Multi level marketing model of amway corporation

National Economic University Advanced Education Program -o0o - Course: Commercial Business Group assignment Multi level marketing model of Amway corporation Group Lecturer: Le Thi Thai Ha Ha Noi, 2023 Nguyễn Thị Minh Châu 11219666 Đỗ Phương Thảo 11219797 Vương Thị An Phương 11214917 Nguyễn Hương Giang 11211782 Nguyễn Đạt Thành Đồng 11211345 This is a preview Do you want full access? Go Premium and unlock all 15 pages Table of content Access to all documents A Introduction Get Unlimited Downloads History and organizational structure 1.1 History of Amway Improve your grades 1.2 Organizational structure Business sector and main activities 2.1 Business sector 2.2 Main activities Upload B Analyze their performance on theories related to Share based your documents to unlock commercial business model Theories related to MLM model 1.1 Direct retailing 1.2 Word of mouth Free Trial 1.3 Multi level network Get 30 days of free Premium 1.4 Reward model structure 1.5 Unique and Exclusive 10 Amway’s achievement 10 Already Premium? Log inof MLM model, C Evaluate the advantages and disadvantages opportunities and threats for Amway 11 Advantages and Disadvantages of MLM 11 SWOT Analysis 12 Conclusion 15 A Introduction History and organizational structure 1.1 - History of Amway 1959: The foundation of Amway Amway's story began with the friendship between two youths who would become the founders Jay Van Andel and Richard M DeVos became friends at Christian High School in Grand Rapids Both served in the Army Air Corps during World War II, after returning and went through many ups and downs in their journey of doing business In April 1959 they created The American Way Association, later renamed the Amway Distributors Association and chose as their first product a biodegradable liquid organic cleanser made by a small Michigan firm, the kind of high-demand merchandise that could be easily sold by MLM - 1962: Amway first became international Amway opened its first international office in London, Ontario, Canada This would be the second of over 100+ countries and territories into which Amway would eventually expand - 1972: Amway acquired Nutrilite Amway acquired the Nutrilite brand, the firm that had introduced Van Andel and DeVos to direct selling, the brand offerings to include home, beauty and nutrition categories Until now, Nutrilite has grown to become the world’s leading brand of vitamin and dietary supplements - 1999: Alticor founded The founder of the Amway corporation established a new holding company, named Alticor and new companies: a sister (and separate) Internet-focused company named Quixtar, Access Business Group, and Pyxis Innovations - 2019: #1 Direct selling company Over 60 years after founding, Amway is the “World’s Number-One-Direct Selling Company according to Direct Selling News Global 100 and this is the 8th year Amway had dominated this position 1.2 Organizational structure Main departments of Amway: • Finance and accounts • Marketing and Sales Underpinning the whole Amway structure and method of operation is The Amway Sales and Marketing Plan It is a complex, multilevel marketing plan In the company's own words, The Amway Sales and Marketing Plan is "based upon repeat sales of exclusive products and an incentive system designed to financially reward the distributor in direct relation to the amount of time and effort devoted to the business" • - Human resources and administration Board of directors: Business sector and main activities 2.1 Business sector This is a preview Do you want full access? Go Premium and unlock all 15 pages - The pioneer of multilevel marketing (MLM), Amway Corporation manufactures and sells its own products as well as brand name products from other companies to all documents through a network of Access million independent distributors worldwide Unlike many other MLM firms, Amway offered a broad selection of items, ranging from cleaning Unlimited products, cosmetics, andGet vitamins to travelDownloads services, discount car purchases, and catalog merchandise - Improve your grades Catagories: • • Beauty (231): make up, skincare, fragrance, … Nutrition (168): vitamin&supplemnt, sport nutriton, weight management, energy drinks,… • • Upload Share yourfordocuments to unlock Gifts (77): seasonal gift, gift the home, … Home (65): Cookware, water treatment, air treatment, laundry, surface cleaners, … 2.2 • Personal Care (63): Bath&Body care, hair care, oral care, … • Catalogs (16) • 30 days APSA-80, of free Premium B2B Products (11)Get : Nutriplant, … • Business Materials (6): Logo merchandise, Literature, … Free Trial Main activities • Product manufacturing • R&D • Training • Design • Distribution • Marketing and sales • Inventory management Already Premium? Log in B Analyze their performance based on theories related to commercial business model Theories related to MLM model 1.1 Direct retailing In traditional retail sales, a manufacturer or wholesaler sells products to a physical store or e-commerce company who then resell the product to the final customer In MLM, specifically Amway, the product will be sold through representatives also known as ABOs (Amway Business Owners) or through their website without through any retail outlets This means that you can only buy Amway products from a distributor or on their website, but not at regular retail outlets The reason Amway didn't choose retail format is because Amway's direct selling business model is built on the personalized customer service and product recommendations received from your Amway distributor, who know about the products and their benefits That's the difference between direct selling and traditional, online retail This is a direct business model and Amway believes their distributors a great job taking care of their customers as they have a vested interest in maintaining customer satisfaction and growing the customer base Currently, Amway has established several buildings called Amway center synthesize the experience of shopping for goods directly at the supermarket; Nutritional beverage experience area - Phyto Café; skin care experience area - Home Beauty; nutrition counseling area - BodyKey; food experience area - Home party, customer care switchboard area, meeting area and business office block This form of Amway can enhance the customer's experience when directly experiencing the product and increase reliability 1.2 Word of mouth Because there is limited retail point, brand awareness is not high in the minds of customers Therefore, the product sales will depend heavily on the ABOs performance: the ability to market the product to the consumer and their network Typically, a direct sales representative sells products and services initially to friends, family members, and coworkers Over time, a successful representative develops a larger pool of customers through referrals and marketing efforts 1.3 Multi level network In Amway’s Multi-Level Marketing model, the middlemen are eliminated Instead of having a large number of distributors, the company deals directly with a person who works as a distributors-marketers-salespersons-delivery agent The business model is based on people who wish to start or advance into an independent small business For this purpose, Amway has succesfully established massive business units or “units of distribution” depending on the markets in which it executes its business operations globally Through these individual distributors, Amway has entered into partnerships with various regional business owners in countries around the globe and have implemented its business model on a global scale As a result of this, Amway has increased its market penetration in the retail industry Supported by 20000+ employees empowering the millions of customers popularly called Amway Business owners (ABOs) through seminars, entrepreneurship programs have helped the company in making its products available globally 1.4 Reward model structure This is a preview Do you want full access? Go Premium and unlock all 15 pages • Stair-step breakaway MLM plan The Stair-Step Breakaway MLM Plan has a hierarchical management structure Access will to all The percentage of commissions be documents divided according to the hierarchy Each tier will have its own commission level and volume commission (surplus value) will Unlimited be calculated based onGet the balance fromDownloads the higher commission (%) minus the lower commission (%) Improve your grades Eg: If A joins the network and earns 12% at his current rank while B earns 5% in his team → A will receive 7% (12% - 5%) of the value of any goods sold by B, Upload regardless of where B is in the system (as long as there is no person higher than B between the two) Share your documents to unlock Consequently, the system will constantly make sure that it is valid and equitable When the distributors in your lower tier network reach a certain level of excess, Free Trial they can "drop out" from your team Direct commissions from their sales through their network or for their products will no longer be paid to you Nevertheless, you Get 30 days of free Premium will continue to receive a modest commission income from the network and volume of the split group of distributors Remember that despite coming from a large network, the commission percentage is low • Already Premium? Log in Amway's Compensation Model: There are types of income for Amway distributors: ➢ 10% Retail Profit: Assists distributors in earning money right away by selling products to consumers at retail prices ➢ Basic commission: Provides a commission to the distributor based on the product sales made by the distributor personally and by their team Up to 10% of income comes from sales made by clients under the distributor condition (Requirement: customers must be registered to become an Amway distributor) ➢ Core Plus: In addition to the standard commissions, Amway also offers a unique Core Plus bonus plan that closely matches the standard bonus plan and enables distributors to earn more money sooner 1.5 Unique and Exclusive MLM business enterprises, especially Amway emphasize strategies to differentiate its products Through emphasizing the unique aspects of its products, Amway is able to differentiate itself from other competitors in a similar product category and thus gain a differentiation advantage In addition, MLM business enterprises also focus on improving product quality Product quality is closely tied to word-of-mouth reputation With strict quality control in the manufacturing process, most popular direct selling products have a proven quality image over time, forming a solid foundation for domination their market Today, Amway is known worldwide for its more than 450 unique products, from environmentally sensitive laundry detergent and cleaning supplies to nutritional supplements and high-quality skincare and cosmetics The brand Artistry™, for example, has been seen on the red carpets of some of the most significant events in the world, from New York Fashion Week to the Busan International Film Festival Artistry Studio™ brand is the hottest new launch, with color makeup collections inspired by the most vibrant global cities Amway is also known for its earthsensitive laundry products and cleaning formulas, and durable household products such as eSpring™, the world’s largest selling brand of kitchen water treatment systems Amway’s achievement Amway is the world’s largest direct selling company (as ranked by 2021 Direct Selling News Global 100, published in the June 2022 edition of Direct Selling News, based on 2021 revenues with $8.9B reported sales, 2021) Amway manufactures and distributes nutrition, beauty, personal care and home products—which are exclusively sold in 100 countries through Amway Independent Business Owners (IBOs) Amway reported sales of $8.1 billion USD for the year ending December 31, 2022 This represents an overall decline from 2021 sales of $8.9 billion due to the strength of the US dollar, the sale of Metagenics, Inc (a non-direct selling entity), and the ceasing of operations in Russia On a constant currency basis, sales for Amway’s direct selling business were up 1.0% representing a third consecutive year of growth Several of Amway’s top markets experienced growth in 2022 including Mainland China, South Korea, Hong Kong, Malaysia, Taiwan and Vietnam Amway currently holds over 900 patents and global patents and is in the process of registering nearly 430 more copyrights With nearly 800 employees engaged in the research process, Amway has created, designed and invented new products that meet the needs of customers and the expectations of the global market In its product development program, Amway's engineering team uses existing customer capital to monitor and test new product ideas Today Amway manufactures over 450 products, with manufacturing facilities in China, India, and the US, as well as Nutrilite organic farms in Brazil, Mexico and the US (California and Washington state) Amway brands include Artistry, Atmosphere, Nutrilite, Artistry Men, Xs Energy, … C Evaluate the advantages and disadvantages of MLM model, opportunities and threats for Amway Advantages and Disadvantages of MLM This is a preview Do you want full access? Go Premium and unlock all 15 pages - For business: • Advantages: ➢ Access to all documents MLM is a cost effective strategy ➢ Large access to final customer ➢ Get Unlimited Downloads Easy to get data from the customers ➢ Wide opportunities to become global • Disadvantages: ➢ Negative perspective from people ➢ Strictly supervised by the government ➢ Structure & products can easily be counterfeited Improve your grades Upload Share your documents to unlock For individuals: • Advantages: ➢ MLM offers opportunities to entrepreneurs ➢ Helps in development of communication skills ➢ Flexible schedule ➢ Mentorship Free Trial Get 30 days of free Premium • Disadvantages: ➢ Network marketing is not for everyone ➢ Face-to-face interaction can be difficult ➢ It takes time to grow ➢ MLM Scams Alert Already Premium? Log in SWOT Analysis Strengths - Strong Global Presence Amway has a strong global presence, Weaknesses - Limited channel of products distributions established in 1959 and sustainably Amway’s channels consist of: ABOs existed for 64 years in the market, with network, website and app Amway over million business owners/agents in products are not freely available in the over 80 countries, across more than 100 market It is available for purchase only markets worldwide This demonstrates through business agents or owners who that Amway is not overly reliant on a single sell the products directly It is also market - available online Diverse Product Range - High price Amway offers approximately 450 products Amway products are relatively costly as in many different categories: personal compared to the products of other key care, nutrition and wellness, home care, players within the personal and health gift catalog, and cosmetics, … - care industry Received many accolades The costly price of the products therefore Amway has received numerous awards, limits the target market to only the including LEED Gold certification, the Asia premium segment making the company Pacific Frost & Sullivan Filtration Company lose the opportunity to establish its of the Year Award, and much more - presence in the lower segment of the market Diversified consumers Amway’s product portfolio caters to a wide - Heavily dependent on WOM to promote the product range of consumers, from young to old, men to women Despite this, women are Amway does not advertise on TV or the primary consumers of Amway through a brand ambassador and hence is products - Employee Base primarily dependent on word-of-mouth publicity that is carried out specifically by Amway employs more than 16000 people the ABOs nationwide emporing over million ABOs They also - Risky business model focus on training and invest heavily in the There is a high risk in the MLM business research and development department and the chain can break at any time MLM with nearly 800 people engaged in the is mostly a risky business, as if any top research process player exists or creates an issue, it impacts the bottom line So, when the chain is not consistent, there is a chance of losing many customers Opportunities - Threats More people are becoming health- - conscious Unstable political environment US and China trade war, Brexit impacting There is an increase in the number of European Union, Russia-Ukraine war and health-conscious consumers around the overall instability in the middle east can world due to increased health and impact Amway business both in local wellness awareness, the market is market and in international market experiencing significant growth - - Increasing competition Growing in Ecommerce and digital Amway is facing intense competition both marketing nationally and internationally, which is In the decade of IoT, people are changing preventing it from expanding its market their habits towards online shopping and share Competiors like Avon, Oriflame, actively in social media for the convenient Herbal life,… are all experiencing and fast connection This can benefit significant rise in the last few years, putting Amway to expand its customer base by heavy pressure on Amway increasing product availability, exploring - Low switching cost new mediums and new communication Because similar products are available in platforms in advertising - the market and E-commerce has Accelerated technological emerged, switching costs are very low, innovations and advances and thus brand loyalty is reduced and Tecnological innovations and advances being easily replaced by local products are improving industrial productivity, allowing suppliers to manufacture a vast line of products and services This can help Amway to significantly venture into adjacent products or reduce the price This is a preview Do you want full access? Go Premium and unlock all 15 pages Conclusion MLM has existed for decades and proved be legal in many countries Numbers Access to alltodocuments have shown that direct selling is still developing at high speed and have no sign Get Unlimited Downloads of slowing down Still, it is controversial and often compared to pyramid schemes While some multilevel marketing operations are legal like Amway, Avon, Improve your grades Oriflame,… others have come under investigation When an organization focuses primarily on recruitment, rather than selling products, this may also signal that it is operating under a pyramid scheme Sometimes, members of these schemes Upload will number in the hundreds or even thousands Many people had to suffer Sharein your unlock because of the illegal MLM model thedocuments past and intosome cases, the total value is incredible However, despite its bad reputation, MLM is still considered as a great invention in sales practice that leads to a big change in commercial activities Free Trial Get 30 days of free Premium Already Premium? 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