My brief interview with HT-Mint (The Wall Street Journal) on following: "Steria hopes French, German are languages of success in Europe"

1. CORPORATE NEWS 07WEDNESDAY, DECEMBER 31, 2008, DELHI ° WWW.LIVEMINT.COM
mint
BRAND REVIVAL
Amway eyes US comeback after
success, scrutiny in India, China
BY JAMES PRICHARD
feedback@livemint.com
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ADA, MICHIGAN
Once a household name
and reputedly the key to
great fortune for modern sales-
men hoping to live out a Hora-
tio Alger myth, the Amway
brand faded from the US mar-
ket years ago, tarnished by le-
gal and regulatory problems.
The direct-seller of every-
thing from health and beauty
items to household cleaners
repeatedly fought allegations
that it was a pyramid scheme.
The company also paid $20
million in fines in a Canadian
criminal fraud case in 1983.
In 2000, after Amway be-
come part of an umbrella com-
pany called Alticor Inc., the
Amway name was dropped in
the US and Canada. The hope
was that the company could
emerge wholly remade in the
world of online sales under a
new moniker: Quixtar.
Now, as Amway’s 50th anni-
versary approaches in May, Al-
ticor is retiring the inert Quix-
tar label and pouring millions
of dollars into reviving the Am-
way brand in North America
with market research, national
television commercials and
ads in newspapers and maga-
zines and online. The compa-
ny will use a transitional name,
Amway Global, before revert-
ing in about a year to Amway.
“We thought, well, if we’re
going to build a brand, build
the brand that everybody
knows already,” Alticor presi-
dent and co-CEO Doug DeVos
said in an interview. “It’s going
to be much more successful
and cost a lot less and happen
a lot faster.”
Despite predictions of con-
tinuing economic gloom, Alti-
cor executives hope to repeat
in the US the kind of growth
they’ve seen abroad in the past
—and to revive the mystique
that helped the company
spread throughout the Mid-
west and, by the mid-1960s,
the rest of the US. Amway’s
hundreds of thousands of dis-
tributors dreamed of getting
rich by selling cleaning prod-
ucts and by recruiting their ac-
quaintances to join the fold.
Still operating on that basic
model, including prices that
tend to be higher than those of
their competitors, Amway saw
global sales revenue top $7.1
billion in fiscal 2007. The com-
pany predicts another $1 bil-
lion increase this year. And
most of its recent growth, in
such developing Asian markets
as China, India and Russia, has
been under the Amway name.
“In the late 1980s, about
three-quarters of our business
was here in the US,” says Steve
Van Andel, Alticor’s chairman
and co-chief executive and—
like DeVos—the son of one of
Amway’s founders. “Now
about 80% of it is outside the
country.”
The company is gambling
that consumers at home,
where sales have been flat for
years, will remember the days
when Amway was known less
for scandal and more for unre-
lenting pitches from well-
scrubbed and optimistic door-
to-door salesmen.
Marketing experts say that,
despite the baggage attached
to the brand, the company is
doing the right thing by bring-
ing Amway back to North Am-
erica in a campaign that
launched in March and first
made a splash in October with
sponsorship of a Tina Turner
concert tour that concludes in
April.
“My sense is that many of
the negative associations of
Amway have now begun to
fade,” says Tridib Mazumdar, a
marketing professor at Syra-
cuse University.
Daniel Howard, a marketing
professor at Southern Method-
ist University, says each term
he asks his students whether
they have heard of Amway,
and each term “the vast major-
ity” respond affirmatively.
“Branding is what marketing
is all about, and the decision to
do away with Quixtar was an
excellent decision,” he says.
“The Amway name is already
fairly well established in the
minds of the American con-
sumer.”
The Quixtar name simply
never caught on, company ex-
ecutives say.
“The research said Quixtar
had a recognition (rate) of 3%;
Amway had a recognition of
76%, as I remember,” says De-
Vos, referring to a study Alticor
that commissioned in 2006.
Van Andel’s and DeVos’ fa-
thers, Jay Van Andel and Rich
DeVos, founded Amway—an
abbreviation of American
Way—in 1959, offering the
promise that anyone who
worked hard could operate
their own successful business.
Amway focused at first on
household cleaners, then ex-
panded its product line in the
1970s to include more nutri-
tional products and, a decade
later, more cosmetics. The
company manufactures all its
own products.
The Federal Trade Commis-
sion examined Amway’s busi-
ness model during the 1970s,
concluding in 1979 that it was
not an illegal pyramid scheme
because compensation is
based on retail sales to con-
sumers and because sales peo-
ple are not paid for recruiting
new colleagues.
Still, it continues to draw
critics and government scruti-
ny, including recent investiga-
tions in England, India and
China.
Van Andel and DeVos have
brought in two key marketing
executives to help revitalize
the Amway brand in North
America.
One is Steve Lieberman,
managing director of Amway
Global, who spent much of his
career at S.C. Johnson and Son
Inc., which makes household
products such as Windex win-
dow cleaner and Ziploc plastic
storage bags. The other is Alti-
cor chief marketing officer
Candace Matthews, who has
worked at The Coca-Cola Co.,
Procter and Gamble Co. and
L’Oreal SA.
Matthews says her job is to
“bring the discipline of mar-
keting to an organization that’s
been really sales-driven”.
Lieberman came aboard af-
ter hearing from a recruiter
about an opening at Quixtar.
“I said, ‘Quixtar? I’ve never
heard of Quixtar.’ So I went on
the Internet and went, ‘Oh, it’s
the old Amway company.’ I
didn’t know they still existed,”
he says.
His two-pronged attack con-
sists of rebuilding the Amway
brand and educating distribu-
tors and customers. The new
ads phase out the Quixtar
brand by showing it gradually
decreasing in prominence over
the course of the ad campaign.
The Amway Global logo
modifies the Amway logo that
has been used throughout the
rest of the world since 2000.
Directly below the blue Amway
name on a white background
now lies the word “Global” in
smaller letters, with a thin, red
swoosh separating the words.
Officials declined to say how
much Alticor is spending on
marketing, but Lieberman said
it’s spending about as much as
other large direct-sales com-
panies, such as Mary Kay Inc.,
Herbalife International Inc.
and the industry’s top-seller,
Avon Products Inc.
“Before, our spending was
relatively nonexistent,” he
says.
The privately owned firm,
based in Ada, about 10 miles
(16km) east of Grand Rapids,
still makes and sells the L.O.C.
household cleaners that made
Amway famous, as well as
food, apparel, baby-care items
and jewellery. But the new
push focuses on Nutrilite vita-
min supplements and Artistry
skin care products.
Amway does business in
most of the world, except
northern Africa and West Asia
because expanding there
would be “too complicated”,
Van Andel says. The most logi-
cal move was to reinvent Am-
way in the US.
“We’ve got to take a look at
the markets that we’ve been in
a while, like the US, that are
mature, that have been kind of
just kind of stable and going
along but haven’t had any
huge growth spurts,” Van An-
del says. “We’ve got to take a
look at what we can do now to
get those markets up and mov-
ing again.” AP
OUTSOURCING STRATEGY
Steria hopes French, German are
languages of success in Europe
BY ARUNA VISWANATHA
aruna.v@livemint.com
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NEW DELHI
Outsourcing services
provider Groupe Steria
SCA is betting large on
being able to expand its Euro-
pean business from India after
the Paris-based information
technology services company
acquired a 5,000-strong work-
force here after buying British
offshorer Xansa Plc. last year.
It could be a tall order as
many Indian outsourcing pro-
viders have had less success
with continental European
customers than, say, US firms.
Companies in Europe, ex-
cluding the UK, are set to
spend around €49 billion on IT
outsourcing in 2009, according
to Ovum, a tech services re-
search and consulting firm. In-
dian IT services companies
such as Tata Consultancy Serv-
ices Ltd and Wipro Technolo-
gies Ltd get around 10% of
their revenues through clients
based in Europe.
Many Indian technology and
back office service providers
have built up their European
business as a way to decrease
reliance on contracts with US
companies, but Indian provid-
ers have generally handled
that work through centres in
eastern Europe or north Africa,
in part to account for language
limitations including the chal-
lenges of finding sufficient
French and German speakers
in India.
Steria is trying to work
around that, by training 1,000
of its employees to speak Euro-
pean languages.
Plus, “only India has
the...capability to get 50 testers
overnight,” says Steria’s mar-
keting manager, Sachdev Ram-
akrishna, referring to ready
availability of employees who
run tests on new software.
Steria is hoping that offering
multiple languages in its staff
will give it a competitive envi-
ronment.
“Language is a key issue that
Indian companies face when
going to Europe, so this is an
advantage,” insists Steria’s
chief executive in India, Muke-
sh Aghi. He describes a con-
versation he had with a Euro-
pean customer who runs a
BPO in Warsaw and has an em-
ployee attrition rate of 70%.
“The work ethic (is) very dif-
ferent,” says Aghi, arguing that
India-based centres can com-
pete with centres in eastern
Europe. “In India, they see it
(such jobs) as very good career
growth.”
Chiraj Jain, for example, has
been with Steria in India for
four years, and took German
classes when the company of-
fered them.
“We may not be that fluent
when it comes to talking, but
we have working knowledge,”
Jain says, describing an in-
stance where he was able to
translate an email that came
from a German client, asking
about certain technical capa-
bilities.
Anil Dhar, another Steria
employee who works on a call
centre process, says he was
able to get by on his French
even when he went to Paris for
one week on a client visit.
Steria’s 1,500-employee of-
fice in Chennai is designated
as the French centre, while a
1,000-employee operation in
Pune will focus on German.
The UK-based Xansa worked
primarily for British clients, in-
cluding public sector firms
such as the Royal Mail Group
Ltd, Britain’s chain of post of-
fices. Steria says UK alone ac-
counts for about 85% of work
offshored to India from Eu-
rope.
After the acquisition, Steria
started offering 20-hour
French courses to anyone in-
terested in taking them, and
around 60-80 employees cy-
cled through each month. Ste-
ria then started conducting in-
termediate classes in conjunc-
tion with the Alliance Fran-
caise, with 100 certified French
speakers, and around 50 certi-
fied in German.
The company also supple-
mented its existing cultural
training for Indian employees
going to the UK with material
on French cuisine and French
wine. Steria’s goal is to have
10% of the company’s India
workforce speak French or
German.
“We’re hoping that at some
point European governments
and enterprises will be forced
to look at India much more
freely,” says Steria’s human re-
sources director Shantanu
Banerjee.
1,000 employees being
trained to speak
European languages to
give the company a
competitive edge
Language lessons: Mukesh Aghi, India chief executive of Steria.
Direct approach: (L to R) Alticor president and co-CEO Doug DeVos, Amway Global managing director Steve
Lieberman, and Alticor’s chief marketing officer Candace Matthews. Alticor has brought in Lieberman and
Matthews to help revitalize the Amway brand in North America.
ABHIJIT BHATLEKAR/MINT
The firm has
designated its
Chennai office
as the French
centre; its Pune
operations will
focuson German
PHOTOGRAPHS BY AP
RCom starts
nationwide
GSM service
BY BHUMA SHRIVASTAVA &
SHAUVIK GHOSH
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MUMBAI
The country’s second larg-
est mobile services firm by
subscriber base, Reliance
Communications Ltd (RCom),
on Tuesday announced the na-
tionwide launch of its Global
System for Mobility, or GSM,
wireless service.
The move makes it the ninth
player in the GSM-based mar-
ket.
Beginning on Wednesday,
the service will be available in
11,000 towns and 340,000 vil-
lages and will reach 24,000
towns and 600,000 villages in a
few months, RCom chairman
Anil Ambani said at a press
conference in Mumbai.
“We have invested Rs10,000
crore as GSM capex (capital
expenditure) till now and will
be spending a few thousand
crore going forward,” he said,
noting that the rollout was six
months ahead of schedule.
While Ambani declined to
give a break-even period or
tariff plans, RCom’s president
for wireless operations S.P.
Shukla said, “The pricing will
be announced for each circle
separately and, barring a cou-
ple of common offers, each cir-
cle will have a unique custom-
ized solution depending on
whether it is a metropolitan or
a rural area.” The wireless
market has 22 circles.
RCom added 1.77 million
users in November, taking it’s
total number of subscribers to
59.6 million.
The firm’s shares rose 7.16%
to Rs228.10 on the Bombay
Stock Exchange, beating the
bellwether Sensex index, which
rose 1.92% to 9,716.16 points.
bhuma.s@livemint.com
New offering:RCom’sAnilAmbani.
ABHIJIT BHATLEKAR/MINT