Industry definition, Structure and Major Competitors

Avon Products Inc. is listed in the personal and household industry of consumer goods sector in the US stock market. The sector includes about 800 companies and 108 companies in the industry[ 1 ]with combined one-year gross of $ 50 billion ; the US personal income drives the consumer demands for personal merchandises[ 2 ].

Presently, the usual distribution form in the industry is altering from the old section shops to higher-growth distribution channels like the cyberspace, commercial, telecasting place shopping and independent gross revenues representatives ; all these are targeted at hiking top-line growing.

Table 3.1 Avon Products Rivals

Major Rivals

Market Capitalization ( $ billion )

L’Oreal SA

246.9

Procter & A ; Gamble Company

178.3

Colgate-Palmolive Company

40.9

Kimberly-Clark Corporation

26.1

Avon Products Inc.

12.6

Estee Lauder Com. Inc.

12.5

Energizer Holdings Inc.

3.8

Alberto- Culver Co

2.9

Elizabeth Arden Inc.

0.4465

Revlon Inc

0.7052

Beginning: hypertext transfer protocol: //biz.yahoo.com/p/323conameu.html

3.2 Industry Growth and Profitability

Market moves over the last two old ages have clearly been extraordinary. The prognosis call for a gradual and continued recovery in demand from developed markets with emerging economic systems doing better every bit good.

Impressive growing potency is shown by dermatological tegument attention, work forces ‘s personal attention and cultural groups ‘ specific designed merchandises with the industry concentrating research & A ; development and advertisement[ 3 ].

A common factor in this industry is acquisition and variegation. Managements seek to get smaller houses which help to keep top-and bottom -line growing.

Table 3.2 Cosmetics Industry Statisticss

Items

2006

2007

2008

2009

2010E

2011E

Gross saless ( $ factory )

Operating border

24,443

11.9 %

27,013

11.8 %

28,898

13.3 %

26,510

11.2 %

29,500

13.0 %

32,550

14.0 %

Depreciation

Net net income

599.9

1,385.4

649.9

1,451.4

713.7

1,867.3

669.5

1,303.3

700

1,700

760

2,155

Income revenue enhancement rate

Net net income border

34.1 %

5.7 %

34.0 %

5.4 %

32.5 %

6.5 %

33.7 %

4.9 %

34.0 %

5.8 %

34.0 %

6.6 %

Working capital ( $ factory )

Long term debt ( $ factory )

Share equity ( $ factory )

3,094.6

3,177.2

5,909.6

2,736.7

5,307.5

4,095.9

3,436.1

5,534.6

4,873.1

4,817.2

6,272.2

5,009.1

4,000

6,000

5,170

3,735

5,155

5,150

Tax return on entire capital

Tax return on portion equity

16.3 %

23.5 %

17.3 %

35.4 %

19.9 %

38.3 %

13.1 %

26.0 %

15.0 %

28.0 %

20.0 %

40.0 %

Beginning: Value line investing study, 2010

Peopless ‘ personal income and disposable personal income are the chief drivers of this sector. Personal income increased $ 30.0 billion, or 0.2 per centum, and disposable personal income ( DPI ) increased $ 17.6 billion, or 0.2 per centum, Personal ingestion outgos ( PCE ) increased $ 44.1 billion, or 0.4 per centum.

Real disposable income increased 0.3 per centum in October, in contrast to a lessening of 0.2 per centum in September. Real PCE increased 0.3 per centum, compared with an addition of 0.2 per centum[ 4 ].

Table 3.2 Personal and Disposable Personal Income, 2010 ( Percentage alteration from predating month )

June

July

Aug.

Sept.

Oct.

Personal income, current dollars

0.1

0.2

0.5

0.0

0.5

Disposable personal income:

Current dollars

0.1

0.0

0.5

-0.1

0.4

Personal ingestion outgos:

Current dollars

0.0

0.5

0.5

0.3

0.4

Beginning: Bureau of Economic Analysis, US Department of Commerce. July, 2010

3.3 PEST Analysis of External Factors Affecting the Industry

Pest analysis is external macro-environment concern measuring tool. PEST ( or sometimes rearranged as “ STEP ” ) is an acronym for Political, Economic, Social and Technological factors. These factors are employed to analyse personal merchandise market both in the US and globally.

3.3.1 Political Factors

Achieving growing in new international markets and keeping the current degree of operations in bing international markets, Avon Products Inc. faces political, legal, revenue enhancement and regulative hazards. Local civil agitation, alterations in diplomatic or merchandise relationships restrict or will interrupt the company ‘s direct merchandising method in international markets. Example, Chinese authorities banned direct merchandising in 1998 although granted subsequent blessing to run in2005 but with a limited trial of direct merchandising in certain countries.

Different Torahs and policies exist in different states. Enforcing currency remittal limitations, transportation of hard currency and control of exchange rate and using local currency as functional currency adversely affect the company ‘s operation in international markets. Example, AVP has exposures to the undermentioned states currencies although the company implement foreign currency fudging and risk direction schemes to cut down exposure: British lb, Canadian dollar, Chinese Renminbi, Euro, Nipponese hankering, Russian ruble, Venezuela bolivar.

3.3.2 Economic Factors

3.3.3 Social Factors

3.3.4 Technological Factors

In the extremely competitory cosmetics industry, research & A ; development of new merchandises, merchandise invention and merchandise redesigning are indispensable to growing.

In 2005, Avon Products Inc. opened a 100 million dollar Research and Development installation ( Suffern, New York ) where technicians apply the subjects of scientific discipline to the practical facets of conveying merchandises to market around the universe. The company has satellite research installations in Argentina, Brazil, China, Japan, Mexico, Poland and South Africa. $ 66.7 million, $ 70.0 million and $ 71.8 million were incurred on new merchandises research activities and betterment of bing merchandises in 2009, 2008 and 2007 severally[ 5 ].

3.4 Porter ‘s five forces analysis of industry competition

3.4.1 Threat of new entrants

3.4.2 Menace of replacement

3.4.3 Bargaining power of providers

3.4.4 Bargaining power of clients

3.4.5 Rivalry among viing houses

3.5 Drumhead

4. Economic mentality

4.1 Global mentality

4.2 Regional mentality

4.3 Local mentality

4.4 Drumhead