Avon, the world largest direct seller of a beauty and beauty-related products

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Overview:

Avon, the world largest direct seller of a beauty and beauty-related products promoted Andrea Jung as their new CEO in November 1999. On that time the company was in serious trouble, with annual sales growth of less than 1.5% and crashing stock price during the greatest economic boom in history.

Andrea Jung build 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 process; make the internet a critical link in its direct selling business model; rebuild its image; enter the retail sector; and update its direct sales model.  

At the second year as CEO, she gains a number of strategic successes. Sales growth had increased from 1.5% into 6% in 2001; Company sales force was expected to expand by 15%; Operating profits were expected to growth by 7%; and operating margins were expected to reach 14% (the highest level of more than 10 years).

Main Issue:

Developing a strategic vision, setting objectives ,and crafting strategies.

Problem Statements:

How Andrea Jung implemented the strategy for achieving the successes for Avon.

Analysis:

        Andrea Jung build 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 process; make the internet a critical link in its direct selling business model; rebuild its image; enter the retail sector; and update its direct sales model.

        For boost  up the sales in CFT industries, product innovation is vital. Product innovation needs a strong R&D team. With strong R&D team, Avon R&D team succeed developing new product  called Retroactive, an antiaging cream ,with total sales $100 million in the first year on the market.

Avon also created new line of business collaborated with Roche Holding,Ltd in the development of vitamins and supplements to promote general health. Avon new products gain market share 0.8% in color cosmetics, 2.2% in antiaging, and 0.3% overall among mass market brands.

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The increase of sales by product line categories shows by exhibit 8. There is an increase in total net sales and sales of each product line. This proves that the product development can increase the sales for the company.

The heart of Avon’s strategy implementation effort was its ability to eliminate the cost of low-value added activities from its value chain. Jung wants to spend $100 million annually to support product development, e-commerce, better commission for independent reps, and global image building. Funding for the activities need fund, it can be achieve if Avon’s president and COO Susan Kropf being ...

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