Avon originally as the California perfume company was founded in 1886 by a New York book sells man name David H. McConnell.In 1914 the company began selling its products in Canada and reached a sells milestone of 5 million units.Sales had grown to $2million by 1928, when the company first launched a line of beauty products under the Avon brand.Even though Avon held on to its lead in the global cosmetic industry until the mid 1980s.

Andrea Jung and Avon's New Strategic Direction

When Andrea Jung became Avon's new CEO in November 1999, the company's annual sales growth had slowed to less than 1.5 percent and it stock price had fallen from a high of $55 to a three year low of $25.The strategies initiated by Charles Perrin had resulted in some initial improvement in operating ratios and yielded some modest sales growth during 1998, but in late 1999 it was clear that Avon was in need of a bold new direction after 16 months as Avon CEO Perrin resigned, concluding that his lack of experience in direct sales limited his effectiveness with the company.The new CEO also discovered firsthand the structural obstacles to achieving success as an Avon lady. Policies that required sales agents to place order only during the beginning of a campaign with no opportunity to reorder hot sales item, procedure that required 40 page order forms to be field out by hand and either mailed or faxed to Avon, and orders that, according to Avon's own estimates, were improperly filled more than 30% of the time all made it difficult for sales agents to increase their sales volumes and commissions.

Jung identified the following strategic priorities to help correct Avon's competitive liabilities and set the company on a new course:

  • Develop e-commerce opportunities for Avon and its sales representatives.
  • Successfully launch Avon wellness line of nutritional supplement a vitamins.
  • Begin to build a profitable retails business to fuel future growth.
  • Reduce inventory levels while at the same time improving service to representatives.
  • Provide representatives with greater career opportunities through sales leadership, enhanced internet capabilities, and training.
  • Purse market opportunities in China and Eastern Europe.
  • Grow global beauty category sales through continued investment in new product development, advertising, and sampling.

Andrea Jung's strategies for Avon were intended to grow revenues and market share by correcting many of the companies competitive liabilities, but not at the expense of it proven direct sales force.If we don't include them in everything we do then we are just another retail brand, just another internet site, and I don't see the world needing more of those.Jung believed that the internet could be among Avon's best hope for future growth and that and e-commerce business model at Avon would benefit the company's representatives.

Another opportunity for sales representative to increase their income was a concept called sales leadership – an idea that had been toped of for years and was partially developed under Charles Perrin.Avon's direct sales model provided Avon representatives with no training and with commissions only on their own sales.

The company's market research shows that Avon's largely working and middle class customers would not afford prestige brands like Lancome or Estee Lauder but craved the elegancy of those brands to improve the company's image Jung called for a redesign of the packaging of Avon's products to better match the look upscale department stores brands launched a "lets talk" advertising campaign.

Avon had achieved success internationally before Andrea Jung became CEO, but she wanted more aggressive growth in emerging international markets like China, Eastern Europe, the Middle East and Africa.China had been identified by Avon management as an Attractive market because it had 20% of the world's populations, it population was relatively young and it represented a large and growing market for beauty products.Avon was the first and largest international direct seller in China from 1990 until April 1998, when direct selling was banned by the Chinese Government.

The company's direct selling model was well and firm's strategy is producing satisfactory results suited to these markets since there were no Governmental restrictions to limit independent sales representatives.Jung's strategies for the EEMEA markets focused on representative recruitments, the development of local leaders, on gong market researches and significant spending for advertising and promotions.Avon also intended to maintained a focused product line EEMEA markets, with limited stock keeping units and 95% of sales coming from the sales of cosmetic, fragrances, and toiletries.