Avon Products, Inc. (Avon), the US cosmetics giant, had considered China the keystone of its marketing effort in Asia. Years of effort and the development of a large direct marketing organisation in that country had made operations in China its most profitable and most rapidly growing market in Asia. On 21 April 1998 senior company officials from the New York headquarters and throughout Asia had gathe red in Guangzhou for what was supposed to be a festive occasion. During the meeting William Pryor, Avon's head of China operations, was called away from his table to take a phone call When he returned, it was with devastating news. The Chinese government had just announced an immediate ban on all direct selling. In 113 years, Avon had used only direct selling and had no experience in traditional retailing. Thus the large financial investments they had made in China beginning in 1990, and the expected potential for growth in the Chinese market, were in immediate and very serious danger. While Avon had enjoyed eight consecutive years of profit in China, the implications went beyond the possible loss of the Chinese market itself. Avon had planned to use China as a manufacturing base for its export activities, thus strengthening its status as a global company. At c orporate `headquarters in the United States the ban not only demonstrated that regulatory and bureaucratic uncertainty continued to be a major problem for foreign businesses in China, but also provoked reconsideration lby Avon of its strategic approach to the global market. The company and its competitors
Products, Inc. was founded in 1886 by David McConnell as the California Perfume Company. The name was officially changed to Avon Products, Inc. in 1939. In the late 1990s the company was operating in over 135 countries with al sales force of mor e than 2.3 million independent representatives. These representatives, called Avon Ladies, handled 650 million customer orders and generated more than US$2 billion in commissions per year. The company is the world's largest direct seller of beauty and related products. A leader in skin care products, it is also;a manufacturer of costume jewelry, and markets-an extensive line of aPParel, gifts, decorative items, collectables, and family entertainment prodAvon
ucts. Of these products, cosmetics account for , over 60% of total sales. With US$4.8 billion in annual rev.= ante, Avon was ranked 293 among Fortune 500's list of the largest US companies in 1998. The vision of Avon is: To be the company that best understands and satisfies the product, service, and selffulfillment needs of women —
The vision influences the company's research, product development, marketing and management practices' (www.avon.corii). Avon is in some of the most competitive consumer product markets in the world Their target market is women in a wide age range, from teens to the over 40s, in two:different market segments. The Avon Skin Cate line, targeted at the lower end of the mass market,-, offers modestly priced, daily-use-type products. This line is designed to be 'simple' and appeal to customers who prefer a 'less involved' skin care regime.- It is' expected to be a .beginning step for some consumers' to skin care, and Avon hopes that these customers will eventually move to its higher-scale products. The major • competitors' in low-end skin care products are Oil of Olay (Oil of Ulan in China), Neutrogena, Ponds, Biore," Malay; there are many others. In coloring produets; competitors include Mabelline, Cover Girl, Alma); Revlon, I:Ortial, Oil of Olay, among many others.Other products, such as Anew, target the lower end of, the premium segment, where competitors include Estee Lauder, lincome, Christian Dior, and Clinique. Two.= major direct marketing competitors , at both the domes-: tic and international levels, are Amway and Mary KO', have been eve -en pro u
through an ongoing research effort that has resulted in a number of innovations and...
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