Am Way

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BPMS 1013 Theory and Practice of Islamic Business Year 2010/2011

Table of Contents

1.0 History and Background 2

2.0 Amway Culture 5

2.1 Mission

2.2 Vision

2.3 Values

3.0 Amway as a Direct Sales company 8

3.1 How Amway Works

3.1.1 Sponsoring

3.1.2 Retailing

3.1.3 Developing Communication Networks

4.0 Amway Product Lines 17

5.0 Amway Marketing Strategies 23

5.1 Developing a Competitive Marketing Strategies

5.2 E-commerce

5.3 Target markets and Market Segmentation (Global Marketing)

5.4 Meeting Social Responsibility

6.0 Criticism of Amway 38

7.0 Conclusion 44

References

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1.0 History and Background

Amway is a direct selling company. Amway originally established at Michigan,

United States. It was founded on 1959 year by Jay Van Andel and Rich DeVos.

The founder’s fundamental are freedom, family, hope and reward. There are six

enduring values as Amway visions to help maintain on the business has been built

on. The six values are partnership, integrity, personal worth, achievement,

personal responsibility, and free enterprise. They launched their first product,

Liquid Organic Cleaner – one of the world’s first bio-degradable, concentrated

multi-purpose cleaners. This product had become a high seller during year of

1959 and begins the inheritance of taking our stewardship for the earth seriously.

After that, Amway business starts to develop, in geography, sales and product

offering.

The company had achieved $50 million during 60’s to 70’s years. Amway

produced the brand of Artistry which debuts with 11 products and 37 shades. This

product has grown to become one of the top five selling premium skin care

brands. Another famous brand which is Nutrilite, which is belongs to Amway had

developed their product line into home, beauty and nutrition sections. Nutrilite

had grown to become the world’s leading brand of vitamin, mineral and dietary

supplements.

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In Amway 80’s to 90’s century, it reaches an additional 20 countries through the

power of more than one million distributors, included in Malaysia. The founder,

Jay Van Andel had proudly announced that Amway had surpassing the $1 Billion

sales mark. The company develops into 33 other markets in the region of the

world, including Malaysia, China and South Africa. Amway would in excess of

double in size during the decade; this is the result of hardworking by our

distributors, employees and partners around the world.

In Malaysia, Amway is the leading direct selling company. The company

established during 1976 year, started with five employees, a small office and

warehouse facility. Today, they have a core distributor force of 208,000 from all

over the Malaysia and they achieved the sales turnover of RM663.9 million for

the financial year ended 31 December 2009. Amway Malaysia is a founder

member of the Direct Selling Association of Malaysia (DSAM). Their

representatives have all the time actively involved in different industry

committees. Currently, the chairman of Amway Malaysia is Dato’ Abdul Halim

bin Mohyiddin.

Amway also manufactures its own products and sells it through network

marketing. All their products are marketed solely through independent Amway

distributors. There are 12 Regional Distribution Centers (RDCs) & Shops located

at Malaysia, where it is at Butterworth, Kota Kinabalu, Miri, Sibu, Ipoh, Kuching,

Petaling Jaya, Melaka, Johor Bahru, Kuantan, Sandakan, Alor Setar. Another one

was located at Bandar Seri Begawan, the country of Brunei Darusaalam.

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Amway specialized in variety of products. There are five core product lines,

which are Nutrition & Wellness (NUTRILITE), Skin Care & Cosmetics

(ARTISTRY), Personal Care (GLISTER and SATINIQUE), Home Care, and Home

Tech (ATMOSPHERE). All nutrition products are certified Halal by the Islamic

Food & Nutrition Council of America (IFANCA). IFANCA is identified by

Jabatan Kemajuan Islam Malaysia (JAKIM, Pusat Islam) as an Islamic body that

concerns requirements of Halal Certification for meats and products for export

into Malaysia. Additionally, The Personal Shoppers Catalogue Programmer

promotes a broad assortment of consumer products sourced or manufactured

locally together with food and beverage, personal accessories, garments and

household appliances.

Amway Malaysia has focuses on creating a healthier minds and happy childhood

amongst children through its One By One Campaign. One of the projects is

Happy Healthy Wards Project, the objective of the project is to build a more

conducive and happy upbringing for recovering children at general hospitals.

Besides that, workshops, camps, seminars, education programmer have been

brought out to reach children and parents too. Amway Distributors and employees

are encouraged to give out their contributions to the community by volunteering

their time at cheerfulness activities which is created by Amway at the redecorated

pediatric facilities under the Happy Healthy Wards Project.

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2.0 Amway Culture

2.1 Amway Mission

AMWAY offer all people the opportunity to achieve their goals through

the AMWAY sales and marketing plan by the partnering of distributors,

employees and the founding families, the support of quality products and

service. AMWAY’s customers and distributors can receive additional

compensation from AMWAY by achieving the designated level of

AMWAY, aside from their volume rebate.

2.2 Amway Vision

The primary vision of AMWAY is to be the best business opportunity in

the world. Amway achieve its vision by helping people everywhere

discover their potential and achieve their goals by offering better products

and opportunities for the future, and by sharing generously with the global

community. Amway take great pride in our commitment to business

excellence, caring for people and their communities, and concern for the

environment

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2.3 Amway Values

Partnership

Partnership is essential to AMWAY business success. It is combination of

founding families, employees and most importantly, products and service

from business AMWAY. AMWAY always try to do the best interest of

their partners, in a manner which increases trust and confidence. The

success of AMWAY is the result of cooperation and hard work done by all

customers and distributors.

Integrity

AMWAY do what is right, not just work only. AMWAY success is

measured by the respect, honesty, truthfulness and credibility of action,

values, method, principles, expectation and outcomes. AMWAY reveals

the link between integrity and increased performance, quality of life and

value provides access to that success link.

Personal Worth

Everyone has the superiority. AMWAY always acknowledge that every

person is worthy of respect, deserves fair treatment and enjoy the success

from their fullest potential. Therefore, all these advantages should be

exploited to achieve a better standard of living. AMWAY perception about

life is not difficult for those who try to find all advantages of covering all

the weakness.

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Achievement

Achievement is the basic drive all our action. Achievement goals can

affect the way a person performs a task and represent a desire to show

competence. Most of our goals are incentive-based. AMWAY motives for

achievement can range from biological needs to satisfying creative desire

or realizing success in achievement of individual and group goal.

AMWAY anticipate change, respond and take action to get the job done

and to get experience from all creativity and innovation thought.

Personal Responsibility

Personal responsibility includes being accountable for the degree and level

of our health, wealth, success and happiness. For example, give 100

percent effort in helping achieve corporate or team goals and helping

people for shared success. One of the best ways to encourage personal

accountability among AMWAY staff is to become a role model. AMWAY

must teach, show the way and take the lead and then behave and act

responsibility to be good citizens in communities.

Free Enterprise

Free enterprise means competition. AMWAY are proud advocates of

freedom and free enterprise. Economic advancement gives advantage of

the free market. Therefore, AMWAY try to produce what they think

customers will buy at the highest price possible. Price changes take place

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all the time. It depends on the current state and the market economy in the

country.

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3.0 Amway as a Direct Sales company

Amway was founded in the USA on 1959 and now, after a few decades it growing

to global business which employing more than 6,000 people worldwide. Amway

is different with convention business and consumer goods business, Amway is

one of the world's largest direct sales companies with over 3.3 million

Independent Business Owners in more than 80 countries and territories in Asia,

Africa, Europe and the Americas. The critical relationship between Amway and

the seller or Independent Business Owner is at the heart of Amway's approach to

direct selling. 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.

What is direct selling? It is a method of marketing consumer goods and services

directly to consumers in their homes or the homes of friends, at their workplace

and similar places away from shops through explanation or demonstration of the

goods or services by a salesperson. Direct selling is a sales policy based on

interpersonal and human relationship, chosen by individuals and corporation,

producers and distributors who take the initiative of a direct and physical contact

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with consumers in order to offer goods or services at their or place of

employment. Direct Selling is based on person-to-person (P2P)1 relationships

which mean Amway business owner approaches the consumer in order to sell its

goods rather than the consumer going to a shop.

Being a Direct Sales company, Amway does not use the conventional distribution

channels employed by traditional manufacturers. The term 'distribution channel'

describes the sequence of ownership as a product goes from the manufacturer to

the consumer. In Amway the distributors are known as Independent Business

Owners (IBOs), as they own the distribution business through which they sell the

goods. Independent Business Owners earn their income by making a profit on the

goods they sell (a margin between 20 and 30% depending on the product). They

can supplement this income by receiving a commission from Amway based on

both the sales they make and those made by their distributor network. Their

distributor network is the group of people they introduce to Amway and with

whom they work to help them build their own independent businesses. The

working conditions are very flexible. They can work full-time or part-time. In

fact, many have other jobs and use Amway to supplement their main income.

For the greater part, Amway's customers are not final consumers. Rather they are

the Independent Business Owners with whom Amway works. Most of these

Independent Business Owners operate from home and many of them have other

careers and want a flexible working relationship with Amway. They want to work

1 involving direct communication or contact between persons or parties

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at a time that is most convenient for them. This can be at any hour of the day or

night.

3.1 How Amway Works

Amway practices direct selling which is “A method of selling goods

directly to the consumer by an independent distributor. Furthermore, big

three foundations were work with Amway to become a largest and

successful direct sales company in the world. The big three foundations

works with Amway are sponsoring, retailing and developing

communication networks

3.1.1 Sponsoring

In Amway, sponsoring refers to the recruiting and guiding of new multi-

level marketers in order to grow a home business as a network marketer

and increase revenues over time. In addition to making sales to consumers,

sponsoring new recruits is essential to the success of the multi-level

marketing business process. By cautiously and strategically mentoring and

guiding new recruits, and company can continue to expand its network of

influence, bring in more sales and increase the earnings of all on the team.

Amway’s sponsoring uses the basic principles of network marketing and

continual lead generation. Getting in touch with more people and finding

those who are sincerely interested in owning a business are the primary

activities of the successful network marketer. Making sure that everyone

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brought onto the team has the support and guidance needed to also become

successful is part of the company sponsoring process.

In many cases, Amway sponsoring also includes making a financial

contribution to support new network marketers afford the investment

needed to get started. This can be in the type of waiving a portion of the

sign-on fee, helping with providing supplies and marketing materials, or

directly sponsoring a new recruit with the expectation that a certain

amount of sales will be generated through the first few months that the

new recruit is on board. In addition, the sponsor will provide training and

shadowing opportunities to the new multi level marketing marketer so that

he will be successful early on.

Furthermore, sponsoring is important because many new network

marketers stumble during the first few weeks or months following their

initial sign-up. This happens for a variety of reasons, such as a lack of

genuine interest, a shortage of funds, not enough time committed to the

business, poor support and training opportunities, or a lack of solid leads.

When a sponsor gets involved, the new recruit becomes the direct

responsibility of the sponsor, therefore all of the above issues can be

resolved immediately.

When Amway have a sponsoring, it means having a person to be

accountable to from the beginning, which can produce much better results

as a network marketer. Many people are accustomed to having a

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supervisor or a manager to report to versus being completely on their own

as a business owner. By using a similar method, MLM sponsoring takes

the place of a superior and can produce a set of expectations that must be

met in order to generate sales and produce more leads which will grow the

business for the entire team.

3.1.2 Retailing

Retailing is key success of network marketing business or direct selling.

Retailing is the process of selling goods to consumers on which retail

margins are earned and performance bonuses gained, it enables

distributors to provide immediate financial incentive rewards. Amway

good in use retailing in its products such as Personal care, Home care,

Health care, Beauty products and some other in order to helps the retail

sales volume grow gaining immediate profits in business. Amway

establish customers and retail products by Word of Mouth which means

referral marketing, Amway let its distributors speak about their products

by using and recommending to their friends and relatives. The distributors

of Amway always being in the right place at the right time and know

which product currently a customer need and just speak your experience

about Amway products.

Direct selling involves sales people showing and demonstrating products

to obtain orders. The objective involves matching consumer needs with the

product. The better the match, the more lasting the potential for the

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relationship between the seller and the buyer. The selling process is aided

by Amway's retail strategy to provide high quality, readily purchasable

items with a good environmental positioning, offering consumer good

value for money.

3.1.3 Developing Communication Networks

As with all direct selling activities, the process involves two-way

communication and this can be time-consuming. Therefore, a clear

communication is essential for Amway when managing activities. Amway

needs to communicate regularly with its 35,000 distributors in order to

help them prepare for their increasingly challenging role. Messages to

Amway's distributors should, therefore, be as clear and direct as possible,

limiting areas in which misinterpretation could arise. Amway using four

communication channels which is corporate event, training, line of

sponsorship and publication to develop an effective and efficiency

communication networks.

Corporate Events

Corporate events include specially arranged functions, such as product

fairs, conferences and seminars, which distributors at different levels are

invited to attend. Face-to-face communication at a range of events helps

Amway and its distributors to get to know each other. They also provide

an opportunity for distributors to get to know each other and are useful for

relaying messages, giving advice and generating personal discussion. Events

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include Pace Setter, a reward incentive to help new and existing

distributors reach the 6bonus level within three consecutive calendar

months. It also encourages a balanced business, with equal amounts of

retailing and sponsoring - essential for long-term success and profitability.

Another events use by Amway is Direct Distributor Seminar which allows

newly qualified Direct Distributors to meet the Amway Management

Team, tour the UK Headquarters, attend key informative, motivational

business sessions and go to the New Direct Distributor Gala Dinner.

Participation at these events enables distributors to contribute ideas and

solutions to problems encountered. The relationship between Amway and

its distributors can, therefore, take place in an atmosphere of mutual trust

and respect.

Training

Training builds the skills and knowledge of distributors and therefore

improves competence levels. For Amway, the starting point of the training

process is to identify the skills and knowledge necessary for distributors to

carry out their role. Acquiring product knowledge is an important aspect of

training and preparation. As Amway relies upon the personal service of its

distributors and the quality of its products, it is essential that distributors

are not just shown how to use products but also how to merchandise them

to their best advantage.

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Lines of sponsorship

Amway is essentially a people-based business - without people, the

business cannot expand. The business of each distributor grows via new

customers and through the sponsorship of new distributors. Established

distributors are involved in helping newly sponsored associates to

merchandise Amway products. Distributor groups meet to discuss

company procedures and their goals. The groups also discuss new product

launches and promotions, the administration of their businesses and

support new and existing distributors. These lines of sponsorship provide

constant, face-to-face support from professional associates.

Publications

Written communication is useful as a permanent source of reference.

Amway uses a range of written communications. These include

Amagram , this magazine is mailed directly to all Amway distributors in

the UK, the Republic of Ireland and Channel Islands. Amagram is used to

communicate information about new products, promotions, community

news, distributor events and recognitions as well as news of other affiliates

throughout the Amway world. Amagram shows how distributors can make

more out of their business. It is also used to help distributors understand

the philosophy by which the business operates and the legislation

regulating the Direct Selling Industry. For example, The Trading Schemes

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Act 1997, widens controls over illegal 'pyramid selling' and provides basic

standards of business practice for participants in legal Trading Schemes.

Diamond & Leaders' News - This is used to communicate special

information to leading distributors. It may involve providing them with

information which they need to pass down to other distributors or it could

provide top distributors with 'elite' information such as the previews of

launches or any changes in policy which only applies to this group, at a

particular time.

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4.0 Product Lines of Amway

There are five core product lines which are Nutrition & Wellness, Skin Care &

Cosmetics, Personal Care, Home Care, and Home Tech.

Nutrition & Wellness

The main product is Nutrilite. Nutrilite is a vitamin, mineral and dietary

supplement brand. Nutrilite has offered variety of supplements in order to fulfill

the needs of health. Especially towards general nutrition, heart health, weight

management and children’s nutrition.

Nutrilite sources are natural. It uses organic plant concentrations. Those plants are

harvested and processed at own certified organic farms in California, Washington

State, Mexico and Brazil. The plants are highly purified vitamins and minerals.

This is to make sure achieve the quality specifications. Every ingredients used in

Nutrilite products are widely researched, checked and formulated to produce a

Nutrilite that meets the nutritional needs of people on their way to finest health.

Nutrilite product families are vitamins & minerals, sports nutrition and weight

management.

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Nutrilite vitamins & minerals refill the nutritional gaps for men, women and also

children when daily foods are not enough to hold a healthy lifestyle. Nutrilite

Sports Nutrition products help to achieve what an athletic desire for. Weight

Management products allow ones to achieve and shape a healthy weight in a

healthy way.

Best sellers for vitamins & minerals are like Nutrilite Double X Vitamin/ Mineral/

Phytonutrient, Nutrilite Protein Powder, and Nutrilite Double X Vitamin/

Mineral/phytonutrient-31-Day Supply/ with Case. The best sellers for sport

nutrition are Nutrilite Chocolate Protein Shake, and Nutrilite Sports Drinks-Fruit

Punch. Best sellers for weight management are like Nutrilite CLA500-180 Count

and Nutrilite Meal Bar- Blueberry Crunch flavor.

Skin Care & Cosmetics

The main product for Skin Care & Cosmetics is Artistry. Amway believes that

beauty is derived from truth. The philosophy and put into practice has sets Artistry

among the world’s top five, largest-selling, finest skincare brands, and the world’s

top ten, largest-selling, finest cosmetic brands. Artistry product families are

Artistry Essentials, Artistry Time Defiance, Artistry Luxury and Color.

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Artistry Essentials have stressed on a fresh perspective on personal style, with the

combination of natural botanicals to keep skin healthy looking and strong. These

products are for all types of skin, which is providing optimal skin health with

maximum ease of use.

Artistry Time Defiance, an anti-aging Artistry skin care system defies age by

focusing on the importance of cellular communication. These products are with

the combination of anti-aging Derma Cell Exchange technology, repairing the

signs of aging to help skin look younger. The series of Crème Luxury is about the

experience of the truth of skin transformations. It gives women the power of

CellEffect, re-energizing skin for optimum performance and a revitalized

appearance. It will bring up the rough skin to firmer, softer, smoother and more

radiant skin that actually acts up to 15 years younger.

The last series is Colour, this is about the concept where beauty and creativity

meet, Artistry Colour products counterpart and improve a woman’s natural

colouring, whoever she is, wherever she lives. Make the look that enhances

woman natural good looks with face, eye, cheek and lip essentials aimed to

disclose the beauty that lives inside every woman. Best sellers of Artistry products

are Artistry Light up Lip Gloss, Artistry Eye Colour, and Artistry Eye Define

Pencil.

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Personal Care

Personal Care products of Amway are basically focused on Hair Care, Body Care,

Oral Care, Men’s Skin Care, ALLANO & Aloe Care, SUDZY, and COLOUR

CREATION.

Body care provides a series of lotions, creams, soaps, shampoos and deodorants.

Those products are dermatological and allergy-tested to make sure it is always on

premium quality standards. The range includes Moisture Stick+, ALLANO Hand

and Body Lotion, Fresh Scent Deodorant and others.

Famous hair care brand is Satinique. Satinique Hair Care System provided a series

of hair care products having the special Ceramide Infusion System. The system is

aimed to penetrate the hair shaft; Satinique replaces lost lipids while provides

moisture purpose, reconstructing damaged hair. The products are clinically proven

to repair and strengthen the hair. While also protects the hair to against everyday

damage such as blow-drying and sun exposure. Hair Stylish John Gillespie is the

spokesperson for Satinique. Oral care main product is Glister. Its range of

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products included toothpaste, mouthwash, and used to include toothbrushes. The

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

many benefits. The best sellers of personal cares are BODY SERIES Antibacterial

Handsoap Refill, Men’s 3 Blade Disposable Razors and Mint Chill Dental

Whitening Gum.

Home Care

Home Care products are basically on laundry care, household, kitchen care, car

care, laundry & apparel care, homecare sales aids and others. The main brand of

Home Care product is LEGACY OF CLEAN. This brand has a line of powerful

and environmentally sensitive cleaning products. The product majorly in cleans

away dirt, grime, grease, and dust without affecting human health or global

environment. This product works out as well as or better than most others.

Household cleaners by Amway are best known in North America for its original

multipurpose cleaning product LOC, SA8 laundry detergent, and Dish Drops

dishwasing liquid. SA8 with Bioquest was rated the best-performing laundry

detergent, scoring 99 out of a possible 100 points. In 2008, Amway’s cleaning

products were named “Favourite of Experts” by an autonomous consumer survey

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in Ukraine. The best sellers’ products are DISH DROPS Dishwashing Liquid,

AMWAY SA8 Liquid Laundry Detergent and LOC Multi Purpose Cleaner.

Home Tech

Amway Home Tech products have many series of brands. The brands are eSpring

Water Treatment System, ATMOSPHERE Air Purifier, Home Alarm System 2,

Home Alarm System 1 Accessories, iCook/ Replacement Parts, WTS

Replacement Parts, Air Treatment System Replacement Parts, and Queen

Cookware Replacement Parts.

Amway’s eSpring water filter was introduced in year of 2000. This is the first

home water treatment system to incorporate a carbon block filter and ultraviolet

disinfection unit. It has becoming the first home system to achieve certification

for NSF Standards.

Besides that, another brand for Amway which is ATMOSPHERE, the air filtration

system has become the first air cleaner. It has been certified as Asthma and

Allergy Friendly by the Asthma and Allergy Foundation of America.

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The best sellers for Home Tech products are eSpring Water Treatment System,

ATMOSPHERE Air Purifier and Home Alarm System 2.

5.0 Amway Marketing Strategies

All organizations face an external business environment that constantly changes.

Changes in the business environment create both opportunities and threats to an

organization’s strategic development, and the organization cannot risk remaining

static. In order to monitor the environment that constantly changes, Amway have

developed several Marketing Strategies2 that move the organization forward and

improve the ways in which it creates products and develops new and existing

markets with a view to offering its customers better service

Marketing Strategies are plans of action designed to achieve the goals of the

organizations. In creating a marketing strategy for the Super Concentrated

Cleaning System, Amway needed to set out the key objectives it wanted to

achieve. The following objectives for the brand were set to increase distributor

2 A marketing strategy is a process or model to allow a company or organization to focus limited resources on the best opportunities to increase sales and thereby achieve a sustainable competitive advantage.

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profitability and productivity by providing a new and exciting business

opportunity. Other than that, it also aimed to optimize consumer convenience and

value through enhanced product differentiation with this exclusive and

revolutionary cleaning system. Marketing strategies developed by Amway

provide innovative and unique products to enhance the image of Amway’s

products.

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5.1 Developing a Competitive Marketing Strategies

Amway makes good use of market research and marketing strategies. This

has helped Amway to anticipate developments within markets and to

introduce new ideas that exploit opportunities and reduce any associated

problems to a minimum.

Ansoff's3 product/market matrix is one of the marketing strategies makes

use by Amway to identifying and categorizing market and product

developments and opportunities. It helps Amway to identify the nature and

extent of competition at a number of levels. For example, it helps

marketers within Amway to find out how well products are meeting

consumer needs and what aspects of competitors' brands appeal to

consumers. The matrix identifies various strategies open to organizations,

and splits them into four categories. For example, when selling existing

products to existing markets, organizations can look to improve their

penetration of that market, and so gain a larger market share.

Where a company introduces new products into its existing markets, this

may give it competitive advantage over its rivals through product

improvement. Market development involves taking existing products into

completely new markets such as finding new markets overseas. Better

customer targeting, further research and market segmentation often help

3 H. I. Ansoff was born in Vladivostock in December 1918 with an American father and a Russian mother. He want on to become a leading US industrialist. He further developed his career as a university professor and become famous of his work strategic analysis and planning.

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firms to identify these new markets. Diversification, on the other hand,

involves moving into new products and new markets at the same time.

This may involve a complete shift away from core activities into some

other form of related activity. It represents a step into less familiar,

perhaps even unfamiliar territory.

Ansoff’s Matrix

Products:

Existing Products New Products

Existing Markets Market Penetration Product Development

New Markets Market development Diversification

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

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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

organization 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.

For example, based on a Euro monitor study of 1998 estimated global

retail sales data, 'artistry is among the world' top five largest selling

prestige brands of facial skin care and color cosmetics. Others in this

distinguished group include Clinique, Lancôme, Estee Lauder and Sofia'.

Amway currently holds more than 380 patents internationally and has

approximately 430 patents pending. Within its product development

programmer, Amway's technical teams use the company's customer base

to monitor and test new product ideas.

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Market Development

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, where I stand for Independent Business Owners (IBOs), M

for Members and C for Clients or 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

Ansoff pointed out that a diversification strategy stands apart from the

other three strategies. The first three strategies are usually pursued with the

same technical, financial, and merchandising resources used for the

original product line. Diversification, however, usually requires a company

to acquire new skills, new techniques and new facilities. This implies

significant investment.

One way in which Amway have diversified its activities is through

creating an on-line business opportunity called 'AMIVO' to support and

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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.

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5.2 Amway E-Commerce

These days, we are surrounded by ‘high-tech’ developments. Ordinary citizens

may not suffer too much from failing to keep track of new technologies the

moment that they appear, but it can be disastrous for a business not to notice what

is taking place. One key challenge for any business is to see how new

technologies can be harnessed to develop the business and keep it ahead of the

competition.

Recent times, the Internet has once again forced businesses to rethink how they

operate. The Internet is potentially exciting but is also a real challenge. Businesses

have to look very closely at what the Internet can offer and then decide how well

it meets their own needs and the needs of their customers. Some businesses

carried out insufficient research regarding what the Internet had to offer them.

Others seriously underestimated the hazards of going online, to their own great

cost. If organizations do not accumulate ‘know-how’ and if they fail to monitor,

trial and introduce new technologies as they develop products and processes for

their consumers, they may find that their alert, progressive competitors have given

themselves a competitive advantage challenge.

Amway is different from more traditional distribution channels. Its Independent

Business Owners own their own business, with the flexibility to deal directly with

their own clients and to build up personal relationships. These Independent

Business Owners also have the ability to deliver Amway’s products to their

customers’ homes. Independent Business Owners sell to people they know or

32


meet. The personal contact and care they provide is an important element in direct

selling. They are also self-employed and can introduce others to the business to

form their own sales group of Independent Business Owners.

The channel of distribution describes the stages of ownership that take place as a

product moves from a manufacturer to a consumer. The increasing use of the

Internet by consumers has created a real potential for developing different types of

business models and for new approaches to reaching users directly and quickly in

their homes. A website enables people to communicate, no matter where they are

or when they work. This brings huge advantages to organizations that centre their

communication strategy around the Internet with a view to keeping their many

Internet-linked customers happy. With high levels of Internet use within the UK

and Europe, market research showed that Independent Business Owners were

Internet-ready, and that the time was right for Amway to develop e-commerce

opportunities that would offer the 24-hour service its customers were wanting.

Amway had already developed e-commerce opportunities with its Independent

Business Owners in the USA. This experience was there to be drawn on; within a

large organization, it is important to share knowledge so that best practice can be

followed from successful situations.

The web development provided Amway’s Independent Business Owners with an

alternative, enhanced way of managing their businesses. It gave them the chance

to use technology to communicate in a different way with Amway. Within a short

period of time, the website attracted a significant number of Independent Business

33


Owners who wanted to try the online service. Promotions helped to encourage

repeat use of the site by demonstrating the unique benefits that it offers. Using the

site allowed the UK Independent Business Owners to monitor their bonus and

sales in real time. It also helped them to see which areas of sales were worth

targeting as they developed their businesses. Trading on the Internet has also

helped Amway to refocus its business by flexibly engineering it to meet the needs

of its Independent Business Owners. At the same time, there are clear cost savings

for Amway in being able to communicate with its customers through the Internet,

rather than by using postal or telephone services.

The sites showed that, no matter what the size of the business, the Amway

business model works across the Internet. Given this successful outcome, Amway

was able to identify best practice on these older sites and then apply it to new sites

such as the AMIVO site used by IBOs in the UK. The AMIVO website

development has given UK-based IBOs an alternative, enhanced way of managing

their businesses. The website rapidly attracted a significant number of IBOs keen

to try the online service. The purpose of the Amivo site was to provide e-

commerce support for Independent Business Owners that would help them

manage their businesses. Available 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 users needed was an

Internet-ready computer and access to the Internet.

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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. The site was first

launched within the UK, mainly because of the UK’s high level of Internet use

and market readiness. Rather than go for a full launch, marketers within Amway

decided to opt for a soft launch. There is a natural hierarchy of Independent

Business Owners. The higher level, leading Independent Business Owners were

given the opportunity to use the site first. This helped to provide valuable

feedback about the site, which was then used to influence further development.

These trial periods helped the designers to iron out some of the issues associated

with the site and also prepare it for a full launch. The full launch of the site

involved password allocations, log-on details, navigation details, and direct

mailings to Independent Business Owners as well as training and support for

users. Amway’s ‘Amagram’ magazine helped the Independent Business Owners

to understand more about the ways in which the e-commerce process could help

provide their individual business needs. In order to bring customers on board, it is

usual to provide some incentive or added value to influence their patterns of

behavior. This is an aspect of sales promotion. The Independent Business Owners

were offered a number of small launch promotions as well as a range of additional

bonuses designed to encourage them to come online.

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5.3 Target Market and Market Segmentation (Global marketing)

Market segmentation4 is the process of breaking a market into sections which

match consumer needs. Where segments are identified as having requirements

that can be met by an organization, they can then be targeted. Finding the right

marketing mix would require finding the common ground between the geographic

differences and preferences highlighted by the research. The solution came about

through developing a product range suitable for all markets, developing universal

packaging and undertaking a global promotional campaign that met with regional

image requirements.

Through developing a product range for all markets, the maximum number that

could be produced at any one time can be determined. In order to introduce new

product, products that were under-performing would have to be deleted. This was

complicated by the nature of the marketplace, as one product might under-

performing in one region may be performing well in another region. Each region

was assigned the task of carrying out research to identify under-performing

products which could then be deleted to make room for new products. Through

this step, each country can draw the mix of products to the needs of its target

market, thereby ensuring the product requirements of all markets are met.

Besides, packaging is particularly important as part of the ‘product surround’ in

the cosmetics industry. The functions it serves include: protecting the product

4 A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing action

36


which it contains, acting as a communication tool -conveying messages about the

image and ingredients of the product and the manufacturer and creating brand

identity between the numerous components. Packaging is globally standardized.

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 target markets.

Furthermore, one of the biggest challenges for global businesses is designing

promotional and advertising materials that go beyond national and cultural

boundaries. The revision of Artistry was backed up with a promotional campaign

designed to build brand awareness, increase sales of the product range and

maintain a consistent global image to meet specific market needs. The challenge

was how to advertise the brand with images that would be appealing and

meaningful across a range of nationalities. A portfolio of promotional material

was produced using this ‘signature model’ in six different styles communicating

different moods and images. From this portfolio, Product Merchandisers of each

region could choose the advert containing the best images for each marketplace.

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5.4 Meeting Social Responsibility

A Successful business does more than simply provide goods and services for

customers. They also make a real contribution to the communities in which they

operate. Amway provides a good example of a business that recognises its wider

responsibilities. The world's most respected companies recognise that being a

good corporate citizen means supporting causes that matter to the communities in

which they operate. This is why Amway Europe has created links with the United

Nations Children's Fund (UNICEF)5. UNICEF is a global champion for children's

rights. It seeks to make a lasting difference and improve children's lives. The

United Nations Convention on the Rights of the Child sets out the right of all

children to reach their full potential. It is the foundation of UNICEF's work.

Working with UNICEF, Amway has launched an exciting pan-European

fundraising campaign for children. It recognises the importance of building good

working relationships with UNICEF's National Committees in each market in

order to roll-out fundraising programmes to Amway's IBOs and their customers.

Other than corporate with UNICEF, in order to give many of the world's children

a chance to live a better life, Amway launched the global One by One campaign

for children in 2003. One by One campaign is the idea of making a difference in

children's lives one step at a time. The campaign is part of an umbrella cause to

improve the wellbeing of children worldwide. The campaign name and logo are

colorful, cheerful, optimistic and hopeful. The objectives of One by One

programmer are aim to help Amway to bring its vision to life and declares what

5 An agency of the United Nations that administers programmer to aid education and child and maternal health in developing countries

38


the Amway stands for. It also builds trust and respect in Amway brands and

establishes Corporate Social Responsibility (CSR)6 at a high level. Staff and IBOs

of Amway are encouraged to support its One by One campaign for children.

Since 2001, Amway Europe has been an official partner of UNICEF and has been

able to contribute over €2 million (about £1.4 million). The focus is on supporting

the worldwide 'Immunization Plus' programmer. This involves, for example,

providing measles vaccines to children across the globe. The 'Plus' is about using

the vehicle of immunization to deliver other life-saving services for children. It is

about making health systems stronger and promoting activities that help

communities and families to improve child-care practices. For example the 'Plus'

could include providing vitamin A supplements in countries where there is

vitamin A deficiency. Amway and its IBOs across Europe have been supporting

UNICEF's child survival programmer. The need is great. One out of ten children

in Kenya does not live to see its fifth birthday, largely through preventable

diseases. Malaria is the biggest killer with 93 deaths per day. Only 58% of

children under two are fully immunized.

The work of the One by One campaign is illustrated by a field trip undertaken by

Amway IBOs to Kenya. The IBOs travelled to Kilifi in 2006 to meet children and

to find out what the problems are in various communities. They act as champions

spreading the message throughout their groups. In Kilifi, the focus is on trying to

reach the most vulnerable children and pregnant mothers. The aim is to increase

6 A management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders

39


immunization from 40% to 70%. Other elements of the programmer involve

seeking to prevent the transmission of HIV/AIDS to infants.

Amway's One by One campaign provides a good example of the way in which

businesses can make a difference in the communities in which they operate.

Research showed that Amway's stakeholders are committed to activities which

better the lives of families and children. The company has therefore been able to

formulate a plan and a well targeted programme to harness the commitment of its

people to help others and to create a more prosperous world. By working with

UNICEF it is partnering one of the world's most highly regarded children's

organisations. Together they are able to help children enjoy a better future.

40


6.0 Criticism of Amway

Amway is the largest multi-level marketing (MLM) organization in the world.

Amway have an impressive growth in the global, whereas it suffers from a

negative reputation in some quarters. The MLM system practices in Amway

company have cause strong repercussions.

6.1 MLM confine Amway Operate: ANTI-AMWAY CASES

There are several cases in the global which had critics Amway is actually a

fraud :

The government of England says that Amway is pernicious and

inherently objectionable7 and should be shut down and banned

from the country. It is because Amway currently operates with its

multi-level marketing plan.

USA is the based for Amway. US government had impeach

Amway in 1975-79 as a pyramid scheme fraud. The US Federal

Trade Commission allow Amway to continue but only on the

condition that it operate fundamentally as a retail-bases scheme

that sold a “business opportunity”.

In 2005, the country of China banned Amway’s multi-level pay

plan8. It means that China agreed with England. China studied the

Amway model and determined that it was a prescription for fraud.

7 In the Public Interest"England Wants to Kick Amway Out of the Country8 China has Outlawed MLM as It Is Practiced in the USA

41


They only allowed the company to operate only as a retail sales

operation, not an MLM.

At year 2006 to 2008, a group of Amway’s top insiders9 and one of

America’s premier law firms10 had filed in lawsuits and charging

that Amway is not retail-based but is exactly a fraudulent pyramid

scheme. It is just as what the US government , England and China

government charged.

There have indisputable statistical11 evidence is now available

showing that 99% of all Amway sales representative never earn

even one penny in profit. Based on the report, it show that Amway

is operates its MLM scheme. In fact, few sales people ever retail

any products to customers. They only “self-consume” and then,

recruit other “self-consumers.” In other words, Amway is a invest-

and-recruit scheme but not a direct selling business.

6.2 What sustains Amway in the face of the evidence and the charges for

fraud, deception and harm?

Got studies show that government payoffs to stave off investigation and

prosecution. Amway’s political influence-buying is well known12. There is

also the fear of disrupting a pyramid of $6 billion. Many current and

9 Amway/Quixtar Pyramid in Collapse10 Amway/Quixtar Sued as Pyramid Scheme11 Study of Ten Major MLMs and Amway/Quixtar Show Huge Consumer Losses and Pyramid Recruitment

12 Why the FTC Lets MLM Run Wild in America

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hopeful participants would loudly scream when Amway collapse all at

once from a government prosecution. They would blame regulators and

“unfair” publicity for the collapse. Lawsuits would explode in numbers.

As a consequence, government officials would resign and some Amway

executives would likely go to jail. It is similar to those when Enron fell

apart, or when the fraudulent real estate loan schemes collapsed in

America and keep Amway’s house of cards intact, for now.

But the popular myth surrounding Amway is another factor, perhaps even

larger than the role of regulators and judges. The Amway myths are stated

as below:

i. Amway is a sales company that sells product to people who

want its products.

ii. Amway offers a great income opportunity to millions of

people based on selling Amway products to retail

customers.

iii. Amway has integrity, tells the truth and operates on the

principles of Christianity.

iv. Amway’s offers success, happiness, and freedom and it is a

caing community.

v. Amway is a legal and legitimate business that is respected

and revered by business organizations and political and

religious leaders worldwide.

43


If the statements above are true, the charges of the government of England

that Amway is “pernicious and “inherently objectionable” cannot be

correct.

The myth also cannot be true if the claims in the lawsuits from Amway’s

own insiders that the company is a fraudulent money trap and pyramid

scheme are accurate. Amway cannot be viable and legal and a pyramid

fraud at the same time. Amway cannot be based on Christian principles if

it is true that it promotes an insidious and entrapping lie about product

sales. The business community cannot respect Amway if it is true that it is

merely a pyramid scheme that hawks a bogus income promise. So the

greatest factor sustaining Amway is not sales, since it has no customers,

only a revolving group of failed sales people. It cannot be sustained by

providing a viable income opportunity, since it is now undeniably

demonstrated that 99% of all Amway sales people never earn even one

penny of profit and more than half quit within a year, having lost money.

The government of England revealed this data and it has been verified in

the USA also.13

1.1.

13 From The Times,November 24, 2007: Amway Sales Group Facing Government Closure Call

44


6.3 What sustains Amway is a widespread belief in the Amway myth?

While people “believe,” England and China government officials will

have the political courage to enforce the law on Amway. To enforce the

law means not only eliminating a fraud, but also dashing beliefs, taking

away the dream, the illusion, and the hope that Amway represents to

many people.

Economic earthquake will occur and few judges want to prompt that

cataclysm when the belief is revealed to be a lie. Even they know about

the fact and can proved it, but they rarely report the facts. The facts

strongly conflict with deeply held beliefs of their readers. The reporters

are dare not challenge the beliefs. It is a force stronger than censorship.

It is a rare publication that will challenge its readers.

Amway stands naked in front of the world wearing only its myth and it

dares anyone to tell the truth about its naked frauds. As in the story of

the emperor in the parade wearing no clothes, the crowds see the

nakedness but no one will acknowledge the fact. Fear overcomes

evidence and soon most will swear the emperor was dressed beautifully

in magnificent robes (sales to retail customers and income to the

salespeople).

The longer the Amway myth endures, the harder it is to unveil. How

could it be untrue if so many people believe it and for so many years?

45


Many victims prefer the myth to the truth of being scammed and fooled.

Politicians on the take use the myth as legal protection and to allow

them to receive Amway’s campaign contributions. Law firms and PR

companies promote and defend the myth for fat retainers. Advertisers

love the myth as they get paid by Amway. Public speakers stand at the

podium and reinforce the myth after receiving generous speakers’ fees

from Amway. Amway’s home state allows the myth because it offers

jobs and tax money.

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7.0 Conclusion

As a conclusion, Amway was founded on 1959 year by Jay Van Andel and

Rich DeVos. Now, Amway is one of the world's largest direct sales companies

with over 3.3 million Independent Business Owners in more than 80 countries

and territories in Asia, Africa, Europe and the Americas. Amway has its own

mission, vision and values which guide the company and employee to move the

organization forward and improve the ways in which it creates products and

develops new and existing markets with a view to offering its customers better

service. On the other hand, there are several primary product lines of Amway

such as Nutrition & Wellness (NUTRILITE), Skin Care & Cosmetics

(ARTISTRY), Personal Care (GLISTER and SATINIQUE), Home Care, and

Home Tech (ATMOSPHERE). Three foundations were work with Amway to

become a largest and successful direct sales company in the world which are

sponsoring, retailing, and develop communication networks. Amway as one of

the successful direct sell company in the world is a example of good makes use

of marketing strategies. Ansoff's product/market matrix is one of the marketing

strategies makes use by Amway to identifying and categorizing market and

product developments and opportunities. Other than provide goods and services

for customers, Amway also aim to meet social responsibility. Amway linked

with UNICEF and establish One by One campaign in order to achieve those

objectives. However, there have numbers of criticism toward Amway such as

pyramid scheme fraud and Amway’s political influence-buying.

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Am Way