Strategics Management at Amway

Amway Introduction

Amway is an American company which involves multi level marketing techniques to sell a variety of products, primarily in health, beauty, and home care markets. Amway was founded on 1959 by Jay Van Andel and Richard Devos. Based in Ada, Michigan, the company and family of companies under Alticor reported sales of USD$11.3 billion for the year ending on December 31, 2012 the seventh consecutive year of growth for the company.

Its product lines include home care products, personal care products, jewelry, electronics, Nutrilite dietary supplements, water purifiers, air purifiers, insurance and cosmetics. Amway conducts business through a number of affiliated companies in more than a hundred countries and territories around the world. Amway was ranked No.114 among the largest global retailers by Deloitte in 2006 and No.25 among the largest private companies in the U.S. by Forbes on 2012.

Background of Amway

Jay Van Andel and Rich Devos are friends since school days and had been business partners in various endeavors including a hamburger stand, air charter service, and a sailing business. In 1949 they were introduced by Neil Maaskant (Van Andel's second cousin) to the Nutrilite Products Corporation. Nutrilite was a California based direct sales company founded by Dr. Carl Rehnborg, developer of the first multivitamin marketed in the United States. In August 1949, after a night long talk, Devos and Van Andel signed up to become distributors for Nutrilite food supplements. They sold their first box the next day for $19.50, but lost interest for the next two weeks.

Shortly thereafter, at the urging of Maaskant, who had become their sponsor, they traveled to Chicago to attend a Nutrilite seminar. The meeting was at a downtown hotel, with over a hundred people in attendance. After seeing promotional filmstrips and listening to talks by company representatives and successful distributors, they decided to pursue the Nutrilite business opportunity with enthusiasm. They sold their second box of supplements on their return trip to Michigan, and rapidly proceeded to develop their new business further.

In 1949, Devos and Van Andel had formed Ja-Ri Corporation (abbreviated from their respective first names) for importing wooden goods from South American countries. After their trip to the Nutrilite seminar, they droppedthis business and Ja-Ri became their Nutrilite distributorship. In addition to profits on each product sold, Nutrilite also offered commission on the sales of products by new distributors introduced to the company by existing distributors system today known as multi-level marketing or network marketing.

 By 1958, Devos and Van Andel had built an organization of over 5,000 distributors. However, following concerns about the stability of Nutrilite, in April 1959 they and some of their top distributors formed The American Way Association to represent the distributors and look for additional products to market.

Their first product was called Frisk, a concentrated organic cleaner developed by a scientist in Ohio. Devos and Van Andel bought the rights to manufacture and distribute Frisk, and later changed the name to LOC which known as Liquid Organic Cleaner. They subsequently formed Amway Sales Corporation to procure and inventory products and to handle the sales and marketing plan, and Amway Services Corporation to handle insurance and other benefits for distributors. In 1960 they purchased a 50% share in Atco Manufacturing Company in Detroit, the original manufacturers of LOC, and changed its name to Amway Manufacturing Corporation. In 1964 the Amway Sales Corporation, Amway Services Corporation, and Amway Manufacturing Corporation merged to form a single entity, Amway Corporation Amway bought control of Nutrilite on 1972 and full ownership on 1994.

Amway expanded overseas to Australia in 1971, to Europe in 1973, to parts of Asia in 1974, to Japan in 1979, to Latin America in 1985, to Thailand in 1987, to China in 1995, to Africa in 1997, to India and Scandinavia in 1998, to Ukraine in 2003, to Russia in 2005, and to Vietnam in 2008.Amway Malaysia stands tall within the Amway worldwide group as one of the top 10 performing affiliates backed by impressive indicators, such as sales turnover, profitability, and an ever-expanding Distributor force.

Since its humble inception on 1976, Amway Malaysia has expanded to support the business of its Distributors with an extensive network of Amway Retail Shops and Regional Distribution Centers throughout Malaysia and Brunei.

In 1996, Amway Malaysia became the first ever direct selling company to be listed on the Main Board of the Kuala Lumpur Stock Exchange. Amway is also the first direct selling company to be awarded a 10-year Direct Selling License by the Ministry of Domestic Trade Cooperatives and Consumerism, MDTCC on 2010.

Vision

           

            Amway work each and every day to help people live better lives. It achieve company’s vision by helping people everywhere discover their potential and achieve their goals by offering better brands and opportunities for the future, and by sharing generously with the global community. To be the best business opportunity in the world, with the tagline “Helping people live better lives.”

Mission

            Through the partnering of Distributors now it known as Independent Business Owner (IBO), 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. The Amway business opportunity is still a great way for people around the world to start a business of their own. The Quixtar business opportunity is a great way for people in North America to start their own I-commerce business powered by Quixtar Inc.

Nutrilite Amway Background

Nutrilite is a brand of mineral, vitamin, and dietary supplements. Carl F. Rehnborg created the first multi vitamin on the 1930s. When he visit China between roughly 1917 and 1927 exposed him to experiences in which he realized the role vitamins and nutrients impacted general health. He began selling his vitamins as the California Vitamin company and renamed it in 1939 to Nutrilite. On 1945, he invented the multi level marketing, door to door, selling system to distribute his vitamins. Two men, Lee S. Mytinger and William S. Casselberry became exclusive national distributor on 1945 and operated a company to distribute the vitamins.

The founders of Amway, billionaires Jay Van Andel and Rich Devos, began as independent distributors selling Nutrilite products in 1949, at a time when the product's previous distributors (Mytinger and Casselberry, Inc.) were involved in a dispute with the U.S. Food and Drug Administration (FDA), which accused them of false advertising. They rose rapidly to being top selling distributors. Concerned about the FDA dispute, Van Andel and Devos launched a new company, the American Way and later known as Amway, to use the MLM system for other household products. Mytinger-Cassleberry dispute, which was gone to the United States Supreme Court, was resolved in favor of the FDA on 1960s.

 Amway bought a controlling interest in the company on 1972, and took over complete ownership on 1994. On 2001, five Nutrilite products were the first dietary supplements to be certified by NSF International. On 2007, the Simply Nutrilite which later renamed Nutrilite Trim Advantage Body System line was introduced. The line includes health bars, anti-oxidant, and vitamin supplements.

History of Amway Malaysia

            On 1976, Amway begin it business with just five staffs in a small office and warehouse facility in Jalan Ipoh, Kuala Lumpur. Amway is the pioneer for direct selling industry in that time.   Amway Malaysia stands tall within the Amway worldwide group as one of the top 10 performing affiliates backed by impressive indicators, such as sales turnover, profitability, and an ever-expanding Distributor force.

            Since its humble inception in 1976, Amway Malaysia has expanded to support the business of its Distributors with an extensive network of Amway Retail Shops and Regional Distribution Centers throughout Malaysia and Brunei.

            On 1996, Amway Malaysia became the first ever direct selling company to be listed on the Main Board of the Kuala Lumpur Stock Exchange. The sales of Amway Malaysia are kept on increase each and every year. Now it will predicted that Amway Malaysia become the billion dollar company.

Achievement and awards of Amway

            There is a non-exhaustive list of awards and recognitions from year 1989 to 2012 received by Amway and affiliated companies. Achievements and awards enhanced the reputation of Amway and public recognition. This is a list of achievements achieved by Amway in year of 2012 up to date.

·         Amway Achievement and Awards 2012

·         Amway Nutrilite - Most trusted brand Asia

·         Amway eSpring - Most trusted brand Asia

·         Amway Nutrilite - Most trusted brand China

·         Amway Nutrilite - Most trusted brand India

·         Amway eSpring- Most trusted brand Malaysia

·         Amway Nutrilite - Most trusted brand Malaysia

·         Amway eSpring- Most trusted brand Singapore

·         Amway Nutrilite - Most trusted brand Singapore

·         Amway eSpring- Most trusted brand Taiwan

·         Amway Nutrilite - Most trusted brand Taiwan

·         Amway eSpring- Most trusted brand Thailand

·         Amway Nutrilite - Most trusted brand Thailand

·         Amway China awarded "most responsible enterprise"

·         Amway China wins "Best Customer Service" Award

·         Amway US wins "Corporate Community Leader" Award

·         Amway Center named "Sports facility of the year"

·         Amway India wins "The Aaj Tak Care award for Education"

·         Amway Malaysia named "Health Supplements Company of the Year"

·         Amway Artistry Intensive Skincare Renewing Peel wins Her World Malaysia Reader's Choice Award

·         Amway Artistry Hydrating Foundation wins Her World Malaysia Reader's Choice Award

·         Amway US a finalist in Volunteer Match "Employee Volunteer Program of the Year"

·         Amway's Fulton Innovation wins Gold Edison Award for Innovation

·         Amway's Artistry Lip Gloss wins Total Beauty "Reader's Choice" Award

            Nutrilite tops Consumerlabs.com "Customer Satisfaction" survey

                       

SWOT Analysis of Amway

           

            The SWOT analysis is a powerful tool to a company for understanding and to make decision. SWOT analysis perfect for business planning, strategic planning, competitor evaluation, marketing, business and product development and research reports. The SWOT analysis helps companies to identify the positive and negative influencing factors inside and outside of a company or the organization.

i.            Strengths

·         High Quality

            The product of Amway is high quality. The products are manufacture at United States of America, Brazil, Mexico and also New Zealand. The following are procedure followed to ensure the best quality:

Ø  65 R&D and QA labs worldwide

Ø  2000 of global labs space

Ø  More than 700 scientists, engineers and technicians globally

Ø  Worldwide range of scientific background and expertise

Ø  More than 240 technician consultants

Ø  More than 75 University Associations

Ø  More than 85 Trade Associations

Ø  Fulton innovation, founding member of the wireless power consortium (WPC)

o   Over 61 WPC members, growing each week

Ø  500 products focused on health, wellness and beauty

Ø  Bio gradable and recycled package material

Ø  Analytical services and quality assistant more than 10,000 bioassays per year

Ø  7441 raw material managed

·         Online Purchasing

            Amway Company offer very easy purchasing to their distributor. To run their systematic operation, Amway provided many facilities to their members. They can make online purchasing while there are working. Once they back from office they can collect products at Amway head quarters and other ware house. Besides that, Amway also offer door delivery to the distributor who in deeded. Other than that, the member also can use their ATM card at counter. This enable the distributor feel very comfort and easy for them to do the purchasing. Thus, these conditions become one of the strength Amway Company.

·         No pyramid system

            According to direct selling association of Malaysia, they are over 500 Multi level marketing company become the part of the association. Based on them, there is several unregistered company also doing their Multi level marketing business in Malaysia. Even though there is several illegal and unregistered companies compared to them, Amway are one of the company which ensure the distributed wellness. Amway Company is not structured with pyramid.                     

            This business truly deserve for the hard working distributors. There’s no cheating or fraud in this business. For example some of the other MLM, the performance of depth line or the down line distributor enable the sponsor or the up line become the leader and ensure for their success. But in Amway, they will pay to the distributor based on their performance. This enable the distributor in bottom or depth line can succeed compare to their sponsor. Besides that, it will prove those who really involve in this business conquered a great height.

            For example, Managers who involve in Amway on 2004 with a dedication towards the business and after 10 years hard work enable him to become a Diamond direct distributor. On the other hand, some of the distributor qualified diamond within 4 years. It’s obviously shows that, this business is not having pyramid system and anyone can change their life as per their wish. This is one of the strength of Amway among other companies.

·         Establish direct selling association of Malaysia

           

            Even though there are many direct selling company worldwide, Amway is the pioneer company to direct selling they did they operation around 80 countries. In Malaysia, Amway was foot their steps on 1976. It almost 38 years operate business successfully at Malaysia and 55 years around the world. Amway also very pioneer MLM Company in Malaysia. Even though many other direct selling company in Malaysia, Amway is the only company who put their effort to establish direct selling association. Besides that, not only establish the association but Amway also become the leader of association and also provide moral support to the other company.  Establishment of the association enables the Amway Company become very strong and it’s become one of their strengths. 

ii.            Weaknesses

·         Unknown

            Although Amway is a pioneer to the direct selling, people are still not familiar with the products. They think that the products are expensive and they need to highly pay. Actually, people are not understood the product and the price. The products of Amway, manufacture with the extraordinary quality and high concentration. The product really cheap compare to the quality. Besides that, Amway product is high concentration and the consumer can use it for long run. The product customer needs to pay only once and they can use for long last. For example, the glister of Amway cost around RM25 and it is equal to 6 tube of tooth paste of other company’s products.  

            Besides that, the Amway Nutrilite very cheap compare to the quality. Each tablets of Daily Amway contain all the nutrition to a human being daily required.  Each tablets cost around 60 cents. On the other hand, the LOC of Amway is equal to 8 bottles of cleaning agent of other company. The LOC also have multipurpose function and can use as a floor shine toilet cleaner, car polish, window polish and kitchen cleaner. The customer only needs to pay RM30 or that product and they truly deserve more quality and benefits with long lasting. But unfortunately, people are often not use the Amway product because of lacking knowledge and wrong interpretation.

·         Not have proper guidance

                        Amway offer many course, rely and other classes to Amway distributor. But very few distributor are attend the classes and the rest are not eager learn to earn. This enable, the distributor is lack of knowledge and skills to succeed.  Besides that, the leader also not brings proper guidance to their down lines or depth lines. To provide the knowledge, the leaders should provide meeting to their distributors. They have to invite and make sure all their distributors are attend the meeting regularly. On the other hand, the distributor also got business training and practice discipline. This make they understand the business ethics and how to do business in a professional manner. Most of the distributors are sign up their down line and not bother about their product skills and ignore them. This make the distributor not understand the membership of a great and solid business which conquer the world compare to other competitor.

iii.            Opportunity

            There are many opportunities available in Amway such as own business to the distributor. The distributor should be Malaysian with 18 years and they only required RM90 to get the membership. Besides that, the distributor also not required a big capital to start their business. Other than that, the distributor also not required highly educated and experience. Moreover, this business also not required any good location. The distributor purchases the product from HQ or warehouse and they will distribute to their customer directly. So, there’s not required a good location. Furthermore, the business is not required good looking. Anyone with the age 18 above till old ages are able to do this business. In addition, this business also not required workers. So the distributor doesn’t have pressure to pay their workers like other business.

            Other than that, this business has royalty income. The income of the distributor can generate to the next generation. The royalty income is only provided for the great Hollywood’s star, fame singers and royal family members. But this business gives a great opportunity. Whenever the distributor passed away, their income pass to their family members even though they did nothing for the business. This will enable the person life including the family is secured even they are no more.

            This business also enables uncommon freedom to the distributor. When the distributor achieved platinum level and above, they can resign their job and they can concentrate on this business. This will make no need to work till retired. Through this business the distributor can do early retirement as per their wish. The companies also send the distributor to overseas to appreciate their hard work. Through this the distributor can go around the world once in a year and also twice in a year when qualified as a Diamond direct.

iv.            Threats

            Amway is a solid and pioneer business but unfortunately have some threats. The other direct selling company becomes the competitor to this business. The low price of other product, compare to Amway enable people to buy those products. Besides that, the shop ownership only provided to authorize person from Amway. But in Cosway the authority given to anyone paid for it. These enable more Cosway shop available around most of the cities and towns.

Competitive Advantage

Product Development

           

            Research and development play a vital commercial role creating better products through improving operational processes and helping the whole business focus upon its customers. Artistry products are the result of years of research, development and testing, supported by modern manufacturing principles. Amway's research is proactive, taking the lead in a market by researching the newest ingredients in the industry for continuing development of new formula using state of the art manufacturing techniques.

Marketing

            Amway is a global organisation which markets products in international market places. Planning for global markets is a much more complex process than for domestic markets. It presents many more risks than operating in a domestic market where goods are sold in only one local area. Global marketing involves recognising that people from all over the world have different needs is values, customs, languages rules and currencies.

             Even though it is said that, consumer needs around the world are converging, there are accepted needs and wants that go beyond national barriers. The marketing mix consists of a complex set of variables which an organisation combines together in order to ensure that both global and local corporate objectives are achieved.

Universal Packaging

Packaging is particularly important as part of the product surround in the cosmetics industry. The functions it serves include:

• Protecting the product which it contains.
• Acting as a communication tool conveying messages about the image and ingredients of the product and the manufacturer.

·         Creating brand identity between the numerous components.    

                                                                                                                

            More than $2.5 million was invested by Amway in high quality packaging communicating one theme, designed to position the cosmetics in the high quality premium sector. Different languages and product information ensure that the message is communicated to all targeted markets.

The Product Life Cycle

Markets are in a constant state of change. Over a period of time, tastes and fashions alter and the technology used to produce goods and services moves on. As a result, there will always be a demand for new products as old ones become redundant. According to the product life-cycle concept, all products move through four life cycle phases.

·         During the introductory phase growth is slow and volume is low because of limited awareness of the product's existence.

·         Sales rise during the growth phase and profit per unit sold reaches a maximum.

·         As products reach maturity, growth in sales starts to level off. Organisations have to invest heavily to extend the life cycle while competition becomes stronger.

·         When sales start to fall a product is said to be in decline.

In a global environment, managing and maintaining the market share for fashion products is particularly demanding. Cosmetic manufacturers are constantly challenged by different changes in the fashion industry. If these changes are not properly managed, products could quickly move into decline.

Strategic Planning

Creating the online presence

            The Amway project's starting point was to create a brand name for the site that was truly pan-European and which would be acceptable across a range of European markets. Developing a brand involves compiling for products with a range of features that identify them as a group e.g. name, logo and other distinctive elements. Marketers at Amway had to take into account the way in which the brand they developed would be pronounced, written and interpreted.

            For Internet trading, a new brand would also require a unique domain name that would not infringe any existing copyright. The development of the name involved considerable research. It had to be available and sound appealing

Combining offline and online

            Developing a new process like Amway's European online business takes place in distinct stages. The first phase was to construct a business analysis report that focused upon how the Independent Business Owners were likely to respond to the development of e-commerce opportunities.

            The market research involved running focus groups with Independent Business Owners in Italy, Germany, Spain and the UK. These groups enabled marketers to find out about the functions desired from an e-commerce site as well as giving an insight into many other e-commerce opportunities.

Launching the website

            The purpose of the Amway site was to provide e-commerce support for Independent Business Owners that would help them manage their businesses. It will available for 24 hours a day and 7 days a week, the site was developed to help users to find products, place orders, repeat previous orders and check all of the information about their businesses. All the distributors needed were an Internet-ready computer and access to the Internet.

            The day when a website is launched is also the day when it comes under the critical scrutiny of others, including competitors, so it has to be in good shape from the outset. That implies a large amount of testing and fine tuning at the development stage. The challenge then is to stay on schedule.

Competitor of Amway (Cosway)

Background of Cosway

            Cosway operations begin on December 1979 with a simple concept to make quality products at highly competitive prices. Today, it was growing up to become the one of Asia’s largest Network Marketing Company and the Cosway formula was helping thousands of members to achieve the financial success. The company distributes were distribute wide range of exclusive, quality products, from established manufacturers all over the world such as Personal Care, Organic Food and others. The company operates as a subsidiary of Berjaya Group Berhad. The company retails multi brand consumer durables, ranging from household, beauty, health care and car care products to audiovisual home entertainment, as well as children’s education learning aid products.

Cosway 4Ps of Marketing

·         Product

            Cosway distributes a wide range of exclusive, quality products from established manufacturer Cosway 4Ps of Marketing all over the world. These products are readily in demand as they fulfill the everyday needs of customers. Many possess unique features that distinguish them from other products in the market. Together, they ensure repeat sales and growing customer base.

·         Price

                       Known for providing great value for money products, Cosway pricing strategy allows its quality products to be more affordable and appealing to a wider range of people. Cosway achieves this by purchasing in large quantities directly from manufacturers, and then passing on the big volume discounts to its members and customers.

·         Promotion

           All year round excitement makes recruitment and selling easier Cosway believes in proactive, aggressive, exciting promotions to help members recruit more members, attract customers and retain customer loyalty. Other than that, for monthly promotions members can look forward to exciting offers and bargain buys all year round. In addition to Cosway regular products, these promotions also include gift, food items and innovative products at lower than retail prices. For Great Redemption Program, members simply love this. Hundreds of valuable gifts can be redeemed for totally free or at below cost prices by collecting Redemption Coupons when they purchase Cosway products. Redemption Point (RP) is special price reductions on Cosway products for members. Training and Product Demonstrations conducted regularly throughout the country to help members train their network of down line members.

Physical Distribution

           Cosway products are available at hundreds of easily accessible sales centers located throughout the country. This ensures that there will always be a centre close to where the distributors or their down line members work or live. This gives great advantages. The following are Cosway principles:

·         No keeping of stocks for the down line members. Buy only what needed.

·         No delivery of products to the down line members because they can buy directly from the sales centers too.

·         The distributor can recruit members anywhere and everywhere. The sales centers are present at every part of the country, next to where the distributor work or live and also in shopping complexes.

Conclusion

            Amway work each and every day to help people live better lives. They should achieve their vision by helping people everywhere discover their potential and achieve their goals by offering better brands and opportunities for the future, and by sharing generously with the global community. Amway focus on continuous improvement, progress and achievement of individual and group goals. Amway also anticipate change, respond swiftly to it, take action to get the job done, and gain from the experiences. Besides that, Amway also encourage creativity and innovation. Finally, now Amway operates in hundred countries, Amway should widen this business to all over the world so that more people gain Amway’s benefit and upgrade their life.