MKTG3410

INTERNATIONAL MARKETING

MID-SEMESTER EXAMINATION (10%)

1. This is an INDIVIDUAL examination.
2. Submit your examination answers/solutions in MS WORD format. Font: Times New
Roman 12 and single spacing.
3. Please take note that this is an individual task. Your answer script will not be marked
if it is found to be having high similarity rate.
4. Submission due date: Thursday, 7 January 2021 @ 4.00pm.
5. Please adhere the due date given above for submission of your soft copy to
www.turnitin.com. Negotiation for individual extensions will not be entertained and
marks will be deducted for late submission.
*Class ID: 27250907; Enrollment Password: 310579

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There are TEN (10) questions in this section. Answer ALL questions in the Answer
Booklet.

Amway: Meeting Customers’ Needs through the Internet

Introduction:

Founded in the USA in 1959, Amway is a global business with 6,000 corporate
employees worldwide. It is one of the world's largest direct sales companies that services and
supplies over 3.3 million independent business owners (IBOs) in more than 80 countries and
territories in Asia, Africa, East and Western Europe and the Americas.
The critical relationship between Amway and the seller or IBO, is at the heart of
Amway's approach to direct selling. This form of selling allows each IBO to focus upon
individual consumers and their needs, with the IBO delivering direct to the consumer rather
than the consumer having to visit a shop. Because Amway manufacturers its own branded
products and distributes these through 'direct selling', its operation differs from that of more
traditional distribution channels.
Having signed a contract to work within Amway's Rules of Conduct and Code of
Ethics (best practice), IBOs are self employed and the Amway business gives them the
flexibility to work where and when they want. They sell to people they know or meet,
introduce others to the Amway business and form their own sales group. The personal
contact and care they provide is an important element in direct selling. To do this they need
support, and rely on having ready access to a quick, efficient supply chain so that they can
meet customer needs.
Increasing use of the Internet has created real potential for businesses to develop
different types of business models and to try out new approaches to reach users directly and
quickly in their homes. Amway was well placed to make such a move. With high levels of
Internet use within the UK and Europe, market research showed that IBOs were Internet-
ready, and that the time was ripe for Amway to develop e-commerce opportunities that
would offer the 24 hour/7 day service its customers were wanting.
Having received supporting merchandising materials, literature and training so that
they know the best way to promote the features and benefits of Amway products, IBOs order
the product direct from Amway having taken an order from their customer. Most operate
their business part time from home, as many have full time jobs and want a flexible working
pattern with Amway. They want to work at a time convenient for them, which can be any
hour of the day or night, with an organisation they can rely on. The Internet offers the
opportunity to meet these needs.

Strategic Development of Interactive Communications:

Amway's IBO customers depend on Amway for more than products. They look to
Amway for support that will help them manage their businesses. For an organisation to be
competitive in a crowded market place it has to be market-focused. Amway knows that it
succeeds only when it helps its customers to succeed.
By placing customers at the centre of its focus, an organisation then builds processes
designed to satisfy their needs. For Amway, this involves a whole series of activities that link

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the supply of raw materials to production processes, to physical distribution management and
finally getting the goods in a timely way to the IBOs, who can then meet their commitments
to their customers.
With more than 3.3 million distributors in more than 80 countries and territories and
with own-branded products ranging from ARTISTRY skin care and cosmetics to
NUTRILITE nutrition and wellness products, Amway faced a huge challenge in providing
customers with goods at the right time, in the right place and in the right condition.
The starting point was to undertake some market research that would enable Amway
to understand its customers better, and provide a model for how a web e-business opportunity
could best be developed.

Independent Business Owners (IBOs):

In order to understand what IBO customers want in terms of products and service,
Amway builds up typical customer profiles. These are made as full and accurate as possible.
In that way, Amway can target its current support services. Equally important, it is able to
anticipate the future needs of its various customer groups, and can target them with specific
product information.

Amway knows that most IBOs are entrepreneurial individuals who want to sell
quality products to people they know or meet. Most also fall into the ABC1/2 categories of
socio-economic grouping. This is often used by marketing departments to segment the total
audience and identify particular groups they want to target.
Most of Amway's IBOs are well educated and ambitious, and many have families.
Working from home, they supplement their family income mainly by working part-time,
although some work full-time. Most of these IBOs have web access, many of them having
bought PCs to support their children's educational progress.
The research revealed that many IBOs felt they needed more support for their selling
activities. In particular, they wanted quick, secure access to more accurate, up-to-date
information that related specifically to them. The answer had to lie in a carefully constructed,
properly run, well thought-out Internet operation.

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Developing an Internet Strategy:

Business strategies are designed to be consistent with an organisation's overall

purpose or mission. As a world leader in direct selling, Amway builds opportunities and
partnership with individual customers so that they can share in its success.

To support this purpose, corporate strategy involves making far-reaching long-term

decisions that look to match an organisation's activities with its business environment. With
huge changes in technology and many IBOs ready to make use of web access, Amway felt
that the web would be one of the most effective ways of meeting their needs.
For Amway's IBOs the web had many potential benefits such as:
✓ providing up-to-date feedback and information with fewer clerical errors
✓ receiving access to valuable business information and advice 24 hours a day, 7 days a
week both from Amway and elsewhere
✓ offering a range of evolving functions such as live online ordering
✓ enabling IBOs to check the bonuses they receive on their purchases
✓ providing a modern and exciting way in which to run and promote a retail business
opportunity to like-minded entrepreneurs.
Making a strategic decision to develop the Internet for their IBOs enabled Amway to match
technology with a whole range of functions such as marketing, operations and logistics in a
way that would meet its needs more closely.
As part of a Pan European decision, Amway's strategic plan was to increase its use of
the Internet by 'e-enabling' all of its European markets in a phased roll-out plan over 24
months. In order to develop an online presence, Amway grouped countries together wherever
possible so as to link parts of the business in a way that would serve customer needs. This
enabled it to gain economies of scale, e.g. a reduction in distribution costs.
Each of the following websites have common features for each region as well as
services tailored for each country:
❖ amivo: UK, Italy, Germany, Ireland, Austria, Scandinavia (Denmark, Finland,
Sweden, Norway), South Africa, Netherlands, Belgium, Greece
❖ v.e.b.s.o. from Amway: Hungary, Poland, Romania, Czech Republic, Slovakia,
Croatia, Slovenia, Turkey.
The more established sites showed that, no matter what the size of the business, the Amway
business model works across the Internet. Given this successful outcome, Amway was able
to identify best practice on these older sites and then apply it to new sites such as the
AMIVO site used by IBOs in the UK.

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Conclusion:

The AMIVO website development has given UK-based IBOs an alternative,

enhanced way of managing their businesses. The website rapidly attracted a significant
number of IBOs keen to try the online service. Promotions helped to encourage repeat use of
the site by demonstrating its unique benefits.
Today, over one third of Amway's UK business is transacted through the AMIVO UK
website and it's well on the way to reaching 50% by the end of 2004. The average value of
orders is 25% larger online than offline, and this has resulted in more efficient handling of
orders and lower freight costs per order.
When organisations make strategic decisions they have to take into account many of
the changes taking place in their business environment. This Case Study illustrates how, in a
rapidly changing consumer goods industry, with IBOs facing significant competition from
traditional channels of distribution, Amway has used emerging technology in a way that
provides both it and its partners with a distinct advantage in the marketplace.

Source: http://businesscasestudies.co.uk/amway/

Questions (CLO3:PLO6:C3):

1. Briefly discuss the business model that adopted by Amway.

(4 marks)

2. What makes Amway to take such a move of developing its e-commerce system in
supporting its IBOs?
(5 marks)

3. “Amway knows that it succeeds only when it helps its customers (IBOs) to succeed.”
Why?
(4 marks)

4. Why a market research or study should be carried out first before any strategic action
taking place?
(5 marks)

5. Why Amway is segmenting its customers into different groups?

(3 marks)

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6. What expectation on the information that the Amway should deliver to its IBOs?
(4 marks)

7. What are the potential benefits provided by the web to Amway’s IBOs?
(5 marks)

8. “The Amway’s websites have common features for each region as well as services
tailored for each country.” Why?
(4 marks)

9. Why promotions are provided to encourage repeat use of the site?

(3 marks)

10. What benefits gained by Amway through online transactions?

(3 marks)

*** END OF QUESTIONS ***

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