Amway's multi-level marketing strategy banned by the
Government of China. The marketing Strategy and challenges
Submitted by: Aziz Baghadia
Course: MBA Term2, Group: 1(Marketing)
Student Id: 099154 – 87
UWL Id: 29002133
Module: Marketing Project
Lecturer name: Richard Small
College name: College of Technology London
University name: University of Wales Lampeter
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Table of Contents
Aim of Project
Hypothesis of Project
Discussion on Proposed Hypothesis and their Analysis with help of
secondary data - Literature Review
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In this project report, it is shown that how multi-level marketing company "Amway" needed to revised its pyramid business model to satisfy and overcome barrier enforced by the Government of China. First of all the concept of multi-level marketing and organisational background are explained. The difficulties faced by Amway after the ban by China government on multi-level marketing and how the organisation cope up with that difficult situation is mentioned in this report. Two hypotheses are laid down and tested as well. This report shows that multilevel marketing strategy is inefficient, revising marketing strategy for big organisations is very risky and Amway China is able to make profit despite of reiterating their independent sales techniques.
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AIM OF PROJECT
How the multi-level marketing company "Amway" needed to revise its pyramid business model to satisfy and overcome barrier enforced by the Government of China
This report is based on the failure of multi-level marketing strategy used by a well known company Amway in China. Amway Corp. is a multimillionaire dollar company today and its reason for being so successful in many countries is its multi-level marketing strategy. But this strategy fails when China Government ordered an immediate ban on multi-level marketing. Not only Amway but all the other organisations, who were involved in multi-level marketing, suffered a lot because of this ban.
Aim of multilevel marketing is to sell product or services through distributors. Multilevel marketer convince people by explaining them that this kind of business model promise that if they sign up as a distributor they will get commission from their sales and from other people who are recruited by them to join distributors. This plan gives promise for commissions through two or more level recruit which is called down line of distributors. In multilevel marketing individuals are attached with parent company as a franchise (Multilevel marketing – Why it is a Scam, 2010).
Multilevel marketing companies have various compensation plans as well. Compensation plan of MLM companies are complicated as they are designed in such a way so people who join company encourage participating more to earn more money. (Understanding MLM Companies, 2007) MLM companies want to sell their product in markets and they know that
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their distributors are their marketers and so they will provide commission for selling company's product. Numbers of different compensation plans are discussed as under: 1) Unilevel Compensation Plans: These plans are very simple to understand like distributors can sponsor as many members as they want under them to go deep for forming a good pyramid under them which they can call their own. This plan sounds good for new interested candidates but reality is distributors have to invest lot money in efforts to get people under them from commission as well as he needs a lot contact to get people for connection in pyramid structure.
2) Binaries Plans : These plans are little complex but better than above one as here distributor has to recruit two, then those two will recruit another two...