Avon 2006 Annual Report Download - page 15

Our success depends on our ability to
execute fully our global business strategy.
Our ability to implement the key initiatives of our global business
strategy is dependent upon a number of factors, including our
ability to:
• implement our multi-year restructuring initiatives and achieve
anticipated benefits from these initiatives;
• increase our beauty sales and market share, and strengthen
our brand image;
• realize anticipated cost savings and reinvest such savings effec-
tively in consumer-oriented investments and other aspects of
our business;
• implement appropriate product mix and pricing strategies
including our product line simplification program;
• implement enterprise resource planning and our strategic
sourcing initiative, and realize efficiencies across our supply
chain, marketing processes, sales model and organizational
structure;
• implement cash management, tax, foreign currency hedging
and risk management strategies;
• implement our Sales Leadership program globally, recruit
Representatives, enhance the Representative experience and
increase their productivity through investments in the direct
selling channel; and
• reach new consumers through a combination of new brands,
new businesses, new channels and pursuit of strategic oppor-
tunities such as acquisitions, joint ventures and strategic alli-
ances with other companies.
There can be no assurance that any of these initiatives will be
successfully and fully executed within the planned time periods.
We may experience difficulties, delays or
unexpected costs in completing our multi-
year turnaround plan, including achieving
the anticipated benefits of our multi-year
restructuring initiatives.
In November 2005, we announced a multi-year turnaround plan
as part of a major drive to fuel revenue growth and expand
profit margins, while increasing consumer investments. As part
of the turnaround plan, restructuring initiatives include:
enhancement of organizational effectiveness, implementation of
a global manufacturing strategy through facilities realignment,
additional supply chain efficiencies in the areas of procurement
and distribution and streamlining of transactional and other serv-
ices through outsourcing and moves to low-cost countries. We
may not realize, in full or in part, the anticipated benefits from
one or more of these initiatives, and other events and circum-
stances, such as difficulties, delays or unexpected costs, may
occur which could result in our not realizing all or any of the
anticipated benefits. If we are unable to realize these benefits,
our ability to continue to fund planned advertising, market
intelligence, consumer research and product innovation ini-
tiatives may be adversely affected. In addition, our plans to invest
these benefits ahead of future growth means that such costs will
be incurred whether or not we realize these benefits. Finally, the
costs of implementing the restructuring plan are expected to be
in the range of $500 million before taxes, a significant portion of
which has not yet been incurred.
We are also subject to the risk of business disruption in con-
nection with our multi-year restructuring initiatives, which could
have a material adverse effect on our business, financial con-
dition and operating results.
There can be no assurance that we will be
able to achieve our growth objectives.
There can be no assurance that we will be able to achieve profit-
able growth in the future. In developed markets, such as the
United States, we seek to achieve growth in line with that of the
overall beauty market, while in developing and emerging mar-
kets we have higher growth targets. Our growth overall is also
subject to the strengths and weakness of our individual markets,
including our international markets. Our ability to increase rev-
enue and earnings depends on numerous factors, and there can
be no assurance that our current or future business strategies
will lead to such increases.
Our business is conducted worldwide
primarily in one channel, direct selling.
Our business is conducted worldwide, primarily in the direct sell-
ing channel. Sales are made to the ultimate consumer principally
through 5.3 million independent Representatives worldwide.
There is a high rate of turnover among Representatives, which is
a common characteristic of the direct selling business. As a
result, in order to maintain our business and grow our business
in the future, we need to retain and recruit Representatives on a
continuing basis. If consumers change their purchasing habits,
such as by reducing purchases of beauty and related products
from Representatives or buying beauty and related products in
channels other than in direct selling, this could reduce our sales
and have a material adverse effect on our business, financial
condition and results of operations. If our competitors establish
greater market share in the direct selling channel, our business,
financial condition and operating results may be adversely
affected. Furthermore, if any government bans or severely
restricts our business method of direct selling, our business,
financial condition and operating results may be adversely
affected.
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