Strategic Management – MGMT 689

Assignment

GRIGGS UNIVERSITY

April 09, 2010

Submitted by: Mohammed Zaman Shaikh
 ANDREA JUNG’S MAKEOVER OF AVON PRODUCTS INC.
Strategic Management – MGMT 689| 09/04/2010

On Andrea Jung’s commencement as CEO in 1999 she faced a number of strategic

problems at Avon - there was no superior strategy for the company to initiate and
thus no competent implementation and execution of this strategy. This lead to a
number of symptoms such as poor image, slow growth and a decline in sales, which
was a direct link to a vague strategic vision, lack of innovative technology and lack
of leadership. With a new strategic vision implemented by Jung, Avon was able to
move into the 21st Century with a clear view to compete with other Cosmetics
Fragrances and Toiletries (CFT) companies in the same industry.

Primary and Secondary Problems

 Lack of a well defined strategic vision

Avon did not have a well-defined strategic vision. Without this vision
for the company, employees had no sense of organizational purpose and no
motivation and as a result Avon’s image declined. Many customers
commented that Avon’s products were ‘dull’ and ‘not for me’. Alongside this,
were comments regarding poor product packaging, distribution and
advertising campaigns. All of these were symptoms of a lack of strategic
vision and clear-cut objectives.

 Lack of innovative technology – Managerial problem

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
continued with onerous paperwork which consequently leads to mishandling
customer orders.

 Lack of leadership
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.

Andrea’s Recommendations

 Clear Cut Strategic Vision (Image Enhancement)

The strategic vision developed by Andrea Jung incorporates many

useful functions for example the vision specifies where the company is
headed (into fitness and health), it provides long-term direction and
illustrates to customers and staff the type of company Avon wants to
become. Avon should focus on products for men as it is evident in today’s
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 society that many men are interested in hair and beauty products based on

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competitors enter into this market. With a correct image and advertising
campaign Avon should be able to enter into the market for men’s products
thus stimulating the growth of the company as a result.

 Clear Objectivity
Andrea Jung’s Financial and Strategic Objectives are in line with her
strategic vision for Avon. All objectives are future orientated, are measurable
and attainable and are specific in meeting her vision. This motivates staff as
they are aware of the new products available and they know what is
expected of them, which can encourage growth for the company. Avon needs
to ensure that they keep up to date with the latest technology and use the
Internet to their advantage in promoting and gaining sales in the future as
failure to do so could be detrimental to their strategic vision and
implementation of their strategic plans.

 Leadership (Implementation of Strategic Vision)

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.
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 ‘best understands the products of women’.

*********

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 1 What is your assessment of Andrea Jung’s performance as chief
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strategist at Avon Products? What has she done well? What overall grade
would you give Andrea Jung for the job she has done as CEO?

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.

Strategies of Andrea Jung :

 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
product lines.  

 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.

 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

 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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Some Quick results of Andrea’s Strategy :

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 Even though the US economy had officially entered a recession in mid-2001
and had slowed further following September 11 terrorist attacks on the
World Trade center and Pentagon, the great strategy developed by Andrea
helped Avon to increase the sales from 1.5% in 1999 to 6% in 2001.

 The company business process reengineering effort had improved operating

margins by more than 350 basis points. Avon's international sales grew at
double-digit rates, with the strongest performance in Eastern Europe and
Asia.

 During Jung’s first 24 months as CEO, Avon’s common shares had

increased by approximately 90%; where as indexes such as S&P 500 had
fallen by nearly 25%.

 Just prior to completion of Andrea Jung’s second year as CEO , Avon’s

board had endorsed her performance by announcing to investors that Jung
would become chairman of board in addition to CEO

I would give Andrea Jung an "A" for the job she has done as CEO. I
am sure this is a shared opinion because she is one of the most recognized
successes of all time.   At age 40, she became CEO, and in 2001, at age 42,
she was listed on Fortune's ranking of the 50 Most Powerful Women in
American Business.

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 2 What is Andrea Jung’s strategic vision for Avon? Do you
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approve of the company’s new strategic direction? Why was it time

for Avon to fundamentally change direction?
Avon’s Vision :

Andrea Jung envisioned an Avon that would be the “Ultimate relationship

makeover of products and services for women”. Under Jung Avon’s vision
statement read, “Our vision is to be the company that best understands and
satisfies the product, service and self-fulfillment needs of women globally. Our
dedication to supporting women touches not only beauty – but health, fitness, self-
empowerment and financial independence.”

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.

Need for a change :

 Internal operating problems:

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
continue to pay attention to its internal operations to avoid a reoccurring
problem in the future.

 Obsolete products
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.

 Focused product line

Avon has been in the cosmetic industry since it was founded in the
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,

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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.

 Inconsistency
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.

Other major reasons for change were :

Avon’s representatives were vigilant in protecting their customers and sales,

and they were aggressive in reversing strategies that might increase sales for Avon
but limit sales growth opportunities for sales representatives.

 Sales representatives were displaced with any recommendation to make any

Avon products available for sale in department stores or malls.
 The company was limited by its dowdy brand image
 Market research found that most women viewed Avon as “my Grandmother’s
brand” or “Not for me”
 Avon had no Products in some of the fastest-growing CFT categories, and it
had not introduced a hit product in decades
 Distribution inefficiencies, limited income opportunity for the average sales
representative
 Difficult in selling products to busy women as 75% of American women are
working class

References :

1. http://classes.bus.oregonstate.edu/fall-05/ba590/avon.doc
2. http://essayinfo.com/sample/essay/1096/

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 3 What is your assessment of the financial and strategic
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objectives Jung has set for Avon? Do they contain too much stretch?
Too little stretch?
After becoming CEO of Avon, Andrea Jung developed a strategy based on the
market position or core competencies of Avon products. Andrea Jung’s Eight
Strategic Priorities as the catalyst of change in the company after having presented
a daring vision for Avon to be the “ultimate relationship marketer of products
and services for women” which at first seemed implausible are as follows.

 Grow global beauty category sales through continued investment in

new product development, advertising, and sampling.
Through research development Avon was able to launch innovative
products that opened doors of beauty products industry. Research has also
contributed to the study of breast cancer early detection, prevention and
recently for the cure. They also invested for improvement of brochure,
broadcast advertisements, interactive voice response system, fax and toll-
free ordering of products took substantial savings and also it had gained
enormous returns.

 Provide representatives with greater career opportunities through

sales leadership, enhanced sales Internet capabilities, and training.
The implementation of Sales Leadership program in the Avon
community was designed to give better chances of accumulating income for
career-minded women. The said program imparts business savvy,
opportunity to recruit, mentor and train new sales representatives while they
gain commission from it. They can make use of Internet system – Avon.com,
and become e-Representatives.
Therefore, the Avon Company had successfully activated Sales Leadership
plan globally, engendered representative occupation, enhanced efficiency, in
addition to that had vied with further direct-selling enterprises in order to
utilize and retain sales representatives.

 Reduce inventory levels while at the same time improving service to

representatives
The policy behind the new procedure of accounts cataloging is that
inventories are stated at the lower cost of or market. As a result, it improved
the assessment or evaluation of stocks, supply fitting balancing of profits and
operating cost and expenses, and appraisal of company accounting to
comparable bookkeeping system. It is also designed to reveal non-recurring
charges for inventory write-downs and eliminate cease manufacture of
product lines, closures of facilities, reductions of size-of-line, and unseen
product nature modification. The company had also executed an effective

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 centralization of product inventory distribution hubs.

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 Improve operating margins by 50-100 basis points thru business
process redesign
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.

 Successfully launch the Avon Wellness line of nutritional

supplements and vitamins
Avon planned to polish its brand image by the expansion of its line of
products by the invention of wellness products that promoted women’s
health and well-being. It was a new business venture, a new opportunity for
revenue gaining for sales representatives. It is designed to help women of all
ages and lifestyles to enhance their health and vitality, promoting that
woman’s concerns is Avon’s concerns thereby opening a high-potential new
arena that would portray the “we care” attitude of the company particularly
to their women consumers. It was first offered in selected markets in late
2000 and was followed by an aggressive roll-out in 2001.

 Begin to build a profitable retail business to fuel future growth

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 “stranded 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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  Develop e-commerce opportunities for Avon and its sales
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representatives
Avon through Miss Jung, considering that they can redefine direct
selling method though the use of information technology systems for the new
generation of women bringing into line the technological change that will
provide a substantial instrument  for dynamic selling aid and enhanced
earning prospects.
For instance, in Avon Japan, there is an ordering facility that is made
flexible for the sales representatives. The e-Representatives can now order
from a variety or ordering products through the use of telephone, fax,
interactive voice systems or the Internet. Nowadays, there is more than 50
percent of orders are electronically received.
The Internet proved to be a great device and an important method to
achieve Avon’s goal to create a renewed vibrancy and energy for the Avon’s
image and branding.

 Pursue market opportunities in China and Eastern Europe

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
audience and further geographic expansions in countries like China, Russia,
Turkey and eventually India.

References :
1. http://louaiworks.wordpress.com/2009/10/01/strategic-business-analysis-
case-of-andrea-jung-and-avon-products/
2. Gamble, John E., Thompson, A. A., and Strickland. A. J. (2005), “Andrea
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. http://classes.bus.oregonstate.edu/fall-05/ba590/avon.doc
4. www.avoncompany.com

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4 What have been the key elements of Avon’s strategy been

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under previous CEOs? What new and different strategy elements
have been initiated by Andrea Jung? How well does Andrea Jung’s
new strategy seem to match features of the global cosmetics
industry and Avon’s resource strengths, competitive capabilities, and
culture?

Previous Strategies of Avon :

 Door-to-door sales method (Direct sales approach)

 1937 Nationwide print advertising and a sponsored radio program “Friends”
 1944 Introduced mechanized billing and take the company public – with
shares offered over-the-counter in 1946
 In 1954 Avon has just begun a hugely successful television advertising
campaign, the historic “Avon Calling”. In 1956, Avon also opened for
business in Cuba.
 1979 Avon sponsors a Championship Tennis Circuit for young people, and
has held two International Women’s Marathons. A women’s cultural center
“Josei Bunka” is opened in Japan to make awards to outstanding women in
the community. Aerosol products are converted from CFC to
environmentally-friendly hydrocarbons.
 1986 started Investment in Magazines, retirement properties and healthcare
products, as well as catalogs for children and for menswear. A joint-venture
with beauty company Liz Claiborne is also in operation.
 1990 Avon announces a permanent end to animal testing, becoming first
major cosmetic manufacturer to permanently stop using animals in the
safety testing of its products
 Enters into a joint venture with Guangzhou Cosmetics Factory to
manufacture and sell cosmetics in China.

Strategies by Andrea
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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  Marketing transformations
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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.

 Supply chain improvement

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.

 Sales Leadership
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."

 Retail chain stores

In order for Avon to reach more customers the company should
implement a way of targeting its customer by using more retail stores such
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.

 E-commerce and Internet

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
customers was asked how to address them besides using their formal name.

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  International

Strategic Management – MGMT 689| 09/04/2010

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."

The successes achieved by Avon have been tremendous.

References :

1. 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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 5 How well has Avon’s new strategy been implemented so far?
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What are Avon’s strategy successes so far? What problems or

missteps you see? How important has Susan Kropf been to Avon’s
implementation efforts? Was she a good choice as chief operating
officer? Why or why not?
The successes achieved by Avon have been tremendous, Under the
Strategies implemented by Andrea Jung. At the second anniversary of Jung’s
appointment as Avon’s CEO , all indicators suggested that the new vision, strategy,
and implementation efforts were working to near perfection.

 Avon's sales growth had increased from 1.5% in 1999 to 6% in 2001.

 The company business process reengineering effort had improved operating
margins by more than 350 basis points. Avon's international sales grew at
double-digit rates, with the strongest performance in Eastern Europe and
Asia.
 Avon’s common shares had increased by approximately 90%, whereas
indexes such as the S&P 500 had fallen by nearly 25%

The main success strategies implemented are :

 Push into new products, new models, business lines and promotional
campaigns all contributed to sales increases
 Value chain realignment and business process reengineering created
additional resources to support such activities, and simultaneously improved
margins

Problems / Missteps :

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.

Another recommendation to Avon concerns the spokesperson(s). While

enhancing Avon's image and promoting new products, the firm should have been
more careful as to choosing their spokesperson. The Williams sisters' publicity
would have probably achieved greater results if they would have been promoting
the Wellness line of Avon, not the generalized "Let's Talk" campaign. That way, the
image of sports star who puts their physical fitness above all would have been more
victorious.

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 The third identified problem would be Andrea Jung's grand strategy to create

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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.  

Susan Kropf as COO :

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.

 Kropf’s Business Process Engineering(BPR) efforts achieved great success in

2000, delivering cost savings of more than $150 million.
 Improved Avon’s operating margins by 3.2 points in 2000, as she left no
component of the company’s value chain untouched.
 BPR had improved company’s manufacturing and distribution systems.
Company saved a lot by cutting the supplier numbers from 300 to 75
 Used Information systems to automate order processing and logistics to
reduce transportation costs
 Improved demand forecasting, and an overall end-to-end supply chain
reconfiguration

References :

1. 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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Strategic Management – MGMT 689| 09/04/2010

6 Has Andrea Jung been effective in evaluating the company’s

performance, monitoring new developments and initiating corrective
adjustments? Does Andrea Jung appear to have personal traits well
suited to refining and fine-tuning the company’s strategy and
implementation efforts? Are her strengths better suited to
instituting sweeping changes and quickly moving to a new project?

Jung's parents were highly accomplished, first-generation immigrants from

China who moved to the United States for their children's education. Her father,
born in Hong Kong, received a master's degree in architecture from the
Massachusetts Institute of Technology, and her mother, born in Shanghai, was a
chemical engineer and later an accomplished pianist.

Destined for Success

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 “I’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
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).

Jung began her career as a management trainee for Bloom-ingdale's, and

she quickly revealed her drive to succeed. She became second in command at I.
Magnin & Company in her late twenties and was in charge of all women's apparel
for Neiman Marcus by age 32. Jung even brought work home with her, marrying
Michael Gould, CEO of Bloomingdale's, in 1993. After moving to Manhattan, New
York, she and her husband became regular fixtures in local newspapers' society
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pages. Once in Manhattan, Jung joined Avon as president of U.S. product marketing

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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
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:

 Integrity and character: “It 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.”
 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. “I loved this work and this organization,” she said. Twenty months
later, when her predecessor left, the CEO’s job was hers.
 Compassion: “Leaders must treat employees with respect, no matter what
the business decision is.”
 Humility: “Acknowledge what you don’t know. Acknowledge what you did
wrong and learn from it.”
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  Pride: “Take pride in who you are and what you do.”
Strategic Management – MGMT 689| 09/04/2010

 Courage: “There are curveballs in business every day. Leaders cannot be

afraid to fail and must have the courage to act swiftly.”
 Focus on Social Causes: “Doing 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".

References :

1. Byrnes, Nanette, "The New Calling," BusinessWeek, September 18, 2000

2. Preston, Morag, "Avon's New Calling," Times (London), June 29, 2002.
3. http://www.hbs.edu/news/releases/112106_avon.html

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7 What additional actions would you recommend Andrea Jung

Strategic Management – MGMT 689| 09/04/2010

take to help the company to achieve its long-term strategic and
financial objectives? Are any changes needed in the company’s
vision? Its objectives? Its strategy? Its implementation efforts?
What challenges might the new strategy present to Avon’s top
management team? What risks do you see?

Alternatives :

 Since many young women are wearing make-up these days, Avon should
develop an inexpensive, teen line.
 Sharing advertising/branding costs among all countries will lower the
operating costs.
 Use Avon product placement in popular movies and television shows.
 Launch the men line products to cover the market need.
 Recruit the male representatives to generate more income.
 Enter to the new countries   that have a potential to grow and earn enough
profits e.g. Vietnam
 Promote a nutritional product line by sponsoring the sport event.
 Educate the representatives to point out the need of introducing the new
distribution channels.
 Expand the new distribution channels to facilitate the customers and prevent
the dropping in direct sales in the future e.g. the airlines.
 Specialty stores are growing 4% per year and are attracting affluent baby-
boomers which are ever growing segment of the population
 Full line discount stores have high customer traffic, pointing towards high
volume sales of the more affordable Avon products.

Strategy and Vision :

As for aiming at Baby Boomers, this group is desirable because of their

potential spending power expected to increase over the next five years. They
traditionally "outspend" all the other customer group categories, so they
would be a great target group for Avon.

Lastly, when expanding any business product line, current successful

processes must be considered and preserved. By aggressively jumping into
the retail market Ms Jung is sure to jeopardize the current relationships with
the Avon sales representatives that currently support the Avon Company. If
sales representatives become frustrated and leave the organization due to
this strategy, which is very likely, then Avon's "core" current business is at
serious risk. This places extreme pressure on the ability for the new
expansion into the retail market to succeed.

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Strategic Management – MGMT 689| 09/04/2010

Challenges presented by top Management and Risk

The review board criticized Andrea's approach and pointed out that :
 Brand name erosion and sending mixed messages to consumers is a risk
when going into partnership with low-end department stores.   If Avon goes
retail then one might assume that retail products sold in stores being
exclusive, then brochure products were of inferior quality.
 Sears and JC Penny stores   have a low end image and are recognized as
being on the weakest end of the retail market.   These stores also lack
cosmetic customers.
 The direct sales personnel would resent being transferred to retail sales
positions and also would feel their job security threatened if Andrea's plan
were implemented.
 Another concern with Ms Jung's strategy is her decision not to heed the
advice of the consultants that she brought in. One of their primary
recommendations was to distribute the Avon spa products in specialty stores,
which seems to be fully in line with current trends in "health". It would
appear that the consultant's recommendations are more in line with the
current Avon external and internal environment than Ms Jung's.

References :

1. http://www.oppapers.com/essays/Avon
2. http://www.oppapers.com/essays/Avon-Case-Analysis
3. http://classes.bus.oregonstate.edu/fall-05/ba590/avon.doc

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