Amway in China (A): A New Business Model SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Sales & Marketing
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Amway in China (A): A New Business Model
Amway is a large manufacturer of household products that uses the direct selling approach. The company was established in the late 1940s and over the years, still using direct selling, branched into the United Kingdom, Europe, and Japan. With this global success, it expanded further, into the Chinese market. However, the company must look at its strategy after the Chinese government implements regulations on the direct marketing business model.
Swot Analysis of "Amway in China (A): A New Business Model" written by David Tan, Justin Tan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Amway Direct facing as an external strategic factors. Some of the topics covered in Amway in China (A): A New Business Model case study are - Strategic Management Strategies, Corporate governance, Marketing, Policy, Regulation and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Amway in China (A): A New Business Model casestudy better are - – geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing,
digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, etc
Introduction to SWOT Analysis of Amway in China (A): A New Business Model
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Amway in China (A): A New Business Model case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Amway Direct, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Amway Direct 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 in China (A): A New Business Model can be done for the following purposes –
1. Strategic planning using facts provided in Amway in China (A): A New Business Model case study
2. Improving business portfolio management of Amway Direct
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 Amway Direct
Strengths Amway in China (A): A New Business Model | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Amway Direct in Amway in China (A): A New Business Model Harvard Business Review case study are -
Successful track record of launching new products
– Amway Direct has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Amway Direct 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.
Effective Research and Development (R&D)
– Amway Direct 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 in China (A): A New Business Model - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Sales & Marketing industry
– Amway in China (A): A New Business Model firm has clearly differentiated products in the market place. This has enabled Amway Direct to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Amway Direct to invest into research and development (R&D) and innovation.
Learning organization
- Amway Direct 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 Amway Direct is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Amway in China (A): A New Business Model Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Amway Direct is present in almost all the verticals within the industry. This has provided firm in Amway in China (A): A New Business Model case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Low bargaining power of suppliers
– Suppliers of Amway Direct in the sector have low bargaining power. Amway in China (A): A New Business Model has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Amway Direct to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Amway Direct is one of the leading recruiters in the industry. Managers in the Amway in China (A): A New Business Model are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Cross disciplinary teams
– Horizontal connected teams at the Amway Direct 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.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Amway Direct digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Amway Direct 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.
High brand equity
– Amway Direct has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Amway Direct to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Amway Direct has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Amway in China (A): A New Business Model HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Amway Direct
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Amway Direct does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Amway in China (A): A New Business Model | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Amway in China (A): A New Business Model are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Amway Direct is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Amway in China (A): A New Business Model can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Amway in China (A): A New Business Model, in the dynamic environment Amway Direct has struggled to respond to the nimble upstart competition. Amway Direct has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Amway in China (A): A New Business Model 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 Amway Direct has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Amway Direct 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.
No frontier risks strategy
– After analyzing the HBR case study Amway in China (A): A New Business Model, it seems that company is thinking about the frontier risks that can impact Sales & Marketing strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Low market penetration in new markets
– Outside its home market of Amway Direct, firm in the HBR case study Amway in China (A): A New Business Model needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Amway Direct is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Amway Direct needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Amway Direct to focus more on services rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As Amway in China (A): A New Business Model HBR case study mentions - Amway Direct 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Amway Direct 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.
Capital Spending Reduction
– Even during the low interest decade, Amway Direct has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Slow decision making process
– As mentioned earlier in the report, Amway Direct 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. Amway Direct 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.
Opportunities Amway in China (A): A New Business Model | 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 in China (A): A New Business Model are -
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. Amway Direct can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Amway Direct 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Amway Direct 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 Amway Direct to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Amway Direct has opened avenues for new revenue streams for the organization in the industry. This can help Amway Direct to build a more holistic ecosystem as suggested in the Amway in China (A): A New Business Model case study. Amway Direct can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Amway Direct can use these opportunities to build new business models that can help the communities that Amway Direct operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Leveraging digital technologies
– Amway Direct can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Buying journey improvements
– Amway Direct can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Amway in China (A): A New Business Model suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Amway Direct can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Amway in China (A): A New Business Model, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Amway Direct has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Amway in China (A): A New Business Model - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Amway Direct to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Amway Direct can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Amway Direct 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.
Building a culture of innovation
– managers at Amway Direct 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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Amway Direct in the consumer business. Now Amway Direct can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Amway in China (A): A New Business Model External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Amway in China (A): A New Business Model are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Amway in China (A): A New Business Model, Amway Direct may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
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. Amway Direct can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Amway Direct with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Amway Direct 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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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. Amway Direct needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Amway Direct can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Amway in China (A): A New Business Model .
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 Amway Direct.
Increasing wage structure of Amway Direct
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Amway Direct.
Stagnating economy with rate increase
– Amway Direct 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.
Shortening product life cycle
– it is one of the major threat that Amway Direct is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Amway Direct will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Weighted SWOT Analysis of Amway in China (A): A New Business Model 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 in China (A): A New Business Model 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 in China (A): A New Business Model 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 in China (A): A New Business Model 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 in China (A): A New Business Model 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 Amway Direct needs to make to build a sustainable competitive advantage.