Amway (AMWA) SWOT Analysis / TOWS Matrix / MBA Resources
Personal & Household Prods.
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Amway (Malaysia)
Based on various researches at Oak Spring University , Amway is operating in a macro-environment that has been destablized by – increasing energy prices, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices,
supply chains are disrupted by pandemic , wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Amway can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Amway, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which 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 can be done for the following purposes –
1. Strategic planning of Amway
2. Improving business portfolio management of Amway
3. Assessing feasibility of the new initiative in Malaysia
4. Making a Personal & Household Prods. sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Amway
Strengths of Amway | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Amway are -
Low bargaining power of suppliers
– Suppliers of Amway in the Consumer/Non-Cyclical sector have low bargaining power. Amway has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Amway to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Amway
– The covid-19 pandemic has put organizational resilience at the centre of everthing Amway does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Amway has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Amway to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Personal & Household Prods.
– Amway is one of the leading players in the Personal & Household Prods. industry in Malaysia. Over the years it has not only transformed the business landscape in the Personal & Household Prods. industry in Malaysia but also across the existing markets. The ability to lead change has enabled Amway in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Amway has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. 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.
Analytics focus
– Amway 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 Personal & Household Prods. industry. The technology infrastructure of Malaysia is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Cross disciplinary teams
– Horizontal connected teams at the 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.
Diverse revenue streams
– Amway is present in almost all the verticals within the Personal & Household Prods. industry. This has provided Amway 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.
Learning organization
- 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 Amway is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Amway emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Amway has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Amway staying ahead in the Personal & Household Prods. industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Amway is one of the most innovative firm in Personal & Household Prods. sector.
Highly skilled collaborators
– Amway has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Personal & Household Prods. industry. Secondly the value chain collaborators of Amway have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Amway | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Amway are -
Lack of clear differentiation of Amway products
– To increase the profitability and margins on the products, Amway needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, 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.
Ability to respond to the competition
– As the decision making is very deliberative at Amway, in the dynamic environment of Personal & Household Prods. industry it has struggled to respond to the nimble upstart competition. Amway has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on Amway ‘s star products
– The top 2 products and services of Amway still accounts for major business revenue. This dependence on star products in Personal & Household Prods. industry has resulted into insufficient focus on developing new products, even though Amway has relatively successful track record of launching new products.
Aligning sales with marketing
– From the outside it seems that Amway needs to have more collaboration between its sales team and marketing team. Sales professionals in the Personal & Household Prods. industry have deep experience in developing customer relationships. Marketing department at Amway can leverage the sales team experience to cultivate customer relationships as Amway is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee of Amway is just above the Personal & Household Prods. industry average. It 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.
Workers concerns about automation
– As automation is fast increasing in the Personal & Household Prods. industry, 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.
Need for greater diversity
– Amway 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.
Employees’ less understanding of Amway strategy
– From the outside it seems that the employees of 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.
Capital Spending Reduction
– Even during the low interest decade, Amway 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 Personal & Household Prods. industry using digital technology.
High bargaining power of channel partners in Personal & Household Prods. industry
– because of the regulatory requirements in Malaysia, 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 Personal & Household Prods. industry.
Amway Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Amway are -
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 can use these opportunities to build new business models that can help the communities that Amway operates in. Secondly it can use opportunities from government spending in Personal & Household Prods. sector.
Better consumer reach
– The expansion of the 5G network will help Amway to increase its market reach. Amway 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.
Leveraging digital technologies
– Amway 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.
Manufacturing automation
– Amway can use the latest technology developments to improve its manufacturing and designing process in Personal & Household Prods. sector. 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.
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 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Amway is facing challenges because of the dominance of functional experts in the organization. Amway can utilize new technology in the field of Personal & Household Prods. industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for 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 Personal & Household Prods. industry, and it will provide faster access to the consumers.
Learning at scale
– Online learning technologies has now opened space for Amway to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Amway can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Personal & Household Prods. industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. 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. 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.
Use of Bitcoin and other crypto currencies for transactions in Personal & Household Prods. industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Amway in the Personal & Household Prods. industry. Now Amway can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Amway can develop new processes and procedures in Personal & Household Prods. industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Amway 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 Amway to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Amway External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Amway are -
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.
Stagnating economy with rate increase
– 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 Personal & Household Prods. industry.
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.
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 needs to understand the core reasons impacting the Personal & Household Prods. industry. This will help it in building a better workplace.
Increasing wage structure of Amway
– 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.
Shortening product life cycle
– it is one of the major threat that Amway is facing in Personal & Household Prods. sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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 Amway in the Personal & Household Prods. sector and impact the bottomline of the organization.
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 Amway business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– 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 Personal & Household Prods. industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Amway in Personal & Household Prods. industry. The Personal & Household Prods. industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Consumer confidence and its impact on 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 Personal & Household Prods. industry and other sectors.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Personal & Household Prods. industry are lowering. It can presents Amway with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Personal & Household Prods. sector.
Weighted SWOT Analysis of Amway Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Amway 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 Amway 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 Amway 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 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 needs to make to build a sustainable competitive advantage.