PAST OBSTACLES BECOME FUTURE OPPORTUNITIES
Multilevel or direct marketing is arguably one of the most effective available systems of marketing a unique product with low overhead costs. The largest multilevel marketing or MLM firms are based in the nutraceutical or health industry. Although many MLM firms earn revenues of tens of billions of dollars annually, for many the phrase ‘multilevel marketing’ carries the strong negative connotations of pyramids and Ponzi-schemes. Unfortunately for many MLM firms, these negative perceptions are shared by the government and social institutions of one the biggest potential markets in the world: China.
In 2005, with its 1.3 billion people and a gross domestic product (GDP) of approximately $5,600 per capita, China stands as the third-largest economy in the world after the European Union (CIA, 2005, p.7). Initial attempts at multilevel marketing in China were met with bitter setbacks when bad press, ignorant management, lack of political cooperation and socially contrary marketing closed all legal MLM operation in China by 1998.
Today’s movement of rapid globalization continues to emphasize the need for balance in our world of complex systems. The necessary balances of political, economic and social institutions in China are not very well understood by most MLM companies. Although the difficult obstacles that previously inhibited multilevel marketing are beginning to give way, the past experiences of the pioneering leaders in China leave several clues for a more efficient method of penetration and maintenance in the Chinese marketplace. With further study into the relationships of business and government in China, an effective balance of political, economic, media and social institutions can be established. This balanced approach can thus help companies avoid many of the problems MLM companies face in the beginning stages of doing business in China.