Avon Case Solution

1. Comment on Avons investment and financing decisions in the 1980s pointly on the reasons for restructuring in 1988. Did the changes make sense? The trend towards greater female participation in a professional and social life in the early 80-ies challenged Avons traditional avocation model resulting in a tedious dec draw off in revenues and bottom railway system of the Companys cosmetics business (see turn off 1 below): Table 1 [pic] Mgmt defensive strategy assumed diversification into the healthcare assiduity. This diversification added to the bottom line in the short hold out but it destroyed mete outholders foster eventually. There was no particular synergy between the effect business and the healthcare M&As. Apparently Avons centering lacked the expertise and skills to evaluate and lick health business suitably and in a gang with the negative for Avon change in Medicare the health division was no longer seen as a growing and profitable business. financial outcome of this policy was a modest 1% CAGR in total revenue in the period 1980-1987; EBT margin in 1987 was 6% lower than in it was in 1979 and earnings per share were down by ~50%.

The restructuring plan makes sense because Avons management demonstrates that it accepts the mistake of its healthcare diversification strategy, and now it concentrates substantiate on the core business initiating a transformation from the drive sales model towards mantrap business. On the back of cosmetics industry recovery and Avons substantive position in this sector, this cargo sends a positive meat and in our opinion is therefore a much to a greater extent excusable strategic choice. 2. What was Avons condition in mid-198! 8 and wherefore was Avon reduce its dividends? In the mid-1988 Avon was divesting from its healthcare business with significant losings and undeniable to reserve money for the restructuring costs. The management planned to gain on the cosmetics market recovery and to double its investments in the lulu products...If you indigence to get a full essay, order it on our website: OrderEssay.net

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