Final Amway

AMW AY in C hi na ADAPATING TO CH ANGING ENVIRO NMENT

MADE BY: PRATEEK GUPTA SAHIL JAGGA NEHA ARORA MUKESH KUMAR SONAL MATHUR KUNAL NAYAR JATIN SETHI RAHUL KHEMKA BALPREET SINGH LUBNA SALEEM

Amway  Established in 1992  Founders- Richard DeVos and Jay Van Andel  Chairman of Asia Pacific Amway- Steve Van Andel  Joint venture between Amway Asia Pacific and the Guangzhou Economic Technological Development Zone (GZETDZ)  In April 1995, started a manufacturing plant

 Employs direct distributors , called independent business owners (IBOs)  Responsibility of IBOs  Perform functions associated with management  Organize meetings and events  Co-ordinate distributors  Devise incentive programs for recruits  Marketing for Amway products and the Amway business

Product line up  Home care  Personal care  Jewellery  Electronics  Nutrilite dietary supplements  Air purifiers and Water purifiers  Insurance and cosmetics

Amway’s MLM Business model  MLM strategy Similar to illegal pyramid type  Faced problems in USA, France and South Korea  Selling distributorship and high entry cost  Amway worked hard to distinguish itself from illegal pyramids  No high entry cost and no emphasis to purchase large inventories  Refunded legitimate claims and repurchased stocks from distributors

Amway’s competitors  Direct competitors  AVON  MARY KAY  SUNRIDER  Indirect competitors  P&G and Unilever  Local Chinese companies

Changing Political & Economic Atmosphere  Distributors seldom used the products  Products used as samples to persuade relatives and friends to join Amway  IBOs emphasized profits plans - perceived as best way to motivate potential recruits  Focus shifted from selling products to recruiting  Popularity increases - distributors distorted the business Model  Fraud and deception maximum in 1998.

Changing Political & Economic Atmosphere  Chanting slogans of affirmation and asking followers to believe that they will succeed.  Taught skills for developing customers and asked to invite friends and relatives to join business  Most of the business were scams  April 1998 – Chinese Government imposed a ban on all direct selling operations  Trade policies imposed by developed nations including US.

New Strategy of Amway  Agreement with the government and company resumed operations  Goods will be sold in retail outlets and through sales representatives  Income of sales distributors will be based on direct selling done by them  Same Distribution centers served as retail outlets for the company

New Strategy of Amway  Localization of employees  Localization of Business Model  Localization of production and Raw Material  Localization of research and development  Support for China’s entry into WTO  Active community development  Transparency and Credibility of company’s management

Facing the future  Solid distribution network  New competencies with localized business model  Good relations with government & Positive public image  After entry into WTO, Government, began new round of crackdown on illegal business  No impact on Amway due to its new business model

Facing the future  At end of 2003, legislation pending in government al allow return of direct sales in China  Government to reinforce laws to govern the direct selling industry  Amway continued to operate profitably and was successful in China due to its localization strategy  Amway builds up its own Kingdom in China and succeed in China

ANALYSIS

PEST ANALYSIS  POLITICAL Government allowance. Production base in china for export to Asian countries  Supportive for china’s entry into WTO.  

 ECONOMICAL     

localization of production and raw materials. Own production plant in china 50% of raw materials acquired itself from china Localization of employees More than 2000 employees were Chinese or overseas Chinese.

 SOCIAL  Active involvement of community  Financial and human support in areas of human services education ,art ,culture etc.  Invested $ 4 million for this purpose

 TECHNOLOGICAL  setup R&D department  Invested $ 1.5 million  developed new and tailored products like whitening make up for Chinese women.

SWOT  STRENGTH  Based on direct selling operation  Training to staff  Functions are performed by IBOs  Organize meetings and events time to time  Have good customer service system  Return and refund policies

 WEAKNESS  More power to IBOs  Initially high entry cost  Rumors for direct selling operations  Focus shifted from selling products to recruiting

 OPPURTUNITIES  Setup a manufacturing plant  Population of china  Popular in China

 THREATS  Too much freedom to IBOs  Change in government policy  Competitors

CRITICAL ANALYSIS AND CONCLUSION  Solid distribution network  New competencies with localized business model  Good relations with government & Positive public image  Amway continued to operate profitably and was successful in China due to its localization strategy  Amway succeed in China.