Case Study: The Impact of China's Economy on Amway's Business

This case study analyzes Amway's business operations in China, focusing on the interplay of global economics and political factors. It begins with an overview of Amway's entry into the Chinese market in 1995 and its subsequent challenges, including the ban on direct selling. The study examines the economic environment in China, including its rapid growth, technological advancements, and impact on Amway's sales revenue, as well as the company's strategies to adapt to regulatory changes. The analysis further explores the influence of Chinese economic policies, the Foreign Corrupt Practices Act, and the impact of trade policies, including the US-China trade war. The case concludes with lessons learned, emphasizing the importance of adapting to economic fluctuations, regulatory burdens, and trade disputes. It also highlights the importance of a systematic business plan for success in the Chinese market.

Global Economics and
Politics
Name of the Student
Name of the University
Course ID

Introduction
• Today businesses are not limited within a single nation
• Companies are doing business internationally
• Economic environment and government policies affect business
• External macro and microeconomic environment
• Government influences business through taxes and interest rates
• Trade policies affect a business
• Case study on Amway business in China

American Way in China: case study
• America originate company
• Selling products relating to health care, beauty and home care
• Jay Van Andel and Richard found the company in 1959
• Company recorded sales worth of $8.6 billion
• Ranked first among multi-level direct selling companies
• Expanding the business internationally.
• Launched its business in China in 1995

American Way in China: case study
• A ban on operation of direct selling companies
• Hampered Amway’s business in China
• Years of negotiation
• Avon, Amway and Mary kay got permission in China
• Received license for resuming business in 2006
• 160,000 sales representatives
• 237 retail stores

Economic environment in China and effect on Amway business
• One of fastest growing developing nation
• The advanced technology and fast economic growth
• Three consistent years of a relatively lower sales
• Demographic contributes to business expansion
• Largest international market for Amway
• Advanced technology helps the company
• Sales revenue of $8.8 billion in 2016
• Cyclical and short term decline in revenue

Economic environment in China and effect on Amway business
• Disappointment with China’s economic growth
• Economic growth to be 6 to 7 percent
• Growth rate is still higher
• increasing focus on consumer demand
• household has a relatively lower debt
• Not always at an advantageous position
• Company struggled to establish business in China

Amway’s strategy to fight
China’s direct sell ban
• China banned direct selling
• Between 1998 and 2008
• Amway stayed in China
• Established hundred of new shops
• Experienced centers
• Distributors demonstrated products
• Opened brick and mortar shops
• Tweaked the payment system

Economic environment in China
and effect on Amway business
• Revenue fluctuates for economic condition
• Slower Economic growth
• Fluctuation in currency exchange rate
• Contraction in sales revenue
• Deep financial impact on the company
• Strategy of riding out
• Optimism regarding China’s market

Economic policies in China and impact on Amway
• Broader consumer base in China
• Less promising future in China
• burden of regulatory pressure
• Foreign Corrupt Practices Act
• Forbids bribe to any foreign officials
• Amway did not face any investigation
• sales distributors prompted to investigation

Economic policies in China and impact on Amway
• Chaotic beauty industry in China
• Worst business practices
• Government faces challenges
• Corruption
• Four governmental agencies
• Pyramid structure scheme
• Faced skepticism from regulatory authorities

Trade policy and possible impact on Amway
• Important determinant of cross border business
• Trump’s protectionist policy
• Heavy import duty on imported goods
• Trade war between China and United State
• Vulnerability to trade war
• Relatively disadvantageous position
• Retaliation to imposed tariff

Conclusion
• Case study: evaluates Amway’s business in China
• Seller of beauty and health care products
• Economic growth and adaptation of advanced technology
• Demographic trend helped in business expansion
• Continuous growth sales revenue since 2005
• Recent slow-down of China’s economy
• Exchange rate, regulatory burden
• US-China trade war affect the business in China