External and Internal Environmental Analysis

External and Internal Environmental Analysis

Tara Beck

STR/581

June 3, 2013

Steve Mersereau

External and Internal Environmental Analysis

Avon Products Inc. is a global organization that sells beauty related products. They have created a strong brand and are known round the world as a leader in the beauty industry. To create a strong strategic plan it is important to perform an internal and external environment scan to pinpoint where changes need to be made in the future to continue to grow the company. There are different areas that need to be considered when performing a scan of the company. The following information will break down the different areas that need to be addressed.

External Environment

"A host of external factors influence a firm's choice of direction and action and, ultimately, its organizational structure and internal processes. These factors, which constitute the external environment, can be divided into three interrelated subcategories: factors in the remote environment, factors in the industry environment, and factors in the operating environment" (Pearce II & Robinson, Jr., 2011, p. 81). External factors are important to identify when creating a strategic plan for an organization because they influence how an organization runs just as much as internal factors.

Remote Environment

"The remote environment comprises factors that originate beyond, and usually irrespective of, any single firm's operating situation: (1) economic, (2) social, (3) political, (4) technological, and (5) ecological factors. That environment presents firms with opportunities, threats, and constraints, but rarely does a single firm exert any meaningful reciprocal influence," (Pearce II & Robinson Jr., 2011, p. 81). With the downturn ] in the economy one may expect there to be a large decline in the purchase of beauty products for women, but Avon has had a small drop in total revenue. According to "Www.media.avoncompany.com/" (2012), "For the fourth quarter, total revenue of $3.0 billion decreased 1%, but increased 1% in constant dollars" (para. 2). Although the drop in total revenue is concerning, Sheri McCoy, Chief Executive Officer, is confident the company will see progress on the three year financial goals ("Www.media.avoncompany.com/", 2012). Avon has been committed to social and ecological responsibility since the inception of the company in 1886. According to "Www.avoncompany.com" (n.d.)," Avon Founder David H. McConnell committed his company 'to meet fully the obligations of corporate citizenship by contributing to the well-being of society and the environment in which it function'"" (para. 1). Avon has created a foundation for women and made a commitment to raise funds and awareness for deforestation.

Industry Environment

"The industry environment is the general conditions for competition that influence all businesses that provide similar products and services," (Pearce II & Robinson Jr., 2011, p. 91). Avon has many competitors in the beauty market, L'Oreal, Mary Kay, and Revlon to name a few, and each company must find a way to stand out in the market. Competition is fierce in the beauty market. One just has to walk down the beauty aisle to see how competitive the market is. Although the beauty related market is huge, it is important to create unique products at competitive prices. Avon has created new and innovative products, but needs to work on their brand image with the younger generations. The average age of Avon customers is 45.

Operating Environment

"The operating environment, also called the competitive or task environment, comprises factors in the competitive situation that affect a firm's success in acquiring needed resources or in profitably marketing its goods and services. Among the most important of these factors are the firm's competitive position, the composition of its customers, its reputation among suppliers and creditors, and its ability to attract capable employees. The operating environment is typically much more subject to the firm's influence or control than the remote environment," (Pearce II & Robinson Jr., 2011, p. 103). Avon has chosen not to have their products sold in the traditional marketplace. They use independent consultants and the Internet to sell product direct to the consumer and you will not find him or her in the beauty aisle at the store. Avon has created a large sales force in many different countries and territories. They also have made a commitment to minimize their global environmental impact with their Green Building Promise.

Internal Environment

SWOT

"SWOT is an acronym for the internal Strengths and Weaknesses of a firm and the environmental Opportunities and Threats facing that firm. SWOT analysis is a historically popular technique through which managers create a quick overview