Problems of Gray Marketing Channels in International Business Market
The selling of products of a company through illegal supply channels is referred to as grey marketing. The products in the grey market usually seems cheaper because they follow unauthorized systems where they dodge taxations (Cespedes, Corey and Rangan n.p). In some cases, the products may be of less quality especially when companies use a particular supply channels to upgrade the quality of products before getting to the customers. In some cases,the products that channel through grey marketing are second or have second hand parts that looks new and original. Grey products lacks warranties and lack update capabilities.
One of the causes of grey market is the differences in the costs of a given product in different countries. In that line, some capabilities. The differences in the prices of a given product in different countries is one of the factors that brings about grey marketing. In that line, some vendors in a country where the price is high will import the same from the country that sells it a lower price. The importer will then sell it at a lower price and earn enough profit. This step will disadvantage the authentic vendors who use the legal means of distribution.
The items of the grey marketing can have some problems. First, the products are illegal and may lack proper safety standards that may endanger the life of customers. Second, the products of grey market lack warranties and customers cannot lay claim to the manufacturer about any fault (Cespedes, Corey and Rangan n.p). Authorized dealers may also avoid repairing items made in the grey market as ways to discourage the practice and maintain company or manufacturer’s integrity. Thirdly, the grey products cause competition of the same product brand that can involve the authentic channel actors and the grey market actors.
Despite being a problem in the economies, there are no right ways to tackle grey marketing. It is upon companies to trace the flow the products from their stores to the markets. Governments can also block the importation of products from countries other than the home of manufacturing or production.
EX: Global Pricing
Pricing is one of most important marketing mix strategies. A price must be low enough to gain sales, but high enough to guarantee the flow of funds to support activities like R&D, production, and distribution. However, pricing is more complex internationally than domestically. We often see identical products being priced differently in international markets. Why is that? Please write an essay about global pricing by answering the following questions.
|
Country |
Price in local currency |
Price in US dollar |
||
|
|
Before Tax |
After Tax |
Before Tax |
After Tax |
|
US |
|
179.99 |
|
179.99 |
|
1. United Kingdom |
|
365 |
|
343.1 |
|
2. India |
|
60,093 |
|
931.96 |
|
3. Japan |
|
62165.18 |
|
569.80 |
From a global business manager’s perspective, please discuss why the prices are different across countries. (Please list and discuss factors that affect global pricing.)
Taxes and import duties
Different countries have different tax regimes for different product categories. It is possible to find a country charges low taxes on electronic imports while another country charges high taxes on similar product categories. In such a way, the price of the products in the given category will be higher in the high-tax country than in the low-tax country (Brauer 5).
Exchange rates against US Dollar
The American dollar is the standard measure of international currency exchange. The rate of local currency exchange against the dollar varies across countries and depends on various factors like the balance of trade. The countries that have a negative balance of trade are likely to have high exchange rates because of increased importation that creates a high demand for American dollars. This means that the cost of imported goods is likely to be high. The countries with a positive balance of trade import less and have lees demand for dollars, which means that the imports must cost low to enter the market. In such cases, imported products are likely to sell at lower prices.
Works Cited
Brauer, Holger. The Real Exchange Rate and Prices of Traded Goods in Oecd Countries. Berlin: Springer, 2003. Print.
Cespedes, Frank, Corey Raymond, and Rangan Katsuri. Gray Markets: Causes and Cures. 2017. Web. 14 Apr. 2017.
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