Jung’s Strategic Plan for Avon

Con Position

Avon is the world's leading direct seller of beauty products, with over $6 billion in annual revenues. In November of 1999, Avon announced the appointment of Andrea Jung as president and chief executive officer of the firm. Although Avon is best known for their direct-selling method, Ms. Jung felt they needed a new strategic plan to attract and retain Avon customers. Her strategic vision is to bring the Avon product line to consumers through new distribution channels including retail outlets like Sears and JC Penney. This retail initiative was not met with great enthusiasm from her board but the recommendations of their consultants (kiosks, full-line discount stores, and specialty stores) were still part of a market development grand strategy. Team C will explore why this strategy is not the best approach for Avon to meet its corporate goals for growth in revenues.

• Specific faults in proposed market development options:

• Expansion into Sears and JC Penney has three primary drawbacks:

o Jung proposed entry into this market with an upscale exclusive product line, which would create mixed messages for the consumers and an assumption that products in the catalog were of lesser value. This would erode the brand image of the core business, which is essential to success.

o Sears and JC Penney were recognized as the weakest portion of the mass retail market, tended to lack cosmetic consumers, and did not currently have the selling cosmetic infrastructure such as beauty advisors.

o Entry into this market would likely cannibalize direct sales business and upset the sales representatives that Avon relies on for the core business.

• Utilization of kiosks, specialty stores and full-line discount stores also have negatives:

o Not enough cash to penetrate all markets simultaneously. A staggered approach would be necessary and would be based on the success of the previous campaign. This dilutes any possible success over time.

o Avon does not have the necessary retail market relationships for entry into the specialty stores and full-line discount stores. This is a major weakness for the entire strategy (see more below).

o There is not enough prime retail space for kiosk expansion in the US.

• As part of the market development strategy, Ms. Jung also contemplates the expansion of Internet based sales because growth is significantly below projections (1% vs. 8%). However, this would further cannibalize the direct sales and the current Internet strategy with e-representatives is proving too costly and needs to be reevaluated.

• Breaking