Background of the Amway Business Venture

Background of the Amway Business Venture Amway was co-founded in 1959 by Jay Van Andel and Rich Devos, they worked together in a variety of small entrepreneurial ventures since their teens whereby they found that they shared many common values, interest and aspiration. Amway is well known for direct selling, and it started by developing and selling their own product line of high quality, high concentrated home care products. Multipurpose Liquid Organic cleaner, known as L.O.C. product line was the first companys product(httl://www.amway.com). Amway is a part of the Alticor group of companies (parent company) with headquarters in Ada, Michigan, USA. Company has wide range of products which reaches to some where around 450 quality of products. Amway has always been at the centre of Global market for the last 50 years hence their phrase Think Global, Act Local Amway is good at direct selling where they sell their product person to person manner generally in their home or home of others or other places away from permanent retail location whereby direct sales occur through explanation or demonstration by salespersons normally referred as Direct Sellers. This has proven successful, with direct selling in 2007 alone generating an annual turnover of close to 111 billion US $ worldwide. Amways trend has shown significant growth from when the company was founded. In 1960s its first years sales reached an impressive US$500,000 while the business continued to grow in United States, where Co-founders decided to expand to Canada in 1962. In 1989 Amway was recognised as a corporate leader in promoting environmental awareness and education when it received the United Nations Environmental program Achievement Award. In 1990s Amway saw a dramatic international expansion. In just half of the decade, Amway doubled the number of its international affiliates. Annual sales kept growing, by the end of decade more than 3 million sales people in some 80 countries and territories were involved in the Amway business worldwide and the retail sales reached and estimate US$5 billion. Around the world Amway affiliates continued to support their distributors with the launch of e-commerce sites that extends the Amway Business opportunity into cyberspace. The web-based Amway business around the globe, supported by the local distribution and manufacturing and warehousing facilities, has assured on time and accurate order processing and delivery of products. Amway today still remains under the parent company Alticor Inc.(www.alticor.com) today Alticor has net sales of US$7.1 billion (fiscal year 2007) sales force of more than 3 million independent business owners and contracting agents more than 13,000 worldwide em ployees, 160 distribution centre and among other developments. Amway has a long-standing tradition of Corporate Citizenship which since the company started has been an important goal. Amway is subjected to different laws in different countries and Amway goes beyond mere compliance with applicable legal requirements and always places importance on maintaining the highest ethical standards. This is ensured through; treating employees with due respect, maintaining a relationship with Amway Business Owners, which is based on trust and partnership, ensuring trustful relationship with customers, providing high quality products, caring for the environment through the conservation of resources committing themselves to the wider community. Social Responsibility since the founding days has always been an integral part of the company with its Global One by One campaign, Amway wants to provide children with a chance to live a better life, and to achieve this aim the company supports various projects promoting education and health as well as cultural advancement among children in more than 50 countries.. Amway have been successful because of their clear vision of the business, it has formulated strategies which has helped them achieve their goals and objective and also assist them in meeting their stakeholders needs and promoting corporate social responsibility in a global way and also acting in an ethical way, all these drives have enabled them in becoming one of the most successful direct selling company in the world. Cited on (www.amway.co.uk) LITERATURE REVIEW STRATEGY: It is important for any organisation to have a long term plan in order to achieve their objective. Hence strategy can be defined as long term objectives and general means by which an organisation/business intends to achieve them, it is an area of management that is concerned with general direction and long term policy of the business as distinct from short term tactics and day-today operations (Karami, 2007) according to one American Business historian, he defined strategy as the determination of the basic long term goals and objectives of an enterprise, and the adaptation of causes of action and the allocation of resources for carrying out those goals (Chandler, 1962). Strategy as both position and perspective can be compatible with strategy as plan and or pattern although these definitions can be involved more than just stating what a strategy is, in relation to these definitions Johnson and Scholes (1993) describe the strategy as concerned with: Full scope of an organisations activities Strategic Management: Mainly Strategies are created and designed for the whole organisation by senior managers therefore managing strategy should start from the top to bottom. Effective strategies involve discussion and communication. Strategic management focuses on integrating managerial abilities and techniques such as; marketing, financial/accounting, human resource management, production management, research development to achieve organizational success. (David 1995). Corporate Strategy: organisations should be able to sustain competitive advantage in a discrete and identifiable market, It is the way a company creates value through the configuration and co ordination of its multimarket activities. When all these are carefully managed then the organisation is able to achieve its competitive or corporate advantage. Corporate strategy involves the following; vision which is the ambitious aspiration of a company, for example; Amways CSR global strategic vision is to make life better for children, Goals and Objectives; short and medium-term quantitative targets e.g. Amway raising funds for good causes, resource; these are skills assets and capabilities of the firm, business; this is the industry by which the firm operates, Amway sells health and beauty products and it has extended its product portfolio to household. Structure; the way the corporation is divided into discrete units Systems; set of formal policies and routine and Processes; informal elem ents of the organizational activities. (Bower, 1970). Corporate Advantage results from a harmonious combination of the above elements which work together to create value of the company. The Strategic Planning Process The top down model which has a structure of top down is followed my quite a few big companies in the year 1970. According to this model the process in which strategic planning takes place became deliberate which involves high level managements who constructs the company strategy and further they push is over to organization for execution.(Nolan 1993). . The following is a flowchart model of this process: Mission | V Objectives | V Situation Analysis | V Strategy Formulation | V Implementation | V Control Organizational Mission The mission of the company is basically reason of its existence. Mission is generally presented in the form mission statement, which mainly explains the reasons for employee and work also the companies market image to customer. In the process of strategic formulation, this statement decides where company basically wants to go. Organizational Objectives Objectives are fixed targets that the organization wants to reach, generally in terms of most of organization its earning profit. The objectives is always challenging but should be reachable. The objective is countable enough for company as it can keep a track on its progress and also areas in which improvement needed. Organizational Situation Analysis Once firm has decided its target, it starts with its existing situation to make a strategic plan to reach those targets. Modification in the surrounding environment normally creates new opportunities and new ways to reach the targets. An environmental scan is performed to identify the available opportunities. The firm should know its own merits and demerits in order to select the scope that it can pursue with a more chances of success. The external surrounding consist of two aspects: the macro-environment which generally has affects on all companies and a micro-environment that impacts only the companies in a specific industry. The macro-environmental analysis consist of political, economic, social, and technological factors and sometimes is considered as a PEST analysis. ( Ansoff,1987) The situation analysis can produce huge amount of data, which is not mainly related to strategy building. To create the information and make it more manageable, it sometimes is beneficial to separate the internal factors of the company as strengths and weaknesses, and the external environmental factors as opportunities and threats. Such an analysis often is referred to as a SWOT analysis.( Brooksbank,1996) http://www.marketingteacher.com/Lessons/lesson_swot.htm Organizational Strategy Formulation Once a clear image of the company and its surrounding is with you, particular strategic alternatives can be produced. While multiple company having multiple options differing from their situation. Michael Porter identified cost leadership, differentiation, and focus as three generic strategies that may be considered when defining strategic alternatives. Porter advised against implementing a combination of these strategies for a given product; rather, he argued that only one of the generic strategy alternatives should be pursued.( MIcheal Porter,2004) Organizational strategic Implementation The strategies are mostly shown in top-level specific terms and priorities. The existence of strategy in functional policies mainly highlights all the topics which are not easily visible or even accessible at higher level. Generally the strategy are shifted to particular policies in functional domain like Marketing, R D, Procurement, Production, Human resources, Information systems. The one of the important task involved in this process is identifying all the available resources and then further arranging them at right place in the company. Organizational Control After any strategy being implemented then further ahead at each stage the strategy gets measured and recalculated in order to make changes subject to requirement. The special control system is generally being facilitate to look after this. Performance is generally standardized to particular level and every individual performance is cross checked to ensure the success of the objective. The whole process and the end result of success generally can be seen via tools such as Dashboard etc STAKEHOLDERS: Stakeholders is generally a person, group or company which has direct or indirect share in an cmpany. The concept stakeholder was developed by R. Edward Freeman in year 1980. They can be either external or internal to the organisation. There are various types of stakeholders which can be one of the following: Employees, Communities, Shareholders, Investors, Government, Suppliers, Labour Unions, Government regulatory Agencies, Industry Trade Groups, Professional Associates, NGOs, Prospective employees, Prospective customers, Local communities, National Communities, Public (Community), and Competitors. Further more internal stakeholders are the ones who are generally a members of the business organisation and they can also inclusive of Owners and shareholders, managers, staff and employees Mainly External stakeholders are not considered as a part of the company; where as few groups has both internal and external stakeholders. Such as staff or shareholders who are also local residents. Also External stakeholders present outside the company but has a direct interest in what it does. All stakeholders are not essentially equal and are entitled to different considerations. First is to establish who exactly your stakeholders are. Communication of Strategy With stake holders Amway have a wide range of stake holders, whereby each one of them have interest in the company. These are as follow: Global headquarters Amway Europe; they are interested in the growth of the business and want to see the CSR strategy matches with the company strategy as a whole. Amway regularly communicates with them through publications and updating their sites regularly. ABOs; the main interest is that they want to see the company (Amway UK) being a responsible caring organization at the same time as helping them earn some money. Communication is through face to face i.e. regular meetings example in 2005 they organized a joint briefing for ABO leaders, printed materials and Emails Customers; they are more interested in good quality products which meet their needs as well as being efficient. Normally Amway uses direct selling for their product which is door to door hence they are able to meet them face to face. Staff; it is at interest of any staff in a company to work for an organ ization which does the right thing and which make them feel comfortable at work place, this could be in terms of having good training in place among other needs. Main method of communication is face to face either with their managers etc. AMWAYS Business Strategy Amway being a global direct sales company, works with around three million ABOs in over 80 countries. These ABOs form the links with consumers and the communities in which they operate by offering and selling them a wide range of Amways own branded products. ABOs are stakeholders in Amway. Amway manufactures and then distributes a range of their branded products to the ABOs worldwide, the typical products that ABOs sell include: Skin care and cosmetics, Personal care, e.g.; fragrances, body care, etc, Clothing and footwear, Cookware, Water treatment systems and Nutrition and wellness products such as food supplements, food and drinks. The ABOs are self employed and are highly motivated people, hence the Amways support in enabling people to have their own businesses. The ABOs operate their business independently as small businesses and develop direct supply channels and sell the products to people who they know or meet. They also introduce others to the Amway business, this chain is shown in a simple diagram on the following page: Source: www.thetimes100.co.uk The ABOs work to Amways rules of conduct and code of Ethics, which are about being honest and responsible in trading, Amway places strong emphasis on the ABOs since they are more able to focus on individual customers and their needs, hence serving them better and building lasting relations with them. They work in a self regulatory environment, and should also have a flexible approach to business. However as mentioned earlier they sign a contract to work within Amways rules of conduct and code of Ethics, since they are the final and the most influential contact with the end consumers in the supply chain, and if they do not operate within the set rules it could bring a bad impression on the company. CONCLUSION: Base on our findings we have been able to find out how Amway have been successful in doing their business. Amway have been able to succeed in developing hundreds of product they sell through direct selling, though they engage in direct selling method they have few retail outlet whereby customers can purchase their products. Stakeholders are integral part of the business today and their contribution shape the success of the business as a whole, clearly Amway ensures that by meeting their needs at all aspects of their business. Today many businesses need to have a Strategy the way they do their business it is important because it reinforces the strength between the business owners and the stakeholders at large. Amway take this aspect seriously in the way they do their business and tries to be ethical in what they do especially when they are conducting business in different countries it is important to respect rules and regulation of each country. Good communication is important in any business today, either internally or externally, Amway have strategic communication in place and this enables them to be able to do business and they continue to improve on their communication through innovation and development of software and communication networks. All this have helped to shape Amway and enabled them to be one of the best Corporation Globally today.