Discuss the Differences Between Adopting the Conventional Wholesale Retail Approach of Opening Stores Versus the Direct Selling Approach

743 Words Sep 1st, 2015 3 Pages
Name:Huiwei Tan
Student number:16869365

Identify the reasons why China outlawed direct selling in 1998. Do you think this action was justified?
The Chinese officials issued a ban of direct selling on Amyway Inc. and it was a big threat and a loss of multi-million dollar profits. China issued the ban arguing that there were fears that the company was spreading heretical religion and was ready to start a secret society in China. Another reason for the ban was that China claimed that the organization acted as a base for criminal activity. The reasons for the ban are not justifiable because the company uses the pyramid scheme when selling its products. This is a threat to the Chinese government since it encourages sales people to recruit
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It is less costly in that there is no need of physical location for the seller. The control and commitment of direct selling is dependent on the particular seller or consumer who wants to make sales. In direct selling the salesman can make sales depending on the ability to convince other people to purchase. On the other side, the cost of wholesale retailing is higher because selling is done in physical location where by they have to pay rent. The costs of setting the store are high and control is done by the organization. Since they have to employ sales people, the cost of wholesale retailing is high compared to direct selling where the seller decides and controls the process.
How did Amway change the “entire distribution compensation system” (Page 43)? Did this action affect its global corporate positioning?
The ban issued by the Chinese government was lifted after three months. Amway was forced to revise the process of selling to retail outlets from its former direct selling process. The new guidelines were different from the selling technique that Amway uses. This action affected the global corporate positioning because the company does not rely on wholesale retailing but uses direct selling. The establishment of its new market bases in China saw the change of the global positioning by increasing the cost of running the business with the introduction of expensive sales process. The wholesale distribution system is different from the normal
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