The Strategy of International Business: Avon Products

BSD119 CASE STUDY REPORT

Cover Sheet (A4)

The Strategy of International Business: Avon Products

Outline Avon’s international strategy prior to 2005 and forward to today. What has changed? What effect did the GFC have on Avon’s business? How important are international sales to Avon?

                                                                                           08972231 Sun Jae Hwang (Sun)

                                                                                           08992274 Diana Salcedo

                                                                              08955000 Lin Zheqiong

Date Submitted:

        2nd of May, 2014

Avon Products

1.  Introduction

Avon Products, Inc. is one of the world’s largest direct selling organization and merchandiser of beauty and beauty related products. This report describes how Avon, Inc., which started from 1886, has developed and survived through the years. The report also explains the changes and the global financial crisis that happened from 2007. Furthermore, shows how Avon has leaded the company to a global business view being the largest direct seller company in the world.

1.  Body

1. Outline Avon’s international strategy prior to 2005 and forward to today. What has changed?

Avon has changed its international strategy, and the most significant factor is their CEO Andrea Jung. Andrea Jung, who is the first female CEO of Avon Products Inc.'s (AVP) , and use the direct sales model to lead the company’s revenues growth over 10 per cent annually. However, after six years growth and a tripling of earnings, the success story turned to ugly in 2005. The company began losing sales and shrinking markets in all of the world all at once, including China, Europe, Russia and North American. It caused most of the investors lost confidence in Avon, and this dramatic turn of events shock investors heart (Hill, Cronk & Wickramasekera, 2014). Avon want to protect themselves, so Jung had told investors that Avon will achieve high expectation in Wall Street’s targets in same years. At the end of that year, Avon was rapidly backpedaling and the stock prices fell sharply about 45 per cent. After these misfortune happened, Avon begun to reevaluate their global strategy. Jung has tried to figure out what went wrong and how to fix it. That is why Avon sells Skin So Soft and anew skin-care products as well as makeup and other items through a network of 5 million independent representatives. One of Jung's most important moves has been forcing managers to make decisions based on fact rather than intuition. In 2006, she has reorganized Avon's management structure, taking away much of the autonomy from country managers, in favor of globalized manufacturing and marketing. Previously, Avon managers from Poland to Mexico ran their own plants, developed new products, and created their own ads, often relying as much on gut as numbers. In Jung's words they were "king or queen of every decision." In addition, Jung’s turnaround strategy involved several elements. To help transform Avon, she hired seasoned managers from well-known global consumer product companies such as Unilever and Pepsi. By 2007, this strategy was starting yield dividends, so Avon’s performance improved and growth resumed. Avon gained global market share and its financial performance improved in the different year 2008 and 2009.  According to PR Newswire in 2011, Avon announced a comprehensive management realignment to enhance the company's operational and executional effectiveness. The reorganization, the company's most significant since it reduced management layers in 2005, provides added management depth and increased operational oversight of its Commercial Business Units and also reflects leadership changes in the company's priority geographies. (2011)