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MInolta
MInolta
Also the service output levels were almost same across the two channels thus excluding the
price difference, the end customers was indifferent for buying the product from either of the
channels.
Q2. Where is the gray market product originating? Trace the flow of gray market product and
show financially how the gray market is supported.
ANSWER:
The gray market product originated from either Japan or Hong Kong. Detailed product flow and
prices can be seen in the Exhibit 1.
Q3. What do you suggest that Minolta do in the face of growing gray market sales? Consider
these alternatives: (a) do nothing; (b) take action against Goddard; (c) vertically integrate
further down into the channel; or (d) make product or warranty alterations to its products in
different markets.
ANSWER:
To address the problem at hand we propose alternative (d) make product and warranty alteration to
its products in different markets.
By doing this they will be able to make some differentiation between the products and services
offered across geographies and thus might justify the price difference. Also, marketing and selling
the different product models in Germany than in Hong Kong or Japan will deter the end customer
from buying the low cost China’s imported products for perceived inferior quality than products
sold in Germany. By doing the specific marketing campaign for different geography, Minolta would increase
its referent power. Similarly, changing the warranty policy and not giving in warranty for products not
bought through the authorized channels would deter end customers buying the product coming
from gray product channel.
EXHIBIT 1 : CHANNEL FLOW OF MINOLTA's CAMERA Co. Ltd
Production Cost
MINOLTA (JAPAN) $62.00
Single Distributor Cost to Distributors (HK) Own Subsidiary Cost to Distributors (USA) Own Subsidiary Cost to Distributors (GERMANY)
HONGKONG $121.00 USA $123.00 GERMANY $130.00
End Customers /
people who work for $170.00 End Customers $174.00 End Customers $342.00 End Customers $270.00 / $210.00
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