2. Question of the Day:
Which
of the following is an example of distributing goods through a gray-market strategy?
A. An Asian-based company establishes an
Internet web site to sell its cleaning products directly to European consumers.
B. A franchisee obtains a license to sell a
well-recognized brand of tires through her/his dealership.
C. A pharmacy sells brand medications to
customers in foreign countries for a lower price than they can get
domestically.
D. A local jewelry store has exclusive
distribution rights to sell expensive wristwatches for a Swiss manufacturer.
C
A pharmacy sells brand medications to customers in foreign countries for a
lower price than they can get domestically. Gray markets occur when imported
goods are sold by businesses other than the authorized intermediaries. In most
cases, the goods are sold to customers for a great deal less than if purchased
through authorized distribution channels. Many types of products, from
electronics to clothing, are sold through gray markets. In some cases, the
authorized dealers choose to abandon a brand because they cannot compete with
the gray market. A franchisee who obtains a license from the franchisor is
conducting a legal means to distribute through a product trade-name franchise
agreement. A company that sells its own products on an Internet web site to
foreign customers is not conducting activities through a gray market. A
business that has obtained exclusive distribution rights from a manufacturer is
not participating in gray-market activities.
SOURCE: CM:006
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