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Herbalife Multilevel Marketing

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1 In a narrative format, discuss the key facts and critical issues presented in the case. What were William Ackman's accusations against Herbalife? Why are multilevel compensation plans often confused with illegal pyramid schemes?

2 Assume that you are a part of Herbalife's top management team responsible for responding to these accusations. Craft a response.

3 Compare Herbalife to BurnLounge discussed in the case. What are the key differences between the two companies?

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The solution explains a structured manner in this response to Herbalife multilevel marketing case study. The answer includes references used.

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1.
Herbalife International is the third largest direct selling multi-level marketing company in the world. It markets weight management and nutrition products. Its products are not sold in retail stores instead its customers interact with independent contractors to order products. The point is that Herbalife uses multilevel marketing and independent contractors a method that is confused with pyramid schemes. Herbalife has throughout its career faced charges of pyramid schemes. Herbalife also carries our several social responsibility programs. The products sold by Herbalife include weight management powders, targeted nutrition compositions, and energy and fitness programs, and personal care products. It uses direct selling through person to person sales presentation at home or online. The method used is network marketing or multilevel marketing in which the contractors earn income from their sales as well as commission from sales made by those they have recruited. Herbalife has nearly 3 million independent contractors. This method is different from a pyramid scheme which is fraudulent and barred by law.
Ackman's accusations against Herbalife were that the majority of contractors lose money, Herbalife spends more recuiting new contractors rather than selling, and only the top 1 percent of ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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