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Avon: introduction

Avon is the world’s largest direct seller and a leading beauty company. It has more than $11 billion in annual revenue. Its product line includes beauty, fashion and home products.

Before 1998, the company sold its products via direct selling. However in 1998, the Chinese government ordered a ban on all direct-selling schemes out of fear for social unrest and instability.

Therefore, Avon needed another business model and switched to retail selling by setting up counters at department stores and opening its own boutiques.

Since the demand for cosmetic products surged in China, the Chinese market became the largest driver of Avon’s growth in China.

SWOT analysis

Strengths: * direct-selling model is deeply ingrained in Avon’s corporate culture and Avon was an early member of the Direct Selling Association which is a trade association devoted to helping direct-sales companies * incentives to its agents in addition to commissions: management skills training and commissions based on sales made by all agents recruited under a representative * Sales Leadership Programme: strong incentives for sales representatives to expand their downline * Low fixed investment: Avon is very flexible and is able to make profits very quickly * Agreement with a government-owned company where Avon has 60% ownership. * Avon sources raw materials for manufacturing its products from local, Chinese suppliers

Weaknesses: * sales agents: opportunity for further development was scarce * incentive system: a lot of sales agents made purchases that they were not able to sell and some companies forced their agents to stock up and then disappeared social unrest ban on direct sales in 1998

Opportunities * China has the largest number of potential cosmetics customers in the world

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