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Research Proposal On Competitive Advantages And Disadvantages Of The Network Marketing

Competitive advantages and disadvantages of the Network Marketing.


Research Aims:

This proposed research attempts to achieve the following objectives:

1.    To determine the factors, requirements and principles of network marketing

2.    To compare the advantages and disadvantages of network marketing and pure e-commerce

3.    To analyze the competitive advantages and disadvantage of network marketing among firms and across countries

4.    To evaluate the strengths and weaknesses of network marketing

Research Questions:

          In accordance with the research aims of this proposed study, the following will be asked:

1.    What are the advantages and disadvantages of network marketing?

2.    How does the  strengths and weaknesses of network marketing as opposed to pure e-commerce gains a competitive advantage?

3.    How can network marketing create competitive advantage among firms and across countries?


          Network Marketing has been the setting the trend for firms and even industries nowadays. Its flourish has been the debate of many scholars who both see network marketing as a double edge sword: a tool in the cultivation of the market and a means that can increase fraudulent activities. This proposed paper will dwell on the competitive advantage of network marketing among firms.

Scholars attribute the strength of network marketing on its competitive advantage because of its dynamic, blended approach to acquiring and retaining customers, handling the actual sales transaction, and delivering the products or services to the ultimate consumer. Network Marketing helps companies and their distributors establish their brand in the marketplace, ensure their longevity, and also offer consumers the attractive option of choosing when, where and how they want to purchase products or services. Firms have to offer consumers the same convenience that other consumer goods companies offer, and at the same time, overlay "competitive advantage" - through distributors. The combination of e-commerce and person-to-person marketing gives Network Marketing companies a huge advantage over strictly e-commerce companies.

          This proposed study will outline the idea underlying network marketing and how it had effectively penetrated the market. Moreover, the advantages and disadvantages of this scheme will be discussed in connection with the traditional method of selling and even e-commerce. Finally, this paper will argue upon the success of firms using network marketing, that countries can have the competitive advantage if network marketing will be inculcated in the operation of businesses.


          This chapter will outline the methods to be used in gathering data: the respondents of the study, the sampling technique, the instrument to be used, the validation of the instrument, the administration of the instrument and the statistical treatment of the data that will be gathered, and how this data will be analyzed qualitatively.

Method of Research

This proposed study will use the descriptive approach- utilization of interview, observation and questionnaires in the study. The purpose is to describe the situation as observed by the researcher.

The study will determine whether network marketing has created a competitive advantage over the traditional method of selling and e-commerce. The specific focus is the benefits firms have gained over the years in terms of sales, profit and the reach of their market.

            The primary source of data will come from the financial records of firms involved or not involved in network marketing. Secondary sources will come from the research-conducted questionnaire, interviews, published articles from economic journals, theses and related studies on network marketing.

For this research design, the researcher will gather data, collate published studies from different local and foreign universities and articles from social science journals, distribute sampling questionnaires; arrange interviews; and make a content analysis of the collected documentary and verbal material.  Afterwards, the researcher will summarize all the information, make a conclusion based on the null hypotheses posited and provide insightful recommendations on network marketing

Review of Related Literature

The upsurge of network marketing has considerably increased the number of literature relating to the subject. Several scholars attempted to study, explain and evaluate this phenomenon in relation to the issue of Competitive Advantage across countries. Some of the works of these scholars are outlined in this chapter.

In Power Play: The Beginning of the Endgame in Net Markets, Moriarty and Klassen (2001) reveal how established companies are combining well-honed business skills with the power of the Internet to reclaim their lead position -- and create sustainable competitive advantage -- in the new economy. Using thorough research, solid analysis, and in-depth case studies of some of today's leading net markets, including Covisint, the WorldWide Retail Exchange, and Aerospan, Moriarty and Klassen explain how the winners in the net market arena will be those companies that combine their experience, deep industry knowledge, and solid business fundamentals with the agility and flexibility that companies once exemplified.

In The Anatomy of Buzz, former marketing VP Emanuel Rosen (2002) pinpoints the products and services that benefit the most from buzz-a universe that embraces everything from high-tech equipment to books, various consumer and entertainment products to legal and other support services-and offers specific strategies for creating and sustaining effective word-of-mouth campaigns. Drawing from interviews with more than 150 executives, marketing leaders, and researchers who have successfully built buzz for major brands, Rosen describes the ins and outs of attracting the attention of influential first users and "big-mouth" movers and shakers. He also discusses proven techniques for stimulating customer-to-customer selling-including how companies can spread the word to new territories by taking advantage of customer hubs and networks on the Internet and elsewhere.

Executives charged with rolling out cutting-edge software products or on-line versions of their magazines are tempted to abandon the classic lessons of economics, and rely instead on an ever changing roster of trends, buzzwords, and analogies that promise to guide strategy in the information age. Not so fast, say authors Carl Shapiro and Hal R. Varian (1998). In Information Rules Shapiro and Varian (1998) warn managers to, "Ignore basic economic principles at your own risk. Technology changes. Economic laws do not." Understanding these laws and their relevance to information goods is critical when fashioning today's successful competitive strategies. Information Rules introduces and explains the economic concepts needed to navigate the evolving network economy.

     In Clockspeed, Charles Fine (1999) draws on a decade's worth of research at M.I.T.'s Sloan School of Management to introduce a new vocabulary for understanding the forces of competition and making strategic decisions that will determine the destiny of companies, as well as industries. Taking inspiration from the world of biology, Fine argues that each industry has its own evolutionary life cycle (or "clockspeed"), measured by the rate at which it introduces new products, processes, and organizational structures. Fine illustrates how competitive advantage is lost or gained by how well a company manages a dynamic web of relationships that run throughout its chain of suppliers, distributors, and alliance partners.

     Marckini (2000)showed how to cope with the latest algorithms, as well as the latest policies of "human-edited" directory services. He dwelt on how to improve positioning on search engines that base their results on existing web links; how to get Yahoo! to pay attention when they're ignoring 90 percent of all submissions; how to generate search-engine optimized "doorway pages," and more.

     Written by digital marketing expert Kim Bayne (2002) Marketing without Wires: Targeting Promotions and Advertising to Mobile Device Users, this book offers practical advice and lighthearted observations about creating a well-executed wireless marketing program. Bayne clearly explains the major differences and similarities between wired and wireless marketing tools and demonstrates how to leverage them for optimum advantage. Throughout the book, she also includes cutting-edge case studies detailing how companies are setting the trends for mobile advertising and she helps marketers determine how to choose and implement the best options and services to meet their needs.

     Fox (2001) describes proven strategies for creating a thriving virtual accounting practice and presents in-depth coverage of the various accounting and consulting services that accountants can offer to small business owners via the Internet. He describes successful techniques for identifying potential clients and packaging and marketing services, and arms readers with a complement of valuable tools for helping them get started in virtual accounting, including detailed business plans, numerous tables, forms, checklists, and connections with leading virtual accounting service providers.

     Aimed at managers, Kaplan’s (2001) book explains how to mobilize people to fulfill their company`s mission. It delves into business strategy measurement and management, and it details the four categories of the balanced scorecard: financial performance, customer knowledge, internal business processes and learning & growth. 

     Harris (1997) described an integrated system for achieving delivery of high value to all stakeholders in the information age, centering on utilizing the voice of the customer and linking business decisions with customer needs through a leadership tool called a control panel. Shows how a control panel can integrate data with human factors that motivate customers, shareholders, and employees and how it can provide metrics needed to adjust strategy according to needs and emerging trends. Includes chapter key points and a qualitative assessment tool.

Living Networks by Dawson (2002) shows managers the profound business implications-and offers detailed, specific guidance on how to respond. Moreover, he showed how to use tomorrow's living networks to build lasting customer and partner relationships based on transparency, collaboration, and shared value. Dawson introduces proven techniques for leading companies toward tomorrow's business models and for leveraging living networks in the creation of new products, services, and intellectual property. Simply put, he not only shows leaders how to leverage changes in technology but in the underlying sources of business value.

          Mohammed, Fisher and Jaworski (2001) presents a road-tested framework to help students and practitioners understand how to think about and implement effective Internet marketing programs. The focus is on using marketing levers to vary the level of intensity that the consumer has with a Website to build a relationship with the customer through four stages; from Awareness,to Exploration/Expansion, to Commitment, and possibly through Dissolution. This four stage customer-centric framework shows readers how to use the Internet to create intense and profitable relationships with their customers.


This proposed study will work on the hypothesis that: the more firms use the strategy of network marketing, the higher the inclination to its success in terms of sales and profits.  In reverse, the more firms’ stick on the more traditional method (direct-selling and pure e-commerce), the lower the tendency that their sales will improve.

Therefore, this proposed paper concludes that network marketing provides a competitive advantage over traditional means of selling/retailing goods and services.



Carl Shapiro, Carol Shapiro and Hal Varian, “Information Rules: A Strategic Guide to the Network Economy”, Harvard Business School Publishing; November 1998, 368 pages

Charles F. Fine, “Clockspeed: Winning Industry Control in the Age of Temporary Advantage”, Perseus Publishing; September 1999, 288 pages

Emnuel Rosen, “The Anatomy of Buzz: How to Create Word of Mouth Marketing”, Doubleday and Company, Incorporated., April 2002, 320 pages

Fredrick Marckini, “Search Engine Positioning”, Wordware Publishing, Inc.; November 2000, 568 pages

Jack Fox, “Building a Profitable Online Accounting Practice”, Wiley, John and Sons, Incorporated; February 2001, 360 pages

Kim M. Bayne, “Marketing without Wires: Targeting Promotions and Advertising to Mobile Device Users”, Wiley, John and Sons, Incorporated; April 2002, 304 pages

Michael Harris, “Value Leadership: winning Competitive Advantage in the Information Age”, ASQ Quality Press; January 1997, 274 pages

Michael Moriarty and Bruce Klassen, “Power Play: The Beginning of the Endgame in Net Markets”, Wiley, John and Sons, Incorporated; September 2001, 256 pages

Rafi Mohammed, Robert Fisher and Bernard Jaworski, “MP Internet Marketing: Building Advantage in a Networked Economy with CD”, McGraw-Hill Companies; August 2001, 726 page

Robert Kaplan, “The Balanced Scorecard: Translating Strategy into Action”, Harvard Business School Publishing; August 1996, 336 pages

Ross Dawn, “Living Networks: Leading Your Company, Customers and Partners in the Hyper-Connected Economy”, Pearson Education;  September 2002, 304 pages

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