1 Lucia Procivňáková Veronika Sviteková

2 The Story Line… How It All Began Where Avon Is Now Avon Vision And Mission Financial Data Products Who Are Avon Competitors What Are Avon Practices 14 Years In Slovakia 1. About AVON 2. Problem Definition Why We Are Here Perspective/Context Basic Questions To Be Solved Criteria For Success Scope Constraints Decision Makers Avon basics Avon today

3 1. ABOUT AVON

4 How It All Began... in 1885, California Perfume Company was founded by David McConnell business based on several factors:  direct sales  image of the company that captured California's beauty and excitement  national network of sales agents developed earlier by 1969, manufacturing plants, distribution centers and sales branches throughout the world Source: November 2005 Established in 1985 in California

5 … Where Avon Is Now corporate offices in New York, USA primarily: door-to-door or direct- selling basis product line: cca 600 items pricing: moderate world's largest direct-selling organization and merchandiser of beauty-related products world's largest manufacturer and distributor of fashion jewelry Source: November 2005 World’s largest in direct sales and jewelry manufacturing Direct sales of 600 products

6 Avon Vision… The Global Beauty Leader The Women's Choice for Buying The Premier Direct Seller The Best Place to Work The Largest Women's Foundation The Most Admired Company …And Mission To be the company that best understands and satisfies the product, service and self-fulfillment NEEDS OF WOMEN - GLOBALLY Source: November 2005 Global beauty leader oriented on women and the best place to work

7 Net Sales (In Million $) Year +13% Net Sales Increased By 13% Between Years 2003 And 2004 Financial Data from Annual Report $6,774 $7,656 Source: Financial Annual Report, November 2005

8 Net Income (In Million $) $665 $ % Net Income Increased By 27% Between Years 2003 And 2004 Source: Financial Annual Report, November Year Financial Data from Annual Report

9 Cash Flow from Operations (In Million $) $745 $ % Year Cash Flow Operations Increased By 18% Between Years 2003 And 2004 Source: Financial Annual Report, November 2005 Financial Data from Annual Report

10 Products SKIN CARE MAKEUP HAIR CARE FRAGRANCES BATH JEWELRY & MORE 6 product lines, 600 products Source: November 2005

11 Who Are Avon Competitors Direct-selling industry: –few large, well-established firms & many small ones that sell about any product imaginable competitors: Mary Kay (cosmetics), Amway (home maintenance products), Shaklee Corporation (vitamins and health foods), Encyclopedia Britannica, Tupperware (plastic dishes), etc. competitors: Procter & Gamble, Unilever, Revlon (Max Factor, Almay), Estée Lauder, L'Oréal, etc. Direct sales /all kinds of products/ Department stores /cosmetics and personal care/ Source: authors Stores offering beauty products : - regular stores, supermarkets, hypermarkets, drugstores, independent retailers, specialized beauty stores 2 basic types of competition: direct sales and department stores

12 What Are Avon Practices Operations that demonstrate respect for the environment - efficient use of natural resources, waste minimization, reuse and recycling practices No Animal Testing Environmentally conscious Safe products Helping the community Avon does not conduct animal testing on any of its products or raw ingredients The safety of every product must be substantiated prior to product introduction. Fight against breast cancer, support for women's empowerment programs, and issue of domestic violence Source: November 2005 Concerns for social issues

13 …15 years in Slovakia Avon started in the Slovak market in 1991 Avon expanded relatively quickly and with success Offers products through direct-sales - Avon Lady/Avon Gentleman Serves more than 3,6 million customers Employs 50 employees Offers flexible income Source: November 2005 Avon in Slovakia Today Starting up in Slovakia Customer- oriented & flexible Long & successful tradition

14 2. PROBLEM DEFINITION

15 Why We Are Here… 2. Basic question to be resolved 6. Decision makers 1. Perspective / Context 3. Criteria for success 4. Scope of solution space 5. Constraints within the solution space Source: authors

16 1. Perspective / Context In general, the effectiveness of the Avon sales force has declined in recent years due to: - increasingly sophisticated customer - competition of other mass merchandisers They are paid commissions in the amount of 20%-50% of the price of products they sell In Slovakia, the only way Avon sells its products is via its local independent sales representatives + Quite a costly way of doing business = What led the Avon management to invite a consulting company? Source: authors

17 2. Basic Question To Be Solved Based on the current situation, Avon local management in cooperation with our consulting company defined the problem as follows: What would be the best sales model for Avon in Slovakia? Being more specific, the task we will be dealing with is: Design a new, most effective sales model for Avon operations in Slovakia, prepare a framework plan for its implementation, and guide the implementation process as such. = What are we here for? Source: authors

18 3. Criteria For Success = How will we measure our success? 2. The following schedule is kept: The project was successful if: A)½ year for designing the new model and providing for its successful implementation B)next ½ year for implementation of communication campaign C)1 year for shifting the abovementioned % of Avon customers to the newly designed sales channel(s) 1. In 2 years after the project has begun, 20% of Avon customers shift to the newly designed sales channel(s) +

19 4. Scope… = What are the limitations the Avon management has established? 3. No cutting of the number of sales force, at least not directly. 2. Budgetary constraints. 1. The effects must be visible in maximum of 2 years. Source: authors

Constraints… = How are we limited by the conditions in the Avon’s external environment? Commercial Law – meeting the legal requirements for conducting sales in any of the possibly proposed forms Work Law – minimum wages / salaries, working hours Regulations of the Council for Advertising – meeting the ethical as well as legal requirements regarding the content and context of advertising campaigns Source: authors

Decision Makers = Who has the final say over the project proposals? CEO for SR Sales and Marketing Manager SR Possibly vetoed by: Person at Avon’s US Headquarters responsible for strategic decisions regarding sales channels Source: authors

22 To be continued...

23 Backupy

24 Products Product LineBrands SKIN CARE Anew Avon Skin Care Basics Clearskin Moisture Therapy MAKEUP Avon Color Beyond Color Hydra Finish Perfect Wear Color Trend HAIR CARE Advance Techniques Hair Care Herbal Care FRAGRANCES one new product each year BATH Skin-So-Soft Naturals Aromatherapy Footworks Avon Bubble Bath Milk Made JEWELRY & MORE jewelry - fashion, classic and seasonal apparel - watches, shoes and purses gifts - collectibles, toys and unique gifts Around 600 items in their product line Cosmetics, skin care, and fragrance The worlds largest manufacturer and distributor of fashion jewelry Source: November 2005