Case Study:Alliance Formation with Direct Selling Companies: Avon and Mattel

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Case StudyAlliance Formation with Direct Selling
CompaniesAvon and Mattel

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• ??Lawrence B. Chonko
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Abstract

• This paper provides an assessment of the recent
  alliance formed between Avon and Mattel.
• The alliance represents,among other things, a
  blending of Avons sales expertise with Mattels
  high quality products,including the Barbie
  product line.
• The alliance is evaluated on the basis of seven
  requirements.
• Managerial suggestions and research ideas are
  presented.

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Strategic Alliance FormationA Brief Overview

• A company such as Mattel,Inc.can enter a
  foreign market in one of three ways(Magrath
  1992)
• Establish a Foreign Subsidiary.
• Acquire Competitors and/or other Business.
• Form Alliances and/ or Joint Ventures.

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Strategic Alliance FormationA Brief Overview

• Magrath(1992)goes on to identify four types of
  marketing alliances
• Establish Product and/ or Service Alliances.
• Establish Promotional Alliances.
• Establish Logistic Alliances.
• Establish Pricing Alliances.

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Strategic Alliance FormationA Brief Overview

• Alliance seekers hope to achieve a number of
  benefits,as shown below
• Gain Access to Local Markets
• Derive Learning Economies of Scale
• Block and/or Co-Opt competitors
• Obtain Manufacturing Economies of Scale
• Offset Competitive Disadvantage
• Shape the Nature of Competition
• Gain Access to Needed Technologies

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Strategic Alliance FormationA Brief Overview
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The Avon-Mattel Alliance
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The Avon-Mattel Alliance

• The Avon-Mattel alliance can be characterized as
  a product alliance for Avon and a promotional
  alliance for Mattel.
• Both Mattel and Avon are seeking benefits of a
  larger scale through resource pooling-Avon
  benefits from Mattels products and Mattel
  benefits from Avons sales expertise and both
  companies retain their independence.
• The Avon-Mattel alliance also has some of the
  characteristics of Kantors(1989)opportunistic
  alliance.

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The Avon-Mattel Alliance

• Mattel brings well-known brands and licensed
  properties to the alliance.Mattel is enabling
  Avon to become a primary source of Mattel
  products in a direct selling format.
• Avon brings a strong global distribution network
  to the alliance.
• The existence of this distribution enables Mattel
  to expand the growth of both Mattel products and
  properties.

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Evaluation of the Avon-Mattel Alliance

• In order to withstand the rigors of
  international competition,an organization should
  posses the following characteristics
• A well-respected product or service.
• Time-tested internal process.
• Significant financial assets
• Experience in international trade
• Knowledge about foreign cultures and laws.

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Evaluation of the Avon-Mattel Alliance

• Seven characteristics are commonly associated
  with successful global ventures.
• Global Vision
• Managers International Experiences
• Strong International Business Networks
• Preemptive Technology or Marketing
• Unique Intangible Assets
• Closely Linked Product/Service Extensions
• Closely Coordinated Worldwide Organization

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Results

• While the jury is still out,the Avon-Mattel
  alliance should produce results in the following
  areas
• Improved Customer Service Quality
• Improved Support of Core Businesses
• Improved Employee Performance
• Improved Operating Procedures

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Managerial Issues Associated with Alliance
Formation

• Focus on cost improvements that can be achieved
  through consolidation and elimination of
  redundancies,before looking for alliance
  arrangements.
• Communicate, to all employees,all the essential
  aspects of the alliance.
• Assign a dedicated team of the best people to
  the project,recognizing that an alliance my be
  the future of the company.
• Make sure that some people participate in all
  phases of alliance consideration.Having some
  people who have been through it all lends
  continuity to communications and understanding of
  the reasons for alliance consideration in the
  first place.

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Managerial Issues Associated with Alliance
Formation

• Maintain good relationships with vendors.This is
  imperative for continued successful customer
  service.
• Explain,though multiple communication sources,why
  change is needed.Such communication is
  particularly useful when resistance to change is
  a function of the lack of information.
• Bring those responsible for implementation into
  the design phase of alliance formation.This will
  increase their commitment to future changes.
• Encourage managers to be supportive by providing
  training necessary to facilitate and implement
  alliance formation.

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Conclusion

• Alliances may become so critical that they serve
  as basic building blocks in the operation of
  selling organizations.
• Internally,cross-functional activities and team
  formation have become norms of doing business.
• Firms employing these strategies are in position
  to offer a broad-based set of capabilities to
  customer.
• Internally,training and education have emphasized
  these broad-based skills and capabilities.

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Conclusion

• These internal capabilities have been emphasized
  as companies drive toward sustainable advantage.
• As alliances form,sustainable advantage becomes
  relevant for both partners and the
  internal,broad-based training orientation of two
  companies must be blended with an external and an
  internal focus.