Avon1

Presented By:Steven Doman CGA080079

Lim Kim Leong (Thomas) CGA 080077

Retailing CMGB6305Dr. Yusniza Kamarulzaman

Avon China Video

http://www.youtube.com/watch?v=80naK4NyMZk&feature=related

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• Leading Global Beauty Company• $9 Billion in annual revenue• Markets to women in over 110 countries• Direct selling, 5 million independent sales representatives• Beauty products, jewelry and apparel

• Customers, most employees are women but company has traditionally been run by men• Poor strategic decisions in 1980s led to change towards increasing diversity

• 1970’s Management was solely men• Ignored their own research that more women were entering their workforce and professional careers• Sales growth slowed and sought unrelated diversification as area for growth• Brink of bankruptcy

• CEO Jim Preston refocused on its roots• Developed strategies to reach women in the marketplace• Realized customers needed to be recognized in senior management

•Now a leader in management diversity•CEO and Board Chairman is Andrea Jung

• 86 percent of management is women• More than any other Fortune 500 Company• Half of Board of Directors are Women• Many programs to make sure women and minorities have opportunities for development

• Networks• Hispanic, Black, Asian Gay and Lesbian• Act as liaisons between management and associates

•Turned to Foreign Markets for growth• 2006 the company earned first foreign direct selling license in China

• Current management launched new growth initiatives

• Private label brands• Jewelry and apparel• High performance hair products for every hair type/ethnicity

•Avon wellness promotes balanced healthy lifestyle for women and their families•Strategic Partnership with Curves

•Started to offer grooming products and accessories in a Men’s catalog•Technology to support efforts of 5 million reps

•Reps can manage business electronically•Personalized web pages•Place and track orders online•Target specific groups and customers•Track orders•Use e-mail to share product information, selling tips and marketing incentives

2008-(In millions)• Total Revenue $10,690.1 (8% increase)• Cost of sales $3,949.1 (no significant change)• Net Income $875.3 (65% increase)• Earnings per share $2.04 (69% increase)

Why is Avon so committed to diversity?

•Primary customer is female, need to have females in leadership role•More women and minorities are entering the workforce•Networks allow minorities to interact among each other since they do not report directly to an office

Select another retailer that also values diversity. How does this commitment also affect its financial results?•Amway provides opportunities for more than 3 million people worldwide.•Operates in over 80 countries and territories•Annual turnover exceeding USD $8.2 billion•Where you find Amway, you'll discover people sharing the entrepreneurial spirit•Amway is the global leader in the direct sales business sector

Amway Malaysia•Began with five employees, in a small office facility in Jalan Ipoh in 1976•Amway Malaysia was one of the pioneers in the direct selling industry at that time.•Today, Amway Malaysia is the leading direct selling company in Malaysia with a core distributor force of 195,000 and a sales revenue of RM645.5 million for 2008•Profit after tax of RM95.1 million

•AMSB and ABSB provide direct employment to 359 employees throughout Malaysia •They have a core distribution force of 195,000•Distributors are independent business owners. Amway products and services are marketed solely through independent Amway Distributors

Amway's direct selling approach offers three important advantages, including a diversity focus:•An opportunity for anyone to own a business•Low entry cost and high quality products•no sales territories, an Amway business that starts locally can grow as large as desired, even worldwide•

In 2001, Amway Malaysia was honored for its corporate leadership by making the top 10 list in these categories:•Overall Best Managed Company - ranked 7th

•Corporate Governance - ranked 5th

•Treatment of Minority Shareholders - ranked 3rd

Make a projection for the results of the test market of Avon’s direct

selling strategy in China. How did you develop this projection?

Make a projection for the results of the test market of Avon’s direct selling strategy in China.

Year 2006 2007 2008 2009 2010China Cosmetic Market Size US$2,200M US$2,600M US$3,200M US$3,800M US$4,600M

Avon China

US$212.0M

US$280.5M

US$350.9M

US$438.6M

US$548.3M

Avon Beauty Category

US$152.6M

UD$202.0M

UD$252.6M

US$315.8M

US$394.8M

Avon Direct Selling $$

US$106.0M

US$140.3M

UD$175.5M

US$219.3M

US$274.1M Distributor 200,000 400,000 600,000 1,000M 1,600MConcept Store 6,000 7,000 7,500 8,000 8,500MSS % 6.94 7.77 7.90 8.31 8.5816

Principal market drivers

Strong economic growth and growing awareness of personal well-being

The fast expanding rural market The rise of the middle-class Women fueling the market growth The emerging markets

Babies & ChildrenMen

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Principal market drivers

Mainland people are now better-educated, better-paid and they attach more attention to fashion and their personal image.

They not only focus on improving basic living conditions, but are also keen to enhance their overall quality of life.

Their increasing awareness of health, hygiene and appearance has made cosmetic products one of the consumption hotspots.

In fact, the pursuit of beauty and health is no longer confined to young women only. Cosmetic products are gaining popularity among men, children and the elder people.

The cosmetics market is getting bigger and bigger embracing consumers from all ages and from all walks of life

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China Cosmetic Distribution ChannelsDepartment stores – most popular among more

affluent consumers Supermarkets, hypermarkets and grocery stores –

major distribution channels for mass Products Pharmacy chains – an emerging channel for

medicated cosmetics Specialty stores – providing professional services and

full range of merchandises of a specific brandProfessional stores – dominated by numerous small

players but some big ones targeting at mid- to high-end segment emerging

Direct selling – awaiting market liberalization Online sales – in initial stage of development Cosmeceutical stores – selling pharmaceutical

products with cosmetic benefits 19

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