AMWAYAMWAYin Chinain China

ADAPATING TO ADAPATING TO CHANGING ENVIRONMENTCHANGING ENVIRONMENT

MADE BY:MADE BY:

PRATEEK GUPTA PRATEEK GUPTA SAHIL JAGGASAHIL JAGGANEHA ARORANEHA ARORA

MUKESH KUMARMUKESH KUMARSONAL MATHURSONAL MATHURKUNAL NAYARKUNAL NAYARJATIN SETHIJATIN SETHI

RAHUL KHEMKA RAHUL KHEMKA BALPREET SINGHBALPREET SINGHLUBNA SALEEMLUBNA SALEEM

Amway 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 Employs direct distributors , called independent business owners (IBOs)business owners (IBOs)

Responsibility of IBOsResponsibility of IBOs Perform functions associated with Perform functions associated with

managementmanagement Organize meetings and eventsOrganize meetings and events Co-ordinate distributorsCo-ordinate distributors Devise incentive programs for recruitsDevise incentive programs for recruits Marketing for Amway products and the Marketing for Amway products and the

Amway business Amway business

Product line upProduct line up

Home careHome care Personal carePersonal care JewelleryJewellery ElectronicsElectronics Nutrilite dietary supplementsNutrilite dietary supplements Air purifiers and Water purifiersAir purifiers and Water purifiers Insurance and cosmeticsInsurance and cosmetics

Amway’s MLM Business modelAmway’s MLM Business model

MLM strategy Similar to illegal pyramid typeMLM strategy Similar to illegal pyramid type Faced problems in USA, France and South Faced problems in USA, France and South

KoreaKorea Selling distributorship and high entry costSelling distributorship and high entry cost Amway worked hard to distinguish itself from Amway worked hard to distinguish itself from

illegal pyramidsillegal pyramids No high entry cost and no emphasis to purchase No high entry cost and no emphasis to purchase

large inventorieslarge inventories Refunded legitimate claims and repurchased Refunded legitimate claims and repurchased

stocks from distributorsstocks from distributors

Amway’s competitorsAmway’s competitors Direct competitorsDirect competitors

AVONAVON MARY KAYMARY KAY SUNRIDERSUNRIDER

Indirect competitorsIndirect competitors P&G and UnileverP&G and Unilever Local Chinese companiesLocal Chinese companies

Changing Political & Economic Changing Political & Economic AtmosphereAtmosphere

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.Fraud and deception maximum in 1998.

Changing Political & Economic Changing Political & Economic AtmosphereAtmosphere

Chanting slogans of affirmation and asking Chanting slogans of affirmation and asking followers to believe that they will succeed.followers to believe that they will succeed.

Taught skills for developing customers and Taught skills for developing customers and asked to invite friends and relatives to join asked to invite friends and relatives to join businessbusiness

Most of the business were scamsMost of the business were scams April 1998 – Chinese Government imposed a April 1998 – Chinese Government imposed a

ban on all direct selling operations ban on all direct selling operations Trade policies imposed by developed nations Trade policies imposed by developed nations

including US.including US.

New Strategy of Amway

Agreement with the government and company Agreement with the government and company resumed operationsresumed operations

Goods will be sold in retail outlets and through Goods will be sold in retail outlets and through sales representativessales representatives

Income of sales distributors will be based on direct Income of sales distributors will be based on direct selling done by themselling done by them

Same Distribution centers served as retail outlets Same Distribution centers served as retail outlets for the company for the company

New Strategy of AmwayNew Strategy of Amway

Localization of employees Localization of employees Localization of Business ModelLocalization of Business Model Localization of production and Raw MaterialLocalization of production and Raw Material Localization of research and developmentLocalization of research and development Support for China’s entry into WTOSupport for China’s entry into WTO Active community developmentActive community development Transparency and Credibility of company’s Transparency and Credibility of company’s

managementmanagement

Facing the futureFacing the future

Solid distribution networkSolid distribution network New competencies with localized business modelNew competencies with localized business model Good relations with government & Positive public Good relations with government & Positive public

imageimage After entry into WTO, Government, began new After entry into WTO, Government, began new

round of crackdown on illegal businessround of crackdown on illegal business No impact on Amway due to its new business No impact on Amway due to its new business

modelmodel

Facing the futureFacing the future

At end of 2003, legislation pending in government At end of 2003, legislation pending in government al allow return of direct sales in Chinaal allow return of direct sales in China

Government to reinforce laws to govern the direct Government to reinforce laws to govern the direct selling industry selling industry

Amway continued to operate profitably and was Amway continued to operate profitably and was successful in China due to its localization strategysuccessful in China due to its localization strategy

Amway builds up its own Kingdom in China and Amway builds up its own Kingdom in China and succeed in Chinasucceed in China

ANALYSISANALYSIS

POLITICALPOLITICAL

Government allowance.Government allowance. Production base in china for export to Asian Production base in china for export to Asian

countriescountries Supportive for china’s entry into WTO.Supportive for china’s entry into WTO.

PEST ANALYSISPEST ANALYSIS

ECONOMICALECONOMICAL localization of production and raw materials.localization of production and raw materials. Own production plant in chinaOwn production plant in china 50% of raw materials acquired itself from china50% of raw materials acquired itself from china Localization of employeesLocalization of employees More than 2000 employees were Chinese or More than 2000 employees were Chinese or

overseas Chinese.overseas Chinese.

SOCIALSOCIAL Active involvement of community Active involvement of community Financial and human support in areas of human Financial and human support in areas of human

services education ,art ,culture etc.services education ,art ,culture etc. Invested $ 4 million for this purposeInvested $ 4 million for this purpose

TECHNOLOGICALTECHNOLOGICAL setup R&D departmentsetup R&D department Invested $ 1.5 millionInvested $ 1.5 million developed new and tailored products like developed new and tailored products like

whitening make up for Chinese women. whitening make up for Chinese women.

SWOTSWOT

STRENGTHSTRENGTH Based on direct selling operationBased on direct selling operation Training to staff Training to staff Functions are performed by IBOsFunctions are performed by IBOs Organize meetings and events time to time Organize meetings and events time to time Have good customer service systemHave good customer service system Return and refund policiesReturn and refund policies

WEAKNESSWEAKNESS More power to IBOsMore power to IBOs Initially high entry cost Initially high entry cost Rumors for direct selling operations Rumors for direct selling operations Focus shifted from selling products to Focus shifted from selling products to

recruitingrecruiting

OPPURTUNITIESOPPURTUNITIES Setup a manufacturing plantSetup a manufacturing plant Population of china Population of china Popular in China Popular in China

THREATSTHREATS Too much freedom to IBOs Too much freedom to IBOs Change in government policy Change in government policy CompetitorsCompetitors

CRITICAL ANALYSIS AND CRITICAL ANALYSIS AND CONCLUSIONCONCLUSION

Solid distribution networkSolid distribution network New competencies with localized business New competencies with localized business

modelmodel Good relations with government & Positive Good relations with government & Positive

public imagepublic image Amway continued to operate profitably and Amway continued to operate profitably and

was successful in China due to its was successful in China due to its localization strategylocalization strategy

Amway succeed in China.Amway succeed in China.