UK2900#0303#2 (A)

doc

School

Egerton University *

*We aren’t endorsed by this school

Course

210

Subject

Marketing

Date

Nov 24, 2024

Type

doc

Pages

Uploaded by KarashD

1 Question 4: Grey Marketing Grey market entails products, which are sold legally, although outside the permission of the brand. The goods may harm associations with distributors and destroy product image. Products under the grey market comprise cars, cameras, pharmaceuticals, and watches. In the United States, annually, approximately products valued from $7 to $10 billion are sold without the producers’ authenticated distribution channels (Hlavnicka and Keats, 2021). From this perspective, managing grey market distribution presents a critical issue to manufacturers. Grey marketers purchase products in markets with lower prices and then ship these goods to markets with higher prices, in which they will possibly sell at a profit. Despite the products being similar, customers generally may consider grey market products as inferior because they do not have benefits such as warranty coverage or after-sale services. The alleged benefits of grey marketing are cheaper prices to customers and extra sales channels for a producer. Nonetheless, in terms of brand, grey marketing establishes unfair competition, conflicts with their associates, damage to the brand’s reputation, and margin erosion (Hermawan, 2019). Causes of grey marketing Supplier pricing policies can be seen as the most typical cited aspect that leads to grey marketing. However, for several producers, there are better reasons for pricing in favor of huge volume orders. In the disk drives, the policy partially depicts the scale and learning curve economies inherent in big orders and the strategic significance of large consumers for the firm’s cost structure, after-market replacement sales, and product development strategies. Immense competition among watches or car vendors for big consumers creates competitive pricing as per order size commanding, and a supplier that refutes to offer huge volume discounts may find it challenging to be left out in the cold (Hermawan, 2019). Further, in many industrial markets, bid or negotiated prices, lower than the book price of a manufacturer, are typical, mostly for large orders. Bid consumers often sell part of the merchandise to grey marketers who in return sell to other consumers who could otherwise purchase at a higher book price at an authorized distributor. It is another perspective that price

2 differentiation, set for competitive motives for various classes of accounts, assists grey markets to thrive (Hlavnicka and Keats, 2021). The global rate of exchange fluctuations may lead to price differentials and develop arbitrage opportunities for grey marketers. For instance, between 1984 and 85, a period when the US dollar was strong and becoming stronger against major currencies, most goods initially sold in one country got their way through agents to other nations as parallel imports (Woodburn, 2023). For example, in the US grey marketers often imported Caterpillar loaders and excavators built in Belgium, Japan, and Scotland, and priced to sell in local currencies. After insurance and shipping charges, the resellers generates more and had many buyers among Caterpillar’s US authorized dealers, who were remitting 15 percent more for similar equipment made in domestic plants of Caterpillar. Being prices surpassing $200,000 for a Cat excavator, the price differentials maintained a flourishing grey market (Hlavnicka and Keats, 2021). Conversely, from 1987 to 88, having a weak US dollar and an escalating Yen, the thriving grey market established in Japan as per some distributors’ unauthenticated re-importation of Japanese goods from the US and other nations, such as Panasonic Cordless phones and Canon cameras and resell in Japan. Grey marketing adopts pricing differentials in the market to make profits from their business. Grey marketers mostly focus on pricing models and instances in the market to profit from them. As more producers adopt global product approaches, with uniform products and multilingual packaging for global markets, global grey marketers in several products can have a bright future. In this perspective, batteries, smartphones, and other gadgets have become a case point for exploiting grey marketing (Woodburn, 2023). Solutions to the grey marketing practices The first solution to control this problem is for brands should take a global strategy to the grey market across borders other than by region. For instance, let’s contemplate lower-priced goods originally sold in Eastern Europe being sold by unauthenticated distributors in Italy. At first, the regional operation in the region profits from the sale to the unauthenticated distributor or dealer. But the brand suffers if the commodities are resold in Italy. Therefore, multinational brands may

3 begin by taking a cohesive stance against supplying products to unauthenticated distributors even if it implies losing sales within that region (Hermawan, 2019). The second solution to this issue of grey marketing is for brands to educate their consumers on the significance of buying from authenticated distributors. Most customers adhere to their favorite brands based on the social media platform, although if they are not made aware of the grey market, they become susceptible to deep discounts from unauthenticated distributors in terms of low prices. Therefore, grey market awareness must be integrated into the media presence of the brand to create customers' awareness of the issue (Hlavnicka and Keats, 2021). Further, a one-price for all policy may eradicate a significant source of arbitrage and permit a supplier to reclaim a measure of channel control. Because it is different pricing for different quantities that drive the grey marketing, therefore, eradicating the differences could help in solving the problem. A distribution channel that is most efficient in the disk for Lotus and can sell its product at the lowest achievable gross margin must gain strength over time, and this is the channel that the company wanted to utilize to get its goods to market. However, the policy implies the sale of almost all the output at lower prices to all consumers, small or big, without considering transaction costs. The approach often forecloses authentic price discrimination opportunities among consumer classes who are shopping for different benefits for the same product in the market. The approach should also comprise a way to reward the full-service distributors in the network. Adding former grey market dealers or distributors to the network could also be the solution to the problem. In addition, franchising more dealers can provide a supplier better control over the flow of its goods to market (Woodburn, 2023).

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

4 Reference List Hermawan, D. (2019). Marketing innovation in industry 4.0: Experiential marketing practices in the culinary industry. Proceedings of the International Conference of Business, Economy, Entrepreneurship and Management , 9 (12), pp.1-59. Hlavnicka, P., and Keats, A. (2021). Protecting the brand: Counterfeiting and grey markets . Business Expert Press. Woodburn, B. (2023, March 26). What is gray market and how to protect against it . https://www.redpoints.com/blog/what-is-grey-market/

Related Documents

Principles of market research.edited.docx

Marketing Questions.edited.docx

COM 215 Terms 379.docx

Readings.docx

topic 8 dq1.docx

4 hypt.docx

Task 3 - Sample 1.pdf

Artificial Intelligence in Marketing Essay.docx

Disruptive marketing summary.edited.docx

COM 215 Terms 439.docx

DIS 2.docx

389331018.docx

Recommended textbooks for you

Purchasing and Supply Chain Management

Operations Management

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Cengage Learning

Marketing

ISBN:9780357033791

Author:Pride, William M

Publisher:South Western Educational Publishing

Contemporary Marketing

Marketing

ISBN:9780357033777

Author:Louis E. Boone, David L. Kurtz

Publisher:Cengage Learning

Foundations of Business (MindTap Course List)

Marketing

ISBN:9781337386920

Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor

Publisher:Cengage Learning

Foundations of Business - Standalone book (MindTa...

Marketing

ISBN:9781285193946

Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor

Publisher:Cengage Learning

SEE MORE TEXTBOOKS

Recommended textbooks for you

Purchasing and Supply Chain Management
Operations Management
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Cengage Learning
Marketing
Marketing
ISBN:9780357033791
Author:Pride, William M
Publisher:South Western Educational Publishing
Contemporary Marketing
Marketing
ISBN:9780357033777
Author:Louis E. Boone, David L. Kurtz
Publisher:Cengage Learning
Foundations of Business (MindTap Course List)
Marketing
ISBN:9781337386920
Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Publisher:Cengage Learning
Foundations of Business - Standalone book (MindTa...
Marketing
ISBN:9781285193946
Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Publisher:Cengage Learning