude:

The above grid shows the intensity of each external force on the company, these external factors should be reviewed by management and formulate strategies accordingly.

Reference

Experience Avon’s History. Retrieved August 31, 2017, from http://avoncompany.com/aboutavon/history/index.html
Forbes. Retrieved August 31, 2017, from https://www.forbes.com/sites/panosmourdoukoutas/2015/06/04/avon-products-the-rise-and-decline-of-great-franchises/#680aa20d3297
Z. Avon Marketing Mix (4Ps). Retrieved August 31, 2017, from http://www.mbaskool.com/marketing-mix/products/16774-avon.html