Amway Case Study

7/22/2019 Amway Case Study

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The role of stakeholders

IntroductionAmway is one of the worlds largest direct sales companies. It is a globalenterprise and is privately owned by the families that started thecompany in 1959. Amway manufactures, markets and distributes morethan 5! consumer products. In the "# Amway distributes a variety ofproducts, including$% &ersonal 'are ( fragrances, body care and hair care products% )kin 'are and 'olour 'osmetics% *urables ( cookware and water treatment systems% +utrition and ellness ( food supplements, food and drinks% 'atalogue Items ( third party electrical goods% -ome 'are ( laundry, cleaning and car care products.

Amway employs 1,!!! people worldwide in its offices, manufacturingcentres, warehouses, call centres or stores. It also works with around threemillion Amway Business Owners A/0s in more than 2! countries.3hese A/0s are the link between Amway and its products and theconsumer. 3hey also link Amway with communities across the globe. 4ormore than5 years, Amway 'orporation has enabled people to have a business oftheir own. Amway has built up a strong regional structure aroundregional affiliates, for eample, Amway "# and the 6epublic ofIreland. 0perating through the regional structure, affiliate companiesare responsible for$

% forecasting ensuring enough stocks are available to meet demand% managing customer service and contact with customers% efficient distribution to ensure products reach A/0s on time and in top condition% product promotion and A/0 support, for eample, supplying brochures to A/0s.Amway is an eample of a business that recognises its widerresponsibilities. It recognises that to be a good corporate citizen, itneeds to support causes that matter to the communities in which itoperates. As well as its business aims, the company has a range of socialand ethical aims that are part of a 78lobal 'ause &rogram.Amways global vision is to help people live better lives. At the heart of this

commitment isthe 0ne by 0ne 'ampaign for 'hildren that helps disadvantaged childrenfrom around the world. 3his programme aims to support Amwaysemployees, A/0s and customers in putting time and money into helpingdisadvantaged children get access to medicine and education. Amwayworks with many different groups of people to carry out its business. 3hiscase study eplores the relationship between Amway and itsstakeholders.

Stakeholders)takeholders are groups or individuals who have an interest in the

decisions of the company and its business. )takeholders can be internalto the business, such as employees, or eternal, like suppliers, customersor the public.


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A company may have shareholders who can be internal or eternal stakeholders. Asaprivate company, the families who own Amway are its sole shareholders.It is important that Amway communicates regularly with its stakeholders.3hey can affect or be affected by the business.Amway uses different ways to communicate with its various groups of

stakeholders. 3he method chosen depends on the message and theperson receiving the message$% websites, emails and voice mail updates promote products andservices to A/0s and customers and keep them up(to(date% industry and trade memberships enable Amway to share and receive industryinformation% publications target key sales messages, for eample, its monthly newsletter forA/0s,Amway Focus% events and ehibitions help Amway to communicate to A/0s, consumersand guests about running an Amway business and the products it canprovide.

How stakeholders affect AmwayAmway is a direct selling company, selling products directly toconsumers without going through traditional retail outlets or 7highstreet. A supply chain links the finished productsto end consumers. Amway has its own distinct supply chain, placing astrong emphasis on its A/0s. 3hey are able to focus on individualcustomers and their needs. 3his supply chain is different from a moreconventional supply chain that sells goods to final consumers through

retail outlets. Amways way of working depends on building lastingconnections with the end consumer. 4eedback provided by consumers andA/0s helps to shape future changes in products and the service provided.

)uppliers must produce :uality goods that Amway A/0s can sell with

confidence. 3he goods should offer value for money and provideguarantees that they will meet Amway standards. )uppliers maycontribute to the design and appearance of Amway products.A/0s operate independently as small businesses. 3hey develop direct


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supply channels and sell products to friends and customers that theyknow or meet. 3hey need to have a fleible approach to business. 3heyre:uire Amway to provide high :uality, value for money products with a1!!; satisfaction guarantee. A/0s determine for themselves how theywill conduct business. 3his is a 7self regulatory environment. -owever,

they sign a contract to


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work within Amways 6ules of 'onduct and Code of Ethics. If A/0s donot conduct business within these rules, their behaviour could reflectback on the company.'onsumers affect how Amway develops and promotes products. 3hey dothis by indicating their preferences and re:uirements through feedback.

Amway can then make more of particular products or change the formatof others. 'onsumer demand also influences how much stock Amwayneeds to carry. 'onsumers can show where Amway needs to addressissues or concerns to improve the business.ith many different types of stakeholders, it is possible that differentgroups will have different key obecti!es or priorities. 4or eample, abusiness needs to make a profit but customers want low prices. 3hecompany might find it difficult to support price cuts, as this would reduceits profit. 3hese two priorities might be in conflict.

How Amway affects its stakeholdersAmways !ision is 7helping people live better lives. Amways businessplays a key role in the communities in which it operates. Amway has aglobal strategy for producing, distributing and marketing its productsworldwide. It also has a strategy for promoting corporate socialresponsibility ')6 in a global way. ')6 refers to the role that acompany plays in meeting its wider commitments as a citi


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% It develops campaigns that support the business and social aims of thecompany. 8etting the image right is vital in a business that relies onbuilding relationships with individuals and the wider community.


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% Amway regularly seeks to develop new products in line with marketresearch aimed at finding out what customers want.% Its employees volunteer at different charity organisations.% It has shared ?9 million around @15! million with non(profitorganisations since the company began.

Amway produced its 8lobal 'ause &rogram in !! as the result ofetensive research. Amway defines a global cause as 7a social issueaffecting many people around the world engaged in a struggle or aplight that warrants a charitable response. 3he 8lobal 'ause &rogram$% helps Amway to bring its vision to life% declares what the organisation stands for% builds trust and respect in Amway brands% establishes corporate social responsibility as a high priority.In developing its global cause strategy, Amway also listened to what itsA/0s cared about. any favoured a cause to help children. 3his led toAmways partnership with "#ICE$s Immunisation &lus programme. 3hisaims to provide vaccination against the si most serious diseasesaffecting children in the developing world. Amways business imagebenefits from the relationship with "+I'B4. "+I'B4 benefits from thefundraising Amway and its A/0s contribute.

Ethical businessEthical enterprises do more than simply provide goods and services forcustomers. 3hey also make a real contribution to the communities inwhich they operate by$% creating employment and =ob security

% providing products that give consumers good value for money% contributing to creating a more caring and cared(for community./usinesses operate in a competitive environment. 3hey maycompete on a number of factors$% price% range of products% :uality% speed of service% customer service.Amway is a global enterprise. It must comply with the laws of the manydifferent countries in which it operates. Its business ethics provide a

framework to guide the behaviour of the company and its stakeholders. Aspart of its business !alues, it protects its consumers through the :uality ofthe products and by offering guarantees of satisfaction. It promotes andsupports ethical selling behaviour amongst the A/0s through its codes ofconduct. -owever, in a highly competitive market where businesses aresimilar, Amway needs to finda way of achieving competiti!e ad!antage. *emonstrating a positiveinvolvement in the community and attention to environmental issues canprovide a business with competitive advantage. It shows that thecompany behaves in an ethical way, shares its values and enhances its

image as a responsible organisation. Amway recognises that to respondto ')6 issues, it must base its business on the principles of 7relevance,simplicity and humanity.4or eample, Amway set up the 70ne by 0ne programme following


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discussions with various organisations involved in providing help tounderprivileged communities worldwide.Amway is also active in a number of programmes to reduce its impact on theenvironment,


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including$% supporting organic farms to grow the plants for its vitamin and mineral products% training employees to protect the environment, for eample,encouraging re(use and recycling to conserve resources% changing product formulations to be more concentrated and

biodegradable, which reduces packaging and waste% using sources of renewable energy, for eample, a wind farm at itsorld -ead:uarters will provide 1!; of energy needs% measuring its environmental impact by auditing its activities tointernationally recognised standards.All these activities carry a cost, therefore Amway needs to balance thecosts of its corporate social responsibility programmes against not onlythe benefits of doing so, but also the cost of not doing so./usiness practices that do not take account of ethical behaviour mightlead stakeholders to reconsider their relationship with the company.)uppliers might stop trading or customers might stop buying whichwould result loss of revenues. At the company level, it might lead toinfringement of the law or loss of reputation, which would influence thewider public.

ConclusionAmway is a global direct selling organisation. It has to deal with manydifferent stakeholders with different ob=ectives. 3hese stakeholders maybe internal or eternal to the company and can affect or be affected byAmway in different ways.Its organisational structure is based on a network of A/0s who work

independently. 3herefore, it is important that Amway sets the standardsof ethical business behaviour forthe people who work with, and for, the company. It demonstrates thesestandards by setting rules of conduct and codes of ethics. In addition, itputs its ethics into practice through its various ')6 programmes ofactivity, supporting the environment, its employees and disadvantagedchildren across the world.

%uestions1. ho are the stakeholders and what methods of communication doesAmway use with eachC

. Bplain how the A/0s operate their business and the potential issuesC>. *escribe Amways strategy and its impact on its stakeholdersC. "sing eamples, discuss the meaning of an ethical businessC

Amway Case Study

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