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Case Study Of Herbalife

Decent Essays

The case study for this week discusses the issues Herbalife has faced regarding their business model. To share a background regarding Herbalife, it is a well-known direct-selling and multi-level marketing company which offers a variety of products. The success of the company in their business model is verified by Herbalife’s ranking within the top three largest direct selling companies in the world (Ferrell, Thorne & Ferrell, 2016). Herbalife is known to focus on areas to include nutrition, weight-management, and personal care products. Additionally, their methods for selling the products are handled by independent contractors and not sold within retail stores (Ferrell, Thorne & Ferrell, 2016). From the initial start of Herbalife, changes …show more content…

The pyramid schemes are defined by characteristics that promote profit through recruits. Individuals are promised an opportunity to gain profit by the number of recruits that buy in to the company. Additionally, the pyramid scheme involves investors; therefore, individuals are promised higher profits based on the number of investments made and investors obtained. Pyramid schemes may also be considered illegal acts if products are marketed through an offer of contract (Ferrell, Thorne & Ferrell, …show more content…

Based on my perception of how Herbalife operates under the current business model, their methods are not consistent with methods implemented through the pyramid schemes. There is no indication to me that the contractors are being influenced by the number of recruits brought into the company. It is my understanding that the “dangling carrot” for the independent contracts through Herbalife are presented through personal desire to use the products and access to the various available discounts. Additionally, these contractors are not forced to remain within the company; however, they are given a 100% buy-out

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