E-Commerce Company: Amway Corporation - Case Study Example

E-Commerce Company of the of the Table of Contents Table of Contents 2 Executive Summary 3 Amway Corporation 4 SWOT Analysis 5 Strengths 5 Weaknesses 6  Opportunities 6 Threats 7 Porter’s Five Forces Model 7 Bargaining Power of Suppliers 7 Bargaining power of customers 8 Threat of substitutes 8 Threat of new entrants 8 Rivalry 9 Marketing Mix 9 Products 9 Price 9 Place 10 Promotion 10 E-Commerce Rationale 10 Importance of E-Commerce 12 Benefits of E-Commerce 13 E-Commerce Critique and Recommendations 14 References 19 Executive Summary E-commerce is also known as electronic commerce and it is a term used for marketing and selling product or services through internet. Online shopping, website promotion, B2B or B2C selling are all part of E-commerce. Social media marketing is also a part of electronic commerce. The assignment revolves around the E-Commerce activity of Amway. It suggests the market analysis of the company by highlighting its marketing environment, customer market, marketing mix and major competitors which leads to the implementation and up-gradation of E-commerce marketing strategy for a company. The study would focus on identifying and selecting a company who would be benefitted from an improved E-commerce program. The study further deals with the E-Commerce rationale of Amway. The factors leading to E-Commerce activities, the importance of it in the present market and the benefits achieved from implementing the E-Commerce business model has been further analyzed in details with respect to the company suggested. The final part of the report explains the critiques and recommends viable approaches to improve the E-Commerce activities of Amway. Amway Corporation America Way, popularly known as Amway is a company originated in America. Its business model is based on the multi level marketing model and it caters to the beauty, health and home care market. It channelizes its sales through direct marketing. The company was founded by Jay Van Andel and Richard DeVos in the year 1959 and is known as the first MLM Company. The company is under the parent company, Alticor and has expanded itself all around the world. It is a leading brand which has a product line consists of beauty products, cosmetics, personal care products, home care, baby and health care products. Amway has created a brand name for itself through direct marketing and personal selling and is very popular for its health supplements which are sold under the brand name Nutrilite. It has been ranked 114th among the global retailing companies in the year 2006 and 25th among the largest private companies in the United States in the year 2012 by Forbes. It targets consumers from the age group 1-80 years as it caters from baby care to health care products. It is positioned as the premium consumer products and caters to the need of all age group having varied problems (Amway, 2013). SWOT Analysis Strengths Amway is a home based business selling product through direct marketing. Everyone interested can join in the business and become a direct stakeholder of the company. It has a well structure training and development program. High growth in retail sales. Among the top 30 private companies in America. Expanded worldwide competing with most of the leading brands. Targets a wide range of global customers from babies to elders. The main customer base comprises of women. Consist of a well structured customer service system. High quality products maintaining global standards. Low start up cost for individuals wanting to invest on a business (Liao & Cheung, 2011). Weaknesses Does not consist of retail sales. Mainly based on direct and personal selling through agents. Products are expensive therefore; countries having low per capita income cannot afford the brand. Product promotion and advertising strategies are not well planned. Does not resort to endorsements and television advertisements. Hence, only depends on word of mouth promotion (Bellenger & Kargaonkar, 2009).  Opportunities Can establish manufacturing plants in different countries to increase market coverage and decrease operating cost. Opportunities to expand and gain market share in the international market. It can develop various marketing communication strategies as other international brands operate. E-commerce would be an intelligent and profitable strategy for Amway. Amway can channelize its sales by tying up with health experts and beauty salons. Threats Existence of too many competitive brands in the international market Local products are gaining market share Buyers are switching to products which are of same quality but cheaper in price. Losing market share due to lack of promotional and marketing strategies (Fournier, 2009). Porter’s Five Forces Model Bargaining Power of Suppliers Bargaining powers of the suppliers are low as there are many suppliers distributed all around the world. The agents of Amway are the main suppliers of the product as it deals with personal selling. Amway distribution strategy does not have middle men like wholesalers or retailers. The company does not over supply products to its agents hence; it keeps a control on the price of the products. They distribute products to their agent through direct Amway stores which are operated by the company itself. They do not go for retail marketing hence; supplier’s switching cost is low. The agents generally invests in the company to be authorized sellers hence, it has low tendency to switch as they are part of the company’s stake (Geunes, 2009). Bargaining power of customers Consumer’s bargaining power is high due to the competitive market filled with international brands providing same quality products. Competitors like L’Oreal, Avon, Oriflame and VLCC are established players in the international market. The consumer’s switching cost is low and Amway does not resort to price differentiation strategies depending on the market and its demand, though it maintains its quality standards of the product (Fournier, 2009). Threat of substitutes Threat of substitute is high as there are other competitors in the international market. The competitive brands hold larger market share and presence in the global market arena. They provide higher quality products in lower prices. The factors implemented by the competitive brands follow the price and product differentiation strategies. They spend heavily on promotional and marketing communication activities in which Amway lags behind. Herbal products are also gaining position in the international market giving Amway tough competition (Amway, 2013). Threat of new entrants The threats of new entrants are low since many companies are registered as MLM companies. They maintain a loyal customer base and maintain long term relationship with its customers. They believe in enhancing customer experiences by giving customized products depending on the requirements. They have a low product differentiation and are more expensive than other consumer brands hence, consumer preferences are low. The existing MLM companies are Mary Kay, Cosway, Nuskin, Avon and Herbalife. Amway has already created an established brand name for itself in the cosmetic market with the launch of Artistry, which is very popular in the international market and has secured the highest rank in the global market (Amway, 2013). Rivalry Amway faces tough competition from both consumer retail products as well as MLM companies. Brands like L’Oreal, VLCC, Kerastase are the global competitors of Amway. Among the MLM companies are the brands Cosway, Avon, Oriflame, Mary Kay etc. The MLM companies have the same product assortments as Amway and have very little differentiation in terms of quality. The focus of Amway is to deliver the best quality product and engages in continuous research and development activities to maintain its position in the global market. It faces tough competition from consumer brands due to their market coverage, marketing communication strategies and lower selling cost (Amway, 2013). Marketing Mix Products Amway deals with personal care products (soap, tooth paste, shampoo), cosmetics under the brand names Artistry and Attitude, Health care products like Nutrilite capsules, protein powers and baby care products. Price The products of Amway are expensive and are of premium quality. They do not follow the price differentiation strategy hence demands high cost. Place Amway has large global market coverage though its marketing strategy deals with direct marketing and personal selling. Therefore, it follows the door to door marketing through its agents. Promotion Amway do not follow any particular marketing communication or promotional strategy. It only depends on the word of mouth promotions through its customers and agents. It does not initiate endorsements of its brands or television advertisement to enhance sales. Therefore, it has a selected customer base of middle and high income group catering to premium products (Amway, 2013). E-Commerce Rationale The main target of the company is to attract customers and enhance their product sale through E-commerce. Electronic trading can be initiated through different techniques like website promotion, search engine optimization, affiliate marketing and social media marketing (Bellman, Lohse & Johnson, 2009). The rational towards implementing or improving E-Commerce activities for companies like Amway in the global market arena are as follows: Ubiquity: Traditional market place is restricted to size and place. It is the physical space where the consumer has to visit in order to initiate transaction. These transactions are initiated with the help of marketing communication tools like television or radio advertisements. E-Commerce is a platform where consumers can resort to trading of product in a virtual space. It is ubiquitous which means that it has a presence nearly everywhere. Customers save time in travelling or visiting a physical shop to transact. E-commerce enables consumers to shop through desktop and eliminates the need of a physical space for business. It saves the transaction cost which is the cost for visiting the market that is, time and money to be spent in order to reach the shop for buying the product or service (Balabanis & Vassileiou, 2008). Global Reach: E-commerce enables companies to reach the global market arena in just one click. It initiates cross border transaction through virtual market space without spending extra money on travelling. The transaction takes place through internet under a common market space. This type of trading system is much more effective and efficient than the traditional market system. Therefore, the company’s market coverage increases as it could operate its business in the entire world with the help of a computer and internet. It reduces the distribution cost and caters the needs of the global online population (Bellman, Lohse & Johnson, 2009). Universal Standards: The E-Commerce trading policies are universal as the technical standards of the internet are same all around the world. Hence, these policies are standardized globally catering to various consumer preferences by providing a common market space (Balabanis & Vassileiou, 2008). Interactivity: The level of communication between consumers and the traders are enhanced through the E-Commerce activities. It permits two-way communication and interaction between the parties, the buyer and the seller (Bothma, 2010). Information Density and Richness: The internet helps in proper propagation of information to buyers about the product. The product information and specifications as well as company profiles and news are conveyed to the consumers on a timely manner. There is less chance of misrepresentation of information as there is no scope of biasness. In a local store, a shopkeeper might be biased or earn greater profit on a particular product. Therefore, it would try to push the product to the buyer which is not possible through E-commerce. All the brands get a common platform to sell their product or service and the buyers have the discretion to choose the right product for themselves. The richness of information signifies the quality and substance in the message conveyed (Dholakia, 2008). Personalization: An E-commerce activity enables personalization and customization of product or services. Companies can target specific buyers by communicating their marketing message through personalized emails or promotional messages specifying the buyer’s name, past purchase information, interests. The company can analyze the buying behavior of its customers much easily through the E-commerce activities. Hence, sellers can customize its offers and deliver it based on customer preferences (Bothma, 2010). Importance of E-Commerce The trading through E-commerce saves time of the consumers. Time is a very important aspect in the commercial market arena. A consumers purchase pattern and buying behavior is based on how the company utilizes the right time to pitch the product to the purchaser. It plays a vital role to both the company and the buyer. As per the organization, the lesser the time spent on an individual transaction, the greater would the number and amount of transaction. From the consumer point of view, E-Commerce enable them to save time on a particular purchase and help them in buying several products at a span of time as they don’t need to go around to hundred different shop but can avail all product or services under one virtual space. E-commerce is much more authentic as competition is high and there are no middle men like the retailers or wholesalers. Hence, due to the decrease in the distribution cost of the company, a buyer can avail a brand at a lesser price compared to that of a traditional trading system. Moreover, there is no product ambiguity or price differentiation based on the market as it provides a common market place for global consumers, therefore, no pricing biasness takes place (Dholakia, 2008). Companies can market or promote its product or services through E-Commerce at a much cheaper rate than a television advertisement or print promotion. The online customer coverage and reach is higher in the 21st century which initiates higher market coverage as well as profit returns for an organization. The operating cost of the company descends due to the decrease in establishment cost. E-Commerce eliminates the geographical barrier problem. It also provides an advantage to the consumers to compare products and their features to align their purchase decision with their preferences. It also enables shoppers to buy international brands only with the help of a click, which are not available in the national market (Schniederjans & Cao, 2010). Benefits of E-Commerce E-Commerce has revolutionized the traditional marketing system. It has completely changed the buying and selling process by eliminating the physical existence of the shopping place. Improved Productivity: The time taken to produce, distribute and process a business operation or transaction between a buyer and the seller are reduced significantly. The elimination of human error is reduced due to atomization of the transaction process. It enhances productivity due to easy access of information and higher consumer reach. Better Customer Service: E-Commerce increase the efficiency of the communication process between the consumers and the sellers. Better customer service at any point of time as service providers are available at any part of the world, during any time period, just with a click of button. Convenience: E-commerce enable convenience in shopping for buyers as they can avail service or buy a product at any part of the world at any specific period of time. The websites are available 24*7 days a week and are always ready to provide service to its customers enhancing customer experience. Unlimited Shelf Space: It provides unlimited shelf space as the companies can display all its product line and provide adequate information on it for customer awareness thereby, enhancing customer experience. Customers are able to compare products, prices and fairly make buying decision without any pressure from the intermediaries like retailer. Increased Global Presence: E-Commerce enables companies to increase their global reach. The companies are able to cater to the customer needs all around the world (Szymanski & Hise, 2008). E-Commerce Critique and Recommendations Amway has faced a lot of critical comment on its poor E-commerce activity. It lacks a well structured E-Commerce model and on establishment of a proper model for its E-Commerce activity, it might give competition to itself on its direct-selling model. The company has introduced an online shop for its product to satisfy greater customer need but requires a lot of improvement in its E-Commerce strategy as well as in the operating processes like taking order, logistics, warranty etc which not well organized and implement. The E-commerce activities of Amway are not backed by a strong back end operation. Though it gives its customers the facility to shop through the internet, but it lacks in providing the greater customer experience that they prefer. On ordering products, some of their inventories are out of stock and they do not recognize customer query. On input of customer details like shipping address and contact details, the website tends to fail in creating the registered account. The website interface lacks innovation and is not customer friendly. The website design is not insightful and offers monotonous navigation. It also does not provide a mobile website and the payment option facility is poor. The purchase process is slow and leads to customer dissatisfaction. The product image quality is low and the product description lacks details. Amway websites do not target specific consumers leading to loss of purchaser base. The company does not spend on marketing communication and website promotional activities which are an important aspect in the E-Commerce business (Schniederjans & Cao, 2010). Amway does not engage in E-Commerce activities like social media promotions or online loyalty programs where they can acquire larger buyer base by enhancing consumer experience through product offers and informational videos or advertisements. It lacks in customer awareness and mainly targets higher income group. The company is more organized in its direct- selling model hence fears to lose its image of a premium quality brand on promoting itself as a online consumer brand. Amway charges shipping cost and extra tax, which even increases the product cost while shopping online. It does not provide loyalty coupons or discounts through its website which acts as a great advantage to build customer databases and enhances brand exposure to potential buyers. Amway lacks promotional activities for its E-Commerce like search engine optimization, affiliate marketing, promotional advertisements through You Tube, Facebook and Twitter. These activities help in gathering analytical data to estimate target customers, product choice, price preferences and advertising medium as well as the choice of suppliers can be decided through these analytics resulting in optimizing sales and maximizing profit returns. The customers of Amway are annoyed due to the hidden charges during online purchase like taxes, compulsory registration to initiate buying as well as providing poor customer service. Its vendor management strategies and distribution tie-ups are poor which results in de-motivating consumers to trust their E-Commerce activities (Szymanski & Hise, 2008). The ways in which Amway could improve its E-commerce activities are as follows; the first step to be initiated is to plan an operational and promotional strategy to sell and communicate through online platforms. This would help them to structure an E-Commerce model which will not only help them to enhance profit return but also uplift the direct selling model by increasing purchaser base as well as higher sales through personal selling. The strategy would help in planning for resource expansion which would result in a stronger online selling platform for Amway. It would plan the funding to establish its E-Commerce business. In order to enable business expansion, it has to have a well structured E-commerce platform to pool in more customers (Lee, Park & Ahn, 2010). Amway must establish an E-Commerce vision, mission and goal to target their desired consumers and offer its product as per their preferences. It must develop a competitive pricing strategy for its online business model to attract more buyers. The business model should concentrate on business returns as well as must enhance customer value proposition. The business model helps in planning the future course of the business by identifying risks, resource requirements, forecasting sales and profit as well as integrating the business processes. Another important aspect for upgrading the E-Commerce activity is to understand the target segments. The consumers should have faith on the company’s brand image. Amway must deliver the promised value proposition to its consumers to increase its loyalty base as well as improve customer experience and satisfaction. The company should offer coupons, loyalty programs for online purchases to instill a sense of priority and belonging in its buyer’s mind. It must understand its customer needs before implementing its E-Commerce strategy and sell those products that consumers prefer. Consumer perceived value of the products must be increased and also the website should be designed in a way that attracts them. The visibility aspects of the products must be enhanced to help the website attract more customers (Bothma, 2010). Amway should invest in search engine optimization, blogging, social media marketing, advertising and other marketing communication activities to increase customer knowledge about their company. It should be the primary objective of the company to be visible to as much audiences as possible to increase its reach. This way the brand would get recognized through online promotion. It should take initiatives to advance its customer experience to the highest level by ensuring that its website, products, online contents, landing pages and online customer service align with the sales goals (Lee, Park & Ahn, 2010). The E-Commerce activities of Amway should highlight in personalizing the customer interaction through email promotion and delivering exclusive shopping experience through the E-Commerce platform. It must deliver the ordered products on time to its customers and exempt the shipping charges. It must be able to deliver the customer needs to increase their perceptional value towards the brand. The online customer service should be strong and must initiate in follow up with its customer after order confirmation, and encourage feedback for further improvement of their online operational processes. Up-gradation of product contents and promotional messages are very important in E-Commerce activities to establish their presence in the customer’s mind and enhance recall value of the brand. Amway should renovate its websites seasonally by depicting occasional themes, providing insights and offers to reflect a fresh look. The final strategy for E-Commerce improvement is to make the website mobile. This means the company should launch mobile E-Commerce websites and application to make shopping easier for its consumers (Szymanski & Hise, 2008). References Amway. (2013). Our company. Retrieved from http://www.amway.com/about-amway/our-company. Balabanis, G. & Vassileiou, S. (2008). Some Attitudinal Predictors or Home-Shopping Through the Internet. Journal of Marketing Management, 15, 361-85. Bellenger, D. N. & Kargaonkar, P. K. (2009). Profiling the Recreational Shopper. Journal of Retailing, 56 (3), 77-82. Bellman, S., Lohse, G. & Johnson, E. (2009). Predictors of online buying behaviour. Communications of the ACM, 42(12) , 32-38. Bothma, J. (2010). Managing E-Commerce in Business. New York: Free Press. Dholakia, N. (2008). Global e-commerce and online marketing: watching the evolution. Derby: Cima. Fournier, S. (2009). Consumers and their brands: developing relationship theory in consumer research. Journal of Consumer Research, 24(4), 343-73. Geunes, J. (2009). Applications of supply chain management and E-commerce research. London: McGraw-Hill Education. Lee, D., Park, J. & Ahn, J. (2010). On the explanation of factors affecting e-commerce adoption. International Conference on Information Systems, 109-120. Liao, Z. & Cheung, M. T. (2011). Internet Based E-Shopping and Customer Attitudes: An Empirical Study. Information and Management, 38(5), 299-306. Schniederjans, M. & Cao, Q. (2010). e-Commerce operations management. New York: Mcgraw-Hill Book Company. Szymanski, D. M. & Hise, R. T. (2008). E-Satisfaction: An Initial Examination. Journal of Retailing, 76(3), 309-322. Read More