In 1996 Amway Japan Limited (AJL) was the leader in direct selling market, and the most successful company within the entire Amway group. In the first half of 1997, AJL experienced a net sales decline of 11.6% and net income to 27.6% from the first half of the previous year. The Japanese economy and declining value of the Yen relative to the U.S. Dollar has decreased AJL’s sales volume and profit margin. The Japanese government recently passed laws that confused AJL’s distributors and discouraged potential consumers from buying certain product lines. Furthermore, AJL suffers from a negative public image with over 70% of their customer base having either a neutral or negative opinion of the company. In order to rebuild growth in the second half of 1997 and achieve AJL’s long-term sales goal of ¥300 billion by FY2000, the following strategies must be implemented. AJL must strengthen the overall Amway brand image in Japan by promoting high quality products with a competitively fair price. In addition, AJL needs to target their public-relations campaigns to specific groups by promoting individual products and product lines to build upon their brand equity. AJL will undertake a focused extensive distributor training program which emphasizes distributor ethics, techniques on building correspondent down-line relations, and a greater understanding of Japan’s door-to-door sales laws and regulations. AJL will improve the internal marketing strategy by extending target-marketing initiatives toward specific demographic distributor groups to add upon their success with the Artistry cosmetic brands. AJL will successfully capture their momentum to reach their target revenue goals by implementing the solutions offered above. AJL can improve profit margins at a favorable exchange rate by renegotiating the contract with Amway. Establishing partnerships with regional vendors will adjust focus to product lines aligned with the Japanese culture and consumer desires. Revisiting Amway’s values of partnership with over 1 million core distributors will continue the sustainability and growth in consumer and durable product lines while introducing new product choices. AJL can demonstrate resiliency by learning from its current state of affairs and commit themselves to growing with the four new product categories and adding “low-end” entry-level products. This should be the avenue to test future product lines and expand the AJL “Down Line” base.
Pertinent facts & Reasons
Fact: Amway Japan Limited’s long-term goal is to grow from ¥212.2 billion in 1996 to ¥300 billion by 2000. Importance: The organization is focused on top-line sales.
Fact: AJL is a direct selling business model that utilizes a variety of selling strategies including face-to-face meetings, network marketing, party plan, and multi-level compensations models. Importance: The direct selling business model is sometimes confused with “pyramid schemes” – a fraudulent form of money making which poses a marketing and PR challenge. Recent legal changes to Japan’s door -to-door selling governance led to confusion among the AJL distributors causing a decline in sales of high-ticket products.
Fact: 70% of AJL’s distributors, called “consumer types distributors”, purchase solely for self-purchases to take advantage of the discount (typically 30%), the other 30% are categorized as “business-type distributors” who earn money from the resale of Amway products and bonuses from 3% to 25% based on sales volume. The DDs are Up Line distributors who sign-up new Down Line distributors. Importance: The top five distributors and their Down Lines were believed to contribute to a substantial portion of FY1996 sales. In 1997, the top five distributors decreased their sales production, which puts pressure on the remaining distributors to produce more sales to make up for the top-performing...