A U.S.-based company sells prestigious high-priced liquor under the same established brand name in almost every country around the world. Recently, the director of global marketing at corporate headquarters received strong complaints from the head of the company’s subsidiary in Japan about the substantial quantities of the product that had entered Japan through the gray market. The gray market products are sold at a considerable discount, thus cannibalizing product sales through authorized channels and threatening the high-prestige image of the product in Japan.
The homogenization of customer demand around the world, the lowering of trade barriers, and the emergence of international competitors all contribute to the pressure on companies to market truly global products, that is, products that are almost identical everywhere and backed by global advertising strategies. Examples are such products as Coke and Pepsi-Cola, Levi’s jeans, Swatch watches, Nikon and Minolta 35mm cameras, Sony car stereos, Honda Civic or BMW 320i cars, Caterpillar tractors, and Vizir, a liquid detergent from P&G Europe.
At the same time, these largely undifferentiated global products are sold at different prices in different countries, based on such factors as purchasing power, exchange rate changes, and competition. Because of readily available, inexpensive information on worldwide prices made possible by modern data transfer and telecommunications systems and low transaction costs, such global products are often threatened by gray markets that cannibalize... To read the complete article, login or sign-up using the form below.
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