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“A CONCEPTUAL STUDY OF BUSINESS MANAGEMENTAND

ORGANIZATION SYSTEM”

SUBMITTED BY

Swapnil S.V.

Reg No.ESB/2010/AUG/MBA/011

Under the guidance of

Prof. Yuvaraja S.E.

Excel Business Academy

Ullal Main Road

Bangalore.

STUDENT DECLARATION:
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I hereby declare that the project report entitled “a conceptual study of business

management and organization system –Amway.” Bangalore has been done by me under the

guidance of Prof. Yuvaraj, Professor – MBA & PGPM, Excel Business Academy, and

Bangalore. This project report has been submitted to Excel Business Academy, Bangalore as

a part of partial fulfillment for the award of the degree of Post Graduate Program in

Management from Excel Business Academy, Bangalore.

I also hereby declare that this project report has not been submitted at any time to

any other institute or university for the award of any degree.

Place: Bangalore

Date: / / Swapnil.
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CERTIFICATE BY GUIDE

This is to certify that Swapnil V.S. bearing Reg No. ESB/2010/AUG/MBA/011, A student of

1st Trimester PGPM during the academic year 2010-2012 has successfully completed the

project report “a conceptual study of business management and organization system –

Amway”. Under the guidance of Prof. Yuvaraja S.E, Excel Business Academy, in partial

fulfillment for the award of Post Graduate Program in Management from Excel Business

Academy, Bangalore.

His character and conduct was good during the study.

Place: Bangalore

Date: / / Prof. Yuvaraja S. E.


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ACKNOWLEDGEMENT
The satisfaction and euphoria that accompany the successful completion of any task would

be but incomplete without the mention of the people who made it possible, whose constant

guidance and encouragement crowned our efforts with success.

I consider it my privilege to express gratitude and thanks to the Management – Excel

Business Academy, Bangalore for giving me the opportunity to conduct this study.

I thank our Principal Prof. Thejaswi Naviloor, for the encouragement and intellectual

influence during the course of the project work.

I wish to express my heartfelt gratitude to Prof. Gurutej, Head – PGPM & Techno

Management Studies; Prof. Shreya K Rao, Head – MBA & TPD and my Project Guide

Prof. Yuvaraja S E. for their help and able guidance for the completion of the project

successfully.

I am grateful to the Librarian of Excel Business Academy, for his support during my

study.

Last but not the least, I would also like to thank each and everyone especially all my

friends for their cordiality & support during my project.

Date: / /

Place: Bangalore swapnil


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TABLE OF CONTENTS:

CHAPTER CONTENTS PAGE

NO. NO.
1 1.1 Meaning of Business

1.2 Meaning of Management

1.3 Meaning of Business Administration

1.4 Difference between Business Management & Business

Administration

1.5 Types of Business


2 Organizational System (General Study)

2.1 Meaning of Organization

2.2 Types of Organization

2.3 Types of Ownership

2.4 Vision, mission & Goals of the company

2.5 Organization Structure & it’s Types

2.6 Functional Patterns – People, policies, systems, problems if


any.

2.7 SWOT Analysis


3 Organizational System with respect to Amway:

3.1 Introduction

3.2 Vision, Mission & Goals of the Amway

3.3 Organizational Structure & Type of Amway

3.4 Type of Organization


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3.5 Functional Patterns of Amway

3.6 Type of Ownership

3.7 SWOT Analysis

4 Summary of Findings & Conclusion

4.1 Findings

4.2 Conclusion

4.3 suggestion

LIST OF TABLES AND CHARTS:

TABLE CONTENTS PAGE NO.


1 Structure of Organization
2 Alticor and Amway Sales Growth: 1960 to 2008

3 Amway sell data since 1960 to 1999


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Executive Summary:
This executive summary will give you key facts concerning the Amway. These facts
will help to find out how well the Amway opportunity can match your business goals. Let’s
start from main component that is business. A business' purpose is to attract and keep
customers. Its one basic function is to reliably solve customer problems. Management in all
business areas and organizational activities are the acts of getting people together to
accomplish desired goals and objectives efficiently and effectively. Also Management is the
act or function of putting into practice the policies and plans decided upon by the
administration. Hence Administration makes the important decisions of an enterprise in its
entirety, whereas management makes the decisions within the confines of the framework,
which is set up by the administration.
The important factor important to study is Organization. It is the foundation upon
which the whole structure of management is built. Organization is not an end it itself but a
means to achieve an end. Whether an organization is good or bad depends on the fact as to
how much efficiently and promptly it is in a position to achieve the objectives. Another
important topic is A Business ownership should be structured according to the needs of the
owners and potentially liability that the business could incur. Corporate vision describes
aspirations for the future, without specifying the means that will be used to achieve those
desired ends.
The Mission of organization should represent the broadest perspective of the
enterprise's mission. The major outcome of strategic road-mapping and strategic planning,
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after gathering all necessary information, is the setting of goals for the organization based on
its vision and mission statement.

The most important topic is an organizational structure is a mainly hierarchical


concept of subordination of entities that collaborate and contribute to serve one common
aim. Analysis by A SWOT Exercise is a powerful technique for uncovering and
understanding your Strengths and Weaknesses, and for looking at the Opportunities and
Threats you face.

The Amway/Amway Global, a subsidiary of Alticor, is marketing nutritional


supplements, skin and personal care products, air and water purifiers and a line of home
cleaning products. The products are sold through Independent Business Owners (IBO). The
most effective strategy for this is direct marketing, today also known as attraction marketing.
Using attraction marketing for Amway products is the fastest way to make steady retail
profits.

Amway already helped over 3 million people start on their path to success. They're
attracted by the unlimited potential of the opportunity, the support of a corporation with 50
years of experience and compassion, a global community ready to offer support, and a
premier compensation plan.
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The Meaning of Business:


Great quote on Worthwhile by Mark Kaiser on the meaning of business:

"The simplest definition of business is you solve a customer's problem and create
sustainable profits over time. Anyone with vision should understand the problem they're
solving. The problem with business today is that people think the meaning is about building
a monument to you. The meaning of business is having an impact on people's lives."

My definition is close:

A business' purpose is to attract and keep customers. It’s one basic function is to reliably
solve customer problems...

A business is a legally recognized organization designed to provide goods or


services, or both, to consumers, businesses and governmental entities. Businesses are
predominant in capitalist economies. Most businesses are privately owned. A business is
typically formed to earn profit that will increase the wealth of its owners and grow the
business itself. The owners and operators of a business have as one of their main objectives
the receipt or generation of financial returns in exchange for work and acceptance of risk.
Notable exceptions include cooperative enterprises and state-owned enterprises. Businesses
can also be formed not-for-profit or be state-owned.

The etymology of "business" relates to the state of being busy either as an individual
or society as a whole, doing commercially viable and profitable work. The term "business"
has at least three usages, depending on the scope — the singular usage (above) to mean a
particular company or corporation, the generalized usage to refer to a particular market
sector, such as "the music business" and compound forms such as agribusiness, or the
broadest meaning to include all activity by the community of suppliers of goods and services.
However, the exact definition of business, like much else in the philosophy of business, is a
matter of debate and complexity of meanings.

Meaning Of Management:
Management is generally defined as the art and science of getting things done
through others. This definition emphasizes that a manager plans and guides the work of other
people. Some (cynical) individuals think that this means managers don’t have any work to do
themselves. As managers have an awful lot of work to do. Management is the art and science
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of getting things done through others, generally by organizing and directing their activities
on the job. A manager is therefore someone who defines, plans, guides, assists, and assesses
the work of others, usually people for whom the manager is responsible in an organization.

Management Define:

“The efficient and effective operation of a business, and study of this subject, is called
management”.

The main branches of management are financial management, marketing


management, human resource management, strategic management, production management,
operation management, service management and information technology management.

management1. The group of individuals who make decisions about how a business is run.

2. The initiation and maintenance of an investment portfolio.

Management in all business areas and organizational activities are the acts of
getting people together to accomplish desired goals and objectives efficiently and effectively.
Management comprises planning, organizing, staffing, leading or directing, and controlling
an organization (a group of one or more people or entities) or effort for the purpose of
accomplishing a goal. Resourcing encompasses the deployment and manipulation of human
resources, financial resources, technological resources, and natural resources.

Because organizations can be viewed as systems, management can also be defined as


human action, including design, to facilitate the production of useful outcomes from a
system. This view opens the opportunity to 'manage' oneself, a pre-requisite to attempting to
manage others

Management can also refer to the person or people who perform the act(s) of management.

Basic functions of management:

• Planning: Deciding what needs to happen in the future (today, next week, next
month, next year, over the next 5 years, etc.) and generating plans for action.

• Organizing: (Implementation) making optimum use of the resources required to


enable the successful carrying out of plans.
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• Staffing: Job analyzing, recruitment, and hiring individuals for appropriate jobs.

• Leading/Directing: Determining what needs to be done in a situation and getting


people to do it.

• Controlling/Monitoring: Checking progress against plans.

• Motivation: Motivation is also a kind of basic function of management, because


without motivation, employees cannot work effectively. If motivation doesn't takes
place in an organization, then employees may not contribute to the other functions
(which are usually set by top level management).

Business Administration:
Business administration consists of the performance or management of business
operations and thus the making or implementing of major decisions. Administration can be
defined as:

“The universal process of organizing people and resources efficiently so as to direct


activities toward common goals and objectives”.

The word is derived from the Middle English word administracioun, which is in turn
derived from the French administration, itself derived from the Latin administratio — a
compounding of ad ("to") and ministratio ("give service").

Administrator can serve as the title of the general manager or company secretary
who reports to a corporate board of directors. This title is archaic, but, in many enterprises,
this function, together with its associated Finance, Personnel and management information
systems services, is what is intended when the term "the administration" is used.

In some organizational analyses, management is viewed as a subset of administration,


specifically associated with the technical and mundane elements within an organization's
operation. It stands distinct from executive or strategic work. In other organizational
analyses, administration can refer to the bureaucratic or operational performance of mundane
office tasks, usually internally oriented and reactive rather than proactive.
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As business has become more complex, so too has the oversight of companies: their
management, their growth strategies, their personnel issues, their taxes and the role that taxes
play in corporate economic strategy. Advertising has grown to include multiple media outlets
and an assortment of targeted interest groups: new customers, repeat customers,
stockholders, investors and new geographic markets. Marketing has become the term of
choice for this entire strategically placed product exposure.

Defining business administration then means defining oversight roles for the
assortment of internal specialties that every business of any size has come to include.
Perhaps the best way to define business administration is to look at the types of courses
offered in MBA curriculums and the specialties, or "majors," that one can opt for in an MBA
program.

For a large corporation, business administration is going to include international and


global business, as well as strategy and economics. In this instance, the definition of business
administration will include requirements of certain cultural differences and an acute
understanding of the global economy and its current fluidity. Also included in business
administration at this scale is the art and science of acquisition: when to buy a company or
property and why.

Business administration will always include the intangible quality of leadership;


Along with leadership comes the task of negotiation and conflict resolution, specifically with
regard to personnel. Behavioral psychology plays an important role in business
administration: a misstep in an adversarial situation with a union can take a company under,
as it did Continental Airlines some years ago. The definition of business administration will
have to include marketing; you won't have a business to administer unless you sell your
products. Ancillary to marketing is an understanding of the new tools available for product
distribution, and that will involve understanding e-business and how it is rapidly evolving.

Business administration includes an understanding of entrepreneurship: tax structures


for small businesses along with personnel issues at that level, inventory and cash flow, and
all the other small matters that make a big difference to a new or small business. A critical
part of business administration is the awareness of risk. This might include the risk of
launching a new product, and the costs involved; the risk of an acquisition, the risk of a
competitive strategy, the company's exposure in opting for this health plan instead of that
one. There are risks involved in other personnel decisions and this area is of tangible
importance: company morale is a key to productivity and the resultant profitability. The
definition of business administration includes whatever knowledge is required to make all of
these components work productively, if not in complete harmony.
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Management vs. Administration:


Management and administration may seem the same, but there are differences
between the two. Administration has to do with the setting up of objectives and crucial
policies of every organization. What is understood by management, however, is the act or
function of putting into practice the policies and plans decided upon by the administration.

1) Administration is a determinative function, while management is an executive function.

2) It also follows that administration makes the important decisions of an enterprise in its
entirety, whereas management makes the decisions within the confines of the framework,
which is set up by the administration.

3) Administration is the top level, whereas management is a middle level activity. If one
were to decide the status, or position of administration, one would find that it consists of
owners who invest the capital, and receive profits from an organization. Management
consists of a group of managerial persons, who leverage their specialist skills to fulfill the
objectives of an organization.

4) Administrators are usually found in government, military, religious and educational


organizations. Management is used by business enterprises. The decisions of an
administration are shaped by public opinion, government policies, and social and religious
factors, whereas management decisions are shaped by the values, opinions and beliefs of the
mangers.

5) In administration, the planning and organizing of functions are the key factors, whereas,
so far as management is concerned, it involves motivating and controlling functions. When it
comes to the type of abilities required by an administrator, one needs administrative
qualities, rather than technical qualities. In management, technical abilities and human
relation management abilities are crucial.

6) Administration usually handles the business aspects, such as finance . It may be defined as
a system of efficiently organizing people and resources, so as to make them successfully
pursue and achieve common goals and objectives. Administration is perhaps both an art and
a science. This is because administrators are ultimately judged by their performance.
Administration must incorporate both leadership and vision.
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7) Management is really a subset of administration, which has to do with the technical and
mundane facets of an organization’s operation. It is different from executive or strategic
work. Management deals with the employees. Administration is above management, and
exercises control over the finance and licensing of an organization.

Therefore, we can see that these two terms are distinct from one another, each with their own
set of functions. Both these functions are crucial, in their own ways, to the growth of an
organization.

Summary:

1. Management is the act or function of putting into practice the policies and plans decided
upon by the administration.

2. Administration is a determinative function, while management is an executive function.

3. Administration makes the important decisions of an enterprise in its entirety, whereas


management makes the decisions within the confines of the framework, which is set up by
the administration.

4. Administrators are mainly found in government, military, religious and educational


organizations. Management, on the other hand, is used by business enterprises.

Types of business:
The following are the types of business,

1. Agriculture:
Agriculture is the production of food and goods through farming. Agriculture was the
key development that led to the rise of human civilization; with the husbandry of
domesticated animals and plants (i.e. crops) creating food surpluses that enabled the
development of more densely populated and stratified societies. The study of agriculture is
known as agricultural science. Agriculture is also observed in certain species of ant and
termite.
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Agriculture encompasses a wide variety of specialties and techniques, including ways


to expand the lands suitable for plant raising, by digging water-channels and other forms of
irrigation. Cultivation of crops on arable land and the pastoral herding of livestock on
rangeland remain at the foundation of agriculture. In the past century there has been
increasing concern to identify and quantify various forms of agriculture. In the developed
world the range usually extends between sustainable agriculture (e.g. perm culture or organic
agriculture) and intensive farming (e.g. industrial agriculture).

2. Mining:
Mining is the extraction of valuable minerals or other geological materials from the
earth, usually from an ore body, vein or (coal) seam. Materials recovered by mining include
base metals , iron , uranium , coal, diamonds, limestone’s , oil shale , rock salt and potash .
Any material that cannot be grown through agriculture processes, or created in a laboratory
or factory, is usually mined. Mining in a wider sense comprises extraction of any non
renewable resource (e.g., petroleum, natural gas, or even water).Mining of stone and metal
has been done since prospecting for times. Modern mining processes involve e bodies,
analysis of the Profit potential of a proposed mine, extraction of the desired materials and
finally reclamation of the land to prepare it for other uses once the mine is closed.

The nature of mining processes creates a potential negative impact on the


environment both during the mining operations and for years after the mine is closed. This
impact has led to most of the world's nations adopting regulations to moderate the negative
effects of mining operations. Safety has long been a concern as well, though modern
practices have improved safety in mines significantly

3. Finance:
Finance is the science of funds management. The general areas of finance are
business finance, personal finance, and public finance. Finance includes savings money and
often includes lending money. The field of finance deals with the concepts of time, money,
and risk and how they are interrelated. It also deals with how money is spent and
budgeted.One aspect of finance is through individuals and business organizations, which
deposit money in a bank. The bank then lends the money out to other individuals or
corporations for investment, and charges interest on the loans.

Loans have become increasingly packaged for resale, meaning that investers buy the
loan (debt) from a bank or directly from a corporation. Bonds are debt instruments sold to
investors for organizations such as companies, governments or charities. The investor can
then hold the debt and collect the interest or sell the debt on a secondary market. Banks are
the main facilitators of funding through the provision of credit, although private equity,
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mutual funds, hedge funds, and other organizations have become important as they invest in
various forms of debt. Financial assets, known as investments, are financially managed with
careful attention to financial risk management to control financial risk.

4. Intellectual property:
Intellectual property (IP) is a term referring to a number of distinct types of
creations of the mind for which property rights are recognized—and the corresponding fields
of law. Under intellectual property law, owners are granted certain exclusive property to a
variety of intangible assets, such as musical, literary, and artistic works; discoveries and
inventions; and words, phrases, symbols, and designs. Common types of intellectual property
include copyrights, trademarks, patents, industrial right and trade secrets in some
jurisdictions.

Although many of the legal principles governing intellectual property have evolved
over centuries, it was not until the 19th century that the term intellectual property began to
be used, and not until the late 20th century that it became commonplace in the United States.
The British Statute tee 1710 is now seen as the origin of copyright and patent law
respectively.

5. Manufacturing:
Manufacturing is the use of machines, tools and labor to make things for use or sale.
The term may refer to a range of human activity, from handicraft to high tech, but is most
commonly applied to industrial production, in which raw materials are transformed into
finished goods on a large scale. Such finished goods may be used for manufacturing other,
more complex products, such as aircraft, automobiles, or sold to Wholesalers, who in turn
sell them to retailers, who then sell them to end users – the “consumers”. Manufacturing
takes turns under all types of economic system. In a free market economy, manufacturing is
usually directed toward the mass production of products for sale to consumer at a profit.

Modern manufacturing includes all intermediate processes required for the


production and integration of a product's components. Some industries, such as
semiconductors and steel manufacturers use the term fabrication instead.

6. Real estate:
Real estate is a legal term (in some jurisdictions, such as the United Kingdom,
Canada, Australia , USA and Bahamas ) that encompasses land along with improvements to
the land, such as buildings, fences, wells and other site improvements that are fixed in
location—immovable. Real estate law is the body of regulations and legal codes which
pertain to such matters under a particular jurisdiction and include things such as commercial
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and residential real property transactions. Real estate is often considered synonymous with
real property (sometimes called realty), in contrast with personal property (sometimes called
chattel or personality under chattel law or personal property law).

However, in some situations the term "real estate" refers to the land and fixtures together, as
distinguished from "real property", referring to ownership of land and appurtenances,
including anything of a permanent nature such as structures, trees, minerals, and the interest,
benefits, and inherent rights thereof. Real property is typically considered to be Immovable
property. The terms real estate and real property are used primarily in common law, while
civil law jurisdictions refer instead to immovable property.

7. Retailing:
Retailing consists of the sale of goods or merchandise from a fixed location, such as a
department stores, boutique, or by mail, in small or individual lots for direct consumption by
the purchaser. Retailing may include subordinated services, such as delivery. Purchasers may
be individuals or businesses. In commerce, a "retailer" buys goods or products in large
quantities from manufacturers or Importers, either directly or through a wholesaler, and then
sells smaller quantities to the end-user. Retail establishments are often called shops or stores.
Retailers are at the end of the supply chain. Manufacturing marketers see the process of
retailing as a necessary part of their overall distribution strategy. The term "retailer" is also
applied where a service provider services the needs of a large number of individuals, such as
a public utility, like electric power.

8. Transport:
Transport or transportation is the movement of people and goods from one location to
another. Mode of transportation includes air rail, road, water, cable, pipeline, and space. The
field can be divided into infrastructure, vehicles, and operations. Transport infrastructure
consists of the fixed installations necessary for transport, and may be roads , railways,
airways, waterways, canals, pipelines and terminals such as airports, rail stations, bus
stations, warehouses, trucking terminals, refueling depots (including fueling docks and fuel
stations), and seaports. Terminals may be used both for interchange of passengers and cargo
and for maintenance. Vehicles traveling on these networks may include automobiles,
bicycles, buses, trains, trucks, people, helicopters, and aircrafts. Operations deal with the way
the vehicles are operated, and the procedures set for this purpose including financing,
legalities and policies. In the transport industry, operations and ownership of infrastructure
can be either public or private, depending on the country and mode.
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Meaning of Organization:
Organization is the foundation upon which the whole structure of
management is built. Organization is related with developing a frame work where the total
work is divided into manageable components in order to facilitate the achievement of
objectives or goals. Thus, organization is the structure or mechanism that enables living
things to work together. In a static sense, an organization is a structure or machinery manned
by group of individuals who are working together towards a common goal. Alike
'management', the term 'organization' has also been used in a number of ways. broadly
speaking,

An organization is a social arrangement which pursues collective goals, controls its


own performance, and has a boundary separating it from its environment. The word itself is
derived from the Greek word organon, itself derived from the better-known word ergon.

In the social sciences, organizations are the object of analysis for a number of disciplines,
such as sociology, economics, political science, psychology, management, and
organizational communication. In more specific contexts, particularly for sociologists, the
term "institution" may be preferred. The broader analysis of organizations is commonly
referred to as organizational studies, organizational behavior or organization analysis. A
number of different theories and perspectives exist, some of which are compatible,

• Organization – process-related: an entity is being (re-)organized (organization as task


or action).

• Organization – functional: organization as a function of how entities like businesses


or state authorities are used (organization as a permanent structure).

• Organization – institutional: an entity is an organization (organization as an actual


purposeful structure within a social context)

The 'organization' is used in four different senses: as a process, as a structure of relationship,


as a group of persons and as a system, as given below:

1)Organization as a Process: In this first sense, organization is treated as a dynamic process


and a managerial activity which is essential for planning the utilization of company's
resources, plant and equipment materials, money and people to accomplish the various
objectives.
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2) Organization as a Framework of Relationship: In the second sense organization refers


to the structure of relationships and among position jobs which is created to release certain
objectives. The definitions of Henry, Urwick, Farland, Northcourt, Lansburgh and Spriegel
Breach, Davis, Mooney and Reily etc., come under this group. For example: According to
Mooney and Reily, "Organization is the form of every human association for the attainment
of a common purpose."

3) Organization as a Group of persons: In the third sense, organisation is very often


viewed as a group of persons contributing their efforts towards certain goals. Organization
begins when people combine their efforts for some common purpose. It is a universal truth
that an individual is unable ability and resources. Barnard has defined 'Organization' as an
identifiable group of people contributing their efforts towards the attainment of goals.

4) Organization as a System: In the fourth sense, the organization is viewed as system.


System concepts recognize that organizations are made up of components each of which has
unique properties, capabilities and mutual relationship. The constituent elements of a system
are linked together in such complex ways that actions taken by one producer have far
reaching effect on others.

In short, organizing is the determining, grouping and arranging of the various


activities deemed necessary for the attainment of the objectives, the assigning of people to
those activities, the providing of suitable physical factors of environment and the indicating
of the relative authority delegated to each individual charged with the execution of each
respective activity.

Definitions of Organization:
Different authors have defined organization in different ways. The main definitions
of organization are as follows:

• According to keith Davis, "Organization may be defined as a group of individuals,


large of small, that is cooperating under the direction of executive leadership in
accomplishment of certain common object."

• According to Chester I. Barnard, "Organization is a system of co-operative activities


of two or more persons."
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• According to Louis A. Allen, "Organization is the process of identifying and


grouping the work to be performed, defining and delegating responsibility and
authority, and establishing relationship for the purpose of enabling people to work
most effectively together in accomplishing objectives."

• According to Mooney and Railey, "Organization is the form of every human


association for the attainment of a common purpose."

Social unit of people systematically arranged and managed to meet a need or to


pursue collective goals on a continuing basis. All organizations have a management structure
that determines relationships between functions and positions, and subdivides and delegates
roles, responsibilities, and authority to carry out defined tasks. Organizations are open
systems in that they affect and are affected by the environment beyond their boundaries

Characteristics of Organization:
1) Outlining the Objectives: Born with the enterprise are its long-life objectives of
profitable manufacturing and selling its products. Other objectives must be
established by the administration from time to time to aid and support this main
objective.

2) Identifying and Enumerating the Activities: After the objective is selected, the
management has to identify total task involved and its break-up closely related
component activities that are to be performed by and individual or division or a
department.

3) Assigning the Duties: When activities have been grouped according to similarities
and common purposes, they should be organized by a particular department. Within
the department, the functional duties should be allotted to particular individuals.

4) Defining and Granting the Authority: The authority and responsibility should be
well defined and should correspond to each other. A close relationship between
authority and responsibility should be established.

5) Creating Authority Relationship: After assigning the duties and delegations of


authority, the establishment of relationship is done. It involves deciding who will act
under whom, who will be his subordinates, what will be his span of control and what
will be his status in the organization. Besides these formal relationships, some
informal organizations should also be developed.

Significance of Organization:
1) It Facilitated Administration and management: Organization is an important and the
only tool to achieve enterprise goals set b administration and explained by management.
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Sound organization increases efficiency, avoids delay and duplication of work, increases
managerial efficiency, increases promptness, and motivates employees to perform their
responsibility.

2) It Help in the Growth of Enterprise: Good organization is helpful to the growth,


expansion and diversifications of the enterprise.

3) It Ensures Optimum Use of Human Resources: Good organization establishes persons


with different interests, skills, knowledge and viewpoints.

4) It Stimulates Creativity: A sound and well-conceived organization structure is the source


of creative thinking and initiation of new ideas.

5) A Tool of Achieving Objectives: Organization is a vital tool in the hands of the


management for achieving set objectives of the business enterprise.

6) Prevents Corruption: Usually corruption exists in those enterprises which lack sound
organization. Sound organization prevents corruption by raising the morale of employees.
They are motivated to work with greater efficiency, honesty and devotion.

7) Co-ordination in the Enterprises: Different jobs and positions are welded together by
structural relationship of the organization. The organizational process exerts its due and
balanced emphasis on the co-ordination of various activities.

8) Eliminates Overlapping and Duplication or work: Over lapping and duplication of


work exists when the work distribution is not clearly identified and the work is performed in
a haphazard and disorganized way. Since a good organization demands that the duties be
clearly assigned amongst workers, such overlapping and duplication is totally eliminated.

Significance of Sound /Good Organization:


Organization is not an end it itself but a means to achieve an end. Whether an
organization is good or bad depends on the fact as to how much efficiently and promptly it is
in a position to achieve the objectives. Thus, a sound or good or ideal and result-oriented
organization must possess the following characteristics.

1) Realization of Objectives: Organization is tool of achieving objectives of an


enterprise. For this purpose, the organization should be divided in several department,
sub-departments, branches and units etc.

2) Harmonious Grouping of Functions etc: For achieving the organization objectives


there must be harmonious grouping of functions, jobs and sub-jobs in such a way so
that there is action, consultation and co-ordination without any delay and difficulty.
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3) Reasonable Span of Control: Another characteristic of organization is that it should


have reasonable span of control. Ordinarily, a person (personnel) cannot control more
than five or six subordinates.

4) Clear-cut allocation of Duties and Responsibilities: There must be clear-cut


allocation of duties and responsibilities in any scheme of sound organization. Every
executive must know his scope of activities, the ideal number is three.

5) Promotion of Satisfaction: The most important element of any human organization


is the promotion of satisfaction of workers. Man works in a group or in an
organization and hence the success or failure of any organization depends on as to
how much the organization is in a position to provide satisfaction to individuals or
group working under him.

6) Fullest Utilization of Manpower: Another important characteristic of an ideal


organization is as to how far it is successful in making fullest and economical
utilization of the available manpower.

7) Provision and Development and Expansion: Another important of an ideal


organization is that there exists the necessary provision for development and
expansion so that it is possible to expand and develop any organisation according to
needs and requirements and necessary changes an alternatives may be made.

8) Coordination and cooperation: In order to achieve the objectives of the enterprise,


there must be close coordination and cooperation in the activities of everybody
working in the organization. Further, there should also be active coordination and
cooperation amongst the various departments an sub-departments. It will also assist
in elimination the evil of red tapism.

9) Unity of Command: There must be unity of command. No one in any organization


should report to more than one line supervisor, and everybody must know to whom
he reports and who reports to him. No subordinate should get orders from more than
one supervisor; otherwise it will lead to confusion, chaos and conflict.

10) Effective System of Communication: An ideal organization must possess effective


system of communication. The inter-communication system should be clear and
easier and there should be no ambiguity at and level.

11) High Morale: An ideal organization is that in which the workers possess high
morale. They work with full capacity, energy, enthusiasm, devotion and sincerity.
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12) Flexibility: The last but not the least important characteristic of an ideal organization
is that it should be flexible so that necessary changes an modifications in the the size
of the organization as well as technology could be easily and conveniently effected.

Steps in the Process of Organization:


Organization means identifying, arranging and integrating different elements of
organization into efficient working order. It requires the management to follow the following
process of organization.

• Division of work

The main function is divided into sub-functions and entrusted to the different
departmental heads. The result is the establishment of departments like Purchase, Sales,
Production, Accounts, Publicity and Public relations. The departments can be further
classified just as production department into (1) Planning (2) Designing, (3) Operations, (4)
Production Control and (5) Repairs and Maintenance. The division of the work is based upon
the fact that specialization is keynote of efficient organization.

• Grouping of Job and Departmentation

The second step is to group similar or related jobs into larger units, called departments,
divisions or sections. Grouping process is called departmentation. The department may be
based upon functions such as manufacturing, marketing and financing etc. Department may
also be based on products, such as textiles, cosmetic, stationery etc. These departments may
have different sections as per requirement. Grouping jobs or Departmentation aims at
achieving coordination and facilitates unity of efforts. The departments are linked together
on the basis of interdependence. The divided task is assigned to specific individual or group
of individuals who are supposed to be the most qualified and specialized persons for the task.

• Assigning duties

The work to be performed by every individual is clearly defined and made known to him.
Everyone must know what he is required to do in order to avoid any misunderstanding,
duplication or overlapping in the work.
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• Granting authorities and fixing responsibilities

Assigning of duties to individuals must coincide with the appropriate and relevant
authorities. Every employee must know, what the authorities granted to him and for what and
to whom he will be responsible, liable and accountable.

• Delegation of authority

Those who are made responsible for specific tasks are given due authority. Both
responsibility and authority go hand in hand together. Reasonable powers are delegated to
heads and supervisory staff to enable them to do their work with ease and efficiency.

• Effective communication

Effective communication is the keynote of efficient organization. There should be proper


arrangement of communication messages from executives to subordinates and vice-versa.
Proper communication system establishes harmonious relationship between employees and
enables execution of work in the right manner at the appropriate time and in an atmosphere
of perfect mutual adjustment.

• Co-ordination of activities for common objectives

Business activity is a team work or the group activity, so the efforts of every employee
must be co-ordinate effectively to achieve the common objectives of the enterprise.

Types of organization:

1) Static Organizations:
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Static Organizations have fixed practices, fixed size. Like static equations, these
organizations have no variables. Time doesn't change them significantly. They persist until
some new organization occupies their niche.

2) Dynamic Organizations:

Dynamic Organizations have Fixed practices, variable size. Like dynamic equations,
these organizations vary in size over time, even though their underlying practices don't
change much. They go through a single life cycle, each growing rapidly as it occupies its
niche, and then declining as its competitors implement better practices that steal away its
clients.

3) Adaptive Organizations:

Variable practices, variable size. Like complex adaptive systems, these organizations
vary their practices, seeking the constant improvement that launches life cycle after life
cycle, creating new products, services, and processes that hold on to clients generation after
generation.
They will soon motivate employees to climb adaptation curves by using ISOPs to
fairly share the wealth that each innovation creates. ISOPs ensure that the innovator, the
predecessors, and each shareholder in the corporation benefits.
They will displace dynamic and static organizations in economic competition, so that
within a generation, most people will have learned to expect continual improvement in their
life experience. The fact that their ancestors once worked at the same job in the same way for
an entire lifetime will seem almost as incredible as the fact that people used to stay at jobs
they didn't thoroughly enjoy.

A Business Ownership:
A Business ownership should be structured according to the needs of the owners and
potentially liability that the business could incur. The different types of business ownership
are:

1) Limited Partnerships

2) A Corporation

3) Limited Liability Corporations


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4) Sole Proprietorship and Partnership

5) Nonprofit Corporations

6) Cooperatives

7) Private Corporation:

1) Limited Partnerships:

This type of business organization is costly and complicated to prepare. It is not


recommended for the average small business owner. Limited partnerships are usually created
by one person or company who solicits investments from others. The people who invest are
considered the limited partners. The general partner is in charge of the business's everyday
operations. They are personally liable for business dents. Limited partners have little control
over daily business decisions or operations. Because of this they are not personally liable for
business debts or claims.

Limited partnerships are costly and complicated to set up and run, and are not
recommended for the average small business owner. Limited partnerships are usually created
by one person or company, the "general partner," who will solicit investments from others --
who will be the limited partners.

The general partner controls the limited partnership's day-to-day operations and is
personally liable for business debts (unless the general partner is a corporation or an LLC).
Limited partners have minimal control over daily business decisions or operations and, in
return, they are not personally liable for business debts or claims. Consult a limited
partnership expert if you're interested in creating this type of business

2) A Corporation

The most significant benefit to forming a corporation is that it limits the owners'
personal liability for business dents and any court judgments against the business. A
corporation is an independent legal and tax entity. This sets it apart from other types of
businesses. The owners do not use their personal tax returns to pay tax on corporate profits
because the corporation itself pays these taxes. Any money drawn from the corporation in the
form of salaries, bonuses, etc is paid by the owners in their personal income tax returns.

3) Limited Liability Corporations

Limited Liability Corporations provide their owners just that, limited personal
liability for business debts and claims. However, LLCs resemble partnerships when it comes
to taxes. The owners of an LLC pay taxes on their shares of the business income on their
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personal tax returns. This type of organization is good for business owners who either Could
be sued by customers run the risk of piling up a lot of debt have substantial personal assets
they want to protect.

4) Sole Proprietorship and Partnership

A sole proprietorship, or partnership, is the ideal ownership structure for an up and


coming business or the average small business. They do not have to be registered with the
state and go into effect as soon as one person goes into business with themselves or two or
more people go into business together. Any business income is reported on the owner's
personal income taxes. They are also personally liable for any business debts or court
decisions against the business.

Before you can decide on an ownership structure for your business, you must learn at
least a little bit about how each structure works. Here's a brief rundown of the most common
forms of doing business: For many new businesses, the best initial ownership structure is
either a sole proprietorship or -- if more than one owner is involved -- a partnership.

A sole proprietorship is a one-person business that is not registered with the state as a
limited liability company (LLC) or corporation. You don't have to do anything special or file
any papers to set up a sole proprietorship. You create one just by going into business for
yourself. Legally, a sole proprietorship is inseparable from its owner. The business and the
owner are one and the same. This means the owner of the business reports business income
and losses on her personal tax return and is personally liable for any business-related
obligations, such as debts or court judgments.

Similarly, a partnership is simply a business owned by two or more people that hasn't
filed papers to become a corporation or a limited liability company (LLC). No paperwork
needs to be filed to form a partnership. The arrangement begins as soon as you start a
business with another person. As in a sole proprietorship, the partnership's owners pay taxes
on their shares of the business income on their personal tax returns and they are each
personally liable for the entire amount of any business debts and claims.

Sole proprietorships and partnerships make sense in a business where personal


liability isn't a big worry. For example, A small service business in which you are unlikely to
be sued and for which you won't be borrowing much money for inventory or other costs.

5) Nonprofit Corporations

A nonprofit corporation is a corporation formed to carry out a charitable, educational,


religious, literary or scientific purpose. A nonprofit can raise much-needed funds by
receiving public and private grant money and donations from individuals and companies.
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The federal and state governments do not generally tax nonprofit corporations on money they
make that is related to their nonprofit purpose, because of the benefits they contribute to
society.

6) Cooperatives

Some people dream of forming a business of true equals. an organization owned and
operated democratically by its members. These grassroots business organizers often refer to
their businesses as a "group," "collective" or "co-op" but these are usually informal rather
than legal labels. For example, a consumer co-op could be formed to run a food store, a
bookstore or any other retail business. Or a workers' co-op could be created to manufacture
and sell arts and crafts.

7) Private Corporation:

A business that is a legal entity created by the state whose assets and liabilities are
separate from its owners. While there are also public corporations. Who stock (and
ownership) is traded on a public stock exchange. Most small businesses are (or at least start
as) private corporations. A private corporation is owned by a small group of people who are
typically involved in managing the business. Forming a corporation requires developing a
legal document called the "Articles of Incorporation" and submitting them to the state in
which the corporation wishes to reside. Advantages of a corporation include limited liability.
An owner (stockholder) can only lose up to the amount s/he invested; unlimited lifespan. a
corporation is charted to last forever unless its articles of incorporation state otherwise; great
sources of funding; and ease of transfer of ownership. Disadvantages include double
taxation. The corporation, as a legal entity, must pay taxes, and then shareholders also pay
taxes on any dividends received.
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Company Vision:
Corporate vision is a short, succinct, and inspiring statement of what the
organization intends to become and to achieve at some point in the future, often stated in
competitive terms. Vision refers to the category of intentions that are broad, all-inclusive and
forward-thinking. It is the image that a business must have of its goals before it sets out to
reach them. It describes aspirations for the future, without specifying the means that will be
used to achieve those desired ends.
Warren Bennis, a noted writer on leadership, says: "To choose a direction, an
executive must have developed a mental image of the possible and desirable future state of
the organization. This image, which we call a vision, may be as vague as a dream or as
precise as a goal or a mission statement."

Core values include:

Safety – Safety serves as a barometer of our company’s overall success and is a specific
measure of our operating excellence.

Trust – Trust is the mutual respect for and confidence in people. Trust recognizes the
importance of individuals and appreciates their diverse opinions. Trust compels us to share
information and encourage new ideas. It requires an open, honest, forthright manner.

Confidence – Self-confident people take initiative, handle the unexpected, stand behind
their convictions and support the efforts of others. They take bold, innovative, creative
actions, capitalize on opportunities, make sound decisions quickly, and mobilize the best
resources for rapid action.

Teamwork – Teamwork is personal involvement and collaboration in a team environment.


It includes setting a common goal in support of business objectives, making an individual
commitment to the team’s success and recognizing the success of the team.

Accountability – Being accountable means every employee assumes ownership and


responsibility for his or her own work, regardless of the job they perform. Being
accountable means making decisions and holding oneself responsible for the consequences
of those choices.
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Doing What’s Right – Doing what’s right is being honest, ethical, and having personal and
professional integrity. It means consistently treating all people fairly, delivering on promises,
and taking personal responsibility for your actions.

Quality – Quality is the primary determinant of customer satisfaction and loyalty, and it
requires employees to continuously provide internal and external customers with the right
product or service...done right...the first time. In today’s increasingly competitive business
environment, better quality translates into better value for our customers and, subsequently,
better value for their customers-and this is the very essence of competitive differentiation.

Mission:
Most businesses have some form of mission statement ,whether they know it or not.
For example, other names for a mission include: founder's philosophy, statement of purpose,
business philosophy. An organization's mission describes its fundemental purpose and
overall philosophy. A mission statement (what we are) is different than a vision statement
(what we want to become).

Mission statement:

• Provides thrust and direction to the organization.

• Cornerstone of all strategic planning.

A mission statement is an organization's vision translated into written form. It


makes concrete the leader's view of the direction and purpose of the organization. For many
corporate leaders it is a vital element in any attempt to motivate employees and to give
them a sense of priorities.
A mission statement should be a short and concise statement of goals and priorities.
In turn, goals are specific objectives that relate to specific time periods and are stated in
terms of facts. The primary goal of any business is to increase stakeholder value. The most
important stakeholders are shareholders who own the business, employees who work for
the business and clients or customers who purchase products and/or services from the
business.

The mission statement should be a clear and succinct representation of the


enterprise’s purpose for existence. It should incorporate socially meaningful and measurable
criteria addressing concepts such as the moral/ethical position of the enterprise, public
image, the target market, products/services, the geographic domain and expectations of
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growth and profitability.


The intent of the Mission Statement should be the first consideration for any
employee who is evaluating a strategic decision. The statement can range from a very simple
to a very complex set of ideas.

Specific:

The Mission Statement should represent the broadest perspective of the enterprise's
mission. You may want to take the approach of being very specific. For instance, a Mission
Statement for a fictitious airline could be worded as follows: Your mission statement is an
opportunity to define your business at the most basic level. It should tell your company story
and ideals in less than 30 seconds: who your company is, what you do, what you stand for,
and why you do it. Do you want to make a profit, or is it enough to just make a living? What
markets are you serving, and what benefits do you offer them? Do you solve a problem for
your customers? What kind of internal work environment do you want for your employees?
All of these issues may be addressed in a mission statement.

Other ways to think about a mission statement as you begin to write one include:

• Answers the question, “What business are we in?”

• Provides thrust and direction to the organization.

• Must be market-oriented (focusing on the problem the business is solving),


not product-oriented.

Basic guidelines in mission:

• Your mission statement is about you, your company, and your ideals.

• Don’t “box” yourself in.

• Keep it short.

• Ask for input.

Goals:
The major outcome of strategic road-mapping and strategic planning, after gathering
all necessary information, is the setting of goals for the organization based on its vision and
mission statement. A goal is a long-range aim for a specific period. It must be specific and
realistic. Long-range goals set through strategic planning are translated into activities that
will ensure reaching the goal through operational planning.

Some company Goals may be as follows:


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• To promote a profitable and sustainable business activity that meets the customers’
needs.

• To increase the company's market share.

• To gain the competitive edge.

• To increase the company's role in relations to social responsibility.

• To provide excellent customer service.

Structure of Organization:

MANAGING DIRECTOR

QUALITY MANAGER

OPERATION MGR
MAREKTING MANAGER FINANCE MANAGER

OFFICE ADIMINSTRTOR

PROJECT MANAGER ESTIMATOR


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BULDING CADETS SITE FOREMEN

An organizational structure is a mainly hierarchical concept of subordination of


entities that collaborate and contribute to serve one common aim. Organizations are a variant
of clustered entities. An organization can be structured in many different ways and styles,
depending on their objectives and ambience. The structure of an organization will determine
the modes in which it operates and performs. Organizational structure allows the expressed
allocation of responsibilities for different functions and processes to different entities such as
the branch, department, workgroup and individual. Individuals in an organizational structure
are normally hired under time-limited work contracts or work orders, or under permanent
employment contracts or program orders.

In order to achieve the desired goals, sound and effective organizational structure is
necessary. Organizational structure, as we know is the system of job positions, roles assigned
to these positions and specifying authority, responsibility and task of every positions. The
structure undoubtedly provides basic framework for executive and employees to perform
their task smoothly.

The following points must be taken into consideration while building organizational
structure:

• Job design

Jobs should be designed in such a way, that job should have specified and defined task to
be performed. Jobs should be designed in such fashion that every individual could contribute
his maximum worth to the enterprise. The major and related activities of the jobs should also
be specified.

• Departmentation or Grouping of Identical Jobs

Identical and similar jobs should be grouped together in a department and placed under a
departmental head. Such departmentation will help in building coordination between
different jobs and managers. Departments can be established on different basis. It may have
production, marketing and finance departments, if it is based upon functions.

• Span of Control

Under span of control, the number of employees and jobs managed by each manager is
specified. The chain of command is also clearly stated. It is specified that who will report
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who is the smooth performance of his duties. Effective span of control avoids overlapping,
duplication and confusion in the work.

• Delegation of Authority

In order to get the job done properly and smoothly, requisite authorities are granted to the
managers. Authority is the power to command employees and instruct them to do a piece of
work. The authority empowers to know certain facts, to enjoy privileged position and
command respect and obedience from employees. Delegation is no doubt, sharing task with
requisite authority with subordinates. As such the manger multiplies himself through
delegation.

Organizational structures types:

• Pre-bureaucratic structures

Pre-bureaucratic (entrepreneurial) structures lack standardization of tasks. This structure


is most common in smaller organizations and is best used to solve simple tasks. The structure
is totally centralized. The strategic leader makes all key decisions and most communication
is done by one on one conversations. It is particularly useful for new (entrepreneurial)
business as it enables the founder to control growth and development.

They are usually based on traditional domination or charismatic domination in the sense
of Max Weber's tripartite classification of authority.

• Bureaucratic structures

Bureaucratic structures have a certain degree of standardization. They are better suited
for more complex or larger scale organizations. They usually adopt a tall structure. Then
tension between bureaucratic structures and non-bureaucratic is echoed in Burns and Stalker
distinction between mechanistic and organic structures. It is not the entire thing about
bureaucratic structure. It is very much complex and useful for hierarchical structures
organization, mostly in tall organizations.

• Post-bureaucratic

The term of post bureaucratic is used in two senses in the organizational literature. One
generic and one much more specific. In the generic sense the term post bureaucratic is often
used to describe a range of ideas developed since the 1980s that specifically contrast
themselves with Weber's ideal type bureaucracy. This may include total quality management,
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culture management and matrix management, amongst others. None of these however has
left behind the core tenets of Bureaucracy. Hierarchies still exist, authority is still Weber's
rational, legal type, and the organization is still rule bound. Heckscher, arguing along these
lines, describes them as cleaned up bureaucracies, rather than a fundamental shift away from
bureaucracy.

Gideon Kunda, in his classic study of culture management at 'Tech' argued that “the
essence of bureaucratic control - the formalization, codification and enforcement of rules and
regulations - does not change in principle.....it shifts focus from organizational structure to
the organization's culture”.

Another smaller group of theorists have developed the theory of the Post-Bureaucratic
Organization; provide a detailed discussion which attempts to describe an organization that is
fundamentally not bureaucratic. Charles Heckscher has developed an ideal type, the post-
bureaucratic organization, in which decisions are based on dialogue and consensus rather
than authority and command, the organization is a network rather than a hierarchy, open at
the boundaries (in direct contrast to culture management); there is an emphasis on meta-
decision making rules rather than decision making rules. This sort of horizontal decision
making by consensus model is often used in housing cooperatives, other cooperatives and
when running a non-profit or community organization. It is used in order to encourage
participation and help to empower people who normally experience oppression in groups.

Employees within the functional divisions of an organization tend to perform a


specialized set of tasks, for instance the engineering department would be staffed only with
software engineers. This leads to operational efficiencies within that group. However it could
also lead to a lack of communication between the functional groups within an organization,
making the organization slow and inflexible.

As a whole, a functional organization is best suited as a producer of standardized goods


and services at large volume and low cost. Coordination and specialization of tasks are
centralized in a functional structure, which makes producing a limited amount of products or
services efficient and predictable. Moreover, efficiencies can further be realized as functional
organizations integrate their activities vertically so that products are sold and distributed
quickly and at low cost. For instance, a small business could start making the components it
requires for production of its products instead of procuring it from an external organization.
But not only beneficial for organization but also for employees faiths.

• Divisional structure

Also called a "product structure", the divisional structure groups each organizational
function into a division. Each division within a divisional structure contains all the necessary
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resources and functions within it. Divisions can be categorized from different points of view.
There can be made a distinction on geographical basis (a US division and an EU division) or
on product/service basis (different products for different customers: households or
companies). Another example, an automobile company with a divisional structure might
have one division for SUVs, another division for subcompact cars, and another division for
sedans. Each division would have its own sales, engineering and marketing departments.

• Matrix structure

The matrix structure groups employees by both function and product. This structure can
combine the best of both separate structures. A matrix organization frequently uses teams of
employees to accomplish work, in order to take advantage of the strengths, as well as make
up for the weaknesses, of functional and decentralized forms. An example would be a
company that produces two products, "product a" and "product b". Using the matrix
structure, this company would organize functions within the company as follows: "product a"
sales department, "product a" customer service department, "product a" accounting, "product
b" sales department, "product b" customer service department, "product b" accounting
department.

Matrix structure is amongst the purest of organizational structures, a simple lattice


emulating order and regularity demonstrated in nature.

• Weak/Functional Matrix: A project manager with only limited authority is assigned


to oversee the cross- functional aspects of the project. The functional managers
maintain control over their resources and project areas.

• Balanced/Functional Matrix: A project manager is assigned to oversee the project.


Power is shared equally between the project manager and the functional managers. It
brings the best aspects of functional and projectized organizations. However, this is
the most difficult system to maintain as the sharing power is delicate proposition.

• Strong/Project Matrix: A project manager is primarily responsible for the project.


Functional managers provide technical expertise and assign resources as needed.

Among these matrixes, there is no best format; implementation success always depends on
organization's purpose and function.

Common success criteria for organizational structures are:


• Decentralized reporting

• Flat hierarchy

• High transient speed


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• High transparency

• Low residual mass

• Permanent monitoring

• Rapid response

• Shared reliability

• Matrix hierarchy

Functional Pattern:
Following are the main departments in any organization:
1. Finance and accounts
2. Marketing and Sales
3. Human resource and administration
4. Technical / Operations
Other departments depend on the size of the organization, like
1. Logistics
2. Procurement
3. Treasury department- sub dept of finance and accounts

1. Finance

The definition of finance is the provision of funds or loan supplied to an individual or


company. Often this term is used for the study of economics and how money is controlled. It
can be also defined as the management of funds and capital required by a business and
private activities. Management of finance has also developed into a specialized branch within
the financial sector and is carried out by finance managers.
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Managing this involves dealing with the optimization and allocation of funds to
various areas either by borrowing or by using those available from internal resources. The
word Optimizing may sound strange but it refers to taking measures that minimize the cost of
financing while simultaneously attempting to maximize the profits out of the employed
finance. Bad debts are poor finance management where rules have not been followed; the
result of this is depressed markets, low production and a cash crisis. It is for this very reason
that finance managers are very careful with finance they agree too and where it is funded
from.

It is not uncommon to hear finance managers referred to as bean counters as they are
looking at immediate returns and initial costs against the potential at a later stage. Finance
managers are the pessimists whereas sales managers are the optimists who look to the future
and not to the past! Often though, problems occur with small businesses who fail to see the
distinction between a business loan and a personal one.

Finance department goal and services:

The main goal of The Department is to provide the internal and external users of financial
statements with relevant, accurate and timely information and to guarantee that the required
financial revision is closely adhered to in order to protect the assets of the company. The
Department takes care of finance flow to ensure that the company operates within its
financial regulations and satisfies various external financial requirements. It also ensures that
the corporate, financial records comply with internal and external audit. If to look through
the activity of The Department, there can be picked out the following main services it
renders:

• Payment of invoices and expenses


• Income collection and salary management
• Production and assignment of budgets, capital plans, and cash flow forecasts
• Monitoring and managing financial plans
• Auditing and reporting financial condition

2. Marketing:

Marketing means informing your potential clients about your products or service, and
finding ways to establish and keep a customer base. Your target market is the specific group
of people that consume your product or utilize your service. Advertising refers to the various
media used to convey your message. Printed advertisement, radio air time, television
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commercials and the Internet are all part of advertising that conveys your business message
to the public. Promotion refers to the various methods by which you convey your message to
customers. When you communicate with the public, you're promoting your business. Many
people will join business associations, or set up displays in malls and craft shows for
promotional purposes.

Marketing department tasks:

The Marketing office works to raise the awareness of the company and its prominence in
the industry and market. The global aim of the department is promoting the product/service
and increasing recognition of the company through researches and branding efforts. The
department's strengths should all be in proper understanding of consumer behavior and
efficient decision-making process. Typically, the major tasks of the marketing department
are as follows:

1. * Advertising & Communication

2. * Direct marketing

3. * Conducting researches and market management

4. * Service Marketing

5. * Maintaining image and brand management

6. * Developing new product

7. * Promoting and professional sales

8. * Retail management & technology.

3. Human resource:

Human resources is a term used to describe the individuals who comprise the
workforce of an organization, although it is also applied in labor economics to, for example,
business sectors or even whole nations. Human resources is also the name of the function
within an organization charged with the overall responsibility for implementing strategies
and policies relating to the management of individuals (i.e. the human resources).

This function title is often abbreviated to the initials 'HR'. The origins of the function arose
in organizations that introduced 'welfare management' practices and also in those that
adopted the principles of 'scientific management'. From these terms emerged a largely
administrative management activity, co-coordinating a range of worker related processes
and becoming known, in time as the 'personnel function'. Human resources progressively
became the more usual name for this function, in the first instance in the United States as
well as multinational corporations, reflecting the adoption of a more quantitative as well as
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strategic approach to workforce management, demanded by corporate management and the


greater competitiveness for limited and highly skilled workers. The general purpose of
Human Resource department is to establish proper staffing policy and implement it on
practice.

The main goals and tasks of HR department are:

* organize appropriate system of staff selection and recruitment

* organize system of effective staff training and development

* ensure the competitiveness of the company within labor market

* establish transparent system of staff assessment and promotion

4. Entrepreneurship:

“Entrepreneurship is the act of being an entrepreneur, which is a French word meaning "one
who undertakes an endeavor". Entrepreneurs assemble resources including innovations,
finance and business acumen in an effort to transform innovations into economic goods.”As
an experienced entrepreneur, you are most likely aware that there are daily duties involved
with ensuring your business is successful. Accounting: Includes budgets, payroll, financial
planning, bill payments, and credit management.

• Administration: Includes sorting and/or reading mail and email, filing, answering
inquiries, invoicing, bookkeeping, and purchasing.

• Computer: Includes such things as keeping your website up to date, virus scanning,
contact management, data entry, upgrading software and learning new software.

• Correspondence: Includes writing advertisements, letters, press releases and articles.

• Human Resources: Including interviewing, hiring, firing, training, motivating and


conflict-resolution.

• Sales: Includes marketing, finding customers, client retention, promotions, advertising


and special events.

SWOT analysis:
SWOT analysis is a strategic planning method used to evaluate the Strengths,
Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It
involves specifying the objective of the business venture or project and identifying the
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internal and external factors that are favorable and unfavorable to achieve that objective. The
technique is credited to Albert Humphrey, who led a convention at Stanford University in the
1960s and 1970s using data from Fortune 500 companies.

A SWOT analysis must first start with defining a desired end state or objective. A
SWOT analysis may be incorporated into the strategic planning model. Strategic Planning,
has been the subject of much research.[

• Strengths: attributes of the person or company those are helpful to achieving


the objective(s).

• Weaknesses: attributes of the person or company that is harmful to achieving


the objective(s).

• Opportunities: external conditions those are helpful to achieving the


objective(s).

• Threats: external conditions which could do damage to the objective(s).

Identification of SWOTs is essential because subsequent steps in the process of


planning for achievement of the selected objective may be derived from the SWOTs.

First, the decision makers have to determine whether the objective is attainable, given
the SWOTs. If the objective is NOT attainable a different objective must be selected and the
process repeated. The SWOT analysis is often used in academia to highlight and identify
strengths, weaknesses, opportunities and threats. It is particularly helpful in identifying areas
for development.

• What is SWOT Exercise?

A SWOT Exercise is a powerful technique for uncovering and understanding your


Strengths and Weaknesses, and for looking at the Opportunities and Threats you face.

• Why SWOT?

It helps you carve a sustainable niche in your market by taking the best advantage of
your resources, talents, capabilities and opportunities. SWOT builds alignment. SWOT is a
ground up approach allowing everyone in the exercises to have a voice thus, increasing buy-
in and resulting in a higher level of execution. In general, Strengths and Weaknesses are
internal to your organization while Opportunities and Threats often relate to external factors.

• SWOT Benefits.

What makes SWOT particularly powerful is that it helps you uncover opportunities
that you are well- placed to exploit. And by understanding the weaknesses of your business,
you can manage and eliminate threats that could affect you negatively. Using the SWOT
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framework to assess your strengths and that of your competitors’, you can analyze the
competitive landscape and develop a strategy that helps you differentiate yourself from your
competitors, so that you can compete successfully in your market.

• SWOT Categories.

1) Product (what are we selling?)

2) Process (how are we selling it?)

3) Customer (to whom are we selling it?)

4) Distribution (how does it reach them?)

5) Finance (what are the prices, costs and investments?)

6) Administration (and how do we manage all this?)

• How can SWOT help me?

SWOT identifies critical-to-mission objectives. Once identified, strategy is then defined,


ownership assigned and tasks executed that will get you to the next level in performance.

• SWOT Results. :

SWOT essentially tells you what is good and bad about a business or a particular
proposition. If it's a business, and the aim is to improve it, then work on translating: strengths
(maintain, build and leverage) ,opportunities (prioritize and optimize) , weaknesses (remedy
or exit) , threats (counter) into actions (each within one of the six categories) that can be
agreed and owned by a team or number of teams.

• Origins of SWOT.

SWOT analysis came from the research conducted at Stanford research Institute from 1960-
1970. The background to SWOT stemmed from the need to find out why corporate planning
failed. The research was funded by the fortune 500 companies to find out what could be done
about this failure. The Research Team was Marion Dosher, Dr Otis Benepe, Albert
Humphrey, Robert Stewart, and Birger Lie.
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Type Private.
Industry Direct selling.
Founded 1959
Rich DeVos
Founder(s)
Jay Van Andel
Headquarters Ada, Michigan, United States
Area served Worldwide

Steve Van Andel (Chairman)


Doug DeVos (President)
Key people
Al Koop (Chief Executive)
Russell Evan (CFO)

Revenue USD 8.4 billion (2009)


Employees 13,000
Alticor
Parent
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Introduction:
Amway is the largest direct selling company and manufacturer in the world that uses
network marketing to sell a variety of products, primarily in the health, beauty, and home
care markets. Amway was founded in 1959 by Jay Van Andel and Richard DeVos. Based in
Ada, Michigan, the company and family of companies under Alticor reported sales growth of
2.3%, reaching US$8.4 billion for the year ending December 31, 2009.Its product lines
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include home care products, personal care products, jewelry, electronics, Nutrilite dietary
supplements, water purifiers, air purifiers, insurance and cosmetics. In 2004, Health &
Beauty products accounted for nearly 60% of worldwide sales. Amway conducts business
through a number of affiliated companies in more than ninety countries and territories around
the world. It is ranked by Forbes as one of the largest private companies in the United States
and by Deloitte as one of the largest retailers in the world.

Meaning and the History of Amway:

What does the word Amway mean? Amway is an abbreviation for "American Way".
Great companies start with great ideas, and Amway is no exception. The idea came when
two Nutralite® salesmen, Rich DeVos and Jay Van Andel were at the very top of a very
successful MLM at the time; Nutralite was sold door to door. This was the 1950s, Nutralite
was a single entity company, and by the end of the decade, Jay and Rich had built a
respectable business of their own - approximately five thousand distributors were in their
Both Mr. DeVos and Mr. Van Andel knew how to move product - build on relationships. But
what was needed was a way to expand. A way that would allow them to multiply the efforts
of what they alone could accomplish. In 1959, the American Way Association was formed.
This would be the chance to grow and set the direction of a new entity. Rich and Jay
immediately set out to find an initial product to add to the line. They purchased the rights to
Frisk, a household cleaner (which was later renamed Liquid Organic Concentrate or L.O.C.).

In 1960, the American Way Association, now Amway, bought a controlling share in
the manufacturing facility in Michigan where LOC was made. What this meant is that there
were 3 companies all using the Amway name. The Amway Sales handled product and
distribution, Amway Services did business related tasks (like insurance for distributors) and
Amway manufacturing, which produced LOC. By 1964, the three arms of Amway were all
merged into a single entity - Amway Corporation. The idea was by handling the
manufacturing and distribution of a product line, and then allowing a network of IBOs. This
seemed like the only way to offer what Jay and Rich originally envisioned - a solid
opportunity where anyone with motivation could excel, regardless of their background and
status. This is a main part of Amway's business philosophy. Not just products and not just
sales, but a way to a better life.

Amway continued to grow under the co-ownership of Van Andel and Devos. In 1972,
the pair purchased Nutralite outright - they now owned the company they had started as
employees with.
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Amway continued to expand, reaching past the borders of the US to offer the same
opportunities in other countries:

- Australia - 1971
- Europe and parts of Asia - 1974
- Japan - 1979
- Latin America - 1985
- China - 1995
- Africa - 1997
- India - 1998
- Russia - 2005
- Vietnam -- 2008

Critics argued that the model wasn't sustainable and that growth was mathematically
limited. They cried, "Pyramid scheme!" Fifty years of steady growth has shown this criticism
has no basis in fact.

In 2008, Amway (now technically, Amway Global) reported sales of 8 billion. The
company is in 58 markets worldwide and manufactures more than 450 products. Amway
Global does business in more than 98 countries.

Rich DeVos is still alive, although he has passed the Presidency of Amway to his son
Dick. DeVos was named one of the richest men in America by Forbes magazine, with an
estimated 4.2 billion dollars in personal wealth (2009). DeVos owns the Orlando Magic
basketball team among other assets.Jay Van Andel passed away at age 80 in 2004. Mr.
Andel's place at Amway Global is now held by his son Steve. At his death, Van Andel's net
worth was estimated to be 2.4 billion dollars.

The company is still thriving and still offers opportunity to individuals who have the desire
to build their own business. MLM is a proven business model that produces massive success
for individuals.

• Alticor and Amway Sales Growth: 1960 to 2008:


February 5th, 2009 by ibofightback Posted in Amway News
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Amway global sales were reported at “estimated retail” until 2000 when the holding
company of Alticor was formed. This means they’re valued assuming that they were all sold
at the full retail price, not at the price they were sold to distributors/IBOs. Alticor reports
actual revenue – sales at the base IBO price

I’ve converted the figures so they can be properly compared. It’s important to be
aware of this as many critics of the business (including some former Diamonds who you
would think know about this) have in the past conveniently ignored the change in reporting
standards and tried to claim Amway’s sales peaked in 1998. Note however that Alticor sales
includes revenues from other sources such Access Business Group and Amway Grand Plaza.
In 2007 this was reported as around $100 million, so by far the majority of the sales are
through the Amway business opportunity.

Amway Sales Data:


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Estimated Estimated Estimated Estimated


Year Year Year Year
Retail Sales Retail Sales Retail Sales Retail Sales

1960 $0.5 million 1970 $120 million 1980 $1.1 billion 1990 $2.2 billion

1961 ? 1971 $165 million 1981 $1.4 billion 1991 $3.0 billion

1962 ? 1972 $180 million 1982 $1.5 billion 1992 $3.9 billion

1963 $21 million 1973 $210 million 1983 $1.13 billion 1993 $4.5 billion

1964 $25 million 1974 $230 million 1984 $1.2 billion 1994 $5.3 billion

1965 $38 million 1975 $250 million 1985 $1.2 billion 1995 $6.3 billion

1966 $40 million 1976 $300 million 1986 $1.3 billion 1996 $6.8 billion

1967 $50 million 1977 $375 million 1987 $1.5 billion 1997 $7.0 billion

1968 $65 million 1978 $500 million 1988 $1.8 billion 1998 $5.7 billion

1969 $85 million 1979 $800 million 1989 $1.9 billion 1999 $5.0 billion

Amway has grown fairly quickly since its inception. Its historic sales data at
estimated retail prices is provided below from 1959 to 2000 (in 2000 Amway switch over to
Alticor. At its peak in 1997 Amway estimated retail sales worldwide at 7 Billion USD. With
the founding of Alticor, the report methodology was changed and the actual sales to
distributors instead of estimated retail sales (ERS) have been reported since 2001. Taking the
sales data published in 2001 report into account, the ERS values are about 32% higher than
sales to distributors. The actual sales to distributors are marked with *.

Until 1999 sales were reported at Estimated Retail. This is approximately 32% higher than
actual sales revenues from sales made to Amway distributors.

VISION OF AMWAY:

• Helping people live better lives.

• Showing where the business wishes to be in the future.

MISSION OF AMWAY:

• Through the partnering of Distributors, Employees, and the Founding Families and
the support of quality products and service, we offer all people the opportunity to
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achieve their goals through the Amway Sales and Marketing Plan. Broad over riding
statement of purpose.

• To facilitate best business opportunities.

• To deliver high-quality products to semi-urban and urban homes in diverse areas of


insurance, home tech, home care, personal care, cosmetics and wellness.

GOAL OF AMWAY:

• The development of new business opportunities.


• To increase the company's role in relations to social responsibility.
• To provide excellent customer service.

Awards and Recognition:

• Presented the Millennium Outstanding Service Award 2000, by the Confederation


for the Blind (AICB), in recognition for work carried out for the visually
challenged.

• The Indian Red Cross Society, Orissa awarded AOF a memento & certificate for
conducting a mega-Blood Donation camp of 816 units on 4th May, 2003.

• The Surat Raktdaan Kendra felicitated Amway India at their annual function on 5th
Oct, 2003, for the largest number of donors at a Blood Donation Camp (BDC) held
by any financial and commercial institution and industry. The Mayor of Surat -
Snehlata Chouhan - presented a trophy and a certificate of appreciation.

Social responsibilities performed by AMWAY:

• One by One Campaign for Children


• Amway Opportunity Foundation (AOF)
• National Project for the Blind:

Project Sunrise: The objective is to identify one orphanage/institution at each location


where Amway has a modestly-large office (52 cities). On-going assistance to be provided in
education, healthcare and vocational training under the following heads:

· Health care
· Education and vocational training
· Safe drinking water
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· Children’s Day and AOF Day celebration with Amway staff & Amway

Amway Products:
Amway offers a range of exclusive, competitive brands that meet proven customer
needs around the world. From nutritional supplements to water treatment, cosmetics to
cleaning products, these brands are the solid foundation for a successful, independent Retail
business.

Active Lifestyle • Artistry • Atmosphere • Beautycycle • Body Series • Boutique • Dish


Drops • Eddie Funkhouser • Emma Page • eSpring • L.O.C. • Gensona • Glister • Hymm •
iCook • LifeStyle Balanced Solutions • NAO Cosmetics • Moiskin Skin Care • Nutrilite •
Nutriway • XS Energy • Ocean Essentials • Personalized Health • Peter Island • Protique •
Positrim • Satinique • SA8 • Time Defiance • Tolsom • Trim

Amway Personal Care Products

Nutrilite® is the world’s leading brand of vitamin, mineral, and dietary supplements, grown
harvested and processed on its own certified organic farms.

Artistry® is one of the world’s top five largest-selling prestige brands of facial skin care and
colour cosmetics. Our scientists and formulators have developed the complete line of
cosmetics,

All products of Attitude contain Skin Vitalising Complex that synergistically combine to
cleanse, Replenish & Moisturise the skin making it soft & supple.
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Dynamite's range of male grooming products, formulated internationally is designed to


deliver the ultimate grooming experience.

Glister Toothpaste is a revolutionary Multi-Action Toothpaste with Sylodent that offers


seven benefits.

Persona Premium 3 in 1 Soap is a complete soap for the entire family promises refreshing
confidence.

Satinique Advanced Range with unique Ceramide Infusion System uses nature's own
renewing technology to rejuvenate, strengthen and protect your hair.

SA8 Gelzyme is India's only 3-in-1 laundry detergent which pretreats, cleans and softens.
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G&H Range enriched with the goodness of Glycerine and Honey, deeply nourishes and
hydrates the skin for a healthy glow.

LOC High Suds is a multipurpose household liquid cleaner.

Dish Drops is a concentrated hand dishwashing liquid with a powerful "Triadic Detergency
System".

Great Value Product Range offers you Great Quality, Great Performance, Great Price
and a Money Back Guarantee!

Amway’s competitors:
1) Direct competitors:
• AVON
• MARY KAY
• SUNRIDER
2) Indirect competitors:
• Local INDIAN companies.
• Changing Political & Economic Atmosphere
• Products used as samples to persuade relatives and friends to join Amway
• Focus shifted from selling products to recruiting.

Organizational structure of Amway:

Terms used in Amway:


• IBO/ABO/AIE-Independent Business Owner/Amway Business Owner/Amway
Independent Entrepreneur is a business partner of Amway who is authorized to
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market and distribute products and services available from Amway. Different names
are used in different markets.

• Distributor - an older term for IBO

• PV — Point Value is a value assigned to each product or service sold by Amway.


An IBOs monthly performance bonus bracket depends on total PV in a month.

• BV — Business Volume is typically the wholesale cost of the product or service sold
by Amway. Performance bonuses are multiplied by the groups total BV.

• Performance bonus is the monthly bonus paid by Amway to IBO's. The higher the
PV, the greater the percentage earned. In North America the Performance bonus
ranges from 3% to 25%. In other markets it ranges from 3% to 21%. In India it ranges
from 6%-21%.

• Retail Profit is the markup earned by an IBO when they sell a product to a
consumer, either personally or through an Amway website. Recommended retail
markup ranges from 20%-35%.

• Sponsor is an IBO who refers (sponsors) a new IBO to Amway, although IBO's do
not get paid to sponsor.

• Upline is the term used to refer all the IBOs up in the line of sponsorship of an IBO.

• Downline is the term used to refer all the IBOs down in the line of sponsorship of an
IBO. They are collectively also known as group

• Leg refers to a personally sponsored IBO and all of their downline.

• Silver Producer is an IBO who has reached the maximum bonus level for one
month.

• Gold Producer is an IBO who has reached the maximum bonus level for three
months.

• Platinum or direct is an IBO who has reached the maximum bonus level for six
months. In North America a Platinum is generating a minimum of approximately
$30,000 in sales volume per month.

• Emerald a distributor with at least three legs generating Silver Producer volume for
at least 6 months of a year.

• Diamond a distributor with at least six legs generating Silver Producer volume for at
least 6 months of a year.

• Q-12 is a Platinum or higher IBO that qualifies every month for 12 months of a year.
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• Independent Business Owner (IBO):

An IBO is, literally, an Independent Business Owner: an individual or individuals


who own and operate their own business, which is powered by Amway North America,
formerly Quixtar. IBOs are the CEOs of their own businesses, and they make many of the
same daily business decisions other business executives make. As independent business men
and women, IBOs decide how active to be in their business, what products to sell and at what
prices, who to sponsor, what hours to keep, and other important decisions. IBOs are
independent contractors; they are not employees of Amway North America or Amway
Corporation. As independent business owners, IBOs are free to make decisions many others
in business are not free to make.

• Independent Business Owners Association International (IBOAI) :

The IBOAI (IBOA International or Independent Business Owners Association International)


is a trade association representing Independent Business Owners affiliated with Amway
North America, formerly Quixtar. It is the primary advocacy organization for IBOs in North
America. A trade association is an organization of business people who share common
interests or concerns, and who educate and represent their members. The IBOAI (or IBOA
International) is one example.

Role of the IBOAI Board:

The IBOAI Board is the representative body of the Association acting on behalf of all
IBOs. With IBO input, support, and participation, the IBOAI Board listens to ideas, proposes
improvements, and advises Amway on the best way to move the business forward. Working
closely with Corporate staff, the Board advises Amway on every facet of the business, from
products and promotions to operations and business guidelines, as it has for 50 years.
Together, they bring positive change to this business, to keep it moving forward and make
certain the business is better for every generation.

2010 IBOAI Board and Governance & Oversight Committee:


• Steve Woods, Chairman
• Brad Duncan, Vice Chairman
• Bob Andrews, Past Chairman

Other important directors:


1. Alberto Aguilera
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2. Glen Baker
3. Mike Bundy
4. John Crowe
5. Howie Danzik
6. Jim Dornan
7. Jody Dutt
8. Kanti Gala
9. Bert Gulick
10. Leif Johnson
11. Shivaram Kumar
12. Pedro Lizardi
13. Doug Weir
14. Doyle Yager
15. Dan Yuen

IBOs are never alone. They have a sponsor, a line of sponsorship, and the IBOAI – their
primary advocacy organization – behind them all the way.

Organization type and Business Opportunity:


The Amway is private co operative organization. The Amway Sales and Marketing
Plan put you in control, allowing you the flexibility to work where and when you want,
giving you time for family and friends as well as the opportunity to earn a good income. It
adapts easily to your needs and ambitions, and grows with them, offering you all the personal
support and assistance you require to become the Business Owner you want to be. With
Amway you are Connected to the global leader in multilevel marketing, with over 40 years
of experience, Supported by great products and people who will help you succeed, and
finally In Control of your life.

Sales and Marketing Plan:

The Amway Sales and Marketing Plan is a low risk, low start-up cost business
opportunity that is open to everyone. It allows you to build your business through retailing
products and sponsoring other people who, in turn, can retail products and offer the business
opportunity to others. By passing your sales and marketing knowledge to your developing
team, you not only build your own business network but also enable others to build one of
their own.
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Marketing strategy:

A strategy is a plan of action designed to achieve the goals of the organisation. In


creating a marketing strategy for the Super Concentrated Cleaning System, Amway needed
to set out the key objectives it wanted to achieve. The following objectives for the brand
were set:

• To increase distribute or profitability and productivity by providing a new and


exciting business opportunity
• To optimize consumer convenience and value through enhanced product
differentiation with this exclusive and revolutionary cleaning system
• To provide innovative and unique products to enhance the image of Amway Home
Care.

A 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
• Localization of employees
• Localization of production and Raw Material
• Localization of research and development
• Transparency and Credibility of company’s management

Functional pattern of Amway:


Following are the main departments of Amway:
1. Finance and accounts.
2. Marketing and Sales.
3. Human resource and administration.

Amway Global provides you with support like:


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• Customer care: If you have a question about anything - like registration, renewal,
Business, or product information - our Customer Care Associates can help you.
• Business management: You can manage your business, check customer Volume,
order products, and renew your business, all at Amway Global.com.
• Order management: You sell the products, and we'll do the rest, like process the
order, manages your customer accounts, and handles the shipping details.
• Training: Online, video, and instructor-led training are some of the ways we can
share with you the knowledge to grow a successful independent business.
• Marketing: We support your sales efforts with DVDs, online sites, Magazines,
brochures, and free websites you can personalize. And we help Build awareness of
your products and brands with national advertising, promotions, and event
sponsorship.

Amway believe that quality improvement happens when people come together. This
core belief is what all AOF initiatives are based upon and it holds true time and again. With a
passionate and vigorous workforce ready to contribute their bit to the well-being of society,
volunteering becomes a way of life in Amway. The 550,000 Amway distributors and 450
full-time employees are all considered AOF volunteers. At 56 Amway offices across India,
AOF has formed a team of 6 or more distributors and employees to form a Local
Implementation Committee (LIC). LIC takes ownership of being the face of Amway’s CSR
at the location. They identify potential partners, form a project, and implement this with
other volunteers. The LIC also plays a lead role in raising funds they wish to utilize. The
beauty of this system is that the LIC raises the funds, and then decides how best to utilize this
in their town or city.

Strategic analysis to overcome problems:


Today it is a global business that, along with its parent and sister companies, directly
employs 10,000 people worldwide. The business also operates strategically at a Global,
European and National level. Amway (UK) began operations in 1973 and has its own
distribution and Product Selection Centers.

Amway has helped millions of people around the world to start their own
independent business, through which they engage in person-to-person marketing. This type
of direct selling involves matching a consumer's needs with the goods and services on offer.
The better the match, the more lasting the relationship between the seller and the buyer.

Ownership of Amway:

• IBOs and Customers:


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Amway services the needs of both Independent Business Owners and customers.
IBOs build businesses that allow them to earn income based on sales made resulting from
their efforts. To launch an Amway-powered business, individuals must register with an
existing IBO. Customers pay no fee to shop from a large selection of products and learn from
expert advice on health, beauty, home care, and other topics. Products are shipped to their
homes and covered by Amway's Customer Satisfaction Guarantee. Customers must register
with the identification number of their servicing IBO. If a new registrant Does not have a
servicing IBO, Amway will assign them one..

• Personal Referrals:
Unlike most other companies, Amway's sales are not the result of advertising. The
biggest chunk of Amway's marketing budget goes directly to rewarding IBOs for sales
volume resulting from their efforts. Those efforts include registration of new Ibos, Members,
and Clients, resulting in product sales. Amway's tiered compensation plan rewards the
movement of product through an IBO's sales organization and their ability to train others to
create their own successful organizations. When people visit Amway's site, it is the result of
a personal referral by an IBO -not as a result of some advertisement they saw on TV.
Personal referrals have proven to be much more effective. Only 8% of respondents in the
Edelman 2005Annual Trust Barometer study indicated that information obtained in
advertising was credible, while 42% trusted information obtained from family, friends, and
colleagues.

• Buzz Marketing:
Alticor pioneered buzz marketing through its person-to-person referral model. Some
companies spend millions on strategies intended to get people to spread the word about their
products. Through its Independent Business Ownership Plan, Am-way does the same by
rewarding IBOs for spreading the word about the business opportunity and the exclusive
products available through Amway. This is a much targeted market spend, since IBOs are
rewarded only when their efforts actually result in product sales.

• Business Systems:
IBOs employ many different approaches to build their businesses, typically involving
training systems, motivational meetings and tools, and time-tested tactics to approach people
and interest them in the business opportunity and products. When a person registers with
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Amway, it typically is the result of having been approached by an IBO already involved in
one of several large organizations that provide training and support to IBOs. Often, a new
IBO also will choose to attend optional and voluntary training sessions or purchase
professional development materials provided by that organization - all covered by a money-
back guarantee.

• Independence:
The beauty of Amway's business model is that there can be as many ways of pursuing
the business as there are IBOs. If you're into health, you can focus on Nutrilit supplements
and XS Energy Drinks.

SWOT analysis of Amway:


STRENGTH:

• Based on direct selling operations. Hence it can be A home based business. Every can
participate in business. It’s easy to get admission in Amway with easy rout like
intent.

• Training to staff.

• Functions are performed by IBOs.


• Organize meetings and events time to time.
• Have good customer service system.
• Backed by a 100% Customer Product Refund Policy produce faith and reselling
attitude in customers.
• Quality Products that Inspire Confidence. Almost no risk of money as world class
quality Minimal start up costs gives strong base to the initiation of business. So
everyone can participate in business. The person who wants do something can be
make profit with investment of low cost.
Products are easy to sell.
• A business with national and international scope gives more opportunity to the
costumers.
• The possibility of financial security and freedom of time to enjoy life.

WEAKNESS:
• More power to IBOs gives critical structure to organization.
• Initially high entry cost leads to somewhat restrictions for business development.
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• Rumors for direct selling operations.


• Focus shifted from selling products to recruiting.

OPPURTUNITIES:
• Setup a manufacturing plant in all countries leads to better platform for company.
• Population of INDIA gives better opportunity to company to receive more profit.
• As the company name itself gives reliance and faith for the customer and buyer
produce greater opportunity for marketing which leads to decrease in total
expenditure of company.

THREATS:
• Too much freedom to IBOs.
• Change in government policy may affect to the profit and freedom of company.
• Competitors like AVON, MARY KAY; SUNRIDER creates lot of competition in
market which leads to strong marketing competition in market.
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Finding:
I’ve written about Amway based entirely on factual, confirmable sources. If you’re
researching Amway, especially on the Internet, chances are you’ve encountered people who
claim Amway is some kind of scam business, it’s illegal, the products are poor quality, or
some other information that has made you think twice about being involved.

Skim through these finding and decide for yourself whether those kinds of opinions
really have a lot of credibility in the face of all of these facts. Have all these major companies
and organizations that have recognized Amway for excellence been conned? For fifty years?
Or perhaps the opinions you read on the internet have been formed from limited or even no
experience – from encountering some new or inexperienced Amway rep that never bothered
to learn how to act professionally or properly explain the concept, and probably never did
much more than dabble for a few months. Or perhaps the experience was with just one of
dozens and dozens of different Amway affiliated organizations, each with different ways of
doing things that may not all appeal to everyone? Or perhaps their opinions driven by
business interests working or being paid by competitors or potential competitors to Amway?

CONCLUSION:
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Amway is which is one of the largest direct selling company in the world. The main
objectives of Amway are to profit there distributers by eliminating the middlemen and
provide the products to the distributers in cheaper price. The products of Amway are world
class product quality. They are made up of natural a thing that’s why they are good for health
and environment. Amway covers a wide range of products from beauty care. Health care, to
clothing, and daily use products etc. the products are costly as compared to other branded
products available in market but if we compare the quantity while using the products require
less amount and thus can be used for longer time. Successful business today depends upon a
company's ability to quickly adapt to changes in the marketplace. At Amway, they pride it
selves on knowledge of the dynamic networking market that is quickly becoming central to
modern business. This knowledge, and its willingness to act upon it, has enabled us to
become one of the industry's technological leaders. Through they continued pursuit of new
product ideas, and by consistently refining our existing product line, they have become one
of the top providers of cutting-edge networking products in the global market. If you're
looking for high quality products and solid customer support at rock-bottom prices, then
choosing Amway really does make sense.

SUGGESTIONS:

• Trial packs should be used because customer must have to introduce the product.
Once customer gets idea about product he comes to know advantages of products.
• The products should be cheap the home delivery system takes at least two days to
deliver the products so the delivery should be instant.
• There must be multiple options for purchasing the products for distributers like
online, tale and instant purchasing.
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• In every city, the Amway office should be situated in such a location so that it is in
reach of all distributers.

Bibliography:

1) www.worthwilemag.com
2) http://www.amway.in/
3) http://www.amway.in/Articles/Article.
4) http://en.wikipedia.org/wiki/Amway
5) http://www.authorstream.com/
6) http://www.nutrilite.com/
7) http://en.wikipedia.org/wiki/Organisation
8) http://en.wikipedia.org/wiki/Business
9) http://www.businessballs.com
10) http://en.wikipedia.org/wiki/Administration
11) http://www.business-standard.com
12) http://www.scribd.com
13) http://www.mouthshut.com
14) http://www.mouthshut.com
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15)http://wiki.answers.com
16)http://dictionary.reference.com
17) http://www.thetruthaboutamway.com/
18) http://articles.bplans.com.

Annexure:

Amway India plans 170 new branches by 2013

Eyes 25% y-o-y growth for the next five years.

Amway India Enterprises Pvt Ltd, a major direct selling FMCG Company in the country, is
planning to open 170 new branches across the country in the next three years (by the year
2013). The company is also eyeing 25 per cent year-on-year growth for the next five years.

Presently, the company has 130 branches across the country. The company offers 115
products in five categories- Personal care, Home care, Nutrition & Wellness, Cosmetics and
Great Value products. Nutrition & Wellness segment contributes around 50 per cent of
Amway India’s total turnover.

"With an aim to strengthen our network base, we are planning to increase the number
of touch points (branches) up to 300, by adding 170 new branches across the country in the
next two-three years. We are also planning to launch 6 to 8 new products every year,"
William S. Pinckney, MD & CEO, Amway India, said at a press conference during plant
visit of reporters to its Baddi facility in Himachal Pradesh.
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With an aim to meet the market demand, the company has just tripled the capacity at
its contract manufacturing facility in Baddi (Himachal Pradesh) at an investment of Rs. 55
crore.

"Amway’s focus in the past 2-3 years was to improve consumer access and
awareness, which paid off handsomely. We have grown from Rs. 799 crore in 2007 to Rs.
1407 in 2009 crore over the past three years, essentially as the quality of the Amway pick-up
centre’s has undergone a sea change, and are more experiential for the consumers. We are
eyeing 25 per cent year-on-year growth for the next five years," Pinckney said.