Define the area of alignment, as well as the magnitude and pace of change of the reformation activities that started in in the period 1999-2012?
Define the area of alignment, as well as the magnitude and pace of change of the reformation activities that started in in the period 1999-2012?
CASE STUDY The company recruited Avon Ladies as representatives to personally market and sell beauty products to their family, friends, acquaintances, and anyone they a hundred years, Avon was an institution. Today, in the West only the name seems to have lingered. When Andrea Jung became Avon’s first female CEO in 1999, she entered a company deemed old- fashioned. After a string of male suits, she was the breath of fresh air Avon seemed to desperately need. Jung literally changed the face of the company with her friendly demeanour, flawless make-up, trademark pearl necklaces and Chanel suits, but also brought about two periods of massive change for Avon in an effort to alter its out-of-date image and transform the company. First, Jung attempted to shift Avon away from a brand for the people and lift it to prestige status. Direct selling had to make way for retail – the company’s old slogan, ‘Ding dong, Avon calling,’ got replaced by ‘The company for women.’ Jung opened the Avon Centre with a store, salon and spa in Fifth Avenue’s Trump Tower, and started creating Avon mall kiosks, followed by an attempt to sell the new beComing line in Sears and J.C. Penney. Sears backed out before the line’s launch and J.C. Penney severed business ties with Avon within two years. Second, Jung brought Avon global and entered the developing world early. Though Jung’s retail ambitions failed, globalization and a strong focus on marketing led to unmatched success. Avon’s profits nearly tripled from 1999 to June 2004, from US$287 million to US$846 million. About 70 per cent of Avon’s sales came from outside of the United States. Avon’s tour de force did not last. By 2005, profits fell flat. Competitors had also found their way into developing markets and Avon hardly followed a strategy to stay ahead. Every two weeks, Avon published a brochure of over 150 pages in the US, which allowed for enormous flexibility to change the company’s line-up. However, whatever strategy Avon decided on, it could and would easily sway from. The long-term vision Avon once had, was put on the back burner for short-term problem fixing. A former communications manager put it like this: “At Avon, when something doesn’t go right, just put some concealer on it.” Jung’s restructuring in 2005 and 2009 also failed to bring about desirable results. During the first restructuring, Jung spent half a billion dollars to reduce its 15 management layers down to eight, letting go of 30 per cent of Avon’s managers in the process. The second restructuring created a revolving door – new and old employees had little clue who was in charge and what strategy to follow. Despite bringing in many new faces, Jung could not change the old corporate culture into one with a forward-thinking could get interested in Avon’s beauty products. This direct selling approach created a close-knit Avon community of sales representatives and their clients. Avon typically attracted representatives who sold Avon part-time and made less than minimum wage doing it, but the company offered them the chance to support themselves and their families, as well as connect them to a network of colleagues and provide them with mentoring, training and support. For about mindset – rather than global integration and a mix of retail and digital, many among the company stuck to independent country fiefdoms and direct selling. When Jung resigned in 2012, her successor Sheri McCoy inherited a company in turmoil. Avon had pushed into new markets like Russia, Brazil and China, but Avon’s net income declined each year since 2008. She had two major tasks to return Avon to a healthy, profitable state: stabilizing Avon’s disastrous internal operations and successfully tackling the growing e-commerce market. She only barely managed the first. McCoy slowly changed the company’s structure with yet more restructuring and pushed ahead by introducing long-term growth objectives, though she failed to meet the majority of them. Avon only launched a proper e-commerce site in 2014, but hotter brands like Sephora had beaten it to the chase. The high-end market got captured by Ulta Beauty, while digital start-ups such as the monthly subscription boxes by Birchbox captured the hearts of younger customers. From the time that McCoy took over in 2012 until her resignation in 2018, the company’s shares fell by 85 per cent. They ended up trading around an 18-year low. Now it is up to Jan Zijderveld, who took over as Avon’s new CEO, to make the changes Jung and McCoy could not. He considers Avon’s brand recognition, extensive global reach and market positions in beauty and direct selling to be company assets. However, Avon’s 130-year-old business model has hardly been adapted to the modern age and is difficult to turn profitable as is.
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