All organisations face an external business environment that constantly changes. Sometimes these changes are slight eg minor amendments to regulations or a new firm entering the market as a ‘small player’. At other times, however, changes in the environment may have important consequences for an organisation eg new technologies, changing consumer tastes or a merger between two large competitors.
Changes in the business environment create both opportunities and threats to an organisation’s strategic development, and the organisation cannot risk remaining static. It must monitor its environment continually in order to:
- build the business
- develop strategic capabilities that move the organisation forward
- improve the ways in which it creates products and develops new and existing markets with a view to offering its customers better service.
Amway is an interesting example of a company that reviews its strategic capabilities and uses this review to develop its products and markets. More than 450 products carry the Amway name in the areas of nutrition, health, beauty and home. Amway also has a range of products that include other well known branded goods. The company also offers a variety of third party services.
Amway is different from the more traditional distribution channels in that the business has developed through direct selling. Amway has over three million Independent Business Owners (IBOs) worldwide.
IBOs deal directly with Clients, build up personal relationships and deliver direct to Clients’ homes. IBOs are highly motivated, selling to people they know or meet. The personal contact and care that they provide are important elements in direct selling. IBOs are self-employed and can introduce others to the business, and so forming their own sales network.
This case study illustrates how Amway, after analysing its business operations and performance, moved its business forward by choosing an appropriate marketing strategy.
It demonstrates the connection between Amway’s own strategies and the defining matrix of strategies developed by Ansoff in his article ‘Strategies for Diversification’ published by the Harvard Business Review in 1957.