case study--alliance formation with direct selling companies

8/7/2019 Case Study--Alliance Formation with Direct Selling Companies

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Case Study:Alliance Formationwith Direct Selling Companies:

Avon and Mattel

Lawrence B. Chonko


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Abstract

This paper provides an assessment of the

recent alliance formed between Avon andMattel.

The alliance represents,among other things, ablending of Avons sales expertise withMattels high quality products,including theBarbie product line.

The alliance is evaluated on the basis of sevenrequirements.

Managerial suggestions and research ideasare presented.


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Strategic Alliance Formation:A Brief Overview

A company such as Mattel,Inc.can enter a foreign market

in one of three waysMagrath 1992 Establish a Foreign Subsidiary.

Acquire Competitors and/or other Business.

Form Alliances and/ or Joint Ventures.


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Magrath

1992

goes on to identify four typesof marketing alliances

Establish Product and/ or ServiceAlliances.

Establish Promotional Alliances. Establish Logistic Alliances.

Establish Pricing Alliances.


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Alliance seekers hope to achieve a number of benefits,asshown 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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The Avon-Mattel Alliance

In 1997,Avon Products,Inc. and Mattel,Inc. began aseries of joint marketing initiatives.

Among the joint initiatives was the sale of new Barbiedolls and other Mattel products in the U.S as well as anew line of Barbie cosmetics to be marketedinternationally.

The alliance is expected to generated $100 million insales to Avon in 1998.

Avon and Mattel marketed two exclusive-for-AvonBarbie dolls in 1997, a Spring Blossom and a WinterVelvet Barbie.


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The Avon-Mattel alliance can be characterized as aproduct alliance for Avon and a promotional alliance forMattel.

Both Mattel and Avon are seeking benefits of a largerscale through resource poolingAvon benefits fromMattels products and Mattel benefits from Avonssales expertise and both companies retain theirindependence.

The Avon-Mattel alliance also has some of thecharacteristics of Kantors1989opportunisticalliance.


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Mattel brings well-known brands and licensed

properties to the alliance.Mattel is enablingAvon to become a primary source of Mattelproducts 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 Mattelproducts and properties.


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Evaluation of the Avon-Mattel

Alliance

In order to withstand the rigors of internationalcompetition,an organization should posses thefollowing characteristics

1. A well-respected product or service.

2. Time-tested internal process.

3.

Significant financial assets4. Experience in international trade

5. Knowledge about foreign cultures and laws.


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Evaluation of the Avon-Mattel

Alliance

Seven characteristics are commonly associated with successfulglobal 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 achievedthrough 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 theproject,recognizing that an alliance my be the future ofthe company.

Make sure that some people participate in all phases ofalliance consideration.Having some people who havebeen through it all lends continuity to

communications and understanding of the reasons foralliance consideration in the first place.


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Managerial Issues Associated

with Alliance Formation

Maintain good relationships with vendors.This isimperative for continued successful customer service.

Explain,though multiple communication sources,whychange is needed.Such communication is particularlyuseful when resistance to change is a function of thelack of information.

Bring those responsible for implementation into thedesign phase of alliance formation.This will increasetheir commitment to future changes.

Encourage managers to be supportive by providingtraining 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 sellingorganizations.

Internally,cross-functional activities and team formationhave become norms of doing business.

Firms employing these strategies are in position tooffer a broad-based set of capabilities to customer.

Internally,training and education have emphasizedthese broad-based skills and capabilities.


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Conclusion

These internal capabilities have been

emphasized as companies drive towardsustainable advantage.

As alliances form,sustainable advantagebecomes relevant for both partners and the

internal,broad-based training orientation of twocompanies must be blended with an externaland an internal focus.

case study--alliance formation with direct selling companies

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