AMWAY in China ADAPATING TO CHANGING ENVIRONMENT

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

Amways 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

Amways 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 Chinas entry into WTO Active community development Transparency and Credibility of companys 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 chinas 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.