BUSINESSWEEK ONLINE : SEPTEMBER 18, 2000 ISSUE
COVER STORY Panning for Global Gold in Local Markets (int'l edition) When Avon's Taiwan business started to improve in 1995, it seemed at first just a nice lift for one local market. After all, Avon operates in 137 countries around the world and garners two-thirds of its sales outside its U.S. home base. In that $5.3 billion sea, Taiwan is a small fish. But then Taiwan started to post some amazing numbers. Its compounded annual growth jumped from less than 5% in the first half of the 1990s to 20% in the second. New management initiatives--such as multilevel marketing, where sales representatives recruit others for a percentage of their sales, and selling Avon at retailers like Watson's drug stores--along with a big advertising blitz, were paying off handsomely. And soon, Avon's top brass in New York was sending management from all around the world to Taiwan to study its magic formula. GOING NATIVE. Successfully adapting to the local retailing culture has been a big part of Avon's success. In China, when authorities barred Avon and all direct sellers from door-to-door sales, the company quickly switched to distributing its product to boutiques and department stores. In the Philippines, orders aren't mailed, they're picked up at a central supermarket-style distribution facility. In Japan, conversely, most of the business is mail order. ''Asia is what it is,'' says Chief Operating Officer Jose Ferreira Jr., ''and companies that do well adapt to it.'' More than just adapting, Avon takes lessons learned in overseas markets and applies them more broadly wherever possible. ''Some of our really creative ideas and global initiatives have come from our smaller markets. The leading market may be Taiwan or Malaysia or Brazil,'' says CEO Andrea Jung. ''Avon's operating model has evolved to be a global company.'' And while ideas flow into headquarters from all across the globe, the company is also exporting more efficient ways of doing business to its regional markets. Avon, for instance, has moved away from regional brands to global sourcing and branding, including its first international ad campaign, launched this year at a cost of $100 million. The move toward one consistent image plus a push for improved worldwide distribution will have generated $400 million in savings by the end of this year, says Amanda Tepper, an analyst with Chase Hambrecht & Quist. That should help Avon continue to make strides in its hottest markets, such as Eastern Europe. In Latin America, the company already gets 38% of its operating profit and has 20% of the market, four times its U.S. share. ''Direct selling does much better in markets where retail is less developed,'' says Tepper. Getting into overseas markets early has always been the key. Avon has been in Venezuela since the 1950s. In Asia, it's been doing business in Japan since 1969 and in China since 1990. ''First to market is a big deal,'' says Ferreira, who oversees Avon's international businesses. ''And we were often there [first] by a decade.'' LOST GLOSS. Still, Avon's global reach means special challenges. The planned worldwide launch of a new lipstick on a single day this year, for instance, was scrapped for fear customers might not be able to get the product. Other problems are ones Avon has no control over: Last year the company missed its fourth-quarter target in part because of the devaluation of the Brazilian real. Overall, in 1999 Avon's local-currency sales were up 9%, but after translation to the dollar, they only grew 1.5%. But with hits like Taiwan to point to, a product mishap here and a currency devaluation there are the sorts of risks that Andrea Jung and Avon are more than willing to take. By Nanette Byrnes in New York _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Avon's New Calling COVER IMAGE: The New Avon Lady TABLE: From Ding-Dong to Dot-Com: 114 Years of Avon Ladies RESUME: Andrea Jung CHART: Avon Profits Are Rebounding...But Sales Have Barely Climbed...Making Investors Wary The Man behind Avon's Web Site Panning for Global Gold in Local Markets (int'l edition) INTERACT E-Mail to Business Week Online

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