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Marketing Strategies & Swot of Amway
Chapter 1: INTRODUCTION
All organisations face an external business environment that constantly
changes. Sometimes these changes are slight e.g. minor amendments to regulations
or a new firm entering the market as a 'small player'. At other times, however,
changes in the environment may have important consequences for organisation e.g.
new technologies, changing consumer tastes or a merger between two large
competitors.
Changes in the business environment create both opportunities and threats to
an organization’s strategic development, and the organisation cannot risk remaining
static. It must monitor its environment continually in order to:
build the business
develop strategic capabilities that move the organisation forward
Improve the ways in which it creates products and develops new and existing
markets with a view to offering its customers better service.
Amway is an interesting example of a company that reviews its strategic
capabilities and uses this review to develop its products and markets. More than 450
products carry the Amway name in the areas of nutrition, health, beauty and home.
Amway also has a range of products that include other well known branded goods.
The company also offers a variety of third party services.
Amway is different from the more traditional distribution channels in that the
business has developed through direct selling. Amway has over three million
Independent Business Owners (IBOs) worldwide.
IBOs deal directly with Clients, build up personal relationships and deliver
direct to Clients' homes. IBOs are highly motivated; selling to people they know or
meet. The personal contact and care that they provide is an important element in
direct selling. IBOs are self-employed and can introduce others to the business, and
so form their own sales network.
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Marketing Strategies & Swot of Amway
INTRODUCTION TO AMWAY
Amway is part of the Alticor family of companies, which generated
worldwide retail sales of US$6.4 billion in 2005.
Over 40 years ago, Rich DeVos and Jay Van Andel, two young entrepreneurs
from the USA, created a plan that enabled anyone to start their own business by
selling quality products and giving other people the chance to do the same. This
unique business opportunity has enabled Amway to grow into one of the world's
leading direct-selling companies.
Today, Amway supports your business with over 450 exclusive products and
services, a state-of-the-art global ordering and distribution network and over four
decades of experience and advice to help you when you need it.
Amway's world headquarters in Ada, Michigan, USA, is over a mile (1.6km)
long and is home to more than 300 research and development scientists, product
development teams and global business support personnel. All these resources are
dedicated towards helping you achieve business success. Ada is also one of the four
global manufacturing centers, along with Buena Park, California, USA; Lakeview,
California, USA; and Guangzhou, China. Alongside the manufacturing facility at
Lakeview is one of four farming centers that use organic and natural practices to
grow ingredients for our health and wellness products. Other farms are located in
Trout Lake, Washington, USA; El Petacal, Mexico; and Tiangu, Ceara, Brazil.
The buzzwords for business in the 21st century are Think Local, Act Global.
Amway has been doing just that for over 40 years. With operations in more than 80
countries and territories, and products tailored for local regulations and preferences,
Amway is one of the largest local companies in the world.
Amway’s co founders, Rich DeVos and Jay Van Andel, believe that people
everywhere desire the opportunity to achieve and better their lives. Amway has
developed a series of statements which outline its culture. As with many different
types of statements of corporate purpose, these statements fall into a hierarchy.
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Marketing Strategies & Swot of Amway
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 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.
VISION OF AMWAY
Helping people live better lives.
Showing where the business wishes to be in the future.
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Marketing Strategies & Swot of Amway
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.
Everyone needs a guiding vision to help direct their future. A business is no
different. At Amway, our vision is quite simple “we work each and every day to Help
People Live Better Lives.” So how can we make a positive difference to you and to
others around the world? By helping people everywhere to discover their potential
and achieve their goals, by offering better products and opportunities for the future,
and by sharing generously with the global community.
Helping Consumers Live Better Lives
By providing products and services that offer superior quality and value - to
better meet personal and household needs around the world.
By making the Amway shopping experience faster, easier, and more
convenient.
Helping Business Owners Live Better Lives
By providing a business opportunity that empowers people to realize their
dreams.
By making that opportunity flexible enough to accommodate each person's
individual goals, priorities and interest.
Helping Employees Live Better Lives
By providing a stimulating work environment that encourages everyone to
reach his or her full potential.
By creating opportunities that help all employees fulfill their personal and
professional goals.
Helping Neighbors Live Better Lives
Through corporate contributions that help improve the quality of life in every
community where we do business.
By providing personal assistance to individuals in needy particularly children.
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Marketing Strategies & Swot of Amway
VALUES OF AMWAY
Amway has established some simple shared values that unite the entire
company, and all of the Business Owners that are associated with Amway. It believes
that these values guide their actions and help it to achieve everything it is capable of
without compromise or harm.
Partnership
Amway is built on the concept of partnership, beginning with the partnership
between our founders. The partnership that exists among the founding families,
distributors, and employees is our most prized possession. Amway always try to do
what is, in the long-term, in the best interest of our partners, in a manner which
increases trust and confidence.
The success of Amway will reward all who have contributed to its success. It
will collaborate across boundaries and find common ground by sharing ideas and
resources, with a wide range of stakeholders. Amway will develop networks and build
long term alliances with internal and external customers.
Integrity
Integrity is essential to our business success. It does what is right, not just
whatever ‘works’. Amway’s success is measured not only in economic terms, but by
the respect, trust and credibility we earn. Amway wants to uphold the highest personal
and professional integrity which demonstrates honestly, loyalty, respect and high
ethical standards in all their responsibilities, obligations and other activities. It is
committed to behave at all times in accordance with the ethical practices of the
organization.
Personal Worth
Amway acknowledges the uniqueness created in each individual. Every person
is worthy of respect, and deserves fair treatment and the opportunity to succeed to the
fullest extent of his or her potential.
Achievement
Amway are builders and encouragers. It strives for excellence in all that it
does. Its focus is on continuous improvement, progress and achievement of individual
and group goals. Amway anticipates change, responds swiftly to it, takes actions to
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Marketing Strategies & Swot of Amway
get the job done and gains from its experiences. It encourages creativity and
innovation.
Personal Responsibility
Each individual is responsible and accountable for achieving personal goals,
as well as giving 100 per cent effort in helping achieve corporate or team goals. By
helping people help themselves, it furthers the potential for individual and shared
success. It also has a responsibility to be good citizens in the communities where it
lives and works.
Free Enterprise
It is a proud advocate of freedom and free enterprise. Human economic
advancement is clearly proven to be best achieved in a free market economy.
Trust
Building reliability and dependability for self by displaying commitment,
honesty, confidentiality and consistency in all actions.
Transparency
It wants to promote a culture of openness and mutual trust by interacting
objectively and without underlying personal interests.
Service Orientation
It is committed to serve its customers to fulfill our needs by focusing efforts
on discovering and thereby meeting stated and unstated requirements.
Recognition
It is committed to honor, encourage and support individuals and teams who
contribute, through its behaviors and actions, to the success of the organization.
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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
· Children’s Day and AOF Day celebration with Amway staff & Amway.
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Marketing Strategies & Swot of Amway
HISTORY OF AMWAY
What does the word Amway mean?
Amway is an abbreviation for "American Way" and was coined in 1959 by
company founders, Jay Van Andel and Richard DeVos. Short, unique and easy to
remember, Amway has been registered as a corporate name and trademark ever since.
In the following decades, Amway Corporation successfully established itself as a
leading multilevel marketing business, built on strong values and founding principles
that continue to sustain our company today. The business is built on the simple
integrity of helping people lead better lives.
Today, Amway is a multibillion-dollar international business representing
freedom and opportunity to millions of people in more than 88 countries and
territories around the world. Amway offer over 3 million Business Owners the
inspiration to grow those businesses, and to work hard to provide new and better ways
for them to achieve their life goals.
A SOLID FOUNDATION
Rich DeVos and Jay Van Andel's friendship actually began with a business
proposition, when Rich struck a deal with Jay for a ride to school for 25 cents a week.
After high school they entered the military, but they planned to start a business
together after separate tours of duty. A friendship formed and became a business
relationship that has lasted to this day.
THE EARLY YEARS
Amway quickly outgrew its original facilities in the basements of Rich
DeVos's and Jay Van Andel's homes. In its first full year of business, Amway's sales
were more than half a million dollars.
THE DECADE OF GROWTH
As vowed by Jay Van Andel the night of the 1969 disaster, Amway rebuilt the
aerosol plant and went on. The '70s began with sales of more than $100 million at
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Marketing Strategies & Swot of Amway
estimated retail, and kept going strong. After a lengthy investigation, the FTC verified
that Amway is a genuine business opportunity and not a "pyramid."
THE BILLION-DOLLAR DECADE
The '80s will be remembered for the first Billion Dollar Year at estimated
retail in 1980. Building expansion at Amway World Headquarters continued at
breakneck speed as Amway scrambled to keep pace with demand, opening its new
cosmetics plant in Ada, Michigan.
THE NEXT GENERATION
As carefully planned by Rich and Jay, the second generation Van Andel and
DeVos families took the helm during the ' 90s. The Policy Board was formed and
Steve Van Andel and Dick DeVos succeeded their fathers as Chairman and President.
Distributors witnessed a similar trend, with the second generation of many distributor
families taking on important leadership roles.
NEW HORIZONS
In 2000, Amway prepared for a new century and a new exciting era. Almost
50 years after Amway began, the DeVos and Van Andel families created a new
structure to meet the challenges of this new century. A parent company, Alticor, was
established with subsidiaries Amway, Quixtar and Access Business Group—the latter
to consolidate manufacturing and distribution for the enterprise. At the helm of
Alticor are Steve Van Andel (Chairman) and Doug DeVos (President), jointly holding
the Office of the Chief Executive. Today each area of the business, including Amway,
has the freedom to build on its strengths.
Amway continues to be a leading company in the direct selling industry. Its
fundamental principles—freedom, family, hope and reward—hold as true today as
they did in the very beginning.
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Marketing Strategies & Swot of Amway
Chapter 2: MARKETING STRATEGIES OF AMWAY
DIRECT SELLING
The concept of direct selling is based upon person-to-person relationships. The
seller goes to the consumer rather than the consumer to a shop. In today’s fast
changing society, where more people work and shopping patterns have altered, this
type of shopping not only provides consumers with accessibility to a wide range of
products but is also convenient.
An organization involved in direct selling cannot sell without a sales force! At
the heart of Amway’s approach to direct selling is the critical relationship between
Amway and the seller or distributor. There are more than 2.5 million renewed
independent Amway distributors world-wide, around 37,000 of whom are in the UK.
Each of these distributors is self-employed. Anyone over 18 can establish their own
business as an Amway distributor, either on a part-time or full-time basis. Amway
offers individuals the chance to set up their own business with little or no experience
or capital investment. Working hours and flexibility can be adjusted to suit each
individual. Individuals may have many different motives for starting their own
businesses.
Amway products are sold person-to-person, rather than door-to-door or via
party plan. Distributors earn their income through retail profit on the goods they sell.
In addition, they receive a commission from Amway based on the volume of sales
they generate personally, as well as those by their own distributor network.
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MULTI-LEVEL MARKETING (MLM) / PYRAMID SCHEME
Also called network marketing (NM) - is a business model which utilizes a
combination of direct marketing and franchising. Typically, individuals become
associated with a parent company in an independent contractor relationship. Sellers
are compensated based on their sales of a product or service, as well as the sales of
those they bring into the business.
Pyramid Scheme Accusations
Amway has several times been accused of being a pyramid scheme. A 1979
FTC investigation in the United States (see below), a 1997 Belgian court and a 2008
court judgement in the United Kingdom all dismissed these claims.
FTC Investigation
In a 1979 ruling, the Federal Trade Commission found that Amway does not
qualify as a pyramid scheme since Amway compensation system is based on retail
sales to consumers, not payments for recruiting.
It did, however, order Amway to stop retail price fixing and allocating
customers among distributors and prohibited the company from misrepresenting the
amount of profit, earnings or sales its distributors are likely to achieve with the
business. Amway was ordered to accompany any such statements with the actual
averages per distributor, pointing out that more than half of the distributors do not
make any money, with the average distributor making less than $100 per month. The
order was violated with a 1986 ad campaign, resulting in a $100,000 fine.
BUSINESS MODEL
Amway combines direct selling with a multi-level marketing strategy. ABOs
may both market the products directly to potential customers and also recruit
(sponsor) and train other people who become Amway Business Owners (ABOs)
themselves and in turn have the same opportunity. Each ABO may earn income both
from the retail mark-up on any products they sell personally, plus a performance
bonus based on the sales volume they and their down line have generated. People may
also register as ABOs to buy products at a discounted rate.
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Marketing Strategies & Swot of Amway
CHANGE MANAGEMENT
When the Amway entered into India they soon realised that the business is not
usual here and they will have to go under some changes for business to be fit for
locals. So they brought in the following changes especially for India.
Small Size packaging.
Low range products launched, like Attitude and dynamite.
Special product training sessions which guide how to use the product. (Since
Amway has concentrated products and peruse cost will be less if used properly)
Sale once in a year. (Diwali)
TV Commercial and marketing activities.
CSR (Corporate Social Responsibility) activities:
o Amway opportunity Foundation
o National projects for the blind
o Red Cross help
INTERACTIVE MARKETING OF AMWAY
The electronic way of communicating and selling directly to customers is
interactive marketing. The Internet provides marketers and consumers with
opportunities for much greater interaction and individualization.
There are some types of online component which are used by Amway.
Web sites :
Amway designed their websites that embody or express their purpose, history,
products and vision. Amway is designed a site that is attractive on first viewing and
interesting enough repeat visits. This website is containing all 7Cs of site.
(a) Context: Layout and Design
(b) Content: Text, picture, sound and video the site contains
(c) Community: How the site enables user to user communication
(d) Customization: Site’s ability to tailor itself to different users
(e) Communication: How the site enables site to user, or user to site
(f) Connection: Degree that the site is linked to other sites
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Marketing Strategies & Swot of Amway
(g) Commerce: Site’s capabilities to enable commercial transactions.
This site is easy to use and physical attractiveness. This site has good colour of
use. Their typefaces and font sizes are very readable. Individual pages are clean and
not crammed with content.
The site is quickly downloads. The first page is easy to understand. It is easy
to navigate to other pages that open quickly.
This website contains different information like,
o Amway Corporation
o The History of Amway
o Founder's Fundamental
o Amway India Factsheet
o Our Values. etc
Micro sites :
It is a limited area on the web managed and paid for by an external advertiser
company. Amway is used micro sites for excess their products from other sites like
Microsoft , Google’s, Yahoo and other web sites which are related to other groups.
Search Ads :
It is paid search or pay per click. The search terms serve as a proxy for the
consumer’s consumption interest and trigger relevant link to product or service
offering alongside search results from Google, MSN, and Yahoo!. Amway pay only if
people click on the links, but marketers believe consumers who have already
expressed interest by virtue of the search are prime prospectus. At an average of 35
cents, paid search is a lot cheaper than the $ 1 per lead for Yellow pages listings.
Display Ads :
These are small, rectangular boxes containing text and a picture that
companies pay to place on relevant web sites. Amway gave Display ads on different
websites like Amazon, Google, MSN, and Yahoo. Some banners are accepted on a
barter basis by Amway.
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Marketing Strategies & Swot of Amway
Interstitials :
This type of advertisement with video and animation, those pop up between
changes on a website. Amway Company used animation and video during accessing
website.
Internet specific Ads and Videos :
Amway Company produces Video and animation for their marketing of their
products and services. You tube, MySpace Video, Google video, Amway and
consumers and advertising company upload ads and video to be shared virtually by
millions of people.
Sponsorships :
Amway Company get their name on the internet by sponsoring special content
on websites that carry news, financial information. The Amway Company pays for
showing the content and in turn receives acknowledgment as the Amway suggested.
Alliances :
When one Internet company works with another, they end up advertising each
other through alliances and affiliate programs. Amway used this type of alliances.
Online communities :
Amway sponsor online communities whose members communicate through
postings, instant messaging and chat discussions about special interests related to the
company‘s products and services. Online communities for Amway are Face book,
Gmail, Yahoo, Rediff mail Amazon etc.
E-mail :
E-mail uses only a fraction of the cost of direct mail campaign. Amway
Company uses e-mail for their distribution channels and customer to aware their
products and services of Amway Company.
Mobile marketing :
Amway Company uses mobile marketing for their products on to mobile for
instant checking products and services.
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AMWAY STARTS ADVERTISING
Amway is changing its way. The largest direct selling company in the world,
which has emerged a global retail giant over the last 50 years with minimal
advertising. The US-based wellness and personal care products firm is part of an army
of direct sellers in India that has woken up to the need for complete brand-building
exercise through mass media. Oriflame, Tupperware and Modicare have all started
spending more on advertising and even tying up with retailers as India’s Rs 3,300-
crore direct selling industry is bracing up for increased competition from traditional
players who have added direct selling to widen their reach to rural and semi-urban
areas.
Amway has seen its spending on advertisement rise from about Rs 4crore in
2005 to close to Rs 20crore in 2009. “Amway does not traditionally advertise but we
realised that India was a different market and that we would need to supplement sales
force’s efforts with brand campaigns in mainstream media,” says Bill Pinckney, CEO
and MD, Amway India
BUZZ MARKETING
Buzz marketing is a viral marketing technique that attempts to make each
encounter with a consumer appear to be a unique, spontaneous personal exchange of
information instead of a calculated marketing pitch choreographed by a professional
advertiser. Buzz marketing is not new; Internet technology has changed the way it's
being used. Buzz campaigns are now being initiated in chat rooms, where marketing
representatives assume an identity appropriate to their target audience and pitch their
product.
Following are the activities which might create buzz for Amway.
Daily meeting creating a buzz for new for not joint person.
Only training given to new joining person creating buzz that they are come in
that company which gives you a opportunity to be Financially free, gives you
security, gives you additional income.
All company seminars creates buzz as telling that company is registered at
FICCI and its 1st company among all networking companies.
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Marketing Strategies & Swot of Amway
Company’s advertisement and product also creating buzz for costumers.
Amway India Enterprises, the multilevel direct marketing company, which has
grown into a global multibillion corporation exclusively by creating buzz
through word of mouth publicity.
The campaign, with the tagline "The Power of Positive," is supposed to help
the company to create more buzz and attract more distributors at a time when
many people are unemployed--or tired of the jobs they still have.
It has created new corporate logo which has a few circles and semi-circles in
three different colours (red, green and greyish blue), overlapping each other.
They reflect three focus areas of the company -- home, beauty and nutrition
ranges
“More importantly, ads mention very distinctly about one of its important
unique selling points, which are the 100-per cent customer satisfaction or
money-refund policy commitment towards India.
Amway as a benevolent company has created a tag line such as. "We help
people build better lives, build their own businesses, and together, build better
communities," a voiceover says in one spot that breaks Monday.
Company is set to roll out its maiden product campaign for its Nutrilite brand.
The company has adopted the strategies of direct selling their product in the
market.
The product specific ad campaigns have been designed by ad agency
Rediffusion and will be rolled out in the print media and on television this help
in creating buzz.
DESIGNING THE SALES FORCE
Amway is using a direct-selling force for selling their various types of
product that they are providing. It uses a contractual sales force, it consist of sales
agents who earn a commission based on sales.
Amway is following multi level chain model. With an initial start up cost of
Rs.995 people sign contracts with the company to become Amway Business Owners
(ABO). When they become ABO they gets start up kit consist of product details and
free training sessions’ CD. They can choose to either sell products to other customers
of sign on their friends and relatives to become Amway business owners, who again
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can choose to sell products to other people or sign on other people to the Amway
network. ABO earn commission only on the bases of sale of products by him and his
network not on the basis of number of people that ABO makes on his down line.
The Amway opportunity works in twofold: Giving you a chance to build your
own business at your pace & achieve the rewards and recognition linked to the plan
and at the same time helping other people do the same.
Sales-Force Compensation
Amway has developed attractive sales force compensation by providing
commission on the basis of sales turnover generated by ABOs and their group.
Amway’s performance bonus and award schedule is based on selling of Amway
products which is as under:
MANAGING THE SALES FORCE
Recruiting and Selecting Representatives
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Business Volume(Business Volume is equal to the
Distributor Acquision Price of Amway Products minus Taxes)
16,500
55,500
1,10,000
2,20,000
3,85,000
5,50,000
Commission on Business volume
(% of business volume)
6%
9%
12%
15%
18%
21%
Marketing Strategies & Swot of Amway
Amway recruit people in less numbers because it doesn’t require more salary
based employee as they makes sales with the help of multi level marketing model.
They make ABOs by convincing them that Amway will make their life time free and
provide opportunity to earn money and provide security which is the basic desire of
human beings.
Training and Supervising Sales Representative
Amway provides training sessions’ CD with the start up kit when any person
becomes ABO. And then after they provide training to ABOs about how to convince
people and make them buy the Amway product and become ABO. By this process of
training it helps people to spread their network and earn more commission by
increasing the sales turnover of their group.
Amway – Ahmedabad organises seminar for all new potential prospects as
well as for current ABOs near Natraj Cinema every Wednesday, and they charge
Rs.35 as an entry fee for attending the seminar. In such seminar they train ABOs
about how to sell Amway products and to widening the network. Motivating factor
that motivates Amway’s ABO is the commission that they earn on the basis of sales
turnover of Amway product.
Evaluating Sales Representative
Evaluation parameter for Amway Business Owners is number of down line
members i.e. network and sales turnover made by him and his group.
AMWAY’s CRM
CRM (customer relationship management) web system for trading systems to
manage client’s debts, complaints, comments and documents. The CRM user
interface is web think client which uses internet browser to access this system. The
server side provides role-based functionality for different users’ types.
Amway of Australia uses the Onyx application to consolidate and centralize
information about its Independent Business Owners (IBOs) and to automate
marketing campaigns and processes both for its Australian & New Zealand business.
Amway of Australia's roll out falls on the heels of the recent implementation at
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Amway Korea Ltd. in February of this year. Amway deployed OEP to approximately
300 users in South Korea as part of the overall global deployment of Onyx.
"Amway is focused on building, and rewarding, lifelong relationships with
our Independent Business Owners," said Michial Coldwell, General Manager
Operations, and Amway of Australia & New Zealand. "We will be able to leverage
the Onyx application to ensure that we maintain a high level of service to our
Independent Business Owners and increase profitability per IBO by tracking overall
performance and dedicating our resources to those areas that gives maximum results.
With Onyx, we will continue to lead in the Direct Selling industry by providing
highly personalized service to improve overall success."
One of the factors driving Amway of Australia was its interest in capitalizing
on the success that Amway Korea has experienced with the Onyx campaign
management module. The campaign management tool enables Amway to run new
marketing campaigns. The new campaigns can, in turn, more effectively help
individual business owners achieve their monthly targets and improve overall
marketing return on investment. The Onyx professional services team was able to
quickly implement Onyx on time and on budget and fully integrate it with several
systems, including Amway of Australia's AS400, Business Intelligence system, and
Amway of Australia's custom EDM system used for sending all outbound
information.
"The implementation of Onyx at Amway of Australia is great example of how the
flexibility of our CRM platform allows customers to easily create a solution that is
tailored to meet their specific needs," said Brent Frei, Chief Executive Officer, and
Onyx Software. "Global customers like Amway were exactly who we had in mind
when we made the investment in things like a Internet architecture, web-services
enablement, and full Unicode support, and we're excited to see how they've
leveraged these features to provide a solution that is so critical to their business."
ANSOFF'S PRODUCT/MARKET MATRIX
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Ansoff's product/market matrix is an accepted way of identifying and
categorizing market and product developments and opportunities. Amway makes
good use of the technique.
MARKET PENETRATION
Going for market penetration has involved Amway in making the most of
current products and competences by 'stretching' them to improve Amway's
competitive position within existing markets. One great benefit of direct selling is
that it is an immediate channel to the marketplace that offers customers a good
service, while at the same time providing business opportunities for individuals.
Special incentives enable IBOs and end consumers to take advantage of
particular offers at certain times of the year and these incentives have also helped to
increase market penetration. There are also special events such as Leadership
Training Seminars. These enable IBOs to spend time with others involved in the
business and to learn about 'best practice' from each other, whilst also sharing ideas.
PRODUCT DEVELOPMENT
Product development is a particularly appropriate strategy where an
organisation is strong in research and development. Product development is highly
important for products that have comparatively short life-cycles. Within Amway
there are approximately 500 active research and development projects in progress at
any one time.
With around 575 staff involved in research processes, and with strong links to
many universities, Amway formulates designs and develops new products to meet
customer needs and expectations within the global marketplace. Amway currently
holds more than 380 patents internationally and has approximately 430 patents
pending. Within its product development programme, Amway's technical teams use
the company's customer base to monitor and test new product ideas.
MARKET DEVELOPMENT
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Market development involves taking existing products into completely new
markets. One method used by Amway involves expanding the ways in which
individuals can be involved with the Amway business. Amway has developed a
structure known as the IMC model. This increases the number of ways through
which people can become involved in the Amway business. Each of the letters IMC
stands for a different type of involvement.
I - Independent Business Owners (IBOs)
M - Members
C - Clients (customers) of the IBOs.
Members are allowed to purchase Amway products at a price equivalent to
that paid by IBOs, but do not participate in the Amway Sales and Marketing Plan.
They are a new type of 'customer' who deals directly with Amway.
DIVERSIFICATION
One way in which Amway have diversified its activities is through creating
an on-line business opportunity called 'AMIVO' to support and enhance its
traditional business. This makes use of the internet. The internet is a good example of
a structure that no one firm has had to pay to construct, but which is available to all
firms now that it has been constructed. The challenge to each business is to identify
how to use the internet in ways that are advantageous to it and also profitable.
Amway has succeeded in doing just that. The European platform of AMIVO
was first launched within the UK to provide a one-stop office for IBOs. IBOs can use
AMIVO for:
A means for Amway to communicate with IBOs quickly
Ordering products from their home 24 hours a day, 7 days a week
A communication tool to promote their business
Keeping track of their business status
A reference resource
A medium to recognise IBO business achievement.
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AMWAY PRODUCT STRATEGY
Over 450 unique, high-quality products carry the Amway name in the areas of
nutrition, wellness, beauty and home, as well as commercial products and a variety of
services (from which 105 products are offered in India). In addition, Amway
independent business owners in selected markets sell additional brand-name goods
through local merchandise catalogues, plus a variety of services and educational
products. All products are backed by a customer satisfaction guarantee. Its product
lines include home care products, personal care products, jewellery, electronics,
Nutrilite dietary supplements, water purifiers, air purifiers, insurance and cosmetics.
Amway conducts business through a number of affiliated companies in more than
ninety countries and territories around the world. Its product line is as follows:
NUTRITION AND WELLNESS
Nutrilite®
Nutrilite is the world’s leading brand of vitamin, mineral, and dietary
supplements, grown harvested and processed on its own certified organic farms.
COSMETICS
Our skin is the outward appearance of who or what we are , or what we would
like to be. But it is more than a simple cover. It is the largest organ of our body - a
complex and dynamic system that is vital to our health and reflects it as well.
Artistry®
Artistry® is one of the world’s top five largest-selling prestige brands of facial
skin care and colour cosmetics.
Attitude®
All products of Attitude contain Skin Vitalizing Complex that synergistically
combine to cleanse, Replenish & Moisturize the skin making it soft & supple.
HOME CARE
Amway’s Home Care Brands provide complete cleaning systems that fit with
everyone’s needs. Their versatile, effective product systems offer the features and
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benefits consumers want. No matter what your lifestyle, Amway’s Home Care
products make light work of your cleaning chores.
SA8®
SA8 Gelzyme is India's only 3-in-1 laundry detergent which pretreats, cleans
and softens.
LOC®
LOC High Suds is a multipurpose household liquid cleaner.
Dish Drops®
Dish Drops is a concentrated hand dishwashing liquid with a powerful
"Triadic Detergency System".
PERSONAL CARE
Amway Personal Care products have built global reputation based on their
world-class research and development. These products are designed to deliver the
ultimate grooming experience and the confidence that lasts long.
Glister®
Glister Toothpaste is a revolutionary Multi-Action Toothpaste with Sylodent
that offers seven benefits.
Persona®
Persona Premium 3 in 1 Soap is a complete soap for the entire family promises
refreshing confidence.
Satinique®
Satinique Advanced Range with unique Ceramide Infusion System uses
nature's own renewing technology to rejuvenate, strengthen and protect your hair.
Dynamite®
Dynamite's range of male grooming products, formulated internationally is
designed to deliver the ultimate grooming experience.
G&H®
G&H Range enriched with the goodness of Glycerine and Honey, deeply
nourishes and hydrates the skin for a healthy glow.
Apart from this Amway also deals in Air purifiers and Water purifiers,
Jewellery, Electronics, & Insurance products.
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Chapter 3: CASE STUDY ON SOME PROBLEMS
FACED AND STRATERGIES ADOPTED BY AMWAY
AMWAY IN USA
THE BUSINESS ENVIRONMENT
By the 1800s, direct selling decreased with the advent of mass
merchandising, such as department stores and mail-order sales. In the later 19th
century and early 20th century, however, some manufacturers found direct sales had
advantages over the sales of their products in large stores. They preferred the
personal touch, with salesmen making home demonstrations of their products
exclusively. By the 1920s door-to-door salesmen were marketing brushes, cooking
utensils, and other products.
Retail stores fought back with local laws on peddlers. The federal
government's regulations of company-employee relations led to the independent
contractor solution. As independent contractors, salesmen were no longer employees:
they were independent businessmen who bought products for resale. The first
network marketing began in 1941 when two men created a mechanism to distribute
Nutrilite vitamins. Within this mechanism, in addition to making money in retail
sales, distributors earned a bonus on the sales.
In 1949, DeVos and Van Andel became distributors of vitamins for the
Nutrilite Company of California. They enjoyed modest success from their own retail
sales and from bonuses earned on the sales force they created in the Midwest.
CHANGES IN THE ENVIRONMENT
Increasing government regulations and an internal conflict in Nutrilite led
Van Andel, DeVos and several other leading Nutrilite distributors to start their own
venture.
STRATEGY ADOPTED
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In April 1959 they created The American Way Association, later renamed the
Amway Distributors Association, to protect the independent distributors. They chose
as their first product a biodegradable liquid organic cleanser made by a small
Michigan firm, the kind of high-demand merchandise that could be easily sold by
MLM. By September 1959 the Amway Sales Corporation and the Amway Services
Corporation were begun to assist the distributors.
RESULTS
The company rapidly expanded. The first full year of operations in 1960
resulted in gross sales of $500,000. That figure doubled in each of the next two
years, and in 1964 it reached $10 million. Thousands of distributors signed up each
month. The expansion was so rapid that as soon as the company moved into new
facilities, they were already crowded.
AMWAY IN CHINA
THE ISSUE
Amway entered China in April, 1995. Their entrance into the Chinese market
has earned big profits, with more potential to grow. But on April 21, 1998, Chinese
officials issued an immediate ban on direct marketing that threatened a multi-
million-dollar market for Amway and other potential direct marketing companies.
Chinese government officials claim the ban was absolutely necessary because the
direct-selling operations functioned as a base for criminal activity.
Amway's direct-selling techniques scared Chinese officials for fears of
spreading heretical religion and the start of secret societies. The ban was lifted three
months later on July 21 due to heavy lobbying from American businessmen and
Chinese government officials. But Amway was forced to revise their business plans
to only sell products in retail outlets, not through direct-selling. These new guidelines
are very different from Amway's selling technique, which is based on Amway's
pyramid building and selling system.
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ANALYSIS OF THE SLEPT FACTORS IN CHINA
Economic
It has had positive GDP growth in the last five years, while other Asian
economies have stalled. China’s economy is growing at a rate of about 8 percent, the
fastest in Asia. It means that this country is certainly profitable.
Indeed, China is an emerging economy but a dual economy too, with a
wealthy urban professional and a poor country people.
The Chinese market has attracted foreign investors because of its huge size
and market potential. Some predict that China will become in few years the world’s
largest economy but that could fall flat due to political circumstances.
Political
The Communist Party of China has transformed itself. It has declared that it
represented capitalists as much as workers and peasants. The Old China defended the
working class against the capital class. China has just begun its transition to become
a democratic country. China’s new leadership has come to power facing enormous
economic, environmental, political and social challenges at home. So, Amway faces
the challenge to interpret the very different cultural and political implications of their
presence in a changing communist country.
Social
The Chinese population = 1.2 billion of people. The past decade has seen a
phenomenal rate of growth in China. It represents an important potential of
customers for a firm.
Cultural
The Chinese are sensitive to social risk and the loss of social status if a wrong
buying decision is made. The level of brand loyalty found in a market is also closely
related to the perception of risk. There are huge variations in attitudes to brand
loyalty across different cultures. In China, consumers are loyal, not really brand
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conscious and not really used to cross product comparisons, except the urban
consumers, who have a wide recognition of foreign brand names.
There is a cultural gap between the USA and China. Chinese cultural values
are largely formed and created from interpersonal relationships and social
orientations. Chinese nations tend to rely heavily on personal relationship (Guanxi)
in business dealings.
Finally, Amway produces standard products to meet consumer needs in
Japan, Philippines, Taiwan, Singapore but their product range may not be appropriate
to China. Indeed, even if Amway has considerable experience in the Far East, the
Chinese market is not a mirror image of these countries. Then, door-to-door selling
and “party programmes” are not part of the Chinese culture.
Legal
In China, direct-selling operations function as a base for criminal activity.
Indeed, the market is riddled with unscrupulous operators selling substandard goods
with poor services, claiming to be legitimate direct marketers. So, Amway’s direct-
selling techniques could scare the Chinese government and all direct selling could be
banned; it means that Amway China affiliate could have to make changes in its
distribution methods in order to work with China’s regulations. Amway could have
to revise its business plans to only sell products in retail outlets.
Concerning the personal sales, customers could receive discounts by paying a
small annual fee, similar to buying a membership in a wholesale club. In fact, there is
a cultural gap between American companies trying to use American sales tactics in a
foreign country like China.
Technological
The internet and the access gained to the World Wide Web are
revolutionizing international marketing practices. This explosion of international
marketing activity and the associated emergence of the global information highway
will impact on all businesses
ANALYSIS OF THE REASONS FOR FAILURE
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Inability to find the right market niches
Unwillingness to adapt and update products to local needs.
A vacillating commitment - Amway had not considered the environmental
influences on international marketing that could represent barriers to their entry
in China.
Inability to manage local stakeholders. This includes incompetence in developing
a satisfactory partnership relationship with unions and governments: Amway had
not developed a partnership/relationship with the Chinese government.
Inability to apply ideas developed in one country to other countries worldwide:
Amway tried to use American sales tactics in China, but cultural gaps are too
important.
STRATEGY ADOPTED
After widespread lobbying from American businessmen and several Chinese
government officials, the government accepted Amway's revised business plan to sell
products in retail outlets instead of direct selling on July 21, 1998. (Refer to Fig. 6 in
annexure)
The new plans include combining retail locations operated by the company
with a strong team of non-employee sales representatives to promote Amway's
products and services. It is essential for Amway to reiterate their independent sales
technique that is the heart of their business. The change is this: Customers now pay a
nominal fee to become privileged customers who are eligible to buy products at a
discount. They must physically go to a retail outlet where all Amway products have a
retail price marked. Amway's existing product distribution centers are located in 14
provinces. Amway invested $29 million to set up 100 stand-alone stores - something
it has nowhere else in the world. It started to run an advertisement which was another
first.
CRITICAL EVALUATION OF THE STRATEGY
The company began building close connections with government officials. At
the same time, Amway made highly visible changes to its sales operation. As a
result, with government approval, it racked up $700 million in sales in 2002, almost
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four times what they were before the ban. China is the company's No. 4 market
world-wide, with China profits funding all its expansions here.
Chapter 4: SWOT ANALYSIS
This identifies factors that may affect the desired future outcomes of the
organization.
The SWOT model is based on identifying the organizations internal strength
and weaknesses and external threats and opportunities and consequently identifying
the company’s distinctive capabilities and competencies and key success area. Along
with the other consideration of the societal and company values they lead to creation,
evaluation and choice of strategy.
One of the most important benefits of this analysis is flexibility and
adoptability it can be used in variety of ways, using approaches specific to a
particular setting to create a unique picture of the institutions distinctive
environment.
SWOT’s objective is to recommend strategies that ensure the best alignment
between the external environment and internal situation. It endeavors to identify the
weakness in the external environment and develop ways and means to reduce them,
identify opportunities and take advantages of them in like of internal strength,
identify threats and take actions to stop or reduce their impact.
STRENGHTS
They are internal to an organization and may include marketing capabilities,
technological know-how, qualified personnel, financial strength R&D, good union
relations wide geographic spreads etc.
STRENGTHS OF AMWAY
100% cash based business (NO debts)
o No debts not only keeps a company’s interest cost down, but also gives it
flexibility to invest its cash back into the business to expand or develop
new products.
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o As debt-free companies are mostly cash-rich, they also do not need to raise
large funds from the market to run their operations.
o There are many other advantages that debt-free companies enjoy.
o For instance, debt-free company need not keep aside a portion of the profit
to meet the cost of capital.
o They get interest on their cash deposited with banks, adding to their
reserves. They have low interest-rate risk.
Money back Guarantee
o Backed by a 100% Customer Product Refund Policy produce faith and
reselling attitude in customers.
o It gives a huge Competitive advantage.
o It influences the customers.
o It motivates the customers to make a move towards buying.
o It incentivizes the customers to make the buying decision.etc
CSR activities
o The high positive impact of CSR on employee wellbeing and motivation,
the role of HR in managing CSR projects is significant.
o Research shows that a strong record of CSR improves customers’ attitude
towards the company.
o CSR provides the opportunity to share positive stories online and through
traditional media.
o Companies no longer have to waste money on expensive advertising
campaigns. Instead they generate free publicity and benefit from worth of
mouth marketing. Companies reduce costs by:
More efficient staff hire and retention
Implementing energy savings programs
Managing potential risks and liabilities more effectively
Less investment in traditional advertising
Quality Products that Inspire Confidence
o Almost no risk of money as world class quality Minimal start up costs gives
strong base to the initiation of business.
o So everyone can participate in business.
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o The person who wants do something can be make profit with investment
of low cost.
Loyal and Captive Consumer Base of Distributors
o Distributors have a personal stake in “growing with the business”, so they
are inclined to buy products themselves.
o They are influenced to a great extent by the groups as well and are always
encouraged to try the product beforehand, to be able to sell it better.
Consumer-Distributor Word-of-Mouth Magic
o Being a friend/relative of the consumer, the distributor would be expected
to share similar tastes and interests.
o Therefore, the distributor’s recommendations would be trusted and
acceptable.
o Many a times, it is just tough to say “no” to an old aunt or good friend.
Products
o Product quality has been acknowledged to be really good, and
endorsements.
o Training from specialists at the supplier’s training centers builds positive
perception as well.
o Products are extremely expensive, and high prices are justified on the basis
of quality
o And the concentrated form of the product, which implies lower cost per
use.
More & More Subscription Revenues
o The ever-growing urban middle class in countries like India is the ideal
pool for potential distributors, looking to make extra cash which denotes
“success” and “respect”.
o The margins seem extremely attractive in India, since some research
revealed that prices for many products are identical to those in the US.
o Thus on a pure PPP basis, Indian distributors are much better off.
o Amway boasts of almost 3 lakh active distributors today.
Aggressive Product Launch Strategy:
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o Since a captive consumer base exists, trials and repeats are guaranteed to
an extent, so revenues are accelerated by launching a new product almost
every month.
Market-Specific Initiatives
o India
Mass advertising (this is not a usual practice in direct selling)
Smaller SKU’s (such as sachets)
Tie-ups with big names such as BPCL and Standard Chartered
through petro-card/credit card schemes to add credibility to the
business.
These factors have contributed tremendously to the huge success
that players
Like Amway have enjoyed in India.
o Europe
Vista Print Limited, the small business marketing company
announced a strategic partnership with Amway Corp.
As part of the agreement, Amway will offer Vista Print’s high-
quality marketing materials that are specific to Amway brands to
its independent European sales representatives.
These include business cards, postcards and promotional materials.
Amway Europe leverages its global reach by conducting because
related marketing activities.
Since 2005, Amway Europe has created collectible pins to support
UNICEF.
For every pin sold in 26 Amway Europe territories, a donation of
€1.40 is donated to UNICEF immunization and education
programmes in Africa and Eastern European countries.
Amway Europe also purchases customized retail UNICEF greeting
cards for all of its business operations worldwide.
In 2003, the company launched its Corporate Social Responsibility
Programme, the ‘One by One for Children Campaign,’ which now
incorporates the UNICEF partnership.
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Since 2001, Amway Europe and its 500,000 European Direct
Sellers and 26 Affiliates have donated more than US $3.5 million
to facilitate UNICEF’s Immunization Plus efforts.
In 2005, Amway Europe re-committed to raise € 2.5 million to
support UNICEF Immunization and Education programmes over
the next five years.
o Australia
Traditionally Amway marketing strategies tended to target parents
who want to work from home.
In a shift away from this model Amway Australia signed swimmer
Libby Trickett and cricketer Adam Gilchrist in 2009 as Amway
ambassadors in a push to lift its standing with Generation Y.
This push saw 40% of new members in 2010 under the age of 30.
Increased knowledge about product develops confidence and preference
o Amway educates distributors who pass on the information to other
consumers about product attributes and ingredients.
o This high level of awareness results in inclination to purchase, especially
for high involvement personal care products such as cosmetics.
The Other Internal elements of the business that contribute to improvement and
growth of Amway are as follows:
o Brand Image
o Market share
o Vast network (operated in 63 countries)
o Environmental-friendly
o Amway’s global One by One Campaign for Children.
o Amway retail sales worldwide increasing considerably.
o Amway has long list of awards like Asia Pacific Frost & Sullivan Water
Filtration Company of the Year Award and LEED gold certification.
o Amway ranked as America's top 30 largest privately held companies
o Amway has presence in more than 80 countries with more than 3 million
business owners
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WEAKNESSES
It is also a part of the internal systems of the company they may include poor
work force, high debts, bad products, de interested employees, poor past
performance etc.
WEAKNESSES OF AMWAY
More power to IBOs gives critical structure to organization.
Initially high entry cost leads to somewhat restrictions for business development.
Rumors for direct selling operations.
Focus shifted from selling products to recruiting.
The only mode of availability of product is online and business agents hence
missing out on retail sales.
Products are somewhat on costly side.
Not much of TV advertisement or brand ambassador, only mode of
communication is word of mouth
Highly decentralized
Fewer outlets(less distribution network)
Highly expensive
Lack of brand awareness
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OPPOURTUNITIES
They present in the environment are many. They may be in the form of new
markets, new uses for the same product new technology, invention etc.
OPPOURTUNITIES OF AMWAY
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.
Increase the availability of product in international markets.
Using various medium of communication like it is international brand; online
can be a good platform.
Can tie up with chains of beauty salons and health experts.
Awareness about Amway product is still less in certain region so they have to
focus on spreading awareness about its’ product. It can be done by
advertisement.
Prices of certain Amway products are much higher then what customers
expect so it should be decrease to increase sales volume of products.
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THREATS
It also in the external environment they, may be in the form of competition,
imports, substitutes, new entrants in the market etc.
THREATS OF AMWAY
Too much freedom to IBOs.
Change in government policy may affect to the profit and freedom of
company.
Increasing competition in both national and international markets.
o Competitors like Avon, Mary Kay; Sun rider
o Other Local Market Competitors like VLCC, Loreal, HUL, P&G
o Create lot of competition in market which leads to strong marketing
competition in market.
o Replacement by local products
Switching cost is low.
In strategic planning the appraisal of a firm’s strengths, weakness,
opportunities and threats is often referred to as a swot analysis. Despite the name,
however analysts usually begin by considering environmental opportunities and
threats before determining whether there is likely to be a strategic fit between these
factors and the organizations strength and weakness.
Strength and weakness are normally analysed by reference to competitors
characteristics there is no point at being good at something if someone else is better.
There also very much considered in presentence we will have the best distribution
network in two years time is not strength today. Opportunities and threats are
however evaluated by reference to near future and opportunity that has passed or is
today being seized by a competitor is opportunity missed.
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CONCLUSION
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.
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To conclude a proper response from the environment is necessary for the
survival and growth of any business this response must be well thought of and
implemented in a planned and proper way to get the maximum beneficial results.
This can only be achieved after a careful and thorough understanding of the various
types of business environment that affect a business and will affect it in the future.
In today's highly competitive environment, an organisation has to develop a
business strategy that provides a strategic fit between its resources and the changing
business environment.
This project explains how Amway has continued to develop by using a range
of strategies. These strategies have enabled Amway to build its business by
continuing to broaden its customer base and enhance the service it offers to
Independent Business Owners, Members and Clients.
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BIBLOGRAPHY
Books
Strategic Marketing: Creating Competitive Advantage (By Douglas C. West,
John Ford, Essam Ibrahim)
MBA Concepts and Frameworks (By Ohene Aku Kwapong)
Contemporary Strategy Analysis (By Robert M. Grant)
Business environment (Dr. Namita gopal)
Websites
http://www.business2000.ie/pdf/pdf_2/amway_2nd_ed.pdf
http://www.amway.in/Articles/Article
http://en.wikipedia.org/wiki/Amway
http://marketingpractice.blogspot.in/2008/05/amway-india-we-are-
listening.html
http://businesscasestudies.co.uk/amway/
http://www.reocities.com/TimesSquare/1848/amway.html
http://madlaw.in/multi-level-marketing-and-indian-law-amway-cases-in-india-
and-usa/
http://www.onyx.com/
http://www.amway.com/about-amway/our-company/heritage/vision-and-
values
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