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 - – cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , increasing transportation and logistics costs, increasing commodity prices, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%,
customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, 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 -
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.
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.
Innovation driven organization
– Amway Direct is one of the most innovative firm in sector. Manager in Amway in China (A): A New Business Model Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Analytics focus
– Amway Direct is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by David Tan, Justin Tan can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
Training and development
– Amway Direct has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Amway in China (A): A New Business Model Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High switching costs
– The high switching costs that Amway Direct 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.
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.
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.
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.
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.
Operational resilience
– The operational resilience strategy in the Amway in China (A): A New Business Model Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
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 -
Aligning sales with marketing
– It come across in the case study Amway in China (A): A New Business Model 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 in China (A): A New Business Model can leverage the sales team experience to cultivate customer relationships as Amway Direct is planning to shift buying processes online.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Amway in China (A): A New Business Model has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Amway Direct 's lucrative customers.
Skills based hiring
– The stress on hiring functional specialists at Amway Direct has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, David Tan, Justin Tan suggests that, Amway Direct 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.
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.
Need for greater diversity
– Amway Direct has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
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.
Lack of clear differentiation of Amway Direct products
– To increase the profitability and margins on the products, Amway Direct needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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 -
Manufacturing automation
– Amway Direct 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.
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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Amway Direct can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Amway Direct to increase its market reach. Amway Direct will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Loyalty marketing
– Amway Direct has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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.
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 -
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.
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.
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.
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.
Consumer confidence and its impact on Amway Direct 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.
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.
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.
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.
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– Amway Direct has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Amway Direct 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.
Environmental challenges
– Amway Direct 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. Amway Direct can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
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.
