3. What effects will the use of traditional retailing in China have on Avon’s overall marketing strategy? Avon Products, Inc. (Avon), the US cosmetics giant, had considered China the keystone of its marketing effort in Asia. Years of effort and the development of a large direct marketing organisation in that country had made operations in China its most profitable and most rapidly growing market in Asia. On 21 April 1998 senior company officials from the New York headquarters and throughout Asia had gathered in Guangzhou for what was supposed to be a festive occasion. During the meeting William Pryor, Avon’s head of China operations, was called away from his table to take a phone call. When he returned, it was with devastating news.

The Chinese government had just announced an immediate ban on all direct selling.

In 113 years, Avon had used only direct selling and had no experience in traditional retailing. Thus the large financial investments they had made in China beginning in 1990, and the expected potential for growth in the Chinese market, were in immediate and very serious danger. While Avon had enjoyed eight consecutive years of profit in China, the implications went beyond the possible loss of the Chinese market itself.

Avon had planned to use China as a manufacturing base for its export activities, thus strengthening its status as a global company. At corporate headquarters in the United States the ban not only demonstrated that regulatory and bureaucratic uncertainty continued to be a major problem for foreign businesses in China, but also provoked reconsideration by Avon of its strategic approach to the global market.

The company and its