Value chain analysis for Starbucks in Australia Essay

Value chain analysis for Starbucks in Australia - Essay Example The practice had helped the Starbucks to maintain quality over the years. However, it increased the dependency on the farmers and the variations in the productions affected the company. This made the price of the coffee in the Starbucks higher and the business was rendered unprofitable. In the case of Australia this was one of the factors for the closure of various shops. (Starbucks Coffee Company, n.d.) Operations: In the case of the Starbucks in Australia, the company operated as in the case of the other countries. There were no modifications of the products and no efforts were made to make the products suit the needs of the people in Australia. The ambience of the stores were similar to that of the other parts of the world which did not provide additional value to the customers in Australia. The main factor for the success of Starbucks in the other parts was the essence on â€Å"coffee culture†. However, in Australia, the â€Å"coffee culture† was already in place and the company could not provide extra facilities to the people. (Why Starbucks failed in Australia, 13th August, 2008) Outbound logistics: The Starbucks operates through the chain of stores in the other parts of the world. In the case of Australia, the company opened over 80 stores that were placed in the urbanized areas. The expansion never took of in a big country like that of Australia and the company had presence only in some of the pockets. (Starbucks goes cold in Australia, 29th July, 2008). Marketing and Sales: Starbucks is a well known brand all over the globe. However, surprisingly, the company has never resorted to the aggressive marketing policies. In the case of Australia, the company never marketed the brand aggressively and there were campaigns like the â€Å"red cups on cars† where starbucks cups were placed on top of cars and taxis. The company depended on the â€Å"word of mouth†

System Design Essay Example for Free

System Design Essay The basis for most systems analysis and design methodologies is the system development life cycle or SDLC. It is sometimes called the waterfall method because the model visually suggests work cascading from step to step like a series of waterfalls. The first step is problem definition. The intent is to identify the problem, determine its cause, and outline a strategy for solving it. Given a clear problem definition, analysis begins. The objective of analysis is to determine exactly what must be done to solve the problem. Typically, the system’s logical elements (its boundaries, processes, and data) are defined during analysis. The objective of design is to determine how the problem will be solved. During design the analyst’s focus shifts from the logical to the physical. Processes are converted to manual procedures or computer programs. Data elements are grouped to form physical data structures, screens, reports, files, and databases. The hardware components that support the programs and the data are defined. The system is created during development. Programs are coded, debugged, documented, and tested. New hardware is selected and ordered. Procedures are written and tested. End-user documentation is prepared. Databases and files are initialized. Users are trained. Once the system is developed, it is tested to ensure that it does what it was designed to do. After the system passes its final test and any remaining problems are corrected, the system is implemented and released to the user. After the system is released, maintenance begins. The objective of maintenance is to keep the system functioning at an acceptable level. a. Prototyping Software prototyping is the creation of prototypes or a rudimentary working model of a product or information system, usually built for demonstration purposes or as part of the development process. In the systems development life cycle (SDLC) Prototyping Model, a basic version of the system is built, tested, and then reworked as necessary until an acceptable prototype is finally achieved from which the complete system or product can now be developed. A prototype typically simulates only a few aspects of the features of the eventual program, and may be completely different from the eventual implementation. The conventional purpose of a prototype is to allow users of the software to evaluate developers proposals for the design of the eventual product by actually trying them out, rather than having to interpret and evaluate the design based on descriptions. Prototyping can also be used by end users to describe and prove requirements that developers have not considered. Prototyping has several benefits: The software designer and implementer can obtain feedback from the users early in the project. The client and the contractor can compare if the software made matches the software specification, according to which the software program is built. It also allows the software engineer some insight into the accuracy of initial project estimates and whether the deadlines and milestones proposed can be successfully met. In this project the Waterfall Systems Approach Method is being used. The systems approach is a problem-solving method that breaks a complex problem into pieces, designs a solution for each piece, and then integrates the solution into a complete system (Dewitz, 1996). As applied to information systems, the systems approach decomposes a system into subsystems and with its environments. In the waterfall model time spent early on making sure that requirements and design are absolutely correct will save much time and effort later. Thus, the thinking of those who follow the waterfall process goes, one should make sure that each phase is 100% complete and absolutely correct before proceeding to the next phase of program creation. Program requirements should be set in stone before design is started otherwise work put into a design based on incorrect requirements is wasted. Also the waterfall model has a simple approach and is more disciplined. The model itself progresses linearly through discrete, easily understandable and explainable phases and thus is easy to understand; it also provides easily mark able milestones in the development process. The systems approach recognizes two major activities: analysis and design. b. System Analysis Systems analysis is the process of studying an existing system – whether manual or automated – and its’ environment. The purposes of analysis are to understand the components and functions of the current system, to identify the organization’s information and processing needs, and to determine the characteristics of a new system to meet these needs (Dewitz, 1996). In the System Analysis phase, Preliminary Investigation, Problem Analysis (studying the existing system), Requirement Analysis (identifying the information needs and what the new system should perform) and Feasibility Study (determining whether the system is feasible for the proposed system) will be performed. System design is the key phase within the system development cycle. It consist of devising specifications for an information system (IS) that best fit a company’s current and expected circumstances (Wilkinson. J. W Cerullo. M. J, 1997). The design may involve an improvement to an existing IS or may pertain to the initial IS for a company. Systems design basically is the reassembling of the components and functions of the IS to satisfy the organization’s information needs most effectively and efficiently. 1. Project Deliverables Following are the Project Deliverables for the Hardware Tracking reporting System. Deliverable Name Deliverable Description DBMS The completed project will produce a DBMS for hardware tracking reporting and replace the current paper based system User training manual A training manual that can be used for training of new staff or the re-training of existing staff in the use of the system Troubleshooting manual A troubleshooting manual that can be used to troubleshoot and possibly resolve any issues that may occur in the daily use of the system Reference manual A reference manual that can be used for quick reference a. Project Milestones Following are the major milestones for the Hardware Tracking reporting System.

Human Behavior Is Unpredictable Management Essay

Human Behavior Is Unpredictable Management Essay This research sought to find out the gaps that exist in the Karatina University Colleges performance management system and to come up with recommendations for adjustments that will put the institution on a path towards continuous performance improvement. The objective of the study was to determine how the institution conducts performance appraisal, the main challenges faced in the appraisal process, and the best practices that it can adopt for the process. Literature review was conducted on the subject touching on the various aspect of performance management. The study was conducted using a survey research design. Primary data was collected using self-administered questionnaires with supplements of secondary data used to add efficacy to the results. The questionnaires were administered on randomly chosen members of faculty in the common School of Business Staff room. Descriptive statistics were used including percentages and frequencies. The results were presented in tables in the an alysis for each objective. Human behavior is unpredictable and differs among individuals or even on the same individual at different points in time (Hunt, 2007). Human beings also differ in their abilities, background, training and experience. At the same time, Dr. Nigel Hunt notes that many problems facing most organizations today are social rather than technical or economic. It therefore goes that human resource at work is the most important component of the undertaking. It is therefore very important for organizations to measure performance of this critical resource as doing so ensures organisational success. 10 Performance Management (PM) has recently dominated the Human Resource Management (HR) as a profession owing to the realization that HR is the one of the most potent source of competitiveness in todays operating environment. Insights into performance management by leading thinkers in the recent past (Armstrong, 2009) point to the emergence of Performance Management as the most viable solution to address the productivity lag in most industries. Performance Management is a branch of human resource management whose objective is to support employees in their struggle to attain their goals as well as those of the organisation (Bhattacharyya, 2006). Bhattacharyya explains that PM gained prominence in the 1960s when competition in the operating environment led firms to reexamine their internal operating efficiencies to survive. A difficult operating environment coupled with a desire for productivity led firms to emphasize on productivity of not only their machines but also their human resource. Armstrong (2009) explains that Performance management as a term emerged in the 1970s and was later gained prominence in the 1980s as a distinct discipline within human resource management. Presently, most organizations have embraced performance management as a pillar of productivity in the organisation. As Abbey (2007) describes, performance management has taken prominence in organizations as a vehicle to deliver on organisational and indi vidual performance objectives. Abbey emphasizes that the incorporation of individual objectives into the performance management paradigm made performance management distinct from mere performance appraisal. Performance appraisal emphasized the degree of accomplishment of a given individual by supervisors without seeking the active involvement of the employee in the process (Management Study Guide, 2012). Measuring employee performance therefore goes beyond staff appraisal to include other aspects of performance such as learning and development, talent management and culture change as key contributors to organisational productivity (Armstrong, 2009). Performance management provides the only tool with which the management can evaluate departmental/sectional contributions to the overall organizational performance as well as determine the best options for intervention. For effective achievement of organizational objectives, employees must know what needs to be done and the overall objectives of the organisation (Dransfield, 2000). Besides the knowledge of the overall organizational objectives, individual employees must have knowledge of their particular role within the broader organisational setting. This way, and as Dransfield (2000) notes, all the players in the organizational production chain share a common objective and pull towards the same direction. This is particularly important in that it harnesses organisational synergies in pursuit of a common goal and aligns daily activities within an organization to the overall strategic objectives. Performance management is done to compare relative variations in performance over time for organizations. Output from performance management process is also used for comparison with similar industries or benchmarks and establishing basis for corrective action (Management Study Guide, 2012). The nature of organizational power structure means that senior management cannot keep a direct watch over the performance of the subordinates and therefore a self-corrective process has to be initiates to assess their performance against objectives of the organizations. Performance management also inculcates the culture of sticking to organisational objectives and ignoring the activities that do not add value to the organisational value chain (Management Study Guide, 2012). Though it is impossible to forestall all management challenges, performance management helps the management take steps in advance to improve organizational capacity to deal with unexpected situations The Management Study Guide website details the evolution of performance management as a discipline within the wider human resource management in four phases. The first phase involved filling of annual confidential reports to control employee behavior. Career development was pegged on positive evaluation in the annual confidential report. The second phase entailed communication of the contents of annual report to the employees to correct the identified failings. The last phase involved replacement of the annual confidential reports by performance appraisal process where employees could rate their accomplishment annually. Today, performance appraisals have given way to performance management. The process entails performing continuous reviews based on mutually agreed objectives. The focus of performance appraisal is quantifiable objectives behaviors and values as opposed to employee traits (Management Study Guide, 2012). Appraisal processes are more of directive than participative thus stifling team effort (Leung and White, 2004). The output from performance appraisal is not directly linked to pay as was for the performance appraisals process. Guest, D E et al, (1996) aptly described performance management process as concerned with assumptions, expectations, mutual obligations and promises of employees and the organization. With the continuous change in operating environment, businesses have leveraged on human resource as their basis of obtaining and maintaining competitive advantage (Bhattacharyya, 2006). However, appraisal processes misses the crucial aspects that sustain a firms competitiveness as earlier describes including the wider strategic framework within which the organization operates. A system that emphasizes on employee mentorship and development as opposed to remuneration and disciplinary action enhances organizational output (Tripathi Reddy, 2008). Performance Management requires continuous output by in time for action to be taken. Panagar (2009) explains that employees are disappointed when annual appraisals bring negative feedback and do not point to the areas of improvements that an employee needs to focus on. He offers that participative evaluation in performance management contextualize the management to the working environment and challenges them to facilitate positive change for achievement of objectives. Continuous and balanced feedback enhances coordination and cooperation in organizations (Heskett, 2006). Besides, Heskett cites that employees achievements should be emphasized as opposed to dwelling on areas of improvement to encourage them to do more. Human behavior is unpredictable and differs among individuals or even on the same individual at different points in time (Hunt, 2007). Human beings also differ in their abilities, background, training and experience. At the same time, Dr. Nigel Hunt notes that many problems facing most organizations today are social rather than technical or economic. It therefore goes that human resource at work is the most important component of the undertaking. It is therefore very important for organizations to measure performance of this critical resource as doing so ensures organisational success. 1.2 Statement of the Problem Upon appraising employees and provision of feedback, most organizations wait until the next planned appraisal exercise (Hunt, 2007). Hunt offers that performance management in most organisation stops at the employee evaluation process and mostly after there is sufficient evidence pointing to non-performance. However, this defeats the main objective of the performance management process as an undertaking in aligning employees goals to goals to those of the organisation. This keeps the whole organization focus on its strategic objectives by harnessing collective efforts of its workers. Hunt states four issues that need to be taken into consideration in the performance management process namely following up to ensure achievement of targets, evaluating the entire process to ensure that it is appropriate and fair and do not foster conflict in the organisation. Observance of these four standpoints guarantees employee job satisfaction and continuous improvement in the organization. In most organizations, employees harbor qualms on the appraisal process (Shaddock, 2010). Shaddock attributes the negative perception to the use of appraisal results as evidence of poor performance instead of discussing performance with the employees to find common ground. The infrequent manner in which appraisal process is conducted adds to the subjectivity of the results as managers are more prone to conduct the exercise when performance is deteriorating (Tripathi Reddy, 2008). Tripathi and Reddy explain that the effect of these appraisal processes leave employees disillusioned and afraid to take risks leave alone accepting the fact that continuous improvement can enhance their success and by extension that of the organizational. As a result, employees lose their sense of control over the situation and resign to the directives of the management without their own insights. This contrasts with the new human resource management paradigm that emphasizes on mentorship, coaching and emp owerment (Dacri, 2006). 1.3 Purpose of the Study This research sought to find out the gaps that exist in the KUCs performance management system and to come up with recommendations for adjustments that will put the institution on a path towards continuous performance improvement. 1.4 Research Questions 1.4.1 How does KUC conduct performance appraisal? 1.4.2 What are the main challenges faced in the appraisal process? 1.4.3 What are the best practices that KUC can adopt for performance appraisals? 1.5 Significance of the Study 1.5.1 Human Resource Managers and Practitioners The head of human resource at the institution as well as others will get insights into the performance of their organizations and the best practices they can employ to achieve the best output from the human resource. The research will reveal insights on the frequency of performance appraisal and how best to achieve the desired results. Besides, the research will reveal the benefits of communication between the managers and employees. It will lead to clear understanding of job descriptions by the employees and better performance measurement. This will go a long way in boosting efficiency and effectiveness at the workplace. 1.5.2 Organizations The research will emphasize the role of performance management process in the achievement of strategic objectives of the organization. It will also enlighten the employees on their role in the organisation as well as the opportunities they have to advance boost their performance and by extension their careers. The research will particularly emphasize on the role of the performance management process on continuous improvements within the organization. This will position organization on a path to responsive change needed for survival in todays operating environment (Management Study Guide, 2012). 1.5.2 Employees The research will provide employees with an opportunity to evaluate their performance appraisal system and to suggest adjustments to align it with the organisational objectives. The employees will have an opportunity to express their desired outcomes of the performance management process that best serves the interests of both them and the organizations. Besides, the research will expose new areas that employees need training. Lastly, the employees will feel that the organisation is concerned about their welfare just as much as it is concerned about the performance of the organisation. 1.6 Scope of the Study The study was performed on a group of workers at Karatina University College. Data was collected on the month of February and March to reflect the current operational context of the organization. a review of literature was performed as well as secondary data on performance management concepts, the challenges faced and benefits that can accrues in evaluating an organizations performance. 1.7 Definition of Terms 1.7.1 Performance Appraisal Performance Management is an ongoing communication process, undertaken in partnership, between an employee and his or her immediate supervisor that involves establishing clear expectations and understanding of the functions expected of the employee and their contribution towards the achievement of the organizational goals (Robert Basal, 1999). 1.7.2 Performance Management Performance management refers to the proactive system of evaluating and providing feedback on employee output in line with the desired results. It aims at harmonizing employee and organisational objectives to achieve operational excellence (Management Study Guide, 2012). 1.7.3 Benchmarking Benchmarking is adopting best practices in the industry to guide organizational effort. It involves leaning from success of others (Peters, 2006). 1.7.4 Key performance Indicators These are performance measurement for key values necessary to achieve success in an undertaking (Reh, 2010). 1.8 Chapter Summary This chapter puts into perspective the concept of performance management and its application in modern day operating environment. The chapter defines the concept and differentiates it from performance appraisal as more elaborate and supportive of firms strategic objectives. The chapter also detailed the purpose of the study that was to find out the gaps that exist in the KUCs performance management system and to come up with recommendations for adjustments that will put the institution on a path towards continuous performance improvement. In this pursuit, the three research questions to be answered were identified and the population from which the sample was drawn. Lastly, the research lists the beneficiaries of the research including employees, human resource managers and organizations keen to gain competitiveness from their human resource. CHAPTER TWO 2.0 LITERATURE REVIEW 2.1 Introduction Chapter 2 is a discussion on the various publications on the subject of performance management in line with the objectives of this research. The objectives of this research was to find out how performance appraisal is conducted, establish the main challenges faced in the appraisal process and identification of the best practices that KUC can adopt for performance appraisals. 2.2 The process of Performance Appraisal 2.2.1 Performance Appraisal explained Performance appraisal is a periodic assessment of employee performance and productivity line with the objectives of the organization (Manasa Reddy, 2009). Results of the process are used to gauge employees accomplishments as well as their potential for future improvements. Performance appraisal is done annually with the feedback used to counsel and develop employees, identify their training needs and align the compensation structures within the organisation (Manasa Reddy, 2009). Performance appraisal differs from performance management in that the earlier is carried out on a top-down basis with the supervisor acting as the judge with minimal employee involvement (Management Study Guide, 2012). Grote (2002) rightfully stated that the objective of the performance appraisal was to value each employees contribution against his rewards and take corrective action if the disparity is large. For this reason, performance appraisal was done on an annual or biannual basis depending on the particular entity. On the contrary, performance management focuses on the mutual objectives set by the employees and the management through a dialogue process (Management Study Guide, 2012). It is done continually and focuses on quantifiable objectives, behaviors and values (Management Study Guide, 2012). It thus leaves no room for subjectivity of the supervisor and aims at determining the points of improvements available to both the employer an employee. Performance management dates back to the early 20th century when Fredrick Taylor equated employees compensation to their output at work (Vroom, 1990). In those times, appraisal was less formal than it is today and involved the aspect of units produced per given time (Lyster, Eteoklis Arthur, 2007). ***** offers that performance appraisal is a mere step within the wider performance management paradigm. He notes that performance appraisal is an objective analysis of the facts and not the person. After getting the results of performance appraisal exercise, the wider process of performance management moves a step towards the final goal of aligning organisational and employees goals. According to ***, positive results are celebrated while negative results should prompt development of an improvement plan. Performance appraisal uses a number of methods including graphic rating, ranking, behavioral anchored rating and management by objectives (Cokins, 2009). Cokins explains that the choice of the method used for appraisal depends on the goals of the organizations. Zaffron and Steve (2009) add that regardless of the method used, regular communication and feedback from the managers is essential for success of the appraisal process. That way, work teams in an organization feel that they are working towards a common goal (Grote, 2002). 2.2.2 Purpose of Performance Evaluation. Heskett (2006) attributes the negative perception of performance appraisal among employees to the general lack of understanding about the purpose of appraisal. The Management Study Guide (2012) details out that performance management helps in defining responsibilities of both the individual and the team in the Key Result Areas. That way, coordination and control among the various departments in an organization becomes easy. The Management Study Guide notes that knowledge of responsibilities enables the employees to take initiative and work towards their set targets while improving their areas of weakness. This is as affirmed by Daniels (2006) that an objective and participative performance management process fosters learning and continuous improvement as opposed to breeding animosity. Performance management cultivates a feeling of shared mutual accountabilities within an organization (Shepard, 2005). This way, Sheppard notes that employees are able to overcome resistance to change and are ready to improve on KRAs. Leahy (2003) who offered that effective performance management anchors other operational metrics like the balanced scorecard has supported the views. Effective performance management is crucial in motivating employees (Akrani, 2011). Akrani notes that performance management starts with employees setting goals that they intend to achieve over a given period. The employee assesses what he/she has done against the set targets. Given that the employer and the supervisor mutually set the targets for performance, the employee strives to reach the set targets (Akrani, 2011). Performance below the set standard is taken as an opportunity to improve as it is within the employees capacity to achieve. Beach (2007) explains that the employees give up trying if they feel that the set targets will not be achieved. Since the performance management entails mutual goal setting, such incidences are unlikely to occur. Instead, and as Akrani points out, performance management helps organizations determine the training and capacities for each of their employees. Gamble, Strickland and Thompson (2007) explain that data obtained from performance appraisal is crucial in determining the right people to execute organizational strategy. Employees with the highest performance are easily identified and encouraged to undertake roles that are more challenging. In most cases, results from performance appraisals are used in the determination of employee compensation (Heathfield, n.d) a fact that Kirby (2005) detests. Appraisals are used to determine compensation and promotion levels that assist in linking rewards to performance among the staff (Heathfield, n.d). However, appraisals on their own should not be used as basis for promotions and rewards (Kirby, 2005). Given that the main goal of performance management process is to assist employees in setting goals and aligning them to those of the organization, it is crucial for performance and rewards framework be aligned to this process as opposed to mere performance appraisal (Lyster, Eteoklis Arthur, 2 007). Lastly, performance appraisals play a huge part in shaping behaviors and attitudes of employees (Panager, 2009). Panager notes that employees relate well with the management and are responsive to the changing demands of their workplace. This is consistent with the Conaty and Ram (2011) assertion that human resource is the strongest catalyst or inhibitor of organisational change efforts. Performance management helps an organization to gauge its human resources effectiveness in coping with change (Conaty Ram, 2011). 2.2.3 Common Performance Appraisal Practices. The most common performance appraisal practice involves ranking employees from the best to the worst (Griffin, 2007). The method is mainly subjective with the supervisors judgment being crucial in the ranking of each employee. This subjective approach exposes the process to bias and manipulation by the management. Lunenburg Ornstein (2011) offer that ranking involves the supervisor rating each employee based on employees traits and behaviors in comparison with the rest in the organisation. Despite its subjective nature, ranking gives a clear picture of employee performance relative to the rest of the employees within the organisation and offers them real models that they can follow within the organisation (Coens, Jenkins Block, 2002). However, Griffin (2007) offers that ranking method is prone to bias and can result in poor relationships within work teams. Besides, ranking stifles the opportunity for feedback within an organization and sows a feeling of inferiority among underachie vers (Coens, Jenkins Block, 2002). In the same way, Coens, Jenkins and Block note that persons who are consistently ranked on top of the rest lack an opportunity to improve on their performance as they feel they have done enough. Lastly, Beach (2007) explains that ranking creates an adversarial relationship between work teams that stifles the spirit of cooperation between employees. Paired comparison resembles ranking method only that the performance of each employee is compared to that of every other employee based on a single criterion (Mondy, 2008). If an employee receives the highest number of favorable comparisons, s/he is ranked the highest. The process is more objective compared to the ranking method but poses huge problems for organizations with large numbers of employees (Mondy, 2008). Another performance appraisal system commonly used in organizations is the graphic rating scale. Under the system, evaluators judge performance of employees on a scale of about 5-7 categories (Mondy, 2008). These categories depict the rating of the employees by use of appropriate adjectives such as needs improvement, outstanding, average, meets expectations etc. The method is good in that it can be quantified by assigning numeric values to the descriptors. It is also easy to administer and can be tailored to meet specific needs of a given organization (Mondy, 2008). Under the forced distribution method, the evaluator assigns individuals to a limited number of categories, similar to the normal frequency distribution curve. Few individuals get very high ratings while a few get very low ratings. Most of the employees rate at the center of the curve (Armstroong, 2009). Mathis and Jackson (2011) decry that this system explicitly calls for evaluators to distinguish between winners and losers even if their performance is not rightly so. For this reason, the method is unpopular among managers and employees as it stifles the concept of employee development and assumes that there must always be very good and very poor performers in the same organisation (Mathis Jackson, 2011). It also creates cutthroat competition among employees that disarrays synergy (Beach, 2007). Another employee appraisal technique is called critical incident method. Under the method, the evaluator maintains records of favorable and unfavorable performance during critical incidences (Mondy, 2008). These incident log records are maintained continually and are used as indicators of employee performance. Ostrom and Wilhelmsen (2012) explain that this method lacks intellectual merit as it is dependent on the frequency of occurrence of critical incidences. Behaviorally anchored rating scale (BARS) is an appraisal technique that aspects of critical incident method and the rating scale method (Mondy, 2008). Under the method, the performance level of each employee is described on a scale. The evaluator then compares the different performance of each employee to decide the best performing and those in need of more training. Mondy offers that this system is more objective but is hard to quantify for further analysis. One of the most common performance appraisal methods today is referred to as Management by Objective (MBO). Mathis and Jackson (2011) and Mondy (2008) define the method as a result based system under which the employees and managers set objectives together that form the basis of appraisal in the next appraisal period. The employee actual output is compared to the set performance targets and points of improvements identified (Griffin, 2007). Management by objectives arises allows management to see the wider picture of the organsaitional and the part that each employee plays in it and to remain on curse to achieving the overall strategic objectives of the firm (Drucker, 1954). Employees also conduct a self-audit of their performance potential and chart out the best course for attaining the mutually agreed goals (Pecora, Cherin Bruce, 2009). 2.3.4 Frequency of Performance Appraisals. In most organizations, employees and their supervisors deliberate on their performance over a given period typically annually, biannually or quarterly (Garber, 2004). Tripathi and Reddy (2008) list two major forms of performance appraisal namely summative and formative. They explain that a summative performance is done occasionally typically in three to six months relative to the organization in question. On the contrary, formative appraisal is done continually typically daily. Formative appraisals are important in that the employees can track their performance over time and determine their weak points for improvement. This is as opposed to summative appraisals under which employees have no trail of their past performance (Management Study Guide, 2012). Many scholars emphasis on the need to perform appraisals based on a schedule (Miller Braswell, 2010; London, 2003; Mathis Jackson, 2011). Routine performance appraisal avoids the temptation of focusing on irrelevant activities (London, 2003). That said, the management is responsible for ensuring continuous performance appraisal taking care not to forget critical incidences (Miller Braswell, 2010). Though appraisal is done continually according to the set schedule, it is important for the managers and subordinates to sustain informal communication throughout the performance period to take advantage of any opportunity to change negative trend (Edwards et.al, 2003). Edwards et al also cites the preemption of negative surprises at the end of an appraisal period as good reasons for maintenance of these informal contacts. Abbey (2007) notes that in most organizations, appraisal forms are used to capture employees accomplishment in the past year as well as some aspects such as their rela tionships with team members, their personality traits and flexibility, etc. 2.3 Challenges are faced in Performance Appraisal process Most organizations experience challenges in their appraisal processes. Deming (2000) once cited that performance appraisal is one of the most powerful inhibitor to quality and productivity. More recently, Lee (2006) offered that performance appraisals inspire hate and distrust among employees. Challenges in performance appraisal occur from the fact that the processes are based on widely held and invalid assumptions that hold back progress (Scholtes, 2008). Lee aptly described the processes as designed to measure and rate performance as opposed to improve it. Past research works (DeNisi Williams, 1988; Longenecker et al., 1987) cite subjectivity among the evaluators as well as different standards used for different employees as major problems in appraisal process. More recently, Lee (2006) cited lack of congruence with organizational objectives as well as lack of use of the results to improve performance. Lee adds that the results of performance appraisal should be used to motivate employees as opposed to instill fear and loathing as to stifle the spirit of teamwork. Hazard, (2004) and Nickols (2010) explain that performance appraisal demotivates the employees, is too subjective and unfair in application, and takes too much time and is seen as a management attempt to coerce employees to submit to management authority. 2.3.1 Employees Motivation Wilheir (2010) explains that motivation is the only effective tool for ensuring effective employee management. According to Wilheir employees, lose motivation when duties become repetitive, too difficult or too easy. The management should ensure that their employees remain motivated and productive throughout their engagement in the organization (Hazelden, 2010). Hazelden (2010) adds that the most common causes of employee demotivation include lack of information, unrealistic expectation by management, feeling of excessive control by authorities and lack of management appreciation of effort. Noone (2008) adds that to keep employees motivated, the management should develop clear goals and keep the roles interesting for the employees. That way, Noore asserts that employees are unlikely to deviate from the organisational mission. . Employee motivation is crucial to achieving the g

Horror and Suspense in Bierces Work Essay -- Ambrose Bierce Short Sto

Horror and Suspense in Bierce's Work A novel is divided into different chapters and usually has different plots to focus on. In a novel there are lots of characters and the time scale is constantly changing throughout. Because there is more than one theme and there are different messages coming across of combined themes, makes the novel denser and more complicated to understand and to take in all the description. Ambrose Bierce wrote a lot of short stories and some we have studied and analysed. In a short story there is usually only one plot and the event usually carries on in the same setting. There are usually a couple of characters and one hidden message which makes the short stories more to the point and very direct. As I was analysing the short stories by Bierce, I realised that most of the characters in them were male and most of the stories contained physicians. Looking over Bierce’s background I was able to see that Bierce was brought up in a male dominated area where women were secondary characters. I assume this is why Bierce’s main characters are male and the female characters only play a secondary part in the setting. He had a son who committed suicide and a son who drank himself to death. I think this is why Bierce put physicians in most of his stories. The physicians don’t know when the victims of the stories are about to die, so maybe Bierce could relate to these because no physician could warn him about his sons dying. Throughout Bierce’s stories he has a good use of horror and suspense. He does this by being very concise and to the point. He also makes more impact on us as he uses pathetic thalacy. He does this by describing the weather in such a way that reflects on the mood o... ...he misery of others.’ This ties in with us laughing at the misery of Henry Armstrong. Others find it horrifying as they would be terrified of being buried alive and in those days it was quite common for medical students to dig up the corpses. This also ties in with Bierce’s definition of a grave, which I also found in ‘The Devil’s Dictionary.’ A grave is a place in which the dead are laid to await the coming of the medical student.’ Reading these stories of Bierce’s I found to be very interesting and thoroughly enjoyed. I think it is clear that Bierce was trying to scare a lot of people and effectively did as the description, the language used, the mixed feelings it sends out and the context of his writing creates a lot of horror and suspense. Some may say that Bierce is sick others say that he is very intelligent. Bierce- brilliant or disturbed?

Appalachian Music :: essays research papers

Appalachian Music Appalachee - people on the other side Folk music - What is folk music? Traditional songs existing in countries. Handed down through generations. Passes on by word of mouth, not written in musical notation. Don't know who wrote it. Melody and lyrics change as they are passed on. Folk Music is History in song: Tells about daily lives. Tells about Special events - often tragedies, themes of romance, battle, adventure, and history. Purpose of folk music: Entertainment, recreation, socializing, dancing, games. Teaching, make work go faster, religious. Tells a story (ballads). Origins of Appalachian people: Ireland Scotland England Music influenced by folk and mountain music: Country Bluegrass Modern folk Musical instruments used (folk instruments): Dulcimer, fiddle, banjo, guitar, mandolin, autoharp, mouth bow, washtub bass. Body percussion, spoons, washboard, Jew's harp. Harmonica, jug. Bluegrass Music - What is bluegrass music? Direct descendant of old-time string band tradition, which developed out of Southern mountain dance music & songs. Combines old-time string band music with gospel harmonies & blues rhythms. Played on acoustic instruments (natural sound): Banjo, guitar, fiddle, mandolin, bass fiddle, dobro (resophonic guitar) Instrumental leads used to show off technical ability Distinctive vocal harmonies Originations of Bluegrass Bill Monroe - "The father of Bluegrass" Grew up in Rosine, Kentucky (Ohio County) Music takes its name from Bill Monroe's band, The Blue Grass Boys Influenced by - Pendleton Vandiver ("Uncle Pen") the uncle who "raised" Bill and taught him how to play the fiddle. Arnold Schultz, black "blues" singer and guitar player. Timeline: 1911 - Bill Monroe born on September 13 1940's - development of bluegrass music 1950's - people began referring to his style of music as Bluegrass 1960's - concept of "bluegrass festival" introduced 1996 - Bill Monroe died on September 9 1997 - Bill Monroe inducted into Rock and Roll Hall of Fame Because of his influence on popular music Bluegrass Music featured in: Films of "Bonnie and Clyde", "Deliverance" Television Shows of "The Beverly Hillbillies", "The Dukes of Hazard" Written Overview A sample overview of the history of bluegrass music follows. It should be brief but comprehensive, as it may also be the introduction of the music to teachers as a study guide before or after an in school presentation or they may include this information in a history of social studies discussion if a program presentation is not possible. Bluegrass Music: The Roots The street balladry of the people who began migrating to America in the early 1600s is considered to be the roots of traditional American music. As the early Jamestown settlers began to spread out into the Carolinas, Tennessee, Kentucky and the Virginias, they composed new songs about day to day like experiences in the new land.

Where Ceramics Once Thrived :: essays research papers

Where Ceramics Once Thrived Watching a skilled ceramics artist shape a creation on the wheel is a thrilling experience. Under her or his hands, a spinning blob of mud grows into a work of art. It's not unusual, after witnessing such a display of virtuosity, for the audience to realize that the ware on their own kitchen shelves pales by comparison. So it's logical to ask: Is every thrown piece made the same way? By hand? Even the cheap stuff at home? Of course the answer is: No. Production ceramic ware comes from highly automated assembly lines. A question with a more elusive answer might be: Where are the factories? Where does production ceramic ware come from? The answer: Until recently a small Ohio town. A visit today to East Liverpool, Ohio, a hamlet situated on the Ohio River just a few miles from the Pennsylvania border, reveals little of the town's history as the former world capitol of production pottery. This is a place of boarded up buildings, discount automotive parts outlets and abandoned storefronts. However for the ceramics industry East Liverpool is an historical mecca, the place America's where pottery industry fought its way to the world's center stage and thrived, albeit briefly. It was in 1841 that British-born potter James Bennett settled here, drawn by accessible clay deposits and the sense that he could make a better living than in Jersey City where he'd worked at the Henderson Pottery Company since immigrating in 1839. Bennett's hunch turned into a family affair - he sent for his brothers in 1845 - and soon expanded. Within four years the family's successful pot-throwing operation had spun off a host of competitors. In 1849 there were six firms running 94 kilns in the sleepy town. Between 1850 and 1950, few would use the word 'sleepy' again to describe East Liverpool. Following Bennett's lead, and copying his family's immigration pattern, a flood of mostly English-born potters arrived in East Liverpool. The work they produced was initially limited in quantity by inadequate power sources and in quality by a lack of clay varieties. Still, the town's early potters were successful. By the time of the opening shots of the civil war, a scant 20 years since Bennett's first endeavors, East Liverpool ware was being shipped throughout the United States and the town was booming. More than large amounts of red and yellow clay and a steady supply of immigrants figured into East Liverpool's growth.

Corporate Evaluation Analysis – Avon Products

Table of Contents I. Company History†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. Pg. 3 II. Recent News†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Pg. 5 III. Industry Analysis†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Pg. 8 IV. SWOT Analysis†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. Pg. 15 V. Value Line Analysis†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Pg. 15 VI. Ratio Analysis†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Pg. 18 VII. Regression & Descriptive Statistics – Growth Analysis†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Pg. 20 VIII. Growth Analysis, Estimates for Earnings Employed in DDM, DDM including Discount Rate, and Other Assessments of Risk†¦Ã¢â‚¬ ¦Ã¢â ‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. Pg. 23 IX. Other Valuation Parameters†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Pg. 26 X. Rule #1†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. Pg. 28 XI. Conclusions/Final Stock Judgment†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Pg. 31 XII. References†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢ € ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Pg. 33 XIII. Appendix†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. Pg. 35 I. Company History In general, Avon Products, Inc. is a U. S. cosmetics, perfume, jewelry, skin care, personal care and children’s products seller with markets in over 140 countries across the world and sales of $9. 9 billion worldwide. Avon Founder David H. McConnell offered women a rarity in 19th century America: a chance at financial independence. In 1886, it was practically unheard of for a woman to run her own business. Only about 5 million women in the United States were working outside the home, let alone climbing the ranks of any corporate ladder. That number accounted for just 20% of all women (Avon. com). The man behind the company for women was the son of Irish immigrants and grew up on a farm. Yet, it was this young man from rural New York, a visionary leader decades ahead of his time, who would become a pioneer in empowering women. McConnell, a bookseller-turned-perfume entrepreneur, would offer women the opportunity to create and manage their own businesses through what later became known as direct selling. David H. McConnell sold books door-to-door and gave out perfume to entice women to buy his books. His perfume proved to be much more popular than his books, so he then founded the California Perfume Company (CPC) in New York, New York. Mrs. P. F. E Albee, a 50-year old wife and mother of two, became the California Perfume Company’s first Representative. The legendary Mrs. Albee is still considered a role model for Avon Representatives today and is credited with creating the company’s system for distributing products. The California Perfume Company was incorporated on January 28, 1916 by David H. McConnell and Alexander D. Henderson (businessman) in Suffern, New York. By 1918, five million units were sold in North America, and by 1928, sales reached $2 million. In October 1939, the name was changed to Avon Products, Inc; McConnell had visited Stratford-Upon-Avon (UK) and had liked the town so much, that he renamed his company after it. The company was taken public in 1946 with OTC stock. By 1954, sales reached $55 million, and the â€Å"Avon Calling† advertising campaign was introduced, making it one of the largest and most successful advertising campaigns in history (Avon. com). In the 1960’s and 1970’s, Avon was one of Wall Street’s favorite â€Å"Nifty Fifty† stocks, a group of well-regarded, â€Å"buy and hold† blue chips that also included Xerox, Disney, and McDonald’s. These stocks helped drive the bull market of the early 1970s in the U. S. , with Avon’s stock soaring to $140. The Nifty Fifty bubble later bursts, sending U. S. stocks plunging. Avon was listed on the NYSE as AVP in 1964. By 1979, sales reached $3 billion, with one million direct sales agents. Today sales exceed $10 billion worldwide. In June 1989, Avon became the first major cosmetic company to announce a permanent end to animal testing on all Avon-manufactured products. Avon does not conduct animal testing on any of its products or raw ingredients and does not require that suppliers of raw ingredients and finished products produced for Avon conduct animal testing on our behalf. In addition to its corporate pursuits, the Avon corporation is involved in philanthropic causes. The Avon Foundation for Women, an accredited 501(c)(3) public charity, is the largest corporate-affiliated philanthropy for women in the world. Avon has been committed to helping women achieve their highest potential of economic opportunity and self-fulfillment by empowering them through scholarships and support for other forms of educational and occupational training and advancement. The Avon Foundation is currently focused on two key causes: breast cancer and domestic violence. Through 2009, Avon global philanthropy raised and donated more than $725 million worldwide for causes most important to women. Since 1992 in more than 50 countries around the globe, millions of dedicated Avon Representatives have sold special Avon cause products, raising almost $150 million to end breast cancer and domestic violence and to help in times of global emergencies. In 1999, the first woman CEO was named: Andrea Jung. In 2003, â€Å"mark. â€Å", which is targeted to younger, college-aged women, was created to help the company reach out into markets it had not previously serviced. mark. as proven to be successful in reaching a new generation of recruits, primarily young women ages 18–25, with a monthly â€Å"magalog† featuring its products. In 2008, reality star Lauren Conrad became a spokesmodel for the brand. Conrad also designed clothing and accessories for the brand. In 2010, actress Ashley Greene would replace Conrad as the spokes model for the brand. T hroughout the first decade of the new millennium, Avon began operating in numerous new markets, with heavy expansion in Central and Eastern Europe and the Caribbean Islands. Avon is now in more than 100 markets and is coined to be â€Å"the company for women†. II. Recent News AVP has a market cap of $11. 43B, operating cash flow of $702M, and consistent quarterly dividends around $0. 22 per share, making AVP a leader in personal products globally (Investment Underground). Given AVP’s positioning in the personal products industry, Avon could be a prime takeover candidate for competitors such as The Estee Lauder Company (EL) or French conglomerate L'Oreal SA (LRLCY. PK) looking to expand their reach into the direct sales portion of the personal products market. Because AVP currently has one of the lowest operating margins in the sector (11. 0%), competitors such as EL could view AVP as an attractive investment in hopes of increasing profitability. In turbulent times, people turn inward. The argument for large cap consumer staple companies is that they are familiar names that offer the necessities of daily life. Barron’s Magazine presents a list of ten companies that fit this argument. The underlying thesis is that these ten com panies offer cash flow, dividends and predictable growth. This list includes: Avon Products (AVP), Campbell Soup (CPB), Clorox (CLX), Coca Cola Enterprises (CCE), Colgate-Palmolive (CL), General Mills (GIS), Kellogg (K), Molson Coors Brewing (TAP), PepsiCo (PEP), and Proctor & Gamble (PG). Are these companies really good investments for today? |Ticker |Company |Recent |Price Chg. |Dividend |EV/EBITDA |EV/SALES | | | |Price |52W |Yield | | | |AVP |Avon Products, Inc. |26. 59 |-19. 00 |3. 50 |15. 03 |1. 31 | |CPB |Campbell Soup Company |33. 50 |-4. 00 |3. 50 |13. 01 |1. 9 | |CLX |Clorox Company, The |68. 81 |7. 00 |3. 20 |17. 46 |2. 39 | |CCE |Coca-Cola Enterprises Inc. |25. 81 |-5. 00 |1. 90 |16. 15 |1. 79 | |CL |Colgate-Palmolive Company |76. 95 |-9. 00 |3. 00 |12. 23 |2. 70 | |GIS |General Mills, Inc. |36. 65 |0. 00 |3. 10 |14. 90 |2. 24 | |K |Kellogg Company |54. 17 |3. 00 |3. 00 |15. 49 |2. 18 | |TAP |Molson Coors Brewing Company |43. 5 |0. 00 |2. 60 |12. 87 |3. 20 | |PEP |PepsiCo, Inc. |63. 24 |-5. 00 |3. 00 |15. 58 |2. 25 | |PG |Procter & Gamble Company, The |60. 60 |-5. 00 |3. 20 |15. 05 |2. 78 | The first item that can be noticed from the above chart is that t hese companies underperformed the S 500 significantly during the past twelve months (Sommer). This lag is not indicative of a turning point. The poor performance reflects high unemployment and consumer uncertainty. The consumer is being more selective in its discretionary spending and seeking alternate, cheaper products. The market seems to reflect this understanding. The high dividend yields provide a measure of support to these stock prices but they also reflect the lack of price appreciation. | Ticker |Company |EPS TTM |2011 EPS |2012 EPS |FCF TTM |Payout Ratio| | | | |(Est. ) |(Est. ) | | | |AVP |Avon Products, Inc. |2. 28 |2. 01 |2. 26 |-0. 03 |38. 0 | |CPB |Campbell Soup Company |2. 36 |2. 43 |2. 53 |1. 15 |47. 50 | |CLX |Clorox Company, The |5. 25 |3. 94 |4. 43 |2. 00 |41. 00 | |CCE |Coca-Cola Enterprises Inc. |2. 05 |2. 04 |2. 26 |1. 44 |5. 90 | |CL |Colgate-Palmolive Company |4. 46 |5. 05 |5. 50 |2. 98 |45. 50 | |GIS |General Mills, Inc. |2. 51 |2. 48 |2. 68 |0. 60 |41. 80 | |K |Kellogg Company |5. 6 |3. 47 |3. 78 |-0. 17 |30. 20 | |TAP |Molson Coors Brewing Company |3. 81 |3. 78 |4. 04 |1. 98 |28. 30 | |PEP |PepsiCo, Inc. |3. 97 |4. 48 |4. 90 |3. 21 |47. 60 | |PG |Procter & Gamble Com pany, The |3. 84 |3. 97 |4. 36 |3. 43 |49. 00 | Each of these companies reports solid earnings over that past twelve month period. Consensus analyst estimates for both the current year and next year are less impressive. We believe the estimates reflect expectations for continued weakness from stressed consumers† (Sommers). These companies are all overpriced and have no catalyst for change. The assumption that investors can find safety by identifying sectors or themes is a dangerous one. Avon recorded feeble operating performance in the fourth quarter of 2010. The company's earnings per share plunged 13. 2% to $0. 59 from $0. 68 per share in the year-ago period. The decline was principally due to reduction in operating margin, which resulted from unfavorable product mix, rising commodity cost and a 27% sales decline in Venezuela (Zachs). Moreover, Avon ended fiscal 2010 with a long-term debt of $2,408. 6 million, reflecting a debt-to-capitalization ratio of 59%, which is substantially higher, and could negatively influence the company's credit worthiness and make it more vulnerable to the macro-economic factors and competitive pressures. Additionally, the North American market continues to remain sluggish with volume falling 14. 0% in the fourth quarter of 2010. Moreover, the company's initiatives to change the product mix and reposition the business in the U. S. arket will require significant expenditure to support increased advertising and promotional activities. This is likely to undermine Avon’s overall operating performance, moving forward. Besides, the company is expecting a mid single-digit revenue growth in fiscal 2011, which can be achieved through strong field programs coupled with an innovative. As well, call it luck; on November 08, 2010, Avon sold out its entire ownership interest (74. 67%) in Avo n Japan to TPG Capital, otherwise the scenario could have been worse for the company due to the recent crisis in Japan product pipeline (Zachs). Pulling out of the Japanese market was part of the company's 2010 decision to redouble its efforts in China. It announced the sale of its 75% stake in Avon Japan to private equity firm TPG for $90 million in late 2010. The move also was part of the beauty-products maker's plan to refocus on direct sales. (The Japanese unit typically generated more than half its revenues through direct mail. ) III. Industry Analysis (Personal Products – Cosmetics & Toiletries) Because of the wide arrange of products Avon offers, it is quite difficult to pin point one single industry. Thus, going by their primary selling products, Avon fits most accurately into the Personal Products and Cosmetics & Toiletries industries. Companies that manufacture and/or market personal care products produce cosmetics, fragrances, and razors. The personal care products industry targets many faces – from chubby newborns to 40-something near-goddesses to those newly retired and dreaming of a beachfront condo. While companies in this sector would like to cater to everyone, the industry has found potential in both the Baby Boomers and their children — the teens and ‘tweens. Called Gen Y, Boomer's teens offer an estimated $9 billion in purchasing power (Hoover’s). Leaving no demographic untouched, personal care products makers also are expanding their target markets across gender lines, marketing everything from cosmetics to hair care to men and teen boys, as well as women. With more US consumers reaching the age of 55 (33% by 2030), the industry has targeted this more-vain-than-not age segment and has logged revenue growth in skin care and hair coloring products throughout the past few years as a result. On the other end of the spectrum, the teen girl population age 12 to 19 grew from 14. 3 million in 1995 to 15. 2 million in the US in 2001 (Hoover’s). Industry beauty companies, such as Avon Products, are targeting this demographic with lifestyle brands the likes of Avon's Mark. While women have historically been a target market — primarily because women are the likely shoppers — the buying power of males is not ignored by the personal care industry. In fact, the group's buying power is eagerly sought after. Industry giants are tapping into the revenue potential of personal care products made specifically for men, illustrated by Procter & Gamble's acquisition of Gillette in October 2005 for some $57 billion (Hoover’s). Gillette represents more than razors. In the eyes of the industry, Gillette is the king of marketing to men. As the top marketer to women, Procter & Gamble has counted on its purchase of Gillette to give it the keys to the castle and enable it to become the voice to men, as well. Men offer revenue potential beyond Gillette's Mach3 and Colgate-Palmolive's Mennen brand. A Newsweek magazine poll conducted in mid-2003 revealed that more than half of men age 35 to 55 are â€Å"somewhat† satisfied with their overall appearance. This percentage reflects an increase for this age segment since Newsweek's last poll in 1996. Companies have begun educating men on the topics of sunscreen, lotions, nail care, hair color, and more. Along the way, the personal care industry has been piquing the interest of the male customer and introducing him to the profitable skin care market, as Estee Lauder has with its Aramis and Clinique brands and Beiersdorf has with its Daily Protective lotion (formerly NIVEA for Men). This trend still extends into 2008. Regardless of gender or age, customers access personal care products through a variety of venues, including grocery stores, drugstores, mass merchandisers, warehouse clubs, specialty retailers, and online e-tailers. Reports about personal care products sales for grocery stores and drugstores are usually prefaced with the phrase, â€Å"excluding Wal-Mart. † (Fidelity) This is a reminder that Wal-Mart Stores, as well as some warehouse clubs, present something of a wildcard to the industry. Outside the brick and mortar, personal care products makers have a polished business model for using direct-selling methods to reach target markets. Cosmetics companies have gained sales advantages — with little or no overhead — by letting their customers sample products at home parties. Direct sellers, such as Avon Products, Mary Kay, and Amway, have long relied on this concept. UK-based natural personal care retailer The Body Shop has tested the US waters by selling through independent consultants and continues to sell in the US after seeing positive results. No matter where a company in the personal care products industry identifies its untapped growth potential — be it in the teenage girls or mid-life males markets — a few of the same factors apply. Staying competitive means implementing innovation fueled by billions of dollars in R&D and a strategy of quick-to-market products. Reaching far and reaching fast are significant parts of the battle. However, expanding as wide as the tentacles of Wal-Mart and maintaining brand recognition and loyalty in a sea of private labels may prove to be the ultimate challenges. Fidelity) [pic] Competitors: Avon faces competition from a variety of products and product lines both nationally and globally. The beauty and beauty-related products industry is extremely competitive and the number of competitors and degree of competition in this industry varies extensively from country to country. Globally, Avon competes against products sold to consumers by other direct-selling and direct-sales co mpanies and through the Internet and against products sold through the mass market and prestige retail channels. The major competitors of the company are L'Oreal SA (LRLCY. PK) and Revlon Inc. (NYSE: REV). Competition from mass merchandisers and specialty and department stores has spurred Avon to not only spend many millions on R&D but set aside just as much — $100 million — to support the launch of a global ad campaign. Avon anticipates driving additional growth based on fragrances (Today, Tomorrow, Always) and skin care (Anew anti-aging) sales. To that end, it signed on award-winning singer Fergie to develop a signature fragrance, which was unveiled in 2010. Previous partnerships have involved French designer Emanuel Ungaro for two fragrances (U by Ungaro for Her and U by Ungaro for Him) and the New York Yankees' Derek Jeter for â€Å"Driven† men's fragrance and a personal grooming line of products. (Yahoo! Finance) [pic] Revlon (REV) is engaged in the production, marketing and selling of an array of cosmetics, hair color, beauty tools, anti-perspirants/deodorants, fragrances, skincare and other beauty care products. The company primarily operates in North America, Asia-Pacific, Europe, Africa, and Latin America. It is headquartered in New York City, New York and employs 4,800 people. Revlon's global brand name, product quality and marketing experience have enabled it to create one of the strongest consumer brand franchises in the world. Revlon’s brand equity among the consumers enabled the company to garner 12. 7% of the US mass retail color cosmetics market; 9. 7% of the hair color market; 4. 6% of the perspirants/deodorants market; and 21% of the beauty tools market, during 2009 (Revlon). Strong brand image of the company facilitates customer recall and allows Revlon to penetrate new markets as well as consolidate its presence in the existing ones. The company recorded revenues of $1,295. 9 million during the financial year ended December 2009 (FY2009), a decrease of 3. 8% as compared to 2008. The decline in revenues was driven by lower net sales of Revlon and Almay color cosmetics and some of the other beauty care products. The operating profit of the company was $170. 8 million in FY2009, an increase of 10. 2% over 2008. The net profit was $48. 8 million in FY2009, a decrease of 15. 7% as compared to 2008 (Revlon). L'Oreal (LRLCY. PK) is one of the largest cosmetic companies in the world. It produces and markets a range of make-up, perfume, hair and skin care products in over 130 countries. It is headquartered in Clichy, France and employs 64,600 people. Since its inception about 100 years ago, the company has developed a strong brand portfolio of 23 international brands. The company's products are sold under well-known brands such as L'Oreal Paris, Garnier, Maybelline, SoftSheen Carson, CCB Paris, L'Oreal Professional, Kerastase, Redken, Matrix, Mizani, Lancome, Biotherm, Helena Rubinstein, Kiehl's, Shu Uemura,and Giorgio Armani. These brands are available through a range of distribution channels ranging from mass market, to selective distribution including hair salons, pharmacies/drugstores and a network of directly owned stores and franchises. Strong brand portfolio lends better visibility and presence in all distribution channels and enables L’Oreal to reach a large customer base, thereby increasing its market penetration opportunities. L'Oreal operates through three business divisions: cosmetics, the Body Shop, and dermatology. The Body Shop division operates a chain of 2,550 stores in 63 countries worldwide specializing in skin and hair care products made from natural ingredients. The company recorded revenues of E17,472. 6 million ($24,367. 8 million) during the financial year ended December 2009 (FY2009), a decrease of 0. 4% compared with 2008. The operating profit of the company was E2,577. 6 million ($3,594. 8 million) in FY2009, a decrease of 5. 4% compared with 2008. The net profit was E1,792. 2 million ($2,499. 5 million) in FY2009, a decrease of 8% compared with 2008 (L’oreal). (Fidelity) [pic] IV. SWOT Strengths |Weaknesses | | | | |Diverse geographic presence enhances |Chinese operations marred with controversy | |scale of operations and mitigates local market risks |and poor performance | | | | |Low cost business model of direct selling |Lack of clear-focus and strategy for non-beauty products | | | | |Strong brand equity |Declining operating margins | |Opportunities |Threats | | | | |Restructuring initiatives for organizational Competitive environment in the global | |Effectiveness |cosmetics industry | | | | |Re-branding strategy to drive consumer |Company’s revenues tied to the | |Demand |performance of the sales representatives | | | | |Emerging markets enhances the scope of |A diversified global operation exposes Avon to currency fluctuation | |growth for the Avon’s value cosmetic |risks | |products | | V. Value Line Analysis On December 24, 2010, Jerome H. Kaplan, a Value Line analyst, points out that investors are not thrilled about Avon’s mediocre progress. The company’s stock price has declined in the last three months. Avon continues to struggle a bit in the U. S. and Chinese markets as is reflected in September-quarter earnings, as well as deteriorating growth in the vital markets of Brazil and Russia. Kaplan states, â€Å"Long-term emerging market-oriented investors should consider this untimely stock. Avon could be viewed as the equivalent of a diversified portfolio in fast-growing regions, such as Latin America, Asia, and Central and Eastern Europe. (Value Line) Improves margins, profits, and share price will most likely be a result of the growth of these markets by 2013-2015, in addition to savings of over one billion dollars by 2012-2013 from programs reducing Avon’s cost structure. When looking at the Value Line, we notice a Safety rating of 3. A Safet y rating is another way to measure the company’s risk or financial strength. It is measured from 1 to 5, with 1 being the highest and best rating indicating the company has a less likely chance of becoming bankrupt and are less volatile. In Avon’s case, a 3 may be interpreted as being unpredictable. If the score is lowered to a 4 or 5, the greater the short-term price movements the stock may experience. Safety ranks work better than Beta when there is a break in the market (when the market is going down). Arguably the most important investment recommendation found on Value Line is the Timeliness rating. The scale is also from 1 to 5 with again 1 being the most desirable rating which reflects the top 100 stocks within Value Line’s 1,700 stocks. Investors typically are encouraged to buy a portfolio of stocks across six or more industries with a ranking of 1 for Timeliness. After some time, investors are encouraged to keep an eye on this rating and when it falls to a 4 or 5 rating that stock should be sold, as is the case with Avon with a Timeliness rating of 4 (Money-Zine). With a financial strength of a B++, Avon is considered a company that would most likely survive a depression. This means the company has sufficient liquidity to payout their dividends or increase how much they give as dividends. When income is the primary consideration, a strong balance sheet provides greater assurance that a dividend can be maintained (Valueline). Proper financing ensures stockholders that operations can be expanded without having to disperse a portion of the earnings to bank or bondholders. The stock price stability (SPS) is the standard deviation of weekly stock prices over the last five years. It is ranked from 5 to 100 and in increments of 5. A ranking of 100 reflects the lowest standard deviation, which reflects the greatest stability attainable, while 5 indicated the largest standard deviation and the least stability. Price stability along with the company’s financial strength rating determines a stock’s Safety ranking. Avon has a price stability of 75 which puts them not too far from the top and would be considered to be on the lower side of good stability. The price growth persistency (PGP) of a stock is measured in the same format as the stock price stability. A stock that is 100 probably beat the index every year of the last 10 years. Avon’s PGP rating is 45, which is on the low side of average. This measurement rewards this fund for the consistency with which it outperforms the broader universe if equity offerings over an extended period of time. Earnings predictability for Avon is 65. This rating provides a measure of the reliability of an earnings forecast. Ratings with a 100 are noted as the â€Å"best fit† on the regression line, meaning they have a high consistency of earnings. Predictability is based upon the stability of year-to year comparisons, with recent years being weighted more heavily than earlier ones. Reliable forecasts are close to 100 and the least are close to lowest of 5. Being that Avon falls around the middle of these two extremes, it can be said that the company is somewhat reliable and other factors should be considered in conjunction. A stock's beta is a measure of a particular stock's price volatility and risk relative to a broader measure of stock price movements such as a market index (Money-Zine). Many stock beta calculations are performed relative to the S 500; however, the Value Line Beta calculation uses the New York Stock Exchange Composite Index. The most important fact to point out is that the beta measures a stock’s movement in price. If a stock has a beta of 1. 0 or above, which is the value of the market beta, it will experience more movement either up or down relative to the index. In comparison, a stock with a beta of less than 1. 0 is considered less risky and stable with smaller price fluctuations. According to Value Line, Avon has a beta of . 5 right under the market beta, which implies that this stock is not risky and will most likely not experience any drastic changes in its price. The Technical ranking of a stock is almost similar to that of its Timeliness ranking except for the fact th at the Technical ranking does not take into consideration earnings per share projections, only the opportunity for a stock’s price appreciation. With a Technical ranking of 2, Avon, according to Value Line, should be purchased since this rating indicates Avon has short-term capital gains, in the three to six month timeframe (Money-Zine). The plowback method is sometimes used to calculate a company’s earnings after dividends have been paid out. A high rate indicates that a company pays less in dividends and thus reinvests more of its earnings into the company. Investors tend to prefer a lower plowback ratio in a slow-growing company and a higher one in a fast-growing company. Whether or not this is desirable depends on the rate of growth. The plowback rate is calculated using the following formula: ROE x (1 – Payout Ratio (Dividends per share/Earnings per share)). Plugging in the Value Line figures for Avon the result is, . 492 x (1 – (. 84/1. 45)) = . 207 = 20. 7%. To calculate Avon’s free cash flow we need the following = per share earnings + cash flow from operations – required dividends – capital spending. Thus, 1. 45 + . 44 – . 84 – . 69 = $0. 36. VI. Ratio Analysis Profitability |12/31/2010 | |12/31/2009 | |12/31/2008 | |12/31/2007 | |Ratios | | | | | | | | |2006 |5. 5 |   |1. 75 |   |6. 26 |   |60. 28 | |2007 |5. 4 | |1. 81 | |7. 23 | |70. 67 | |2008 |8. 3 |   |1. 81 |   |8. 38 |   |125. 92 | |2009 |6. 1 | |1. 61 | |6. 4 | |64. 27 | |2010 |5. 9 |   |1. 48 |   |4. 74 |   |41. 4 | According to this DuPont Analysis for Avon, all three sectors show inconsistencies and overall fluctuations up and down. In 2008, the company is at its highest level but dramatically goes down in all sectors the year following and continues to decline. Overall, efficiency in all sectors are not very stable. The company has had its off and on days throughout the years without any trend or consistency. Avon needs to control their operations and cost efficiency more closely. VII. Regression & Descriptive Statistics – Growth Analysis Using the data figures for Avon provided through Value Line from 2002 to 2009, a descriptive analysis and linear regression were produced for SPS, Shares, EPS, CF, DIV, ROE, PE, BV, FCF, OM, RTC and NPM (Appendix). A more comprehensive analysis was done for EPS, FCF, PE, and ROE. Included in each financial variable analysis is the calculation of normalized data points for the 7th and 8th periods, which are years 2008 and 2009, respectively. Within this additional analysis the Current to Normalized (CNE) was also calculated, and each resulting figure was compared to the normal expected range of . 85 – 1. 15. In the last step of this additional analysis, growth rate and variability figures were also produced. *Please Note: the ROE figures for the years of 2002, 2003, 2005, and 2008 were noted as â€Å"NMF† on Value Line, thus the figures used in the analysis were calculated using the net income after tax from the income statement and the shareholder’s equity from the balance sheet. Looking at the summary of the results for these four financial variables in the chart given below, only the CNE of EPS, which is . 93 falls within the normal range of . 85 – 1. 15, which means that in the remaining three areas of FCF, PE, and ROE, Avon is operating below the expected and acceptable range. These below average results signify that the normalized points produced are not adequate enough to rely on to calculate appropriate growth rates. As can be seen also in the summary, there is a positive growth rate in both EPS and ROE, but negative in both FCF and PE. ROE may be at a significant high growth rate because of the out of norm results that were calculated for the years of 2002, 2003, 2005, and 2008 as mentioned above. In each of these particular years, shareholders equity was low in comparison to net income (negative in 2002) which resulted in abnormal figures Value Line did not wish to indicate. FCF has a negative growth rate since in 2005 it was at an unsustainable figure of 1. 07 and then drastically declined to . 34 the following year and even lower to . 25 in 2007. This drastic change coupled with another fluctuating high and low between 2008 and 2009 are factors for this negative growth rate. In relation, although not as drastic, for PE results more visibly decline in the last two periods of 2008 and 2009. |Avon Products, Inc Financial Variables Analysis | | | |EPS |ROE |FCF |PE | |Normalized 8th Period | |$1. 55 |$156. 38 |$0. 46 |$22. 18 | | | |   |   |   |   | |Normalized 7th Period | |$1. 51 |$121. 35 |$0. 52 |$22. 7 | | | |   |   |   |   | |Current to Normalized | |0. 93 |0. 31 |0. 79 |0. 84 | | | |   |   |   |   | |Growth Rate | |3. 09% |28. 87% |-12. 80% |-0. 88% | Another aspect of the descriptive and regression analysis that is important to point out are the R-squared and skewness. R-squared, also known as the coefficient of variation, is helpful in providing a measure of how well future outcomes are likely to be predicted by the model. The values for R-squared range from 0 to 1: the closer to 1 the results are, the better the â€Å"fit’ of the predicted values and the more realistic or reliable they are. R-squared can also be explained as the strength of the relationship between time and the variable. For all four financial variables, the R-squared figures range from . 01-. 25, which are indicative of weak relationships between time and each of these variables. None of the data points for these variables are strong measures of how well the regression line approximates the real data points. Skewness is a measure of the asymmetry of the probability distribution of a real-valued variable (Wikipedia. com). The results are usually either positive or negative, or in some instances undefined. A negative skew in characterized and having the mass distribution concentrated on the right of the figure or in most recent years and has relatively few low values. A positive skew has a mass distribution concentrated on the left o the figure or in earlier years and has relatively few high values. For both EPS and PE, the skewness is positive in contrast to ROE and FCF which are both negative. Growth for EPS and PE both took place in recent years while growth for ROE and FCF took place in earlier years. |Avon Products, Inc Financial Variables Analysis | | | |EPS |ROE |FCF |PE | |R-Squared | |0. 1041 |0. 2092 |0. 2527 |0. 101 | | | |   |   |   |   | |Skewness | |1. 0284 |-2. 5446 |-0. 3754 |0. 8432 | For the remaining financial variables, the same analysis was produced. Interestingly enough, the CNE for these variables fall within the normal expected range of . 85 – 1. 15, except for BV which is slightly over at 1. 18. These figures range from . 91 – 1. 04. The growth rates for DIV, CF, BV and SPS are positive, but are negative for Shares, OM, NPM and RTC. The negative growth rate of Shares means that the company is buying back their stock. For R-squared the only strong relationships between time and that variable were DIV at . 584, Shares at . 8963 and SPS at . 9632. The R-squares for BV and RTC are relatively moderate. Skewness for DIV, BV, OM and NPM are negative with growth occurring in earlier prior years and skewness for CF, Shares, SPS and RTC were positive with growth occurring in the latter years. |Avon Products, Inc Financial Variables Analysis | | | | | |EPS 2009 |1. 45 | | | | | |Growth Rate = |3. 9% | | | | | |Payout Ratio = |36% | | | | | |Discount Rate = |7. 10% | | | | |Avon Projections 2010-2019 | | |Period |Years |EPS |DIV |PV | |1 |2010 |1. 49 |0. 54 |$0. 50 | |2 |2011 |1. 54 |0. 55 |$0. 48 | |3 |2012 |1. 59 |0. 57 |$0. 47 | |4 |2013 |1. 64 |0. 59 |$0. 45 | |5 |2014 |1. 69 |0. 61 |$0. 3 | |6 |2015 |1. 74 |0. 63 |$0. 42 | |7 |2016 |1. 79 |0. 65 |$0. 40 | |8 |2017 |1. 85 |0. 67 |$0. 38 | |9 |2018 |1. 91 |0. 69 |$0. 37 | |10 |2019 |1. 97 |0. 71 |$0. 36 | |PV total of dividend payout for the next 10 years: |$4. 26 | Terminal Value The 2019 stock price calculated reflects the value of all future dividends or cash flows in perpetuity. In order to determine the 2019 stock price the following will be needed: Because when using the above process the discount rate is assumed and one of the biggest variables that may fluctuate and thus cause the result to differ, other methods should also be considered when doing a company stock price valuation. One other such popular method is the Capital Asset Pricing Model (CAPM). Capital Asset Pricing Model (CAPM) The main purpose of this model is to explain the relationship between risk and the expected return that a stock may yield and is used in the pricing of risky securities (Investopedia). The following formula is used in the calculation of CAPM: o CAPM = Rf + (a (Rm – Rf) Rf = Risk-free rate (Treasury bond rate) assumed at 5% o Rm = Expected market return assumed at 12% o (a = Beta of the security; from Avon’s Value Line beta is . 95 Thus, when using this CAPM formula to calculate the discount rate, the following result is returned: CAPM = . 05 + . 95 (. 12 â⠂¬â€œ . 05) = . 1165 = 11. 65% discount rate (Ke). This new discount rate of 11. 65% is now inputted into the dividends projections table done previously. The new table is shown below with a PV total of dividend payout for the next 10 years now at a reduced amount of $3. 45. The new terminal value also decreases to $16. 87 as well as the PV of this 2019 stock price to $5. 60. The stock remains overvalued with an intrinsic value of $9. 06 compared to the current price of $29. 22. The price-to-intrinsic is now 3. 23. |Variables used to determine PV total of dividend payout for the next 10 years: | | | |EPS 2009 |1. 45 | | | | | | |Growth Rate = |3. 09% | | | | | | |Payout Ratio = |36% | | | | | | |Discount Rate = |11. 5% | | | | | | | | | | | | | | |Avon Projections 2010-2019 | | | | |Period |Years |EPS |DIV |PV | | | |2 |2011 |1. 54 |0. 55 |$0. 45 | | | |3 |2012 |1. 59 |0. 57 |$0. 41 | | | |4 |2013 |1. 64 |0. 59 |$0. 38 | | | |5 |2014 |1. 69 |0. 61 |$0. 35 | | | |6 |2015 |1. 4 |0. 63 |$0. 32 | | | |7 |2016 |1. 79 |0. 65 |$0. 30 | | | |8 |2017 |1. 85 |0. 67 |$0. 28 | | | |9 |2018 |1. 91 |0. 69 |$0. 25 | | | |10 |2019 |1. 97 |0. 71 |$0. 24 | | | |PV total of dividend payout for the next 10 years: |$3. 45 | | The only way that Avon stock would be considered undervalued would be at a discount rate of about 4. 9% or below as shown in the table below. |Variables used to determine PV total of dividend payout for the next 10 years: | | | |EPS 2009 |1. 45 | | | | | | |Growth Rate = |3. 09% | | | | | | |Payout Ratio = |36% | | | | | | |Discount Rate = |4. 0% | | | | | | | | | | | | | | |Avon Projections 2010-2019 | | | | |Period |Years |EPS |DIV |PV | | | |2 |2011 |1. 54 |0. 55 |$0. 50 | | | |3 |2012 |1. 59 |0. 57 |$0. 50 | | | |4 |2013 |1. 64 |0. 59 |$0. 9 | | | |5 |2014 |1. 69 |0. 61 |$0. 48 | | | |6 |2015 |1. 74 |0. 63 |$0. 47 | | | |7 |2016 |1. 79 |0. 65 |$0. 46 | | | |8 |2017 |1. 85 |0. 67 |$0. 45 | | | |9 |2018 |1. 91 |0. 69 |$0. 45 | | | |10 |2019 |1. 7 |0. 71 |$0. 44 | | | |PV total of dividend payout for the next 10 years: |$4. 75 | | X. Rule #1 The Four M’s †¢ Meaning †¢ Moat †¢ Management †¢ Margin of Safety (Sticker Price) Does the business have meaning to you? Since my tender age of 4, I remember going door-to-door with my mother distributing Avon brochures and samples. Not only was she a single mother at the time, but she also went to school and worked another part-time job. My mother eventually left her part-time job and made Avon her full-time career. She now has 25 years of selling Avon and making a living out of it. My step-father also quit his full-time job and dedicated his time to helping my mother out with the business. My whole life I have seen my mother work her hardest to give me anything and everything she could to raise me and get me to where I am now and she could not have accomplished that if it weren’t for her loyal commitment to Avon Products. She built her business from the bottom up just like any other Avon representative. She now works from home and has all her clients come to her. My mother has always told me that she eventually wants to hand over the business to me and I have taken this opportunity in Finance class to learn more in-depth about the company and what it offers not only as a business owner but also as an investor. Ironically enough, just about a month ago my mother showed interest in investing in the company (yes, after 25 years! ) and asked me about whether she should and if so how much she should invest. This evaluation project gave me even more reason to choose Avon Products, Inc as my chosen company of interest. Does the business have a wide Moat? Or in other words, is the company’s future predictable? Avon has been in existence almost 100 years, 95 to be exact. It has had an exciting development from start to present going from being solely in the perfume/cosmetics market to expanding their products to include an array interests from kids toys to men’s sports watches. They have captured a competitive advantage from the beginning starting off as the first to introduce direct selling and now being a well renown beauty global entity; they have indeed establishes a good name for themselves. Avon continues to do extensive research to keep up to par with their different markets and products and continuously strives to improve what they already have and produce new products. Many companies have hence since followed in Avon’s footsteps, realizing the success Avon has had with focusing on interpersonal sales and customer service. Avon has a well-established name and reputation and many customers have been loyal since their early years. The Management Ever since the beginning up until 2001, Avon has had male CEO’s. Some find that a bit peculiar being that Avon prides itself on being â€Å"the Company for Women†. Let’s keep in mind though the history of this company as mentioned in the first part, Avon was created by a man by accident perhaps, but definitely with good intentions. As of 2001, the new CEO, Andrea Jung, has brought new hope and meaning to the company. Since her leadership started the company has revolutionized into a new identity with Representatives truly feeling and living the motto of the company. Both customers and Representatives have more confidence in the company and it has portrayed overall both in the financial and operational functions of the company. Safety of Margin (Sticker Price) On Rule #1’s website www. ruleoneinvestor. com, Phil Town, provides various calculators that aid in the decision to buy or not buy a particular stock by inputting various company figures to produce the company’s true value. Step 1 Data Input: Current EPS: 1. 45 # Years: 10 EPS Growth Rate: 13% Step 1 Result: Future EPS = $4. 92 Step 2 Calculate Future Value Data Input: Future EPS: $4. 92 Future PE: 18 Step 2 Results: Future Value = $88. 56 Step 3 Calculate Sticker Price Data Input: Future Value/Share: $88. 56 Min Acceptable ROI: 15% # Years: 10 Step 3 Results: Sticker Price: $21. 89 Step 4 Calculate Margin of Safety Data Input: Sticker Price: $21. 89 Step 4 Results: Margin of Safety: $10. 95 Overall Results: $21. 89 ; $29. 22 (Current Price) = Stock is Overvalued = Sell/Not Buy XI. Conclusions /Final Stock Judgment Based on all the analysis previously set forth here, the best recommendation for an investor would be not to buy Avon stock or to sell their Avon stock if they currently hold interest in the company. Finding that the intrinsic value of the company using two separate methods (AAA bond rate & CAPM) both return a valuation that Avon’s current stock price is undervalued, would understandably be sufficient to determine that it would not be the best of choices to invest in the company; at least for the current time. The difficulty as well in trying to formulate a regression analysis for ROE also points to the company’s weaknesses since shareholder’s equity has not shown a constant, positive performance and even at times negative. Income generation for stockholders is not quite strong and would require further, long-term watch if an investor has a personal interest in the company to be able to invest at a later time when the value of the current stock is really what it is worth. Furthermore, recent news indicates it is not the greatest time for Avon in terms of earnings as they have spent a great deal on advertising. Getting out of the Japanese market may have been the most perfectly timed move they have made. Although Avon is currently not seen as one of the strongest companies to invest in at the moment, reviews have said not to leave Avon behind for the future. They are slowly regaining momentum and being that their beta of . 95 is still below the market’s beta of 1. 0, it is not one of the riskiest out there. Also, it must be reminded that with a good Technical ranking of 2, Avon has short-term capital gains, in the three to six month timeframe. At a financial strength of a B++, the company is still in good shape and can most likely survive a depression better than other companies. The company has sufficient liquidity to payout their dividends or increase how much they give as dividends. Investors should still proceed with caution if even in the future the company still maintains a Safety rating of 3 and a Timeliness rating of 4 as these ratings do not give the company enough leverage to be deemed financially reliable. In addition, with a Price Growth Predictability (PGP) of 45, Stock Price Stability (SPS) of 75, and an Earnings Predictability of 65, the company does not perform more than average in all of these areas meaning they don’t really beat the index, they are somewhat stable, and they have an average consistency of earnings. Overall, all of the above inconsistencies and especially the overvalue of the current stock price, will not lead to satisfactory returns. Perhaps in the near future the tables will turn as the company does have many opportunities and room for slow growth, but it will require a watchful eye. Avon is a trusted company with a rich history, especially among women, so there is much possibility of vast improvement and capabilities of big interest to investors if the company is more observant with their financial movement and take care of their shareholders. XII. References Avon Products, Inc. Avon. com. 2011. 2 April 2011 Datamonitor. Business Source Premier. 7 June 2010. 3 April 2011 Fidelity. Fidelity. com. 2011. 8 April 2011 Hoover’s Inc. LexisNexis Academic. 8 April 2011. 8 April 2011 Investment Underground. Seeking Alpha. 21 March 2011. 2 April 2011 Investopedia. Investopedia. com. 2011. 6 April 2011 Kaplan, Jerome H. Value Line. 2011. 2 April 2011 L’Oreal. Loreal. com. 2011. 6 April 2011 Money-Zine. Money-Zine. com. 2011. 4 April 2011 Revlon. Revlon. com. 2011. 6 April 2011 Roberts, Andrew. Bloomberg. 17 March 2011. 2 April 2011 Sommer, Ron. Seeking Alpha. 21 March 2011. 2 April 2011 Town, Phil. Rule #1: The Simple Strategy for Successful Investing in only 15 Minutes a Week. 2011. 9 April 2011 Wikipedia. Wikipedia. com. 2011. 6 April 2011 Zachs. Yahoo! Finance. 16 March 2011. 2 April 2011 XIII. Appendix [pic][pic] [pic] ———————– Corporate Valuation: Avon Products, Inc. (NYSE:AVP) F