Part II Review of Related Literature

Introduction According to Macro Lee, Network Marketing has been expanding throughout the years at an incredible rate1. It has captured the needs of many companies for a low-cost, fast returning strategy. It is one of the newest business model developed. Although the concept has been present for a few decades, its full potential as a money generating model has only been fully realized on the advent of computer age. With the aid of the computers of the twenty-first century, the seemingly complex system of multi-level marketing has now been feasible. The change in the psychology of individuals towards Network Marketing is also a major factor. Moreover, the fact that it has enticed many individuals and made numerous millionaires places Network Marketing of high demand. This review has been conducted to formally discuss what Network Marketing is and its noted difference from the traditional pyramiding. As stated, one of the points to consider and will therefore be discussed, is the perception of people towards multi-level marketing.

Body Network Marketing is a business model and a marketing strategy that operates with a multi-level structure sales force. In this model, the members are compensated not only for the amount they personally generate but from the generated sales of their recruits as well. This hierarchy forms the backbone of Network Marketing.2 Pyramiding and Network Marketing are essentially the same and differ only in the legality of the operation. In the last century, many individuals detest or fear Multi-Level Marketing because of the similarities of the two, Pyramiding and Network Marketing, in structure. In a positive note, the pyramid structure of Multi-level Marketing is basically similar as every other sustainable business model across the world, thus proving its stability.3

2 3

http://www.network-marketing-business-school.com/pyramid-scheme.html July,2011 Ibid.

As defined, a pyramid scheme is a fraudulent money-making scheme that is based on a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme without a legitimate product or service being delivered. Eventually, the number of new recruits fails to sustain the payment structure and the scheme collapses with the most people losing the money they paid in.4 To simplify, one can identify a business model as a pyramid scheme if the company does not have any legitimate product or service involved for your initial investment; and if you do not get any financial return, unless you have successfully introduced a number of new recruits into the pyramid. As stated, pyramid schemes concentrate on the money that you could earn by recruiting new people into the pyramid and generally ignore the marketing and selling of any products or services. On the contrary, the concept of Network Marketing is to allow the company to sell the products or services directly to the consumers. No advertisement is used because word-of-mouth is being utilized. The fee for the media is then converted as incentives for the members. In a network marketing company, an individual is not required to recruit to earn. A company with this business model is understood to be focused more on product distribution. Also, one of the indicators of a Network Marketing model is having restrictions to the companys compensation plan. This is to prevent the structure from financially collapsing.

Ibid.

With the advent of the internet comes easy access to information. Filipinos are now more aware of what is happening beyond our borders. With this, the younger generations have become more open-minded. Thus their psyche towards matters has been broader including the concept of Network Marketing.

Conclusion To summarize, a company is pyramid scheming when: a. They do not have any legitimate product or service involved for your initial investment. b. You do not get any financial return unless you have successfully introduced a number of new recruits. c. They do not have restrictions to the companys compensation plan.

As a conclusion, knowing the difference between Network Marketing and Pyramid Scheming is of great importance. The three points mentioned above are tale-tail signs of the legality and security of the company. In addition, the mentality of an individual whether towards Network Marketing or Pyramid Scheming greatly affects the status of the business model.

Part III Methodology

A. Research Design The research will be qualitative in nature. The team aims to determine the cause of the boom of Networking Companies in Tacloban City. Also, it is eminent that the research explains the changes in MLMs. Majority of the information that are to be gathered will b from interviews from Uplines and Downlines; professionals whose fields are related to this study. Henceforth, the research is qualitative. B. Sampling Plan and Techniques
Sub Problems Respondents Sampling Techniques Justification of Methods Since the respondents comprise of experts from the field of economics (local economists and their referrals), it would be appropriate to use such sampling technique. I.T. experts will b sampled. Companies will be grouped according to the networking activities they undertake. Local residents of the companies will also

1. What was the economic condition of Tacloban City (during the emergence of networking) and now?

Random business individuals, networking agents, economists

Expert Sampling

Snowball Sampling

Expert Sampling 2. What was the technological condition then and now? I.T. experts, local residents of the companies

Stratified Sampling

Simple Random Sampling

3. What was the purchasing behavior of the consumers then and now? 4. What was the networking system that was used by the networking companies then and now? 5. What are the differences in the products offered by networking companies then and now?

Local consumers, agents

Systematic Random Sampling

HRMOs, networking agents

Expert Sampling

be sampled, and the list of these groups of individuals will be taken from the companies databases. Again, with the aid of the companies databases, these respondents are hoped to be sampled. The experts in the internal environment of the networking companies (HRMOs and agents) will be sampled using the said sampling method The method will be based on referrals of the respondents given.

Networking company agents, sellers customers (direct buyers and resellers)

Snowball Sampling

C. Method and Data Acquisition The data for the study will be gathered in three (3) ways. 1. Research data from different agencies will be gathered to aid in the study. Information such as the registered Networking Companies and the first date of registration will be gathered.

2. Interview selected downlines and uplines alike will be interviewed regarding different matters related to the study. Managers of the companies will likewise be interviewed. Also, professionals such as IT and marketing experts will also be interviewed. 3. Survey Questionnaire questionnaires will likewise be provided for downlines in the company.

D. Method of Data Analysis All data will b combined and transferred into visual materials for easy comprehension. Graphs, tables and illustrations will undoubtedly be used.

Part IV Appendices
Interview Questions: Marketing Aspect

1. Was there a change in your strategy from the time you started here in Tacloban up until now? 2. Would you say that your business is profitable? Why or why not? 3. Do you do advertising for your business? 4. How do you advertise? How much? 5. Do you sell you goods through sales representatives? Why? 6. Do you sell you goods and or services online? Why? 7. How many outlets do you have for your business? 8. Where are the major locations? 9. Do you have enough outlets for your business to sell your goods and services? 10.How much are you willing and realistically spend on advertising? 11.How much are you willing and realistically spend on packaging and labeling? 12.What do you think is your products biggest selling points? Why? 13.What emotions or sensations do you want to convey as being associated with your products through your advertisements? 14.How long do you want your advertisements to run?

Technical Aspect (Product) 1. How many products do you sell? 2. What are the most sellable? Why do you think it is being patronized? 3. How do you control the quality of your products? 4. How many products were originally offered during your start here in Tacloban? 5. Why was there a need to add products? 6. Were there products that were removed? Why?

Technological Aspect 1. Do you think networking and technology are interrelated? Why do you say so? 2. Does technology have effects on the presence of networking? How? 3. What technology existed during your first year in the business? 4. Did these technologies boost the existence of networking? 5. Were there technological advancements or changes that gave rise to networking opportunities? What are those? 6. Did the internet exist during the emergence of your company? 7. Is the internet an effective form of communication and advertisement tool? How so? 8. Did the internet help introduce networking to the market? 9. Is the internet capable of expanding networking channels? How? 10. Can the internet help further expand the networking business in Tacloban? How?

11. Is the computer important in the daily transactions of your company? Why? 12. Is the cellular phone important in the daily transactions of your company? Why? 13. Did the computer and cellular phone help introduce networking to the existing market? 14. Can the computer and cellular phone expand the networking channels and market scope? 15. Can networking survive the competitive market without the advent of computers and cellular phones?

Economic Aspect 1. How was the economic status of Tacloban City before the emergence of Networking Companies? 2. Why did you choose Tacloban as location for one of your branches? 3. What were the major economic factors that hindered the emergence of an aggressive network marketing in the past? 4. How was the economic condition of Tacloban City after the emergence of Network Marketing? 5. Was the economic condition a major factor that contributed to the emergence of Network Marketing in Tacloban City? 6. What were the major economic factors that influenced the emergence of Network Marketing in todays setting? 7. How was Network Marketing affected the overall employment status of the people?

8. How did Network Marketing contribute to the emergence of a new set of employment scheme in the city? 9. How did it affect the buying behavior or the purchasing power of the people? 10. How did Network Marketing contribute to the emergence of a new set of business opportunities in the city?

Social Aspect 1. How did people look at your company during the beginning of the business? 2. Was your business associated with scamming? 3. What are the difficulties in recruiting aside from money matters? 4. How do people see your company now? 5.