"Amway" Goes Astray In China
Amway is a multi-level marketing (MLM, also known as network marketing) company founded in 1959. The company's name is an abbreviation of "American Way. Its product lines include personal care products, jewelry, dietary supplements, water purifiers, air purifiers and cosmetics as well as other products from top brands.
Amway is one of the largest international direct selling companies and entered China in 1995. Their entry into the Chinese market resulted in big profits and high potential for future growth. However, in 1998 the Chinese Government declared a ban on direct selling which threatened a substantial market for Amway. The reason the Chinese government decided to prohibit direct selling is because they believed Amway's direct-selling techniques could spread heretical religion and the start of secret societies. Chinese officials believed the ban was totally necessary because Amway's distribution and marketing policies were indicative of illegal activities.
The original intent of Amway's founders was to create a business using a novel means of product distribution that facilitates entrepreneurialism, understanding of economic management, and economic independence among its associates (i.e. distributors; the term currently in use is Independent Business Owners, or IBOs).
Amway's marketing structure is based on personal connections in order to recruit new salespeople, called distributors. These are independent agents who rely on close connections such as family, friends and co-workers as customers. To move up the hierarchical ladder, a successful agent will sell more and more products through this network of people. The circle gets bigger and bigger as one distributor is suppose to recruit others to join ...