, 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 stabilise 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?.
CASE SUMMARY.
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 ability to adopt to changes. Avon is no different from any other corporation. In the wake of the fourth quarter sales and earnings, its stock share price node-dived 50%. Avon appointed Andrea Jung, a 41 year-old daughter of a Chinese immigrant parents as the new CEO to replace Charles R. Perrin who has since resigned from the company.
When Jung took over the helm of the corporation, she was faced with the reinvention dilemma. In America, sales growth was flat and niches players were nibbling away its market shares. On the whole, direct sales accounts for 6.8% of the USD27 billion of cosmetics and toiletries sold in America in 1999 which was down from 8% in 1995. However, direct sales has been the only sales model used by the corporation in generating revenues in the billions since its inception in 1886.
