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Historical Review
International expansion, regardless of the industry, can be a daunting task even for the most seasoned international individual. Then throw international expansion into the network marketing industry and it can become even that much more overwhelming. The facts speak for themselves. MLM companies expanding overseas do not have a very high success rate. The reasons for failure are many. However, they do not need to be perpetuated. There are methods now available wherein the Network Marketing Executive can engage international expansion with a far greater probability of success, without anywhere near the cost and concern of years past.
Historically, network marketing companies have expanded internationally in relatively traditional manners (i.e. choose a country, start the exploration phase, establish a foreign office, etc.), which is both time consuming and extremely expensive. Although some have succeeded, others (the majority) have failed miserably and almost all have learned some difficult and costly lessons.
During the 80’s and early 90’s expanding internationally was virtually a non-issue for most MLM companies unless they had: 1) successfully exceeded $50 million in annual sales, allowing them to have the resources necessary to meet the extremely costly activities of international expansion 2) 9-12 months time to prepare for each country 3) an above average group of internationally savvy distributors to lean upon and 4) about $250,000 cash minimum (small countries) in order to be reasonably prepared to enter a marketplace with an office. Historically, companies spend around 9-12 months preparing for language issues, cultural awareness, product registrations, document translation, employee and distributor training, trips by executives, market studies, etc. just for one country.
In the mid to late 90’s a "loop-hole" of sorts was uncovered and exploited by the industry called "personal use". This worked in some countries, but not all. It had some benefits, but not many. Personal use allowed products to be shipped into countries without registration, but it still carried a set of "hand-cuffs" that proved very limiting to the distributors, after the initial craze settled down. The most significant handcuff was that these products could not be resold for a retail profit, an essential element in the overall MLM business scheme and to the legal correctness of the industry at large. For a few years, some companies like Enrich and Neways took advantage of this system in countries like Japan, but the "loop-hole" is drying up, due to either government intervention or market demands by more sophisticated distributors. Evidence of this "dried up" opportunity is in the numbers of new companies entering Japan, as reported by industry experts in Japan. They state that in 1997-98 (two year span) roughly 80-100 U.S. based, network marketing companies attempted to enter Japan alone (most under personal use), whereas in 2002, only five to ten were known to be expanding into this country. Why? Because most failed in the last 90’s because a solid foundation was not created, in a country that does not give many second chances, if any.
Inherent to the traditional method of MLM international expansion is the reality that the MLM world is not operating on a level playing field, when it comes to equal country opportunity. The non "Top 10" MLM countries of the world are often overlooked or avoided for at least 10-15 years of a company’s development, leaving these citizens with little to no opportunity to build an international organization/business. When these non "Top 10" countries finally do get the opportunity, 15 years later, the global opportunity is generally exhausted and they are left to fend with their own domestic situation, which is generally quite limiting.
Fortunately, R&R International Consulting (R&R) has uncovered a better way for network marketing companies to accomplish international expansion. We use several different methods, according to the country’s requirements and needs, but we have created a particular model that levels the playing field and gives close to equal opportunity for all countries of the world. The future of the MLM industry, using R&R’s expansion methodologies, is one wherein the citizen of Costa Rica or South Africa may very well become the leading distributor of a U.S. based MLM company. How you might say? By companies bringing the MLM opportunity to these countries earlier in the game and in a systematic manner that sustains longevity.
In 2001, R&R International Consulting (R&R) was created (division of EDGE Business Consulting Inc.). R&R is a specialized, two-man, consulting team focused on foreign country development and international MLM solutions. The partners (Ron Wade/Ron Smith) are both former executives of international MLM companies and have extensive international educational and work experience within and without of the MLM industry. By living it firsthand, R&R has observed and learned from the many "pit falls" of network marketing international expansion activities and now make a living helping companies avoid them.
In a nutshell, R&R’s methodologies greatly expedite and economize the expansion process, without making costly and oftentimes irreparable mistakes that others have made in the past. The precursor to what we call our Express Model was developed around 1998 by Ron Smith, while directing the international affairs for a network marketing company named Morinda, which has been recognized as one of the more successful nutritional MLM companies of the past 10-15 years. He left this company in 2001 and brought the extremely sophisticated elements of this precursor model to Ron Wade and R&R International. With some "tweaks/improvements" and a few new "additions" this expansion model has become the foundation for our consulting services. For a fraction of the cost of what most companies spent before, and in far quicker time periods, network marketing companies can now expand globally.
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International Expansion Model
We deploy several different expansion strategies in behalf of our clients, according to the specific demands and needs of the country being pursued, but for the most part our objective is to expand into as many countries as possible using the backbone of our Express Model. Through this sophisticated model which has several components, we are able to greatly economize international expenses and expedite the entire process of country expansion. MLM companies can reasonably expand into 5, 10, 15 countries per year under this model, without causing an internal implosion of human or cash resources.
This model implements process engineering in five major international MLM categories: taxation, accounting, international law, marketing/distributor affairs and distribution/logistics. What historically has required hundreds of thousands of dollars and years to accomplish (one foreign country opening) now can be done for fractions of the cost and time. The backbone of this model is a worldwide network of importers which facilitate the entire business model. These importers were selected and trained by R&R to carry out vital localized activities (taxation, importation, storage, registration, etc.) in behalf of R&R’s clients. These independent importers, under the direction of R&R’s clients, engage in many cost-reducing activities and provide a bridge for future growth.
One of the components to this international model is what we refer to as an international sponsorship program. For many companies, this proves to be a great revenue stream, plus an effective control medium for both data collection (pre-market analysis) and policy enforcement. Having control over distributor affairs is an essential safeguard when contemplating international expansion and this program effectively provides this. International expansion is an investment into the future, which should be shared by the distributors. After all, companies expanding internationally are providing opportunity that has significant value. For a small country specific fee (generally $25-$50) significant value is conveyed to the distributor force via tremendously educational, country-specific, electronic packages for the distributors. These packages include current demographic, economic, political and mlm industry data and statistics. Via this education, distributors have a solid foundation for the countries of their interest, which helps minimize mistakes.
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International Phase Expansion
We consult our clients through a logical phased-entry process of international expansion.
Phase 1: This includes establishment of the model utilizing the R&R global network of importers. This phase might also include the use of Not for Resale or Internet Service Based Offices, in locations where it is allowed and appropriate. In Phase 1, three key elements are created for R&R clients:
- If needed, products are registered with the Health Ministries, imported into the foreign country, allowing products to be resold and distributed freely.
- The business is set-up correctly from a legal standpoint to allow distributors to do what they do best - build organizations.
- Mechanisms are put in place (banking) to compensate distributors quickly, cost effectively and seamlessly for their efforts.
Phase 2: This includes the process of localizing many services (i.e. customer service, training, etc.). This is generally outsourced and involves small, inexpensive support centers.
Phase 3: This involves the development of a foreign entity and full-service office.
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