Q1 Why is it important for Amway to be good corporate citizen in China? Can “doing good” overcome negative or inaccurate perceptions of the direct selling industry in China? It is important for Amway to be a good corporate citizen in China. It is because Amway would like to change the perception of multilevel marketing/ direct sell.
The Chinese officials interpreted the direct selling as “passing product from one layer of participants to another layer of participants, with product price increased at each layer”. In another words, they think that the end consumer pay more than the actual product value. And in certain extend, it reflect also the general perception of Chinese citizens on Amway. As a result, even Amway claimed that they are more concern about the product quality instead of business license, but people just simply by pass this point
. Being a good corporate citizen can change the image of Amway, showing Amway care about the Chinese, not just their money. Secondly it is a kind of compromise with China officials, to exchange an authorization from them to allow Amway to continue the business in a legal way. Continuously convincing China official to modify the regulations, allowing Amway in certain extends, to do direct sales business in China. Thirdly, being a good “Corporate Citizen”, staying close with China officials, knowing the most updated regulation in the quickest way.
Having chance to negotiate with China official about how to adopt the new regulations. From the result of Amway turnover and the sales network expansion in greater China, yes, they have overcome the bad image of direct sales. Amway shows their intension to become a member of China, building up their manufacturing plants, creating job opportunities to China people, helping China in the case of joining WTO. Giving China people an impression that they are no just a foreign company who just want to make profit from Chain, but also to invest growth together with China people.
Q2 To what degree has Amway standardized its brand globally? How has it adopted its promotion strategy to local conditions in China? Despite of the product quality, another core part of the Amway brand is the multilevel direct sell, which they believe it is where the profit lie. They think that letting people to set up their own selling network, own selling team, getting profit/commission/compensation base on their effort and result, are the most effective way to generate business. Amway views their product portfolio in terms of the way in which products support the business opportunity.
The intention of Amway to maintain this kind of business model can be seem from the way that Amway to do business in China. With the government regulation, Amway have changed the way to do business in China. However, they are in a way that not directly hiring the staff to sell the product. Instead, they give their “agents” compensation base on team performance and own sales result. After the China official first announced the restriction of direct sales, Amway has set up a nationwide network of retail outlet, act as the bases for the direct sellers to promote the items.
Giving each product a retail price and letting the registered direct seller to have discount from the retail price. The registered direct sellers can get their own profit for the different between retail prices and discount price. With the reinforcement of the regulation, Amway further modified the business model by recruiting sales representatives to promote their products and getting compensation base on performance and result. At the same time, Amway has done more advertisement, which could help the sales representative to generate the business.
Q3 What options does Amway have to address the new regulations on direct selling in China? What are the advantages and disadvantages associated with each? To address the new regulations, Amway has: -
1). Setting up retail location, the major reason/advantage is that it could let Amway to get business license and continuous business in China. On the other hand, it helps Amway to set up national sales network also. However, it can be easily understand that the cost to maintain and expand the retail shop will be high. 2). Setting up recruit system, which help Amway to get the business license, and at the same time to maintain the quality of the agents/representative. The approval to continue business stipulated that sales representative income was base on individual result.
The limited the attraction of forms of direct selling that might lead to pyramid frauds. However, the administrative cost of the recruiting/hiring system will be higher and motivation to the sales to form a team is less. 3). Doing more advertising, which help to improve the image of Amway in general public. Turning their focus on Amway’s business model towards the quality of Amway’s product. It also helps to facilitate the sales by letting consumer know more about Amway and their retail location/sales network. However, advertising always cost a lot especially in tier one cities in China.
4). Doing corporate sponsorships to enhanced its reputation in China. Helping them to have go relationship with China official and also good image in general public. However, in order to get this result, Amway has to continuously doing the corporate sponsorship in long term and the input of money might be huge. 5). Setting up production facilities in China, to reduce the depended on importing the products to China market and also generate the job position for China workers However maintaining the production facilities and adopting labor regulation might cost a lot.
6). Helping China in participation in the WTO, which help Amway to improve their relationship with China officials. However, the return of these kind of volunteer jobs is not guaranteed. Q4 What is your recommendation for a communication strategy during this transition period? First of all, there are several stakeholders that Amway should put more focus on them and they are China Government, Individual business partners, Consumer, Competitors, Media and Headquarter.
Amway should always state close with China officials and maybe setting up conference for them, letting them know more about direct selling and the international regulation. Helping Chia government in setting examination system and make sure the certification system is up to international standard. So the Amway can get the most updated regulation information from China and become one to parties in setting up the certification system.
By providing training, assessment to the individual business partners (sales), helping them to get the certificate. This could ensure the professional service quality provided by Amway sales representatives. At the same time, the sales representatives can understand more about the Amway brand and become more loyalty to the company. They are more willing to work in Amway, where provide them training and opportunities.
Letting the consumers know that with the new examination and certification system. Amway sales representative are professional and selling good quality product with reasonable value. A good communication with media must be ensured, so that it could let the general public know the changes of Amway and the cooperation social activities done by Amway. It could help to build up good reputation and image of Amway and their business models. As a result not resist on direct sale.
Amway China should always give feedback to headquarter. Letting them keep update with the new regulations in China. Making proposals to adopt the change and getting fully understanding and support from headquarter.