It has been established that pyramid schemes are illegal and one must not engage in the operation of such. To furthermore differentiate pyramid schemes from multi-level marketing or is now known as network marketing organizations Koehn (2001) states that Multi-level marketing refers to the dispersal, dissemination, and suppling of goods or services through varying levels of individual agents or contractors. These distributors are being paid commission, bonuses, or other forms of consideration in return for selling such goods or services.
Emek et al. (2011) states that MLM is a type of marketing method that encourages its contributors to promote a certain product to their acquaintances. The popularity of this method proliferates because of …show more content…
First major reason is that they are fraudulent. This is so because they promise a large amount of return using a small amount of investment. Those who have joined early make a great deal of money. While those who come later on make little or may even lose their money because there are simply not enough people to recruit. Second major reason is that they are recruitment-, rather than product-, centered businesses. A company or organizations goals are constrained by what the public deems as its interest. There are two principle that govern ethically legitimate corporate purposes. First is that the company must focus in offering non-harmful products to its consumers. Second is that they must grow through the development of the market for their non-harmful …show more content…
According to Walsh (1998), these schemes are somehow similar. In the former, money or cash is being handed over in order to be invested while in the latter, it is being handed over in exchange for the right to do something.
According to Valentine (1998), a Ponzi scheme is strongly related to a pyramid because it rotates around the concept of continuous or constant recruitment. In Ponzi there are no products and recruiters are not paid any commission. Instead, the promoter gathers payments from a number of people, assuring them of a high rate of return on a short-time investment. It is essentially stealing from Peter to pay Paul.
Valentine (1998) states that both schemes are quite attractive because they are able to provide a high rate of return to a select few early investors in a short period of time. Yet, both are illegal for they unavoidably must fall apart. No type of program can recruit a stream of new members forever. When it collapses, most of its investors find their selves at the bottom unable to recover from their
Emek et al. (2011) states that MLM is a type of marketing method that encourages its contributors to promote a certain product to their acquaintances. The popularity of this method proliferates because of …show more content…
First major reason is that they are fraudulent. This is so because they promise a large amount of return using a small amount of investment. Those who have joined early make a great deal of money. While those who come later on make little or may even lose their money because there are simply not enough people to recruit. Second major reason is that they are recruitment-, rather than product-, centered businesses. A company or organizations goals are constrained by what the public deems as its interest. There are two principle that govern ethically legitimate corporate purposes. First is that the company must focus in offering non-harmful products to its consumers. Second is that they must grow through the development of the market for their non-harmful …show more content…
According to Walsh (1998), these schemes are somehow similar. In the former, money or cash is being handed over in order to be invested while in the latter, it is being handed over in exchange for the right to do something.
According to Valentine (1998), a Ponzi scheme is strongly related to a pyramid because it rotates around the concept of continuous or constant recruitment. In Ponzi there are no products and recruiters are not paid any commission. Instead, the promoter gathers payments from a number of people, assuring them of a high rate of return on a short-time investment. It is essentially stealing from Peter to pay Paul.
Valentine (1998) states that both schemes are quite attractive because they are able to provide a high rate of return to a select few early investors in a short period of time. Yet, both are illegal for they unavoidably must fall apart. No type of program can recruit a stream of new members forever. When it collapses, most of its investors find their selves at the bottom unable to recover from their