"Avon Calling"

Avon, at one time perhaps the best known of the direct-sales companies, has fallen on hard times.

According to one article:

Avon Products Inc reported weaker-than-expected fourth-quarter results as sales slid in every market except Latin America and the company saw a 3 percent drop in the number of representatives who sell its cosmetics directly to consumers.

This reflects drops in sales overall.  Of interest is that only about 20% of their sales (per the 2010 annual report) are from North America.  Two of their biggest markets -- Brazil and Russia (as per the annual report) are markets where Avon has taken a hit.

In the case of Brazil, Avon claims that computer problems (specifically, a "legacy system") are the reason for the sales drop there.  Shouldn't Avon have anticipated problems with an outdated computer system and addressed that much earlier?

In the case of Russia, Avon blames "agressive pricing" from competitors.  Ok.  You compete on one of two things -- price or quality.  If Avon isn't the cheapest brand, should they not position themselves as at least a brand of choice?  Could be on product quality, customer service, whatever, but something that will convince Russian women that, while Avon may not be the least expensive, it's the best value for the money.

It's something to remember.  A company can make a lot of mistakes in going international -- ignoring cultural differences, etc. -- but it's also possible to do things right in the international sense and still just not do a good job of running a business.

Maybe this is why Avon CEO Andrea Jung is looking for a new job.

Mexico party selects first woman presidential candidate (via BBC)

The Mexican voters choose a new president in July of this year (when the US political parties are just settling on their nominees). 

Current president Felipe Calderón is not eligible for a second term (Mexico's presidents are limited to a single six-year term).  He chose as his successor Ernesto Cordero (who was, up until September of 2011, the finance minister).

However, the PAN (National Action Party) did not agree, and chose a different candidate.  The current nominee of the PAN is Josefina Vazquez Mota , who was formerly the education minister. 

According to the BBC, though:

Opinion polls place her some distance behind the current frontrunner, Enrique Pena Nieto, the candidate of the party which ruled Mexico for more than 70 years, the PRI (Institutional Revolutionary Party).  

And, it is most likely that the next president will be Enrique Peña Nieto from the PRI (Institutional Revolutionary Party). 

The Institutional Revolutionary Party (PRI), which ruled Mexico for 71 years until 2000, leads the pack and looks set to return under the slick candidacy of Enrique Peña Nieto, a former governor of Mexico’s most populous state.  

However, there’s been some corruption corruption associated with Mr. Peña Nieto:  

It was a mere $1.8 million, stuffed as brand new bills into two suitcases on a small jet travelling from the drug-raddled state of Veracruz to the home town of the man likely to be Mexico's next president.  Suspicious? Officers from Mexico's Attorney-General's office confiscated the money last weekend during a search of the plane, which landed in Toluca, capital of the state of Mexico. They arrested the two men transporting the cash, who said they were Veracruz officials but could not present any paperwork on where the money came from.  As rumours and speculation swirled, officials in the government of Veracruz acknowledged the money (25 million pesos) was theirs. They said they'd sent it to a publicity agency to pay for promotions for a carnival.  

It happens in the US, too.

It happens in France.

It happens in Australia.

It happens in the UK, though it's been illegal since 1275...

AND because Elections ought to be free, the King commandeth upon great Forfeiture, that [no Man] by Force of Arms, nor by Malice, or menacing, shall disturb any to make free Election.

NYSE Euronext merger with Deutsche Boerse blocked by EU (BBC News)

This is a very appropriate news item, for us at least. On the agenda for tomorrow (Friday) is a discussion of economic and legal systems.

Today's business climate is one of mergers and acquisitions, though those mergers don't always meet with the approval of governments interested in enforcing antitrust laws (see here for a brief refresher on antitrust).

In class, we'll take a look at Microsoft and their troubles in the EU.

The BBC article deals with a proposed merger that's been going on for a while now. Like a lot of these, it goes beyond the merely complex.

NYSE Euronext is a merger (dating back to 2007 or so) of the New York Stock Exchange and Euronext, which was itself a merger of a number of European exchanges (not, however, including either London or Frankfort).

At one point, Deutsche Börse (Germany, based in Frankfort) wanted to buy Euronext, but was beaten out by the NYSE.

So, in early 2011, Deutsche Börse decided that they were going to acquire NYSE Euronext. At the time, the expectation was that the merger would happen fairly quickly. Per a Wall Street Journal article from a year ago:

A deal could be announced as early as next week, according to people familiar with the situation, though a host of regulatory challenges await on both sides of the Atlantic, according to competition experts.

Well, the deal isn't going to go through. The European Commission announced yesterday that the merger would violate EU antitrust provisions.

But, the US didn't have a problem with the merger, approving it in December of 2011.

The difference between the EU and the US is that EU regulators appear to be somewhat more aggressive in their enforcement of antitrust. For example:

The day after blocking the merger of NYSE Euronext (NYX) and Deutsche Boerse AG (DB1), the European Union’s antitrust chief vowed to veto other deals that hamper competition. The EU will continue to block deals “whenever necessary,”
Joaquin Almunia said in prepared remarks for a speech in Brussels today.

So, what does this all mean? There will most likely be additional consolidations in the world's markets; the London Metal Exchange is looking to be bought out soon. It does mean that, as a company looking to raise money in the equities market, that there'll be less choice as to where to list one's stock. Does that matter? In reading through the EU's press release on the NYSE Euronext / Deutsche Börse merger, they keep saying "competition is good," but it's not clear just why competition among financial marketplaces is a good thing.

Ok. Having nothing else to do, I decided to see if I could find out why. What I found was a very long and complex paper written by academic economists in 1998. I ran out of steam on about page 6 (out of 50), but if I'm reading this right, there's no good economic reason for a lot of competition. Also, prior to a single European currency and increased cross-border ownership of securtities, most world exchanges were already monopolies within their countries:

The presence of many exchanges in reality is not incompatible with this view, as exchanges were not competing with one another, at least in Europe, until a decade ago, due to different regulations and currencies that let them be monopolist in their relevant markets. In fact, in each country, either only one exchange existed or only one was dominant and absorbed the small regional ones (as in France, Italy, Spain, and Germany).

Today's story has been widely reported, but the more I think about it, the impact on businesses in general will most likely be a limited one. It's still an interesting story, especially when you look at the history behind it.