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Wk. 6 - Case highlights - Future of Avon China.docx

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MKT 600
Asif Salam

MKT600 Weekly Critique Notes Future of Avon China: Direct Sales, Retail Sales or Both - Avon became first to win approval from Ministry of Commerce for its direct sales operations in China o After 7 year ban. Got approval on April 9, 2005 - Was forced into retail industry because of the ban – came out successful o 6300 boutiques and 1000 department stores - Avon must decide how to allocate its sales resources among its multiple distribution channels. The options are Direct Sales, or Retail sales. - The factors to consider are the growing demand and intense competition in the cosmetics market. Avon‟s background: - Steady growth – slump in 1970s and 1980s because of women‟s changing lifestyles – full time employment and labour jobs - By 2004 – world‟s leading direct-selling company with 4.9 million sales reps and US $7.7 billion revenues - “Let‟s Talk” Campaign: o Successful – sales increased by 15% and profits increased by 13% o To fulfill its corporate mission to become „The Company for Women‟ o Sales reps increased by 10% - Globalisation: o Appointed manager to each country o Covered 60 countries/territories over North America, Latin America, Europe and Asia Pacific Direct Sales: - Deeply ingrained in corporate culture – rejected inquires from drugstores and retailers - Commission earnings were very appealing until 1980s when labour market was booming – 100 years since launch - Sales leadership programme o Sales reps (first tier sales agents) were compensated for recruiting new sales agents and training them in addition to their normal sales commission o Pyramid scheme – bonuses and incentives for all recruits - Direct sales worldwide o Avon could become profitable in a new country within two years of its investment, compared to the normal period of three to five years Avon China - Joint venture with Guangzhou Cosmetics Factory, a government owned company, which Avon had 60% of the ownership - Direct sales in China o Several adaptations were made – d
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