Restructuring / Turnaround Strategies Case Study

Avon gives itself a Makeover

Abstract:

Avon Products, Inc. (Avon) is a leading global beauty company, with over $8 billion in annual revenue in 2005. As the world’s largest direct seller, Avon marketed to women in 143 countries through five million independent Avon Sales Representatives. Avon product lines included popular brand names such as Avon Color, Anew, Skin-So-Soft, Mark, Avon Solutions and also an extensive line of fashion jewelry and apparel.

Although revenues increased in 2003, 2004 and 2005, its net income was $848 million in 2005. There was stiff competition in the US market from other cosmetic companies. To hold its feet in the US and also to focus in other countries, especially China, the company announced changes to its global operating structure to bring senior management closer to its key business geographies, strengthen global integration, speed information flow and position the company for sustainable growth. Avon expected to incur costs to implement these initiatives over the next several years, with a significant portion of the total costs to be incurred during 2006. The company expected that benefits from restructuring would help to fund a significant increase in consumer investment as well as improve the competitiveness of its direct selling opportunity. Avon expected to increase investment in advertising, marketing intelligence, consumer research and product innovation. These actions were expected to improve growth prospects beginning in 2007. It remains to be seen whether Avon would be successful in its makeover plans.

Pedagogical Objectives:

• To elucidate about the US cosmetic market
• To understand how Avon was restructuring to maintain its position in the global cosmetic market.

Keywords : Avon; Direct selling; cosmetics; Anew; Restructuring; Makeover; Mark; Andrea Jung; Restructuring / Turnaround Strategies Case Study; De-layering; Organisation structure; Make-up; solutions; color; L'Oreal; Procter & Gamble