Q.1 Why did Amway have to change its basic operating models twice in China? Amway had to change its basic operating models twice in China because they had to adhere to China’s laws and regulations to continue doing business in China. After first entering the market in 1992, they faced a problem 6 years later. In 1998, the Chinese Government declared a ban on direct selling and recruiting models. This is the successful model that Amway has been using for years all around the world.
The second change came in 2005, when the China state council announced releases of two new statues. Direct selling regulations and regulations against pyramid scheming. This however did allow direct selling, but it restricted the multi level, pyramid model. The allowance of direct selling model was good but it did not allow a multi level, pyramid type company structure. So in order to continue business, they had to change their business structuring to get rid of the pyramid scheme.
Q. 2 Explain how Amway changed its marketing strategy in China? Amway changed their marketing strategy in China by moving to a store front approach instead of door to door marketing. Amway converted most of their Amway offices into stores with employees in it so the consumer can go inside and shop like any other store. Later on, in 2005, they further changed their strategy by removing the pyramid structure where recruitments were not allowed anymore. Actual uses of human resources were required. This changes the whole face of Amway as the marketing within the company is now removed.
Company usually uses networking within with people to build business, but now, it operates as a normal chain of stores. Payment schemes were altered so that pyramids could not exist anymore, which was a large part of their marketing strategy.
Q.3 When Amway first entered the Chinese market, did the company put localization or globalization first? Explain why. The company first put globalization. This is because they came in and expected to expand their existing business models to another country. They tried using the same marketing strategy without adhering to the Chinese culture. Localization only came when the company changed the business structure and marketing strategy to compliment the Chinese culture. Only when the model and strategy was modified did they have localization. Removing of direct selling was a sign of localization and then bringing back direct selling and removing pyramid model is another part of localization.