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The management of MLM business in Taiwan. 1945: Nutrilite Corporation 1997: direct selling industry = US$80.47 billion → 2.06% growth compared with 1996 31 million employees → +25% competition. issues. Political, economic and social Fraudulent pyramid schemes (since 1960)

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the management of mlm business in taiwan
The management of MLM business in Taiwan
  • 1945: Nutrilite Corporation
  • 1997: direct selling industry = US$80.47 billion

→ 2.06% growth compared with 1996

  • 31 million employees → +25%
  • competition
issues
issues
  • Political, economic and social
  • Fraudulent pyramid schemes (since 1960)
  • April 1998: China suspended all MLM activities
  • bad image

- europe: snow ball system

- japan: silver rat, money rat, rat club

slide5
1997: government regulatory agencies, MLM practitioners and media joined effort to change the image of MLM
  • Taiwan total sale turnover: NT$40.1 billion

→ - 1.8% (1996)

  • Taiwan average sale volume: NT$167.16 million

→ + 5.3% (1996)

  • Taiwan total number of distributors: 2.72 million

→ 12.56% of total population

→ N°3 in the world

taiwan mlm industry in 1997
Taiwan MLM industry in 1997
  • Competition from both local and foreign firms
  • Eroded consumer loyalty
  • Changing consumer needs
  • - 3.36% in the number of new DS distributors
  • - 4.38% and – 2.52% decrease of orders and bonuses received by DS distributors
  • N°3 but the productivity of distributors decreased
  • Opportunities: domestic market liberation measures, globalization
  • Threats: more pressure

 Innovative and flexible management approach

research objective and method
Research objective and method
  • The aim of this research is to provide information about the current management of DS distributors in Taiwan MLM industry.
  • Issues:
  • education and training
  • the incentive
  • communication
  • turnover
  • application of computer
  • public relation.
  • Method used: personal interview

executives from 8 foreign and local MLM companies

slide8
Challenge: to develop an attractive package to cater all the needs of the DS distributor

►CEO of Nutri-Metrics International view:

  • Strong leadership in MLM business management
  • Effective management needs:
  • reward
  • recognition
  • ability to duplicate the company’s success formula
  • good relationship between distributors and the management
  • Constant training program
slide9
Network Marketing Magazine survey (1998): 60% of the respondents stayed less than 1 year after joining a MLM firm.
  • According to some studies in Britain and the US, people join MLM firm for:
  • extra income
  • achieving short term goals
  • beeing one’s boss
  • enjoying discount prices
  • winning praises from others
  • Study done with 4 US MLM firms:
  • self satifaction
  • accomplishment
  • flexible hours
research findings and analysis
Research findings and analysis
  • Open-ended question
  • 7 major areas:
  • training and education
  • bonus program and sales network structure design
  • inter-company communication
  • ways of handling high turnover
  • use of computer system and public relation
  • industry image and government regulatory
  • emerging future trends.
training and education
training and education
  • 2 functions:
  • motivate DS distributors
  • educate the distributor with the product
  • In 1997:

Annual company conference: + 6.26%

Training program: + 1.55%

Opportunity meeting: +0.74%

  • Interviewed firms provide:

Products knowledges

Sale skills training

Sales network management

bonus program and sales network structure design
bonus program and sales network structure design
  • MLM need to have a structure to meet the needs of both self-use consumers and distributors.
slide14
commission:

retailing commission + leadership commission

  • Retailing commission = retail discount + monetary reward paid of the group sale volume
  • Leadership commission = compensation for setting up a large scale of down-lines

→ monetary reward = short term effect

MLM firms want a new method to motivate distributors.

inter company communication
inter-company communication
  • Magazines
  • Newsletters
  • Counseling services
ways of handling high turnover
ways of handling high turnover
  • Companies interviewed are not concerned by this issue
  • Goals: - to offer quality products

- to offer attractive packages

use of computer system and public relation
use of computer system and public relation
  • Computer allows to:
  • assess inventory sales
  • monitore sales progress
  • manage sales force
  • develop customer profiles.
  • In the public relation:
  • Print advertisement
  • Sponsoring large scale philantropic events
industry image and government regulatory
industry image and government regulatory
  • Negative image caused to the MLM industry
  • Fair Trade Commission should produce guidelines of regulation
future trends development
future trends development
  • 4 of the interviewed firms want to attract married couples to join and start a « second spring ».
  • Position : « non-store retailers »
  • → provide superior products, carrer opportunities and « personal-touch » experience
  • Products of the future will be more sophisticated, leisure-oriented, environmental-friendly and educational.
  • Different structure of MLM firms and new management philosophy
  • Strategic alliances, internationalization and corporate diversification
conclusion and suggestion
Conclusion and suggestion
  • Macro-management level: MLM do efforts in:
  • Recruiting new members
  • Training with efficiency
  • Closer ties with distributors
  • Media.
  • Micro-management level:
  • High quality product
  • Good image
  • Management philosophy

→ expectation of the government

To prepare to the competition of tomorow, MLM companies should adjust their offerings and change their structures.

suggestion for short term
Suggestion for short-term
  • MLM should focus their effort on consolidating their current network operation and enhancing the productivity of their sales forces:

→ develop closer ties with its distributors at all levels

→ develop « Service First » marketing strategy

suggestion for long term
Suggestion for long-term

→ be technology-driven and market-minded

→ consolidated internal resources and maximize operational efficiency

→ create synergy

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