Andrea Jung speaks at the Clinton Global Initiative. (Reuters)

Just last year, Andrea Jung was one of the most powerful women in the world.

As the CEO and chairman of Avon Products Inc. (NYSE: AVP), the giant direct-sales beauty company with over $11 billion in annual revenue, Jung was a standout in the corporate world, leading Avon through a difficult time when online and discount cosmetics retailers proliferated and cut into its market share and margins.

And as a second-generation Chinese immigrant who became one of the few female CEOs in the Fortune 500, Jung was an inspiration to women of many cultures -- including Avon's sales force from Shanghai to Sao Paulo, San Francisco to Sofia, and in over 100 countries. This legendary, door-to-door army of millions of Avon ladies sells scads of makeup, jewelry and fragrances, mainly to friends and neighbors.

Jung took pride in her role atop one of the world's best-known companies. Clad in Gucci and Prada, she represented an aspirational image for Avon's brand and a message of female empowerment. She also bolstered her credibility as a major corporate player by joining the boards of General Electric Co. (NYSE: GE) and Apple Inc. (Nasdaq: AAPL).

The high-powered executive insisted that success wouldn't hinder her ability to strategize Avon's best move as competition intensified. You reinvent yourself as a leader, not just the company, Jung said in a 2008 interview with Charlie Rose. The hard thing is to be humble enough to switch your own strategy.

Now, however, Avon is scrambling for options. After a disastrous 2011, when its annual earnings per share declined 10 percent, sending the stock price tumbling more than 40 percent, Avon announced in December that Jung was stepping down as CEO but will remain as chairman for two more years. On Monday, Avon announced that Sherilyn McCoy, a 30-year veteran of Johnson & Johnson (NYSE: JNJ), will become its chief executive on April 23.

At the same time, Avon is fending off takeover bids. Last week Coty Inc., the private manufacturer of fragrances including Calvin Klein and Kenneth Cole and by revenue half the size of Avon, disclosed it had made a $10 billion unsolicited offer for its larger rival.

Avon's board rejected the $23.25-a-share bid as too low. It also balked at Coty's insistence on due diligence, which Avon considered a free peek at its finances.

Jung, 53, was successful in building the company for the first eight years, but it's fallen apart in the last two, said Leigh Ferst, an analyst with New York brokerage Wellington Shields & Co. Her legacy has been tainted.

Avon's global headquarters at 1345 Avenue of the Americas in Manhattan. (PropertyShark)

When Jung became Avon's CEO near the end of 1999, the company's revenue was flat, its U.S. sales anemic and moves into markets abroad hurt by the strong dollar. To finance its early global expansion, the New York-based company issued a huge amount of debt, increasing its lending liabilities to $1 billion from about $250 million.

But Jung moved quickly to turn Avon around. By 2005, her belt-tightening and modernization strategy began to show significant results. She cut nearly a third of top management and consolidated inventory and supply chains; reduced the product line by 25 percent by focusing on profitable, high-volume items; bought materials from fewer sources; and increased Avon's leverage with suppliers.

Over time, this approach saved more than $500 million, which Jung invested back into the company to improve sales-force efficiency. She equipped Avon ladies with mobile phones and Internet access. She also designed a detailed plan for entering new markets around the world. In 2005, Avon won the right to become the only foreign cosmetics company licensed to sell products door-to-door in China. (It helped that Jung speaks Mandarin and Cantonese.)

By the next year, Jung's Brazilian push paid off with $1.3 billion in revenue, the second-biggest sales stream after the United States. Overall revenue in 2007 grew to $9.9 billion, a 13 percent increase over the previous year.

The good news didn't last. By 2010, Avon was having problems keeping its sales force happy. Recruitment, critical to expansion, rose only 4 percent that year, from 10 percent in 2009. Typical was the situation in Russia, where independent sellers began to complain that the threshold for cash incentives was too high and that taxes they paid cut too deeply into their wages. Sales growth in Russia, an important market, fell to 2 percent in 2010 from 14 percent the year before.

And in Brazil, Avon's supply chain, which was supposed to provide an edge for the company, virtually collapsed. Manufacturing and delivery delays, along with missed shipments, led to severe product shortages. Avon ladies lost sales as customers became fed up with long waits for their deliveries and canceled their orders. In turn, sales clerks were less enthusiastic about pitching Avon products to customers. We had lost demand as representatives and became annoyed, Jung said in an earnings call last year.

As a result, Avon's Brazil sales growth in 2010 dropped to 4 percent from 13 percent. Moreover, the problems in the South American country have continued into this year.

While its CEO's global strategy was unraveling, the executive suite at the company saw more than its share of turmoil. Last October, the Securities and Exchange Commission opened an investigation into whether Avon had bribed officials in order to obtain its license to sell items door-to-door in China. Four of the company's top managers were fired as a result of that probe, which is ongoing.

Separately, the SEC is investigating Avon for possible improper company disclosures to Wall Street analysts. Avon's chief financial officer, Charles Cramb, was fired in January, soon after Jung was demoted, and replaced with Kimberly Ross, formerly of Dutch consumer group Royal Ahold.

Avon's self-inflicted wounds are having unintended consequences, Moningstar analyst Lauren DeSanto wrote in a research note last week. While Avon faces a perfect storm of problems at the moment, it's clear Coty smells blood.

Bernd Beetz, CEO of Coty Inc. (Reuters)

As Avon loses its value, analysts are intrigued by the potential for a merger with a company such as Coty to improve Avon's fortunes. They say Coty CEO Bernd Beetz, who has doubled profits in the past decade and is a veteran of consumer-products companies as diverse as LVMH Louis Vuitton Moet Hennessy (EPA: MC) and Procter & Gamble Co. (NYSE: PG), could be the answer to Avon's management gap. McCoy's assumption of CEO duties complicates that equation, but Coty's continued strength in established U.S. and European markets could dovetail well with Avon's increasing presence in China, India, South America and other emerging markets.

Avon's management wants the company to remain independent. In order to do so, it will have to energize its door-to-door sales force, a model it has relied on for more than 125 years. There were 6.4 million active Avon ladies at the end of 2011, down 1 percent from the previous year. In the fourth quarter of 2011, Avon's sales force shrank by 3 percent from the same period of 2010 -- the steepest decline in over a decade. All Avon ladies are independent contractors, an arrangement that allows Avon to expand into any geographic area without investing heavily in infrastructure compared to traditional retailers.

Keeping Avon ladies happy is an increasingly challenging task, as evidenced by the experience of Birdie Jaworski, a single mother of two who sold Avon products in Southern California and New Mexico from 2003 to 2010.

Instead of base pay, Jaworski received a percentage of her total orders, ranging from 10 percent for modest sales to 50 percent if she sold over $1,500 worth of goods during a two-week campaign. Salespeople also had to buy the company's brochures, which were issued every two weeks, at their own expense.

During some periods, such as holidays, orders would pile in, but other times were more challenging, Jaworski said: There would be stretches where I'd be begging people to buy lipstick.

During her time at Avon, Jaworski said, the company put greater emphasis on recruiting and offered representatives additional money for signing up new sellers. But there was no structure to avoid overlapping sales territory; more than once Jaworski approached a potential customer only to find that the would-be buyer had already been contacted by another Avon lady.

Although her earnings never amounted to much more than minimum wage, Jaworski credits Avon with giving her the flexibility to make her own schedule while raising her children. And the face-to-face approach allowed her to overcome shyness.

I was terrified of people, she said. Avon forced me to get over that.

She has published two books, the memoir Don't Shoot! I'm Just the Avon Lady, and 100 Ways to Sell Avon. Over time, Jaworski came to realize that what made people buy what she was selling was a universal need that cut through social and economic lines.

We all had the same desires, she said. Everyone wants to be beautiful.

Problem is, they may no longer believe that Avon products are the way to get there.