Professional Documents
Culture Documents
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A problem that was evident for Avon was the inability of the company
to change with the new technological world, which was fast emerging. As
times were changing Avon did not implement vital technological processes
that could manage the firm¶s inventory and sales more efficiently rather Avon
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A third problem evident at Avon was the lack of leadership displayed
by all management. Without correct leadership, advertising campaigns and
product innovation could not be successful nor could Avon remain
competitive with other companies within the same industry.
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It is evident that a lack of management leadership in Avon leads to
disappointing results in 1999. Andrea Jung¶s new vision for Avon, created
strategy elements that were well matched to the changes that have occurred
in the cosmetics industry. The strategies are sensible and are related to what
Avon¶s competitors are doing in the marketplace, which in turn will lead to
Avon creating a competitive advantage and thus an improved financial
performance. Analysis of Avon indicates that Andrea Jung and Charles Perrin
leadership in developing a good sustainable strategy for Avon and Jung¶s
implementation of this has resulted in increased revenue and growth for the
company.
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The case shown that Andrea Jung¶s efforts in rejuvenating Avon should
be commended as all her strategic and financial objectives are outlined
within her vision for Avon. Avon needs to continue to expand globally,
especially those, which are not being accentuated by competitors. Avon also
needs to be wary of having a broad product line as by introducing too many
new innovative products could be costly to the firm and Avon also may lose
sight of their vision of a company that µbest understands the products of
women¶.
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Jung left her job at Neiman Marcus and joined Avon in 1994. Immediately
she made her mark. In one of her first contributions to the company, she unified
Avon's assortment of disparate regional brands into powerful global lines like Avon
Color. She fired Avon's ad agency and oversaw a complete packaging redesign. Her
decisiveness caught the eye of then CEO James E. Preston, who appreciated her
bold take on the business. Said Preston, "We looked at the market through one set
of glasses. She had a fresh take on what Avon could be" (Business Week,
September 18, 2000). Preston became her mentor and ally, asking her to speak at
board meetings and increasing her exposure to upper management, ensuring a
quick climb up the corporate ladder. Just three years after joining the company,
Jung was named head of global marketing at age 37.
In 1997 the Avon board began a search for Preston's successor, and Jung
was temporarily passed over due to her lack of experience in operations and
overseas business. But the board had noticed her talent, and she was promoted to
COO in 1998. As COO, Jung got the necessary grooming required to become the
leader of Avon. When former CEO Charles Perrin stepped down, Jung was promoted
to CEO in November 1999.
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c Her first task as CEO was to hit the streets of her neighborhood, ringing
doorbells, to better understand the desires of customers and needs of sales
agents. She pushed for the addition of attractive new products to Avon's
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product lines.
c Outlined a bold new vision and strategic plan for Avon that called for it to
introduce highly innovative new products; build new lines of business;
transform its value chain and business processes.
c make the internet a critical direct link in its direct selling business model;
rebuild its image; enter the retail sector; and most important, update its
direct sales model to better fit the 21st century which was developed in late
1800s
c She was responsible for developing E-commerce opportunities for Avon and
its sales representatives. Andrea listened to the customers and grew
global beauty category sales by new product development, sampling, and
more up to date advertising.
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Avon's new strategic direction launched an entirely new line of business, the
development of innovative products, new packaging, new channels to do
distribution, a new approach to supply chain management, new sales models, and
new approaches to image building. The new strategies yielded results much faster
than the expected with increased profit margins, market share and expansion of
Avon in Europe and China.
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Avon has been on a turnaround for several years now but this
turnaround was needed because of the internal operating problems. Orders
were being placed and not filled, packaging was out of date and customers
were becoming disgruntled. The Internet was also not being utilized as a
marketing and selling tool. Since these problems have been brought to the
attention of Andrea Jung changes have been made but Avon needs to
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Although Avon develops new products every year they have in the
past overlooked current products that are becoming obsolete. This causes a
loss in profits due to decreased sales and wasted money spent on marketing,
packaging, and buying the supplies for the product. More recently Avon has
retired products off of the product line but they need to get into the habit of
evaluating every product at some time during the year and determining if
they need to produce less, more, or stop producing the product altogether.
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Avon has been in the cosmetic industry since it was founded in the
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1800¶s. Major companies that are ahead of Avon in the CFT industry include
Unilever and Procter and Gamble. Both of these companies offer a variety of
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products including cosmetics, lotions, shaving products for men and women,
baby care products, and shampoos/ conditioners and other hair care products
just to name a few. If Avon wants to become the number one seller in the
CFT industry they have tough competition to surpass because of their diverse
product line. Putting the Avon name and symbol of quality on a new product
line would definitely attract consumers.
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Although Avon has been around for over 100 years they have never
really been super consistent with their promotions, product launches or
retirements, and training and distribution changes. Avon has gone through
some changes more so in the past 15 years than any other time but it has
always been an abrupt change without warning to people in the company
such as direct sales representatives. This causes tension because people are
reluctant to change and always like a warning before it happens. I am by no
means trying to say that the changes Avon has gone through are a weakness
but I am saying their inconsistency in the warning or enlightenment of the
change to the rest of the company has been weak.
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brand´ or ³Not for me´
c Avon had no Products in some of the fastest-growing CFT categories, and it
had not introduced a hit product in decades
c istribution inefficiencies, limited income opportunity for the average sales
representative
c ifficult in selling products to busy women as 75% of American women are
working class
( 3
1.c http://classes.bus.oregonstate.edu/fall-05/ba590/avon.doc
2. http://essayinfo.com/sample/essay/1096/
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The process reengineering is utilized to eliminate non-value adding
costs. The company had allotted premeditated expenditure of more than
$100 million every year to buttress manufactured goods improvement,
effectively implement e-commerce initiatives, improve commission prospects
for self-sufficient sales representatives, and large-scale branding build up. In
consequence, the company had a pretax charges of $97.4 million 2001 and
$43.6 million in 2002 associated to expenses to speed up business
renovation schemes, and were projected to upgrading operating margins by
250 basis points and operating cash flow by $500-$800 million by year end
2004 which more than materialized.
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To fuel future growth around the world through retail business venture
is one of the newest field Avon successfully entered. A test basis was first
employed in 1999, to find out of retailing would be bring another profit venue
for the company. This retail business as better known as Avon Beauty
Centers was operated by Reaching-Out-To-Retail representatives. These
kiosks or beauty counters were located in shopping malls to reach new
customers and serve these ³stranded customers´ for them to have a free trial
of the experience of using Avon products. In a typical Avon retail boutique,
Avon products are displayed like Anew, becoming, Mark and Planet Spa (all
from Avon¶s Wellness division). Other than the expansion of outlets in China,
the company was also able to establish a customer club in China and thereby
triple their advertising to 7 percent of sales.
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Avon had been impervious in envisioning to even take up widening of
the company¶s horizon by entering the market of the Eastern Europe and
China when the there are risks of encountering regulatory and legal
restrictions, governmental licenses, primarily unfavorable net foreign
exchange.
To widen these enlargement of the business opportunities globally,
their first step is dividing and defining the varied audience by lifestyles,
interests, socio-economic backgrounds, cultural differences and target price
points. And Avon plans to seek and serve new segments- the younger
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References :
1.c http://louaiworks.wordpress.com/2009/10/01/strategic-business-analysis-
case-of-andrea-jung-and-avon-products/
2.c Gamble, John E., Thompson, A. A., and Strickland. A. J. (2005), ³Andrea
Jung and Avon Products in 2003: Accelerating the Transformation´ Crafting
and Executing Strategy (Fourteenth Edition), McGraw-Hill, New York, pages
C-267± C-291).
3.c http://classes.bus.oregonstate.edu/fall-05/ba590/avon.doc
4.c www.avoncompany.com
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c Enters into a joint venture with Guangzhou Cosmetics Factory to
manufacture and sell cosmetics in China.
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After becoming CEO, Andrea Jung has overhauled nearly everything about
the way Avon does business: how it advertises, manufactures, packages and even
sells its products. Under Jung's management, the company has set strategic and
financial objectives that are in line with the company's mission and vision
statements. There are 6 areas of development the company is looking at:
marketing transformations, supply chain improvement, sales leadership, e-
commerce and internet, international, and financial objectives.
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"The transformation of Avon's image called for new products, new
packaging, celebrity endorsements, stylish new catalogs, and new advertising
campaigns." Seeing women who cannot afford department store brand
cosmetics but still yearning for them, Jung asked for a new, more glamorous
look for Avon's products. Since they would be selling for much less than the
department store brands, Avon cosmetics were able to attract more
customers through this strategy.
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As the aggressive campaign to turn the company around, Jung needed
more funding for research and development, e-commerce initiatives, global
image building, and more. Under Susan Kropf, COO business process
reengineering efforts achieved great success. Just cutting its number of
suppliers from 300 to 75 saved the company $56 million dollars.
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The Company had two issues with the representation: there was
trouble in the retention of representatives, and there was difficulty recruiting
younger representatives. The solution proposed by Jung solved those
problems simultaneously. "With the launch of Sales Leadership, Avon
representatives could earn commission on the sales of their recruits."
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In order for Avon to reach more customers the company should
implement a way of targeting its customer by using more retail stores such
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as JC Penny that still follow the direct selling approach, but offer the
consumer the opportunity to purchase the products of Avon conveniently at a
shopping mall. Additionally this could be combined with the sales leadership
approach to increase sale and to offer the sales representatives a new way of
selling. By offering incentives to sales representatives Avon would probably
see a bigger profit from such retail chains.
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This initiative has launched the e-Representative idea of doing
business. Internet served as key in the relations between representatives,
customers, and the company's marketing and supply chain operations. The
results were: saving significant amounts of money in internal costs, and
promoting Avon to the younger generation who could access information
over the web interface. Through e-Representatives the customers did not
lose the personal touch that Avon always offered, even on Avon's website the
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customers was asked how to address them besides using their formal name.
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With Andrea Jung's vision Avon realized the importance of emerging
markets globally. Management recognized China "...as an attractive market
because it had 20 percent of the worlds' population, its population was
relatively young, and it represented a large and growing market for beauty
products." There was a need for an effective battle with the competitors in
the market. As a result, Avon brand awareness improved from 41 to 53
percent and sales improved by 47 percent in China. "Also, Avon had the
highest beauty brand image index among global CFT brands in Hungary,
Poland, Russia, and Ukraine."
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1.c http://www.omdix.com/word/docs/The_makeover_of_Avon_Products_Inc_he
aded_by_CEO_Andrea_Jung_high_sample_essays_1071200744.doc
2. http://www.avoncompany.com/about/history.html
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c Push into new products, new models, business lines and promotional
campaigns all contributed to sales increases
c Galue chain realignment and business process reengineering created
additional resources to support such activities, and simultaneously improved
margins
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The successes achieved by Avon have been tremendous. There are, however,
a few recommendations we would like to address. One suggestion to Avon concerns
the vision statement. It is the case where the analysis shows that the vision
statement promises more than Avon is at the moment. None of the strategic
initiatives touches upon "financial independence", and it doesn't seem likely that it
would in the near future.
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The third identified problem would be Andrea Jung's grand strategy to create
a partnership with J.C. Penney and Sears is not optimal. In recent years both
retailers have struggled financially to stay afloat in the competitive retail market.
Although both retailers have garnered tenure customer perception of them is
extremely low. Creating a retail presence within the stores would not significantly
increase revenue for Avon. Jung's strategy should have been geared more toward
towards personalization. Because a large percentage of women are now working
outside the home it would behoove Avon to capitalize on this opportunity just as
their competitor (Mary Kay) has. Consumers as a whole love personal touches and
the fact that they are treated special. Selling/marketing products in the comfort of
one's home has worked well for Mary Kay and there is plenty of room for others to
mimic their approach.
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Susan Kropf, is one of Avon's most experienced executives and has held
senior management positions in virtually all areas of the company since joining
Avon in 1970. Prior to being named head of North America in 1998,Ms.Kropf was
president, Avon U.S., the company's largest operation. Previously, she was
president, New and Emerging Markets, where she directed Avon's rapid expansion
in Central and Eastern Europe, Russia, China and South Africa. She also held
executive positions in marketing, research and development, customer service and
manufacturing. She was obviously the best choice for the following reasons.
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c BPR had improved company¶s manufacturing and distribution systems.
Company saved a lot by cutting the supplier numbers from 300 to 75
c Used Information systems to automate order processing and logistics to
reduce transportation costs
c Improved demand forecasting, and an overall end-to-end supply chain
reconfiguration
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1.c http://www.omdix.com/word/docs/The_makeover_of_Avon_Products_Inc_he
aded_by_CEO_Andrea_Jung_high_sample_essays_1071200744.doc
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Jung grew up in Massachusetts in a household that placed a high priority on
achievement, and she responded with resolute drive. She once recalled coveting a
box of 120 colored pencils as a school child. Her parents indicated that if she were
to make straight A¶s for the school year, she could have the pencils. At the end of
the year, Jung delivered all A¶s to her parents and, in turn they took her to
purchase the pencils. Jung found meaning in the life example given by her parents.
She said ³I¶ll never forget that. My parents ingrained in me early on that the perfect
score is always something to strive for. I want to win and I want to succeed no
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matter what.´
Jung embraced her parents' high standards. Academically she earned high
marks, learned classical piano, and became fluent in Mandarin. Her heritage was a
source of pride that she brought to work each day. "My father was worried that
raising me as a respectful Chinese daughter would be a barrier to what he
perceived as the cut-throat traits of an American CEO. So, it has been interesting
for me to marry my cultural background with succeeding in a tough business world"
(London Times, June 29, 2002).
pages. Once in Manhattan, Jung joined Avon as president of U.S. product marketing
and quickly impressed then-CEO James Preston, making a name for herself with her
decisiveness and no-nonsense style. At the age of 40, in November 1999 Andrea
Jung became CEO of Avon. At that time Avon was in serious trouble, Andrea
developed and implemented the strategy within short span two years to take Avon
to a great success. In 2001 at the age of 42, she was listed fourth on Fortune¶s
ranking of the 50 most powerful women in American Business.
Jung was committed to both the task and her title. On her office couch she
displayed a pillow with the affirmation "If you are not the lead dog, the view never
changes." As CEO she quickly established her goal to resuscitate Avon's old-world
image with a reorganization that would make Avon the one-stop shopping center
for the modern woman. To achieve that goal, Jung had to contend with the fact that
Avon's direct sales force required customers to track down an Avon representative.
This method of doing business was an outmoded concept, an unrealistic notion for
the millions of women in the workforce.
Jung knew that Avon must position itself so that its customers could choose
whether they wanted to buy from a rep, on the Internet, or at a store. Jung
announced a trial run of 50 kiosks based in shopping malls and, in a particularly
brash move, a deal to create a separate line of products for sale at a major mass
retailer such as Wal-Mart. The Internet represented another potential opportunity
for growth.
Although Jung noted that top executives have to remake themselves and
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their companies every year in response to the ups and downs of the business cycle,
she emphasized that there were certain essential qualities that were the hallmarks
of good leadership:
c Integrity and character: ³It starts at the top and has to pervade the
organization. Even with recent business scandals, there is still a great
opportunity to add to the betterment of society.´
c Passion for the work and the company: Although Jung was at first passed
over as Avon¶s CEO, offers from other organizations didn¶t tempt her to
leave. ³I loved this work and this organization,´ she said. Twenty months
later, when her predecessor left, the CEO¶s job was hers.
c Compassion: ³Leaders must treat employees with respect, no matter what
the business decision is.´
c Humility: ³Acknowledge what you don¶t know. Acknowledge what you did
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c Pride: ³Take pride in who you are and what you do.´
c Courage: ³There are curveballs in business every day. Leaders cannot be
afraid to fail and must have the courage to act swiftly.´
c Focus on Social Causes: ³oing well is as important as doing well. Companies
must play a role in social causes and try to make a difference in their
communities.´
In the end, the accomplishments of Avon in the past year have been astonishing.
Andrea Jung has achieved success through "not by abandoning the seemingly
outdated Avon Lady, but by reviving her".
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1.c Byrnes, Nanette, "The New Calling," È , September 18, 2000
2.c Preston, Morag, "Avon's New Calling," (London), June 29, 2002.
3.c http://www.hbs.edu/news/releases/112106_avon.html
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c Since many young women are wearing make-up these days, Avon should
develop an inexpensive, teen line.
c Sharing advertising/branding costs among all countries will lower the
operating costs.
c Use Avon product placement in popular movies and television shows.
c Launch the men line products to cover the market need.
c Recruit the male representatives to generate more income.
c Enter to the new countries that have a potential to grow and earn enough
profits e.g. Gietnam
c Promote a nutritional product line by sponsoring the sport event.
c Educate the representatives to point out the need of introducing the new
distribution channels.
c Expand the new distribution channels to facilitate the customers and prevent
the dropping in direct sales in the future e.g. the airlines.
c Specialty stores are growing 4% per year and are attracting affluent baby-
boomers which are ever growing segment of the population
c Full line discount stores have high customer traffic, pointing towards high
volume sales of the more affordable Avon products.
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1.c http://www.oppapers.com/essays/Avonc
2.c http://www.oppapers.com/essays/Avon-Case-Analysisc
3.c http://classes.bus.oregonstate.edu/fall-05/ba590/avon.doc
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