Andrea Jung's Makeover Of Avon Product Inc.

1.0 The History of Avon

Avon Products, Inc. is a US cosmetics, perfume and toy seller with markets in over 135 countries across the world. The company was founded in 1886 by then 28-year-old David H. McConnell who sold books door-to-door and gave out perfume to entice women to buy his books. His perfume became so popular that eventually that is all the women wanted. He then founded the California Perfume Company (CPC) in New York. As the company grew, he hired his first representative, Mrs. P.F.E. Albee. In 1897, McConnell built a small laboratory in Suffern, New York. In 1906, the West Coast office in San Francisco was destroyed in the Great Earthquake. In 1914 the first non-US office was opened in the Canadian province of Quebec. The California Perfume Company was incorporated on January 28, 1916 by David H. McConnell and Alexander D. Henderson (businessman) in Suffern, New York. [2]. 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. The company was taken public in 1946. By 1954, sales reached $55 million, and the "Avon Calling" advertising campaign introduced. By 1971 the lab would grow into the Avon Suffern Research and Development facility. By 1979, sales reached $3 billion, with one million direct sales agents. Today sales exceed $8 billion worldwide. In 2005 they opened a $100 million dollar 225,000 square foot R&D facility to house its over 300 research and development scientists on the original site in Suffern, New York. Avon also has offices in Luzerne, Pennsylvania and Davenport, Iowa. Their vision is to be the company that best understands and satisfies the product, service and self-fulfillment needs of women globally and dedication to support women touches not only beauty but health, fitness, self-empowerment and financial independence.

Traditionally a direct marketing company, Avon's fastest growing markets today are in China and Russia. The company's chairman and CEO is Andrea Jung, who was promoted to the position in 1999. Avon uses both door-to-door sales people ("Avon ladies," primarily) and catalogs to advertise its products. In some markets (most notably China, which had banned all door-to-door selling before mid-December 2006) Avon products are sold primarily in retail stores. Avon's product lines include lipsticks, foundations, bath and skin lotions, anti-aging cream, perfumes, as well as jewelry and clothing. Although the company has always been more directed towards female customers, Avon's line of male products continues to expand, and its children's products such as shampoos and toys have also proved successful. Two brand diversifications "mark." (Targeted to younger, college-aged women) and "M" (an Avon catalogue for men), have helped the company reach out into markets it has not serviced. Mark proved to be successful in reaching a new generation of recruits, primarily young women ages 18-25, with a monthly "magalog" featuring award-winning products.

In addition to its corporate pursuits, the Avon Corporation is involved in philanthropic causes, primarily centered on domestic violence, women's empowerment and health issues such as breast cancer.

Key rivals of Avon and their position

Rank

Company

2000 Corporate Revenues 2000 Personal Care Sales

1 L’Oreal $10.6 billion $10.3 billion

2 Procter & Gamble $40.1 billion $7.3 billion

3 EstÐ"©e Lauder $4.4 billion $4.4 billion

4 Avon Products $5.7 billion $3.5 billion

5 Intimate Brands $5.1 billion $2.4 billion

6 Alberto-Culver $2.3 billion $2.2 billion

7 Coty $1.8 billion $1.8 billion

8 LVMH $9.7 billion $1.7 billion

10 (Tie) Johnson & Johnson $29.1 billion $1.5 billion

10 (Tie) Revlon $1.5 billion $1.5 billion

11 Mary Kay $1.2 billion $1.2 billion

Present situation of Avon

Avon Products, Inc. is one of the world’s largest direct sellers of cosmetics and other beauty products. 98% of its revenue comes from the sale of lipsticks, perfumes and powders by the famous “Avon ladies” directly to women. Today, however, that sales model which has been successful since its inception in 1886 is in the midst of its own makeover. Its direct sales business was on the decline in the American market.

In an effort to reposition Avon’s flagging image, the Avon board of directors in November 1999 appointed Andrea Jung a Chinese American as its new CEO. With little experience, she has the daunting task of piloting one of America’s toughest consumer turnarounds. In her challenge to reposition the company, she also has to stabilize and motivate 3 million independent sales representatives in 137 countries across the world. Jung’s dilemma was: How could Avon develop new sales channel without alienating its famous sales representatives, the Avon ladies and undermining its existing sources of revenue?

In this highly dynamic business world, corporations need to be watchful of the elements of change from the external environment. Corporations’ survival is dependent on its significant problems.

Significant Problems

пÑ"ј Avon faces the strong competition within fields they are trying to expand into which a nutritional product line is called Wellness.

пÑ"ј Any effort to sell products via the Internet and through retail channels has been rejected by the representatives.

2.0 Strategies of Avon

During the 1990s, Avon began to lose its appeal to the public. The number of new company sales representatives had begun to stall; and by 1999, the U.S. sales representatives had dropped 1% from the previous year. It was at this critical time that Andrea Jung, an Avon saleslady herself, was hired as CEO to help take the company in a new direction. A turnaround grand strategy was envisioned in 2000 to help reenergize the flagging U.S. sales force,

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