Managerial Process Skills

MMS Sem II
Prof M.R.Koshti
Session 14
No. of slides 43
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Todays topic
Dynamics of entrepreneurship
Non-traditional entrepreneurship**

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Why do people start a business?

Control You do not like to have a boss. You
can make your own decisions.
(However realize that many of your decisions
will be dictated by government regulations,
customers, and even your own employees) **

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The Idea
You have this one great idea or a product that
will revolutionalize the world. No one else is
currently offering it and you think you should
not waste time in going ahead.
Threat of competition**

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Flexibility
You want a schedule that allows you to work
when you want to and to spend time with
your kids when you want to.
Running your own business does give you the
flexibility if you want it but now probably you
will spend much more time on the job.
Remember, now the buck stops with you.**

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Money
It is the oldest and most common reason.
Most people start a business because they
feel that it is the only logical way to become
wealthy.
Leave a legacy**

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Disadvantages of running your own

business

You are alone

All decisions are yours
All losses are yours
Financial stress (Paying salary on 10, interest
etc)
Exiting the business is difficult
Succession issues**
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Is there any business idea

which
Gives all the benefits
And
Eliminates the disadvantages?**
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Non-traditional business

Consumer products
MRP Rs 100
Rs 20 Retailer
Rs 25 Distribution & advertising
Rs 55 Manufacturer
Who is the best ambassador of the product?
Satisfied CONSUMER
Why not use him to get sales, and..
Distribute Rs 45 among consumers, using a
systematic method?**
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Direct Selling**

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10

What Is Direct Selling?

Direct Selling means the marketing of
consumer products/services directly to the
consumers generally in their homes or the
homes of others, away from permanent retail
locations, usually through explanation or
demonstration of the products by a direct
seller___

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11

IDSA
The Indian Direct Selling Association (IDSA) is
an autonomous, self-regulatory body for the
direct selling industry in India.
The Association acts as an interface between
the industry and policy-making bodies of the
Government facilitating the cause of Direct
Selling Industry in India___

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12

IDSA
DIRECT SELLING
LEGITIMATE
COMPANIES, MLM

ILLEGITIMATE
FINANCIAL PYRAMIDS,
MLM look alike___

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13

www.indiandsa.co.in (Indian Direct

Sellers Association members)
1. Tupperware India Pvt. Ltd.,
Gurgaon
2. Tianjin Tianshi India Pvt. Ltd
Chennai
3. Oriflame India Pvt. Ltd.,
Delhi
4. Modicare Ltd.,
Delhi___
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14

5. Max New York Life Insurance

Co. Ltd., Gurgaon
6. Hindustan Unilever Network,
Mumbai___
7. Mary Kay Cosmetics Pvt Ltd.
Gurgaon
8. K-Link Healthcare (India) Pvt.
Ltd., Chennai
9. Jafra Ruchi Cosmetics India Pvt. Ltd.

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15

10. Herbalife International India

P. Ltd., Bangalore
11. Elken International India Pvt. Ltd.,
Bangalore
12. Daehsan Trading (India) P.
Ltd., Delhi
13. CNI Enterprise (India) Pvt. Ltd.,
Bangalore___
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16

14. Avon Beauty Products India

Pvt. Ltd., Gurgaon
15. Amway India Enterprises,
Noida, UP
16. AMC Cookware (India) Pvt.
Ltd., Bangalore
17. Altos Enterprises Ltd.
Ludhiana
18. 4Life Trading India Ltd___

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17

Amway India Enterprises,

Noida, UP (from IDSA site)
is the country's leading direct selling FMCGcompany. Its products are covered by 100%
Money Back Guarantee.
wholly owned subsidiary of Amway
Corporation, USA__

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18

PROMOTING FREE ENTERPRISE

Vision
Inspiring people to live better lives.
Mission
To provide the best business opportunity. To
deliver exceptional quality products to urban
and semi urban homes in the areas of
nutrition and wellness, cosmetics, personal
care, home care, home tech and insurance___
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19

Amway

Started in 1959, USA

Operates in 80 countries
Turnover over 5 Bln USD
Home care, Personal care, Skin care, Health
Quality
India, 1998, Foreign Investment/ Planning Board
100% money back
Free enterprise No joining fees**
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20

Research article
Marketing fraud: An approach for
differentiating multilevel marketing from
pyramid schemes: JPP&M JM & PP
Vander Nat, Peter J; Keep, William W . Journal
of Public Policy & Marketing 21. 1 (Spring
2002): 139-151.

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21

Trouble
1979 Amway case (FTC v. Amway 1979).
The FTC (Federal Trade Commission) settlements
reflect the following position
the organization is deemed a pyramid scheme if
the participants obtain their monetary benefits
primarily from recruitment rather than the sale of
goods and services to consumers
specific company policies at that time successfully
established Amway as an MLM firm and not a
pyramid scheme**.
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22

 Since 1979, many MLMs have used the

safeguards outlined in the Amway plan as a
defense against allegations of pyramid scheme
activities.
In Equinox (1999), the company claimed to be
a legitimate MLM and presented-at least on
paper-an Amway-- type plan.**

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23

Sales and marketing plan

IBO Independent Business Owner /

Distributor
Two ways of income
1. Retail profit
2. Cash back (Commission) on monthly
purchase
For a distributor which component would be
higher?**
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24

1 Retail profit
Distributor buys products from the company at DAP
(Distributor Acquisition Price)
Distributor sells products at MRP, earns profit @ 20%
on DAP
E.g. MRP 375 DAP 313 = 62 i.e. 20% 0n 313
Distributor has complete freedom on
1. What products, what quantity, when to buy (No
quotas / targets / limit)
2. What to do with the bought products (Self use / Sell
them in his own sweet time)
Retail profit is realized by the distributor only when
he sells the products. **

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25

Recruiting
The company on its own does not appoint
distributors, however for growth, it needs more and
more distributors
Existing distributors have been given the privilege to
sponsor new distributors under them, train them in
selling, and get heavily rewarded for the sales
performance of their recruits and theirtheir
recruits.
Cash back scheme determines the income that a
distributor will get from the performance of his
recruitsand theirtheir recruits..**

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26

nd
2

way of earning income

Cash back on monthly purchase**

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27

Point Value - PV
Objective To bring multi currency sales on
par
1 PV = 60 Rs (69)**

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Monthly purchase in
PV (Point Value In a
Calendar month)

BV = Business volume =
DAP Taxes

Amount of cash back as

% of BV

1PV = 60 BV Rs

=>300

18,000

6%

=>1,000

60,000

9%

=>2,000

1,20,000

12 %

=>4,000

2,40,000

15 %

=>7,000

4,20,000

18 %

=>10,000

60,00,000

21 %

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29

Situation 1
Table
PV
BV
%
300
18000
6%
1000 60000
9%
2000 120000 12%
4000 240000 15%
7000 420000 18%
10000 600000 21%

You (Distributor)
purchase products
worth 50 PV in a given
month
Retail profit =
50x60x20%=600
Cash back = Nil
Your that months
income = Rs 600**
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30

Situation 2
Table
PV
BV
300
18000
1000 60000
2000 120000
4000 240000
7000 420000
10000 600000

You sponsor A, B, C (money

time problem, tv)
You, A, B, C, each purchase
products of 50 PV in a given
month (Group PV 200)
Your retail profit =
50x60x20%=600
Cash back = Nil
Your that months income =
Rs 600**

%
6%
9%
12%
15%
18%
21%

You

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31

Situation 3
Table
PV
BV
300
18000
1000 60000
2000 120000
4000 240000
7000 420000
10000 600000

You sponsor D,E,F

You, A, B, C, D, E, F each
purchase products of 50 PV
in a given month (Group PV
350)
Your retail profit =
50x60x20%=600
Cash back = 350x60x6%
=1260
Your that months income =
Rs 600+1260 = 1860**

%
6%
9%
12%
15%
18%
21%
You

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32

Situation 4

Table
PV
BV
300
18000
1000 60000
2000 120000
4000 240000
7000 420000
10000 600000

%
6%
9%
12%
15%
18%
21%
You

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Like you, A, B, C, D, E, F each

sponsors 6 distributors. Every
distributor purchases products of
50 PV in a given month. Group PV
= 50+ 6x350= 2150
Your retail profit =
50x60x20%=600
Group Cash back = 2150x60x12%
=15,480
Group A cash back = 350x60x6%=
1260
Same for(B,C,D,E,F)
Your cash back share = 15480 6
x 1260 = 7920
Your that months income = Rs
600+ 7920 = 8520**
33

Situation 5

Table
PV
BV
300
18000
1000 60000
2000 120000
4000 240000
7000 420000
10000 600000

%
6%
9%
12%
15%
18%
21%

You

Each distributor of A, B, C, D, E, F sponsors

6 distributors. Every distributor purchases
products of 50 PV in a given month. Group
PV 50 + 6 (50+ 6x350) = 12950
Your retail profit = 50x60x20%=600
Group Cash back = 12950x60x21% =
1,63,170
Group A cash back = 2150x60x12%=
15,480 (B,C,D,E,F)
Your cash back share = 1,63,170 -6 x
15,480 = 70,290
Your that months income = Rs 600+
70,290 = 70,890
SILVER PRODUCER ( who gets 21%
commission in one month) / Gold
producer (Silver for 3 months) / Direct
Distributor (Silver for 6 months)**

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Situation 6
You

Table
PV BV
%
300 15000
6%
1000 50000
9%
2000 100000
12%
4000 200000
15%
7000 350000
18%
10000 500000 21%

Sachin
200
distributors
What is your commission if
everybody does 50 PV in a
month?
Group = 202x50x60x21%
Sachin=201x50x60x21%
You=1x50x60x21%= Rs
630**

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35

Situation 7
When Sachin reaches 21% (Silver producer)....
Your cash back is nil on Sachins purchase
volume as per the differential formula
But company pays you 4% on Sachins
turnover for developing a self sufficient group
(21%) like Sachin, Rs 24000 pm
Emerald (3 Direct Distributors, like Sachin, in
your organization)
DIAMOND (6 DDs)..Typical income Rs 4-5 lac
pm **
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Executive diamond 9 DDs

Double diamond 12 DDs
Triple Diamond 15 DDs
Crown 18 DDs
Crown Ambassador 20 DDs
Lifestyle of a Crown Video**

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Characteristics of entrepreneur
Bianchi(1993)
1. Being an offspring of self-employed parents
2. Previous employment in a firm with more than
100 people
3. Being a college graduate
4. An individual who supplies financial capital
5. An individual who employs factors of production
(Man, material, machinery, money,
management)**
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38

Background of few very successful

distributors in Amway

Engineers
Doctors
MBAs
CAs
Ph D s
Corporate employees (Oracle)
Arjun Award atheletis
Wibledon tennis player
Housewives
Bus conductor
Rikshaw driver
24-85 yrs old..from every walk of life**

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39

What do you need to be successful AW

Distributor? (above 18)

2 papers
Current money / time challenges
5 cr, 5 lac pm..1
Reasons for not pursuing AW
Excuses.2
Name Dreams / Excuses, Read again, discard one (4
pieces)
Till people brush their teeth, take bath, wash clothes,
Amway will live
AW is there to welcome you the moment you throw
your excuses paper**
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40

Whom will you turn for advice?

Friends, relatives, neighbors?
President, United Chambers of Commerce
Steven Covey Author of 7 habits of most
successful people
Publishers Forbes, Fortune, Newsweek, Time
United Nations
Jay Andel AW cofounder
Video Respected people respect Amway**
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Support
(PG seniors)..Shailesh..Dinesh..Mitch..Jim
Dornan
Network 21
Weekly previews
Business Building Seminar
Week end seminar (Convention)
Next session Jim from a convention**
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42

Class Test
Table
PV
BV
%
300
18000
6%
1000 60000
9%
2000 120000 12%
4000 240000 15%
7000 420000 18%
10000 600000 21%

Calculate your income

for the following
structure. Each
distributor does 65 PV.
You

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11

20

3
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