A version of this article appeared in the April 2013 issue of Harvard Business Review.
Amway’s President on Reinventing the Business to Succeed in China
Photography: Courtesy of Amway The Idea: After the Chinese government outlawed direct selling, Amway repeatedly revised its business model to build a reputation as an honorable corporate citizen. In 2006 it received a new license, and China is now its largest market. When the Chinese government outlawed direct selling, in 1998, Amway was already well […]
Summary.
Reprint: R1304A
When the Chinese government outlawed direct selling, Amway’s signature marketing model, the company’s executives had to decide whether to pull up stakes or find a new way to sell. They chose to stay put and cooperate. To comply with regulatory changes, the company established conventional retail stores and manufactured products in China instead of importing them from the United States. It changed its entire distributor compensation system. It could no longer rely on word-of-mouth marketing, so it turned to brand advertising.
Throughout the process, Amway worked to demonstrate that it would be an honorable corporate citizen in China. Eventually legislation was passed allowing it to return to a direct-sales business model. It received a new license in 2006, and today China is its largest market, with more than $4 billion in annual sales.