Case Study:Alliance Formation

with Direct Selling Companies:

Avon and Mattel
高等直銷管理課程
指導教授：陳 得 發
作者： Lawrence B. Chonko
報告人：李 君 玲
Abstract
 This paper provides an assessment of the recent
alliance formed between Avon and Mattel.
 The alliance represents,among other things, a
blending of Avon’s sales expertise with Mattel’s 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.
 Strategic Alliance Formation:
A 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.

 Strategic Alliance Formation:
A 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.
 Strategic Alliance Formation:
A 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
Strategic Alliance Formation:
A Brief Overview
 The Avon-Mattel Alliance
 In 1997,Avon Products,Inc. and Mattel,Inc. began a series
of joint marketing initiatives.
 Among the joint initiatives was the sale of new Barbie dolls
and other Mattel products in the U.S as well as a new line
of Barbie cosmetics to be marketed internationally.
 The alliance is expected to generated $100 million in sales
to Avon in 1998.
 Avon and Mattel marketed two exclusive-for-Avon Barbie
dolls in 1997, a Spring Blossom and a Winter Velvet
Barbie.
 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
Mattel’s products and Mattel benefits from Avon’s sales
expertise and both companies retain their independence.
 The Avon-Mattel alliance also has some of the
characteristics of Kantor’s （ 1989 ） opportunistic
alliance.
 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.
 Evaluation of the Avon-Mattel
Alliance
In order to withstand the rigors of international
competition,an organization should posses the
following characteristics ：
1. A well-respected product or service.
2. Time-tested internal process.
3. Significant financial assets
4. Experience in international trade
5. Knowledge about foreign cultures and laws.
 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
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
 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.
 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.
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.
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.