Case Study: Amway – Developing Competitive Marketing strategies
All organizations face an external business environment that constantly changes. Sometimes these changes are slight e.g. minor amendments to regulations or a new firm entering the market as a 'small player'. At other times, however, changes in the environment may have important consequences for an organization, e.g. new technologies, changing consumer tastes or a merger between two large competitors. Changes in the business environment create both opportunities and threats to an organization’s strategic development, and the organization cannot risk remaining static. It must monitor its environment continually in order to:
build the business
develop strategic capabilities that move the organization forward
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 and organizational constraints
Amway is an interesting example of a company that reviews its strategic capabilities and uses this review to develop its products and markets. More than 450 products carry the Amway name in the areas of nutrition, health, beauty and home. Amway also has a range of products that
include other well known branded goods. The company also offers a variety of third party services.
The process of strategic analysis helps an organization to understand more about its strategic position and to construct answers to questions such as:
What is happening to our business environment?
What do we need to know about our markets and customers?
What new options should we consider?
How can we develop our competences to meet all of the changes in the business environment?
By asking these questions of itself, a business looks to match its own objectives for growth and development with the reality of the business environment. Businesses need to be realistic. They must base decisions not upon wishful thinking or blind optimism but upon close and careful analysis of products and markets.
Amway and Marketing mix
Amway is different from the more traditional distribution channels in that the business has developed through direct selling. Amway has over three million Independent Business Owners (IBOs) worldwide. One way in which Amway has diversified its activities is through creating an on-line business opportunity called 'AMIVO' to support and enhance its traditional business.
One of the most important lessons to learn about successful marketing is that consumers do not buy products, they buy benefits. And Amway has taken care of that. 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.
Amway and stakeholders
Amway uses different ways to communicate with its various groups of stakeholders. The method chosen depends on the message and the person receiving the message. Consumers affect how Amway develops and promotes products. They do this by indicating their preferences and requirements through feedback. Amway can then make more of particular products or change the format of others. Consumer demand also influences how much stock Amway needs to carry. Consumers can show where Amway needs to address issues or concerns to improve the business.
Amway's business plays a key role in the communities in which it operates. Amway has a global strategy for producing, distributing and marketing its products worldwide. It also has a strategy for promoting corporate social responsibility (CSR) in a global way. Amway operates in many different markets worldwide and has a range of affiliates and ABOs. It therefore has to devise and communicate its plans for corporate social responsibility activities carefully to take account of different priorities and interests.
In today's highly competitive environment, an organization has to develop a business strategy that provides a strategic fit between its resources and the changing business environment. Amway has continued to develop by using a range of strategies which have enabled Amway to build its business by continuing to broaden its customer base and enhance the service it offers to Independent Business Owners, Members and Clients.
Read the above case study and answer the following questions:
1. Investigate how the micro environment and the macro environment have an effect on its marketing and business.
2. Analyze the STP (Segmentation, Targeting and Positioning) strategies of the organization. Evaluate its marketing mix which leads to achievement of consumer satisfaction and organizational goals.
3. Develop strategies that could result in the organization taking better marketing decisions.
1. The micro enovironmental factors that effect the business and marketing of Amway are:
- customers- Amway provided products that are of higher quality to satisfy the customers of an upper level. Customers are the most essential factor that can effect any business specially when it is a retail business. The success and survival directly depends on the satisfaction of the customers.
- Employees- Amway works on the system where the customers of the business are the employees themselves. They buy products of the company and sell them as well being a part of their network. Hence the employees should have the required skills and knowledge to work for selling the right products with the right strategy. If not then it will not only effect a few customers but the whole chain of network.
- Suppliers- These are people who help in keeping the products stock suffienct by regular supply of the material for the manufacture and supply of the finished products. Their effective role in the marketing and business is essential.
The macro environmental factors that effect the business and marketing are:
- Advertising and promotion- Amway used its employees and customers for this purpose initially who advertised their products face to face through seminars and meetings. But of late has started advertising through televisions and ad campaigns.
- Competitors- Companies like Lakme and P&G market products of the same kind as Amway and have big brand names to create competitive environment for the company.
- Technological, political and legal factors- Amway uses its technology for research and development of its products on continous basis. Technology help its business to grow as well as marketing to take place smoothly. Political and legal factors are the metting of standards by the products marketed by the company. They have to pass in the quality tests and found legally permissible to be used by the public.
2. The Segmentation, targeting and positioning strategy of Amway is as follows:
Segmentation: They divide their products into personal care, home care, nutrition care and cosmetics. These products are strategically divided into the segments of the market like demographic segment involves age in which the products are available for every age , the nutrious products being for old age customers and children. Beauty products for middle aged people. The second segment is psychografic in which the products are available to middle and upper class customers, their products being expensive then the others. Under behavioral segment, amway keeps a strategy of loyalty bonus for its customers who also serve as its sellers.
Targeting: For taregting strategy Amway mainly focuses on the female section of the society as the products it sells are beauty home and nutrition products which will atrract the females for their use or use by their families. Also these are direct business products hence the females at home can get involved in selling them further.
Positioning: They use the strategy of more for more. they provide products that are of higher quality and give better services to the customers by direct selling and promotions. They price their products higher but due to their distinctive features the customers are ready to pay that price.
Marketing Mix of Amway that helps it to achieve customer satisfaction and organizational goals are:
Product: They offer a number of products under the categories of personal products, nutritious products, home products and cosmetic products. The products are costlier than the other companies and posses a higher quality too.
Place: They practice direct marketing without the involvement of a distribution channel. Their products are not available in the market but are sold direct from the company representative to the customer. Recently they have started selling their products online too.
Price: They price their products higher than the products in the market and claim them to be far more better in quality for the high pricing. Though their products target higher society for customers, they also sell some products that are at lesser price and target the middle class customers.
Promotion: Their promotion soely lies on word of mouth or through face to face promotion. The customers who have used their products themsleves becomes the sellers and promote the products to other customers. This chain keep developing with the increase in customers.
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