Business 2000T e n t h e d i t i o n

(Unit 6)

Transition YearBusiness

Key Learning Outcomes� Direct Selling

� Corporate Social Responsibility

� Amway’s partnership with UNICEF

Curriculum Links

Introduction

Corporate Social Responsibility (CSR) is a new name for an existing

concept – that a business can serve its interests best by behaving in

an ethical and socially responsible manner. Being a socially

responsible corporate citizen is reassuring for customers, improves

employee morale, generates stakeholder interest and may ultimately

lead to increased profits.

A CSR strategy can also have a positive effect directly on the local

communities where a business operates or its employees live.

UNICEF/HQ05-0491/Ami Vitale.

Amway & UNICEF – a sociallyresponsible partnership

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AMWAY & UNICEFA socially responsible partnership

These effects can spread even further afield, in the case of Amway’s

CSR partnership with UNICEF, to help children in some of the world’s

poorest countries. Amway’s partnership with UNICEF is one example

of a CSR strategy that benefits all stakeholders.

Amway - Who they are

Amway is a leading manufacturer of health, beauty, home care and

personal care products. The company was founded in Michigan, USA in

1959. In total, more than 450 different company-branded products and

services are offered globally by Amway. Amway’s flagship skin care brand

is the Artistry™ line of skin care products and colour cosmetics. In the

highly competitive prestige category, only the ARTISTRY brand and three

other distinguished brands enjoy a leadership position as the world's best

selling cosmetics brands.* (*Based on a third party research study, others

are Clinique™, Lancome™ and Estee Lauder™).

In 2005, Amway launched E. Funkhouser New York™, a line of

professional-grade colour cosmetics for face and body. The company

also manufactures NUTRILITE™ Nutritional supplements and many

other health and beauty products.

Amway also markets products on behalf of other leading manufacturers

such as DeLonghi, Vidal Sassoon and Kenwood. Over 13,000 people are

employed by Amway in 80 countries and territories around the world.

Direct selling in Amway

Unlike some of its competitors, Amway does not use the traditional

distribution channel for getting products to market. Instead, Amway uses

a direct selling approach. Direct Selling is a technique that cuts the

‘middleman’ out of the distribution process by providing goods directly to

individual distributors who provide those goods to consumers. These

distributors are known as Independent Business Owners (IBO).

Amway currently has more than 3 million IBOs around the world,

including over 25,000 IBOs within Ireland, the UK and the Channel

Islands. These IBOs actually own their own independent businesses

through which they sell Amway’s products and these products can

only be purchased through IBOs. By using this direct sales model,

Amway’s parent company Alticor generated annual sales of more than

$6 billion as at 31 August, 2005.

Amway is a global leader in direct selling. No other direct selling company

can compare with Amway’s longevity, stability, and global reach. Direct

selling is increasingly used by

many organisations as a

means of reducing cost and

ensuring a more efficient

fulfilment of customer orders.

This includes companies such

as Dell and Aer Lingus, who

use the Internet as a means of

getting their product to market.

CSR strategies

Businesses have a responsibility to conduct their work ethically. They

are responsible to their boards, employees, customers and to society

as a whole. In recognition of this fact, some companies, including

Amway, have developed an official Corporate Social Responsibility

(CSR) strategy.

Most companies make philanthropic contributions to charities at the

end of the financial year, but a CSR strategy goes much deeper than

this. It defines how the company will conduct its business throughout

the year. It states the values of the company, its executives, and its

employees, and it sets forth a strategy to make sure that the business

is living up to those values. A CSR strategy might focus on engaging

and improving local communities or on supporting global causes.

At the same time, companies are not charities – if they were not

making profits, they would not stay in business. A CSR strategy must

reinforce the company’s profit-making strategy. Amway’s global CSR

strategy is called the One by One Campaign for Children and refers to

the way in which individuals can make a real difference collectively to

the lives of children around the world, one by one.

Companies have CSR strategies for many reasons. Some companies

are owned/operated by individuals who have strong principles and

want their businesses to reflect that.

Stakeholder expectations

Stakeholders today are holding companies to high standards of social

responsibility. Stakeholders do not want to do business with

companies that pollute the environment, harm communities, or exploit

impoverished workers in third-world countries. They want to feel that

their money/business is making a positive contribution to their

communities and the world as a whole, and more and more, they are

spending their money in accordance with these values. As a result,

corporate social responsibility is becoming a progressively more

important component of good business practice.

Here is an overview of some of Amway’s stakeholders and what they

expect from the company:

� Amway Global HQ/Amway Europe – Foremost, Amway

expects a good return on investment. It expects the company to

act in a socially responsible way to benefit the business and its

IBOs; and to provide a high quality business opportunity with high

quality products.

� Staff – The people working for Amway want fair wages and good

working conditions for themselves, but they also want the

company to show care, concern and support for the charities and

causes that they themselves support. If they feel that they are

working for a socially responsible business, they will have

improved morale and generate better revenue.

� Consumers – Primarily, they want consistently high quality

products and value for money. When making a purchase,

consumers base their buying decisions on many tangible factors,

such as product appearance, price and quality. However, intangible

factors are also important. An intangible factor is something that

cannot be perceived by the senses, i.e. by sight, sound, taste, feel

or smell. The intangible in this case is the influence Amway’s

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www.business2000.ie

association with UNICEF can have on consumers. Those who are

impressed by such a socially responsible arrangement are more

likely to buy from Amway than from a competitor.

� Suppliers – Suppliers expect prompt payment, fair terms, and a

reliable relationship based on solid business ethics.

� Community Partners – Amway’s community partners want the

company to show respect, interest, and concern, and for the

company to promote and support community initiatives.

Amway and UNICEFpartnership

One effective model for CSR is when a company partners itself with a

charity or humanitarian organisation. Joint enterprises of this type are

useful for building the reputation of a company while supporting its

partner. Amway’s support for UNICEF is an example of a socially

responsible partnership that illustrates how companies can make a

difference in the world.

What Amway is doing to help UNICEFIn 2001, Amway decided to support UNICEF as a major part of One by

One, its CSR Strategy. Since then, Amway, its staff and IBOs

have been raising money for UNICEF

across 25 European countries. Amway has

pledged long term funding focus and

commitment. In 2005, Amway raised

more than €320,000 in response to

the Asian tsunami disaster.

Amway’s financial contribution to UNICEF comes from five sources:

1. Corporate donations

2. Staff donations

3. Sales of UNICEF greeting cards

4. Donations from IBOs

5. Sales of the exclusive Amway UNICEF Partnership pin – Billy.

Donations from IBOs are facilitated by special Amway order numbers that

allow distributors to make a contribution by logging it on a purchase

order. Order numbers are useful as unique identifiers for products

because they eliminate the need for long-winded descriptions. These

donations help support UNICEF and its ongoing programmes

including the Kids Helping Kids campaign, which is this year focusing

on the importance of water in emergencies.

About UNICEF

The United Nations Children’s Fund (UNICEF) provides assistance for

the world’s poorest children by raising funds for UNICEF programmes

and advocating for change on their behalf.

UNICEF is the world’s leading organisation working specifically for

children. UNICEF work with local communities and governments in

155 countries to provide emergency relief and run long-term

development programmes in areas such as health, education and

child protection.

All UNICEF programmes are entirely dependent on voluntary

contributions. UNICEF Ireland raises funds for these programmes

through donations, the sale of cards and gifts, partnerships with Irish

companies and special fundraising events i.e. 2006 European Premier

of the Irish Film Breakfast on Pluto. UNICEF Ireland also works to raise

awareness of issues affecting children around the world and lobby

government to support children’s rights.

What UNICEF does to helpUNICEF works in more than 90 countries around the world to improve

water supplies and sanitation facilities in schools and communities,

and to promote safe hygiene practices.

UNICEF sponsors a wide range of activities and works with many

partners, including families, communities, governments and other

organisations. In emergencies it provides urgent relief to communities

and nations threatened by disrupted water supplies and disease.

UNICEF – Water issuesWater, sanitation and hygiene are the basic essentials of life. More than

2.6 billion people – 40% of the world’s population – lack basic

sanitation facilities, and over one billion people still use unsafe drinking

water sources.

Every day across the world, 4,500 children die from diarrhoea and

other water, sanitation and hygiene-related diseases because of

unsafe water and a lack of basic sanitation. Many more suffer and are

weakened by illness.

The UNICEF Kids Helping Kids campaign will highlight the importance

of water in emergencies. The campaign focuses on three key areas

where clean water is essential but not always available to millions of

children around the world.

Water in emergencies includes – water in times of war, the importance

of water during a drought and water after a natural disaster.

UNICEF/HQ000048/Jim Holmes.

UNICEF 2005.

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Business 2000T e n t h e d i t i o n

www.business2000.ie

Water in Emergencies

WarIRAQ – By late April 2003 in Iraq, children – who make up half of the

population – faced major threats to their survival, health and well-being,

in the immediate aftermath of the war. Ongoing fighting and looting

prolonged many of the rehabilitation efforts. Severe damage to the water

and sanitation system had created widespread health hazards. Hospitals

and health centres lacked essential medicines, supplies and personnel.

During the war, more than 200 UNICEF national staff continued to

distribute food, blankets and other essential supplies to civilians,

drawing on thousands of metric tonnes of medical, nutrition and water-

related supplies pre-

positioned inside Iraq and

neighbouring countries.

Since the war has ended,

UNICEF has delivered

millions of litres of safe

water, as well as

equipment, fuel, water

purification tablets and

chlorine gas to re-start

collapsed water and

sanitation systems.

DroughtHORN OF AFRICA: Low levels of rainfall for the past several years

have resulted in a widespread water scarcity across the Horn of Africa.

Crops have failed and livestock are dying everywhere. Often, low water

table levels mean that the available drinking water is contaminated

with deadly diseases.

Every cent raised from UNICEF’s Horn of Africa Water Appeal provides

4-5 litres of safe drinking water - enough to save a child's life! Money

raised from this appeal is used to provide tablets that make water safe

to drink. These tablets cost little more than one cent per tablet.

Aquatabs are self-dissolving tablets which, when added to unsafe

drinking water, make it safe to drink. They kill micro-organisms in water

to avoid diseases such as cholera, typhoid, dysentery and other water-

borne diseases. They can be used to protect the lives of millions of

families and children during drought, when families resort to drinking any

water available.

Natural DisastersPAKISTAN: On Oct. 8th 2005 a terrible earthquake struck Pakistan.

Within hours UNICEF was emptying its Pakistan warehouses and

distributing blankets, nutritional biscuits, water cans, children’s

clothing, shelter supplies, and medical equipment.

UNICEF supplied safe water storage units for people displaced by the

Pakistan earthquake. UNICEF also supplied 17 tanks, each with a

700-gallon capacity, to various camps. UNICEF also provided families

with 10-litre plastic jerry cans and has supported the construction of

16 community latrines.

Immediately following the earthquake, UNICEF worked with the

government, National Government Organisations (NGOs) and other

UN agencies to provide health, shelter, food, safe water and sanitation,

and education services for children and their families.

Within a few weeks, six 10,000 litre motorised water tankers, more than

1,000 water storage tanks, 20 water quality test kits and two mobile

water testing units were secured. UNICEF was able to save many

children’s lives by providing these communities with safe drinking water.

Conclusion

Amway’s global One by One Campaign for Children and its European

partnership with UNICEF is an example of how a CSR Strategy can

work in the interest of all of Amway’s stakeholders. By supporting

UNICEF, Amway is associated with a well-respected organisation

while benefiting its stakeholders and communities around the world. It

illustrates how companies can make a real difference in the world.

1) CSR is an acronym for? Find the words. (9, 6, 14)2) People/organisations affected by or involved in the day

to day running of a business. (12)3) A long term plan of action designed to achieve a

particular goal. (8)4) The sales model that cuts the ‘middleman’ out of the

distribution process. (6, 7) 5) Amway’s IBOs are? (11, 8, 6)6) Something that cannot be perceived by the senses is

known as an _______________________ factor. (10)

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Visit: www.amway.co.ukwww.unicef.ie

Find out more

UNICEF/HQ/030515/Shahzad Nourani.D Y J L Z C S W E Y H I S D TC F T L A R I B B C C P R N CS O D I E I U G O W V Z E E EQ P R N L S C N E B E D D J RH Z W P I I X O V A N Z L V IP O K N O W B J S E W I O D DT K E T W R P I P B N T H O KB S S O I W A E S P L B E Q SS C T R L Q D T O N U Z K N QR C R C P N M T E C O V A W SD Z A P I D J I S K Q P T I RI N T A N G I B L E D J S F XB Z E G N I L L E S I W M E CE Z G K Q V O I H Y E S R N RM Y Y Q V C N U W V K K P B O

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