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Competitive Strategic Management - Developing Avon In A Global Perspective

Competitive Strategic Management - Developing Avon In A Global Perspective

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Published by Rin Naz

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Published by: Rin Naz on Apr 05, 2011
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QGM6163- CSM- PROJECT PAPER - DEVELOPING AVON PRODUCTS INC. IN A GLOBAL PERSPECTIVE
 
NOR NAZERANAH OMAR DINKLCP101003 Page 1
AVON PRODUCTS INC. - DEVELOPING IN A GLOBAL PERSPECTIVE
Avon Products, Inc. is the world¶s largest direct selling organization and merchandiser of beauty and beauty related products. From corporate offices in New York City, Avon marketedproduct lines to women in 112 countries through 1.6 million independent sales representativeswho sold primarily on a ³door-to-door´ basis. Total sales in 1992 were $3.8 billion. Thecompany work force of 29,900 employees staffed divisions of product management,manufacturing, and sales and service, worldwide.Avon entered the international marketplace in the 1950s. In 1954, Avon opened salesoffices in Venezuela and Puerto Rico to cultivate the Latin American market. Avon expandedinto the European market in 1957 through its United Kingdom subsidiary, Avon Cosmetics, Ltd.The company entered the Asian market in 1969, by way of Japan. In 1990, it became the firstmajor cosmetics company to manufacture and sell products in China. That same year, Avonbecame the first American beauty company to enter East Germany. Sales of Avon International,in 1992, were $2.25 billion, compared to Avon U.S. sales of $1.41 billion. More than three-fifthsof the firm¶s direct selling sales and earnings came from outside the United States and theproportion was growing.Internationally, the company¶s product line was marketed primarily at moderate pricepoints. The marketing strategy emphasized department store quality at discount store prices.Avon divided the world into four geographical divisions: The United States, Europe, ThePacific, and The Americas. In most of international markets, the primary operating arrangementin each of these divisions was direct ownership by Avon of the foreign country subsidiary. Jointventures with foreign firms were used when the culture and the ways of doing business weresignificantly unfamiliar to Avon management.By 1991, Avon management felt that it was time to re-evaluate and map out the long-term future of the firm¶s beauty businesses on a global level. Senior management knew that thetraditional Avon system of door-to-door house calls worked ³wonderfully´ in developingnations.
 
QGM6163- CSM- PROJECT PAPER - DEVELOPING AVON PRODUCTS INC. IN A GLOBAL PERSPECTIVE
 
NOR NAZERANAH OMAR DINKLCP101003 Page 2
Avon then tried to develop its own global perspective. In developing the market globally,Avon Management identifies three avenues of growth which are geographic growth, leveragingdistribution channels in emerging and developing markets, and marketing in developed industrialareas.The first area was geographic growth. Enormous growth opportunities existed incountries with huge populations such as China, Indonesia and India. In Eastern Europe,management was excited about the potential in Poland, Czechoslovakia, and Hungary. In thePacific Rim area, countries like Vietnam, Cambodia, and Laos were targeted as marketopportunities.The second area of growth was to continue to emphasize direct selling in the emergingand developing markets of Latin America, the Pacific Rim, and other areas. In those markets, theretail infrastructure was undeveloped, especially in the interiors of those countries. The Avonrepresentative provided consumers with an opportunity to buy a wide range of quality products atacceptable prices. In some developing markets, where access to quality goods was particularlyprized, Avon¶s direct selling method opened up unprecedented prospects for women.The third area of international growth was marketing in the United States and other developed industrial areas like Canada, Western Europe, and Australia. New programs weredesigned to complement the existing network of sales representatives and image-enhancingadvertising and promotion programs worldwide to make customers aware of Avon products andthe purchase options available such as on the website and retail outlets.Avon¶s strong presence in the market globally intends to satisfy their customer demandaround the world and shows that Avon has step into the market in a global perspective and varyfrom country to country and market to market internationally. This helps Avon in developing itsown image in a global perspective and in achieving their mission of being the Global BeautyLeader.
 
QGM6163- CSM- PROJECT PAPER - DEVELOPING AVON PRODUCTS INC. IN A GLOBAL PERSPECTIVE
 
NOR NAZERANAH OMAR DINKLCP101003 Page 3
AVON PRODUCTS INC.Introduction
David H. McConnell founded ³The California Perfume Company (CPC) in 1886 with thefirst office located in New York. In 1906 the San Francisco earthquake destroyed CPC¶sCalifornia office however, before long the company reopened. CPC¶s first office outside UnitedState was opened in 1914 in Montreal, Canada. In the 1920¶s CPC sales doubled to $2 millionduring this time there were more than 25,000 representatives in the United States. TheCompany¶s name was change to Avon Products Inc. after the British town Stratford-upon-Avonin 1938. Avon¶s sales increased to about $16 million and in 1946 the company was announcedpublicly with advertising campaign such as ³Avon Calling´. Avon expanded overseas tocountries such as Puerto Rico, Cuba and Venezuela. In the 1970¶s U.S sales top $750 millionsand the first Avon Asian business was opened in Japan. Avon also acquired the Jeweler Tiffany¶sduring this period of growth. It was the first major U.S. cosmetics manufacturer to permanentlyend animal testing.Avon adopted five core values which are Trust, Respect, Belief, Humility and Integritywhich are evident in the mission statement to be a Global Beauty Leader, women¶s choice of buying, premier direct seller, the best place to work, largest women foundation and the mostadmired company.Avon success lies within it channel of distribution, it is the world¶s largest direct seller with 5.4 million Avon representatives in over 100 countries. Additionally, it is the largest microlender to women and it among the world top global brands. The company increased it¶sinvestment in 2007 by over $120 million which aided in the development of new sales leadershipopportunity, improved training, technology tools and changes in commission structure.There are three product categories which Avon distributes, they are beauty, fashion andhome. In 2008, Avon changed its marketing approach of concentrating mostly on a homey imageand is now including celebrities as a part of their promotions. The company advertising costincreased from $136 million in 2005 to $249 million in 2006 and $368 million in 2007. ReeseWitherspoon is the Avon Foundation first global ambassador and honorary chairwoman who

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