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Evaluate the Actions That an International Marketer Can Take to Eliminate or Reduce the Likelihood of ‘grey Markets’ Emerging

Autor:   •  December 20, 2017  •  2,371 Words (10 Pages)  •  141 Views

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The first way to eliminates price differentials is to eliminate price differentials, offer a simple uniform pricing scheme across the different markets, and effectively avoid price differentials caused by currency fluctuation so that promote parallel importation.

In another word, just one currency is destined for pricing product in international market. For example, Christian Dior and TAG Heuer , which price their products the same worldwide. (Antia et al.2004). Although an important source of arbitrage can be eliminated through a one-price-for-all policy, the transaction cost for the source is ignored and it also foreclose valid price discrimination opportunities to those people who buy same products but anger for different benefits. Alternatively, cutting price can be another efficient way to reduce the likehood of grey market. For example, in 2013, 10% of price were reduced by Nikon Company in terms of minimizing the gap between grey products and off-the-shelf products. Additionally, Nikon had bundling its authorized product portfolio by sending free camera case as well as SD memory card to benefit customer. Additionally, offers for two-year warranty are also provided on products which grey market products are not available. Although some of the customers, especially to those price-sensitive customers, the pricing-cutting strategies would be appreciated to boost sales volumes, it is also risky to adopt price cutting strategy as price cutting gets out of hand and retailers have to compete with price their margins suffer. The price reduction may cause profit loss and cause decreasing in profit margin, and may be considered as cut-throat competition. According to Loomis (2014), generally, it requires to sell 50% more to customers to earn the same profit dollars when a 10% reduction were occurred in a retailer's gross profit.

Additionally, another appropriate mean to restrict grey market can be the reevaluating of trade discount structures in different international segments. Although the minimum efficient scale of production has been ensure and been maintain by corporations’ volume discounts, an open invitation to grey marketers had also been invited by indiscriminately discounts provides. Hence, with the intent to transfer their extra one to unauthorized distributors and order excessive inventory, manufactures can reduce cues for authorized distributors through appropriately narrowing discount structure.

Product/service differentiation and availability

Secondly, companies adopt a variety of strategies to counteract gray markets. As products are one of the core matter in international business, to discriminate the products from grey market and authorized market or huge flow of good is important. Thus, the strategies to differentiate their products or services by using different product names, brand, label, packaging, labels, and formulations for different markets are utilized to make it harder for parallel importers to sell the products as perfect substitutes. In another word, developing different versions of products and services. For example, the successful of UGG, one of the girl’s fancying fashionable products, that achieve great avoidance by diversifying its physical appearance in product marks, materials, as well as the packages in different countries, even the size and style is exactly the same; Moreover, the company such as CAPCOM using different names and operation modes in its computer game (e.g. Resident Evil) when releasing in Japan and United Kingdom even if its the same computer games. These discrimination and product differentiation strategies were utilized for customers to distinguish grey commodities. Such as the the product from grey market products to European consumers can not be satisfied because the products were not undergo localization by Canon for intention (Cannon, 2014). Besides, the barcode and/or serial numbers which primarily to facilitate product tracing can be as an alternative way to distinguish grey market product.

However, although the careful design and differentiating strategies of product and services are applied to suit the income level, customer purchasing preference, safety rules, packaging requirements, local taste, technical standards, as well as national health and other important factors in each segment so that customers would thereby, might reluctant to buy those commodities that not embody the same features as the product custom-designed in their segment, the product differentiation and specialization strategy bring higher costs in market research, innovation, product design, labor output, production, which requires more sales and charge higher price to net profit, which higher price in turn, bring more grey marketers. Moreover, product differentiation dose not provide any tangible benefits to a company if its basis is something a customer does not value. Furthermore, if an effective product solution were failed by a company to deliver to a particular market segment, the negative damage to the brand's image can have effects across all of the company's customer markets. Thus, it is difficult to sustain for a long-term if no useful advantages were provided to customers.

adjust distribution

Based on the definition of Grey market, the commodities are leaked from authorized market place and were not sold by the original producer. In order to combat these products, to preserve control over services, pricing, as well as other market variables, it is important for manufactures to manage their distribution channel, and build “closed distribution” structures, whereby distributors are carefully select on exclusive territories, specific qualitative criteria, and other concessions are granted to authorized distributors within the network (Collard and Roquilly, 2002).

Firstly, an remedial actions such as termination should be taken immediately by the manufactures when the supply souses of grey market products were identified. For example, Sun Microsystems has built teams to stripe resellers selling grey of their accreditation and terminate distributors actively involved in sales of grey product to crack down on grey activities. Besides, to simply reduce production so as to force up prices which gray marketers must pay can be another strategy to combat the formation of grey market. The example is true when apple companying launching iphone 5c in China (Computer world, 2010) . Moreover, implementing transparent and viable supply chain management, as well as working closely with authorized dealers can decrease the participation rate of unauthorized marketers in grey market effectively. It is also necessary to formal training program to educate and cultivate internal auditors and employees about the limitations

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