In April 1997, the president of Amway Japan (AJL, Tokyo, Japan), pondered how to reverse the first performance decline the company has experienced since entering the Japanese direct selling market in 1979. Established as the tenth overseas subsidiary of Amway Corp. of Ada, Michigan, AJL had grown to become the most successful company with 1996 sales of Y212 billion ($1.9 billion), accounting for 30% of Amway's worldwide sales. Having succeeded in doubling AJL's sales during the five years of his presidency, the AJL president now needed to develop a strategy not only for rebuilding growth in the second half of FY 1997 but also for achieving AJL's long-term goal of sales of Y300 billion by FY 2000. AJL faced the following issues in 1997: 1) fluctuating distributor motivation, 2) growing dissatisfaction with Amway products, 3) increasing difficulty in controlling the distributor network, and 4) a changing market environment. AJL could enhance its sales growth by boosting sponsoring, retention, and/or productivity of its distributor membership. Strategic options for AJL included: 1) penetration growth, 2) productivity growth, or 3) both. The AJL president needed to come up with a clear strategic design based on a thorough analysis of the pros and cons of each strategic choice.
Authors :: David J. Arnold, John A. Quelch, Yoshinori Fujikawa, Patrick Reinmoller
Swot Analysis of "Amway Japan Ltd." written by David J. Arnold, John A. Quelch, Yoshinori Fujikawa, Patrick Reinmoller includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ajl Amway facing as an external strategic factors. Some of the topics covered in Amway Japan Ltd. case study are - Strategic Management Strategies, Strategic planning and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Amway Japan Ltd. casestudy better are - – geopolitical disruptions, talent flight as more people leaving formal jobs, increasing transportation and logistics costs, technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation,
increasing energy prices, challanges to central banks by blockchain based private currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Amway Japan Ltd. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ajl Amway, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ajl Amway operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Amway Japan Ltd. can be done for the following purposes –
1. Strategic planning using facts provided in Amway Japan Ltd. case study
2. Improving business portfolio management of Ajl Amway
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Ajl Amway
Strengths Amway Japan Ltd. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ajl Amway in Amway Japan Ltd. Harvard Business Review case study are -
Organizational Resilience of Ajl Amway
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Ajl Amway does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Ajl Amway are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to lead change in Sales & Marketing field
– Ajl Amway is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Ajl Amway in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Ajl Amway has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to recruit top talent
– Ajl Amway is one of the leading recruiters in the industry. Managers in the Amway Japan Ltd. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High brand equity
– Ajl Amway has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ajl Amway to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Ajl Amway digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ajl Amway has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Effective Research and Development (R&D)
– Ajl Amway has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Amway Japan Ltd. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Ajl Amway is one of the most innovative firm in sector. Manager in Amway Japan Ltd. Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Ajl Amway is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Ajl Amway is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Ajl Amway is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Amway Japan Ltd. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Ajl Amway has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ajl Amway has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Weaknesses Amway Japan Ltd. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Amway Japan Ltd. are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Amway Japan Ltd. HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Ajl Amway has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the segment, Ajl Amway needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow decision making process
– As mentioned earlier in the report, Ajl Amway has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Ajl Amway even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Amway Japan Ltd., it seems that the employees of Ajl Amway don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Amway Japan Ltd., is just above the industry average. Ajl Amway needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Interest costs
– Compare to the competition, Ajl Amway has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High bargaining power of channel partners
– Because of the regulatory requirements, David J. Arnold, John A. Quelch, Yoshinori Fujikawa, Patrick Reinmoller suggests that, Ajl Amway is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Aligning sales with marketing
– It come across in the case study Amway Japan Ltd. that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Amway Japan Ltd. can leverage the sales team experience to cultivate customer relationships as Ajl Amway is planning to shift buying processes online.
High cash cycle compare to competitors
Ajl Amway has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Ajl Amway is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Amway Japan Ltd. can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow to strategic competitive environment developments
– As Amway Japan Ltd. HBR case study mentions - Ajl Amway takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Opportunities Amway Japan Ltd. | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Amway Japan Ltd. are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Ajl Amway in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Ajl Amway can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Ajl Amway to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Creating value in data economy
– The success of analytics program of Ajl Amway has opened avenues for new revenue streams for the organization in the industry. This can help Ajl Amway to build a more holistic ecosystem as suggested in the Amway Japan Ltd. case study. Ajl Amway can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Ajl Amway can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Ajl Amway can use these opportunities to build new business models that can help the communities that Ajl Amway operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Building a culture of innovation
– managers at Ajl Amway can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Sales & Marketing segment.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Ajl Amway can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Ajl Amway can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Ajl Amway is facing challenges because of the dominance of functional experts in the organization. Amway Japan Ltd. case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Ajl Amway can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Ajl Amway to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Ajl Amway to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Ajl Amway can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Manufacturing automation
– Ajl Amway can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Threats Amway Japan Ltd. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Amway Japan Ltd. are -
Shortening product life cycle
– it is one of the major threat that Ajl Amway is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Ajl Amway in the Sales & Marketing sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Ajl Amway has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Ajl Amway needs to keep up with the evolution of technology in the Sales & Marketing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Stagnating economy with rate increase
– Ajl Amway can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
High dependence on third party suppliers
– Ajl Amway high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Ajl Amway business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Ajl Amway needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Consumer confidence and its impact on Ajl Amway demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Ajl Amway can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Ajl Amway needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Ajl Amway with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Ajl Amway.
Environmental challenges
– Ajl Amway needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Ajl Amway can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Weighted SWOT Analysis of Amway Japan Ltd. Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Amway Japan Ltd. needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Amway Japan Ltd. is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Amway Japan Ltd. is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Amway Japan Ltd. is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Ajl Amway needs to make to build a sustainable competitive advantage.
