Mlm System in Bangladesh

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Journal of Business Studies, Vol.XXVII, No. 1, June 2006

Social Scenario of Multi-Level Marketing in Bangladesh
Samina M. Saifuddin1 Mohammad Nazmul Huq2 Abu Hena Reza Hasan3 Abstract Multilevel Marketing (MLM) is a recent trend added to the business notion of Bangladesh. It is a concept used by many countries around the globe, with United States of America practicing it for almost fifty years. MLM not only operates as direct marketing channel but also it is being practiced by many companies to increase their customer base. The concept of MLM in Bangladesh was introduced by Global Guardian Network (GGN) in 1998. Since then many of the firms have ventured into the MLM practices with particularly one company having an exponential growth ‘Destiny 2000’. As the number of people operating as members/ distributors of MLM companies are increasing, this paper attempts to identify the social scenario of the MLM industry on the lifestyles of those involved in the industry. The MLM industry can offer much to the Bangladesh economy, and has the opportunity for considerable growth, judging from the overseas experience. Thus the government needs to concentrate on formulation of policy issues that will regulate the MLM industry and protect the interest of people involved in such practices. Keywords: Multi-Level Marketing, Network Marketing, Direct Selling.

1.1 Introduction Multi-level Marketing (MLM) is a business opportunity that goes by many names – network marketing, direct selling, person-to person marketing, matrix marketing, or one to one marketing. Network marketing often called Multi Level Marketing is perhaps one of the least understood methods of moving products and/or services into the market place. It is a system whereby the company producing the product or service rewards the people who make word of mouth referrals. The people who operate as components in the chain are referred to by any of the following names - Members, Independent Salespeople, Network Marketers, Advisors, Agents, and Distributors - different schemes uses different

Samina M. Saifuddin, Associate Professor, Department of Management Studies, University of Dhaka, Dhaka 1000, Bangladesh 2 Mohammad Nazmul Huq, Lecturer, Department of Business Administration, Stamford University, Dhaka, Bangladesh 3 Abu Hena Reza Hasan, Associate Professor, Department of Management Studies, University of Dhaka, Dhaka 1000, Bangladesh



Journal of Business Studies, Vol.XXVII, No. 1, June 2006

names. The system cuts out all the middlemen from the equation of normal business and frees up a large volume of money normally spent on advertising, paying commissions, and other overheads. It is intriguing to observe, despite the fact that MLM is the least understood area; very little scholarly work has been done especially in context of Bangladesh. The shortage of research regarding MLM practices in Bangladesh has motivated the authors to venture into this field. Networks are characterized by strong interdependence between components of a value chain( Xavier, 1999, pg 55) This is because, the success of each in the value chain is not only dependent on its own performance but also is closely linked to the interaction between all constituting that chain. The shift to network paradigm is summed up by Kotler (1991) as: “Marketing started out as an analysis of how commodities are produced and distributed through an economic system. Subsequently the companies became interested in distribution channels. What I think we are witnessing today is a movement away from a focus on exchange – in the narrow sense of transaction – toward a focus on building value laden relationships and marketing networks.” This paper focuses on explaining the issues relating to the MLM practices and its evolution followed by the findings of the study which indicates the demographic profile of the people involved in such activity and its impact on their lifestyle. The paper attempts to follow a...
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