IntroductionAmway is one of the world’s largest direct sales companies. It is a global enterprise and isprivately owned by the families that started the company in 1959. Amway manufactures,markets and distributes more than 450 consumer products. In the UK Amway distributes avariety of products, including: • Personal Care - fragrances, body care and hair care products• Skin Care and Colour Cosmetics• Durables - cookware and water treatment systems• Nutrition and Wellness - food supplements, food and drinks • Catalogue Items - third party electrical goods • Home Care - laundry, cleaning and car care products.

Amway employs 14,000 people worldwide in its offices, manufacturing centres, warehouses,call centres or stores. It also works with around three million Amway Business Owners(ABOs) in more than 80 countries. These ABOs are the link between Amway and its productsand the consumer. They also link Amway with communities across the globe. For more than45 years, Amway Corporation has enabled people to have a business of their own.

Amway has built up a strong regional structure around regional affiliates, for example,Amway UK and the Republic of Ireland. Operating through the regional structure, affiliatecompanies are responsible for:• forecasting (ensuring enough stocks are available to meet demand) • managing customer service and contact with customers • efficient distribution to ensure products reach ABOs on time and in top condition • product promotion and ABO support, for example, supplying brochures to ABOs.

Amway is an example of a business that recognises its wider responsibilities. It recognises thatto be a good corporate citizen, it needs to support causes that matter to the communitiesin which it operates. As well as its business aims, the company has a range of social andethical aims that are part of a ‘Global Cause Program’.

Amway’s global vision is to help people live better lives. At the heart of this commitment is theOne by One Campaign for Children that helps disadvantaged children from around theworld. This programme aims to support Amway’s employees, ABOs and customers in puttingtime and money into helping disadvantaged children get access to medicine and education.Amway works with many different groups of people to carry out its business. This case studyexplores the relationship between Amway and its stakeholders.

StakeholdersStakeholders are groups or individuals who have an interest in the decisions of the companyand its business. Stakeholders can be internal to the business, such as employees, or external,like suppliers, customers or the public.

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The role of stakeholders CURRICULUM TOPICS• Stakeholders• Shareholders• Corporate responsibility• Ethics in business

GLOSSARY

Amway Business Owners:independent business ownersoperating direct sellingorganisations.

Consumer: the user of a product,who may or may not be the buyerof it.

Regional affiliates: parts of theorganisation linked to the HeadOffice but trading independently.

Forecasting: predicting the futureor estimating future variables toenable a business to plan ahead.

Corporate citizen: using anorganisation’s resources to benefitthe environment.

Stakeholders: individuals orgroups with an interest in thedecisions made by an organisation.

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A company may have shareholders who can be internal or external stakeholders. As aprivate company, the families who own Amway are its sole shareholders.

It is important that Amway communicates regularly with its stakeholders. They can affect or beaffected by the business.

Amway uses different ways to communicate with its various groups of stakeholders. Themethod chosen depends on the message and the person receiving the message:• websites, emails and voice mail updates promote products and services to ABOs and

customers and keep them up-to-date• industry and trade memberships enable Amway to share and receive industry information • publications target key sales messages, for example, its monthly newsletter for ABOs,

Amway Focus• events and exhibitions help Amway to communicate to ABOs, consumers and guests about

running an Amway business and the products it can provide.

How stakeholders affect AmwayAmway is a direct selling company, selling products directly to consumers without goingthrough traditional retail outlets or ‘high street’. A supply chain links the finished productsto end consumers. Amway has its own distinct supply chain, placing a strong emphasis on itsABOs. They are able to focus on individual customers and their needs. This supply chain isdifferent from a more conventional supply chain that sells goods to final consumers throughretail outlets. Amway’s way of working depends on building lasting connections with the endconsumer. Feedback provided by consumers and ABOs helps to shape future changes inproducts and the service provided.

Suppliers must produce quality goods that Amway ABOs can sell with confidence. The goodsshould offer value for money and provide guarantees that they will meet Amway standards.Suppliers may contribute to the design and appearance of Amway products.

ABOs operate independently as small businesses. They develop direct supply channels andsell products to friends and customers that they know or meet. They need to have a flexibleapproach to business. They require Amway to provide high quality, value for money productswith a 100% satisfaction guarantee. ABOs determine for themselves how they will conductbusiness. This is a ‘self regulatory’ environment. However, they sign a contract to work withinAmway’s Rules of Conduct and Code of Ethics. If ABOs do not conduct business withinthese rules, their behaviour could reflect back on the company.

Consumers affect how Amway develops and promotes products. They do this by indicatingtheir preferences and requirements through feedback. Amway can then make more ofparticular products or change the format of others. Consumer demand also influences howmuch stock Amway needs to carry. Consumers can show where Amway needs to addressissues or concerns to improve the business.

With many different types of stakeholders, it is possible that different groups will have differentkey objectives or priorities. For example, a business needs to make a profit but customerswant low prices. The company might find it difficult to support price cuts, as this would reduceits profit. These two priorities might be in conflict.

How Amway affects its stakeholders

Amway’s vision is ‘helping people live better lives’. Amway’s business plays a key role in thecommunities in which it operates. Amway has a global strategy for producing, distributingand marketing its products worldwide. It also has a strategy for promoting corporate socialresponsibility (CSR) in a global way. CSR refers to the role that a company plays in meetingits wider commitments as a citizen. Such commitments include supporting worthy causes andalways acting in an ethical, honest way.

GLOSSARY

Shareholders: persons owningor holding a share or shares ofstock; a stockholder.

Supply chain: the chain ofprocesses linking the manufacture ofproducts with physical distributionmanagement so that goods aremoved quickly and efficientlythrough various processes to meetconsumer needs.

Code of ethics: set of principlesthat are accepted and used bysociety or a particular group ofpeople.

Objectives: the end purposesthat an organisation or individualseeks to achieve.

Vision: a concise summary inwords, setting out what anorganisation is striving to achieve.

Strategy: long-term businessplan of an organisation.

Corporate socialresponsibility: the responsibilityof an organisation to a range ofstakeholders including thecommunity and society at large.

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Amway operates in many different markets worldwide and has a range of affiliates andABOs. It therefore has to devise and communicate its plans for corporate social responsibilityactivities carefully to take account of different priorities and interests. From the outset, Amwayestablished some clear objectives. These were to: • build loyalty and pride among ABOs and employees • enhance Amway’s reputation as a caring organisation • make a real difference to human lives.

This helps to maintain Amway’s reputation with all its stakeholders.

Stakeholder Impact by Amway

Amway HQ/regional Amway’s CSR strategy supports the growth of the business. affiliates

ABOs The Amway brand as a responsible organisation helps them earn money.

Consumers The products they buy must meet quality standards and are fromresponsible producers.

Amway staff The company demonstrates its values by doing the right thing.

Community partners A partner organisation that shares beliefs and supports fundraising.

Amway contributes time, effort and money to support its business communities:• It creates appropriate Amway products for ABOs to sell. • It develops campaigns that support the business and social aims of the company. Getting

the image right is vital in a business that relies on building relationships with individualsand the wider community.

• Amway regularly seeks to develop new products in line with market research aimed atfinding out what customers want.

• Its employees volunteer at different charity organisations.• It has shared $294 million (around £150 million) with non-profit organisations since the

company began.

Amway produced its Global Cause Program in 2002 as the result of extensive research. Amwaydefines a global cause as ‘a social issue affecting many people around the world engaged in astruggle or a plight that warrants a charitable response.’ The Global Cause Program: • helps Amway to bring its vision to life • declares what the organisation stands for • builds trust and respect in Amway brands • establishes corporate social responsibility as a high priority.

In developing its global cause strategy, Amway also listened to what its ABOs cared about.Many favoured a cause to help children. This led to Amway’s partnership with UNICEF’sImmunisation Plus programme. This aims to provide vaccination against the six most seriousdiseases affecting children in the developing world. Amway’s business image benefits from therelationship with UNICEF. UNICEF benefits from the fundraising Amway and its ABOs contribute.

Ethical business Ethical enterprises do more than simply provide goods and services for customers. They alsomake a real contribution to the communities in which they operate by: • creating employment and job security • providing products that give consumers good value for money • contributing to creating a more caring and cared-for community.

Businesses operate in a competitive environment. They may compete on a number of factors:• price • range of products• quality• speed of service• customer service.

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GLOSSARY

Affiliates: become part of orform a close relationship withanother, usually larger, group ororganisation.

UNICEF: a department of theUnited Nations whose aim isimproving children's health andeducation, particularly in poorcountries.

Ethical: accepted beliefs whichcontrol behaviour, especially suchas a system based on morals.

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Amway is a global enterprise. It must comply with the laws of the many different countries inwhich it operates. Its business ethics provide a framework to guide the behaviour of thecompany and its stakeholders. As part of its business values, it protects its consumersthrough the quality of the products and by offering guarantees of satisfaction. It promotes andsupports ethical selling behaviour amongst the ABOs through its codes of conduct.

However, in a highly competitive market where businesses are similar, Amway needs to find away of achieving competitive advantage. Demonstrating a positive involvement in thecommunity and attention to environmental issues can provide a business with competitiveadvantage. It shows that the company behaves in an ethical way, shares its values andenhances its image as a responsible organisation. Amway recognises that to respond to CSRissues, it must base its business on the principles of ‘relevance, simplicity and humanity’.

For example, Amway set up the ‘One by One’ programme following discussions with variousorganisations involved in providing help to underprivileged communities worldwide. Amway is also active in a number of programmes to reduce its impact on the environment,including:• supporting organic farms to grow the plants for its vitamin and mineral products• training employees to protect the environment, for example, encouraging re-use and

recycling to conserve resources• changing product formulations to be more concentrated and biodegradable, which

reduces packaging and waste• using sources of renewable energy, for example, a wind farm at its World Headquarters

will provide 10% of energy needs• measuring its environmental impact by auditing its activities to internationally recognised

standards.

All these activities carry a cost, therefore Amway needs to balance the costs of its corporatesocial responsibility programmes against not only the benefits of doing so, but also the costof not doing so.

Business practices that do not take account of ethical behaviour might lead stakeholders toreconsider their relationship with the company. Suppliers might stop trading or customersmight stop buying (which would result loss of revenues). At the company level, it might lead toinfringement of the law or loss of reputation, which would influence the wider public.

ConclusionAmway is a global direct selling organisation. It has to deal with many different stakeholderswith different objectives. These stakeholders may be internal or external to the company andcan affect or be affected by Amway in different ways.

Its organisational structure is based on a network of ABOs who work independently. Therefore,it is important that Amway sets the standards of ethical business behaviour for the people whowork with, and for, the company. It demonstrates these standards by setting rules of conductand codes of ethics. In addition, it puts its ethics into practice through its various CSRprogrammes of activity, supporting the environment, its employees and disadvantaged childrenacross the world.

Questions1. Who are the stakeholders and what methods of communication does Amway use with each?

2. Explain how the ABOs operate their business andthe potential issues?

3. Describe Amway’s strategy and its impact on itsstakeholders?

4. Using examples, discuss the meaning of anethical business?

GLOSSARY

Business ethics: recognisedrules of conduct or principleswhich an organisation may follow.

Values: the principles orstandards that are considered tobe important to the business.

Competitive advantage:a strategic element that enables anorganisation to compete moreeffectively than its rivals.

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