AMW AY

in C hi na
ADAPATING TO CH ANGING
ENVIRO NMENT
 MADE BY:

PRATEEK GUPTA
SAHIL JAGGA
NEHA ARORA
MUKESH KUMAR
SONAL MATHUR
KUNAL NAYAR
JATIN SETHI
RAHUL KHEMKA
BALPREET SINGH
LUBNA SALEEM
 Amway
 Established in 1992
 Founders- Richard DeVos and Jay Van Andel
 Chairman of Asia Pacific Amway- Steve Van Andel
 Joint venture between Amway Asia Pacific and
the Guangzhou Economic Technological
Development Zone (GZETDZ)
 In April 1995, started a manufacturing plant
 Employs direct distributors , called independent
business owners (IBOs)
 Responsibility of IBOs
 Perform functions associated with
management
 Organize meetings and events
 Co-ordinate distributors
 Devise incentive programs for recruits
 Marketing for Amway products and the
Amway business
 Product line up

 Home care
 Personal care
 Jewellery
 Electronics
 Nutrilite dietary supplements
 Air purifiers and Water purifiers
 Insurance and cosmetics
 Amway’s MLM Business model
 MLM strategy Similar to illegal pyramid type
 Faced problems in USA, France and South
Korea
 Selling distributorship and high entry cost
 Amway worked hard to distinguish itself from
illegal pyramids
 No high entry cost and no emphasis to purchase
large inventories
 Refunded legitimate claims and repurchased
stocks from distributors
 Amway’s competitors
 Direct competitors
 AVON
 MARY KAY
 SUNRIDER
 Indirect competitors
 P&G and Unilever
 Local Chinese companies
 Changing Political & Economic
Atmosphere
 Distributors seldom used the products
 Products used as samples to persuade relatives
and friends to join Amway
 IBOs emphasized profits plans - perceived as best
way to motivate potential recruits
 Focus shifted from selling products to recruiting
 Popularity increases - distributors distorted the
business Model
 Fraud and deception maximum in 1998.
Changing Political & Economic
Atmosphere
 Chanting slogans of affirmation and asking
followers to believe that they will succeed.
 Taught skills for developing customers and
asked to invite friends and relatives to join
business
 Most of the business were scams
 April 1998 – Chinese Government imposed a
ban on all direct selling operations
 Trade policies imposed by developed nations
including US.
 New Strategy of Amway
 Agreement with the government and company
resumed operations
 Goods will be sold in retail outlets and through
sales representatives
 Income of sales distributors will be based on direct
selling done by them
 Same Distribution centers served as retail outlets
for the company
 New Strategy of Amway
 Localization of employees
 Localization of Business Model
 Localization of production and Raw Material
 Localization of research and development
 Support for China’s entry into WTO
 Active community development
 Transparency and Credibility of company’s
management
 Facing the future

 Solid distribution network

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

 At end of 2003, legislation pending in government

al allow return of direct sales in China
 Government to reinforce laws to govern the direct
selling industry
 Amway continued to operate profitably and was
successful in China due to its localization strategy
 Amway builds up its own Kingdom in China and
succeed in China
ANALYSIS
 PEST ANALYSIS
 POLITICAL

 Government allowance.
 Production base in china for export to Asian
countries
 Supportive for china’s entry into WTO.
 ECONOMICAL
 localization of production and raw materials.
 Own production plant in china
 50% of raw materials acquired itself from china
 Localization of employees
 More than 2000 employees were Chinese or
overseas Chinese.
 SOCIAL
 Active involvement of community
 Financial and human support in areas of human
services education ,art ,culture etc.
 Invested $ 4 million for this purpose

 TECHNOLOGICAL
 setup R&D department
 Invested $ 1.5 million
 developed new and tailored products like
whitening make up for Chinese women.
 SWOT
 STRENGTH
 Based on direct selling operation
 Training to staff
 Functions are performed by IBOs
 Organize meetings and events time to time
 Have good customer service system
 Return and refund policies
 WEAKNESS
 More power to IBOs
 Initially high entry cost
 Rumors for direct selling operations
 Focus shifted from selling products to
recruiting
 OPPURTUNITIES
 Setup a manufacturing plant
 Population of china
 Popular in China
 THREATS
 Too much freedom to IBOs
 Change in government policy
 Competitors
 CRITICAL ANALYSIS AND
CONCLUSION
 Solid distribution network
 New competencies with localized business
model
 Good relations with government & Positive
public image
 Amway continued to operate profitably and
was successful in China due to its
localization strategy
 Amway succeed in China.