Leadership of Jung-Avon

7/25/2019 Leadership of Jung-Avon

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MAKEOVER OF

AVON PROUCTS-

ANDREA JUNG


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FACTORS OF EARLY CRISIS/DOWNFALL

The oldest beauty company in the United States, Avon Products, Inc. has grown from a modest

line of perfumes sold door-to-door to one of the worlds leading brand of cosmetics. It

manufactures and sells cosmetics, fragrances, toiletries, accessories, apparel, and various

decorative home furnishings. Avon employs a uni!ue direct-selling method, which was greatly

responsible for its incredible success in the "#$%s and "#&%s, when women were easily found in

the home for sales purposes. After unsuccessful eff!"s #" $%&e!s%f%c#"%n into the health-care

service industry left the company with massive debts in the late "#'%s and early "##%s, Avon

began to refocus on its roots( beauty products and direct selling.

Some of the factors of Avon)s downfall are( customer complaints about Avon)s image, poor-

!uality products, lac* of interesting new lines, and unattractive catalogs.

The "#+%s presented Avon with its greatest challenges in the companys history. Though sales

topped " billion in "#+, and its profitable costume-ewelry line--begun in "#+"--had made

Avon the worlds biggest ewelry manufacturer in ust five years, Avons growth stalled in "#+/.

The company was hit hard by a recession and the mass entry of women into the wor*force. The

direct-selling system, Avons innovation and strength, was nearly toppled by social changes that

management had not anticipated. The status of the U.S. dollar reduced the companys

international profits0 recession and inflation crippled its high-sales decanter products line0 in

"#+$, about $,%%% Avon 1adies !uit0 and Avon products were outpaced by retail cosmetic firms

offering a22ier products to women with new attitudes. All of these factors converged and led to

trouble times--and Avons eventual restructuring.

COMPETITIVE ANALYSIS

To understand what)s gone wrong at Avon, you first have to understand what it means to be a

direct seller. 3hile Avon is the fifth-largest beauty company in the world, it)s by far the biggest

direct-selling enterprise globally, with &.4 million active representatives mar*eting its products.

3hat Avon is actually selling is an earnings opportunity to its sales representatives, who then

turn around and sell Avon)s lipstic*s and lotions to the end user.

5ffective direct-selling companies are $6 about the brand and +$6 about the sales channel.

7irect selling grew about /%6 between %%& and %"" into a "/& billion global mar*et. Avon

gained only "." percentage points of share in the direct-selling industry during the same time

frame, with "".46 of the mar*et in %"".


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Still, for a time all seemed golden under 8ung)s leadership. 9rom her start as :5; to 8une %%4,

Avon)s stoc* tripled, topping 4& a share. Profits grew at nearly the same rate and reached '4&

million in %%4, up from '+ million in "###. Avon went into international mar*ets early, and

non-U.S. business made up about +%6 of sales.

made inroads in the developing world, and drugstores and big-bo? retailers

e?panded their selection of affordable cosmetics.


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Pe!f!3#nce In$%c#"!s)

1eading global beauty company

3orlds largest direct seller

Top of the :ustomer Satisfaction Survey

an*ed C in Top $% cosmetics brands

;racle Dyperion-based 5PB

SWOT An#l4s%s

S"!en"(s)

7irect Selling 1eader

:ommitted 3or*force

Self-;wn 9acilities

We#'nesses)

7ecrease Sales

1ow


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I n 1 8 8 6

B y D a v idH .M c C o n n e l l

F o u n d e d

B e a u t y

Fa s h io n

H o m e

P r o d u c tD i v i s i o ns

D ir e c tS e l l i n g

S a l e sL e a d e r s h i

L i m it e d! e t a i l S t o r eS a l e s

" # S a l e s

S a l e s / D is t r i b u t i on

H e a d$ % c e a t& e ' (o r )

M o n t r e a l *F i r s t$ v e r s e a s$ % c e

+a a n *

F ir s t , s i a n$ % c e in1 - 6 -

F i r s tO f c e s

& o r t h, m e r ic a

L a t i n, m e r ic a

" u r o e a n d e s t , s ia

, s i a / a c i 0 c

G l o b a lD i v i s i o ns

T(!e#"s)

Inflation ates

ising :osts of commodities

1ow Internet Selling

STAGES OF DEVELOPMENT >?ISTORY@

LEADERS?IP C?ANGE AND ITS CONTRI


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Avon started moving out of America and by the time Bs 8ung too* over foreign mar*ets

accounted for 4%6 of its sales.


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FTransactional leadership occurs when the leader rewards or disciplines the follower depending

on the ade!uacy of the follower)s performance.G She cut off + layers of management and

changed her mindset, changed Avon)s mar*eting and product development and also herself

wor*ed with a high enthusiasm. In this particular story, 8ung started to change her leader style

with Factive management-by-e?ceptionG. She started to serve Avon :ompany as a role model

and even sacrificed her family time. Der performance and enthusiasm encourage employees.

8ung herself was also an inspirational force with the ran* and file, who viewed her as a visionary

leader with a true love of the company. Andrea)s tenure has been underscored by a deep

commitment to its representatives. 8ung pushed a new incentive system for reps and made it

easier for them to do business online. Avon e?ecutives who previously wor*ed directly with 8ung

were more critical. She was image-conscious, they said, loo*ing to outsiders such as consultants

and new hires for affirmation. 5arly in her tenure, in a leadership-derailment assessment, which

measures a leader)s vulnerabilities when under stress, 8ung tested as a Fpleaser.G The label meant

she had difficulty with conflict and a natural inclination to meet e?pectations of others.

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Leadership of Jung-Avon