Parallel Import of Aurora

Lotion in Switzerland

Problems of Grey Market Dilemma

Parallel Import of Aurora Lotion In Switzerland

Prepared for

Mr. Shahed Rahman

Lecturer, School of Business

North South University

Prepared by

Syed Faisal Ahsan

Student ID # 071 917 030

MKT 450, Section 1

Date of Submission

December 22, 2011

 Letter of Transmittal
December 22, 2011

Mr. Shahed Rahman

Lecture, School of Business

North South University

Dhaka.

Dear Sir,

Here is the report on the case you have assigned to us.

As you have instructed, I have analyzed the case from the learning from your course.

At last I appreciate having this case study. It has really given me the knowlendge of how
conflicts are held and managed in real business world. I have learnt a lot from it and thanking
you for giving me this assignment.

Sincerely yours,

Syed Faisal Ahsan

Student ID# 071917030
 Table of contents

 Introduction

 Main problem of the case

 The product: Aurora Lotion

 Market Briefing

 The Manufacturer

 The Authorized Channel Member

 The Reason of Parallel Importing

 The parallel Import Process

 Available alternatives to solve the dilemma

 My recommendations
 Introduction
Parallel importing or grey markets are have been always been a big problem for the authorized
channel members specially for those, who face severe competition from the unauthorized
importers. In many countries this is not illegal so were a foreign product is more popular channel
members are often experience this irritation. Produits Pour Fammes (PPF) is a authorized
subsidiary for marketing AURORA lotion in Switzerland this is a product of Smythe-Dabney
International Ltd,UK. John Farechild is the overseas manager who are facing a big dilemma
when the general manager of PPF reported him about the parallel importing.

Main problem of the case

The dilemma of John Farechild is to take the effective step. That will ensure that the profits of
trading will be satisfied and also the demand of the subsidiary can be fulfilled. Having a parallel
import is not harmful for the parent company. It is because parallel import occurs when only
when the product has higher market penetration or strong brand recognition. Besides the parallel
importers are also by indirectly from the manufacturers .so it is not a lose for the parent
company. But he has also to take some proper steps so that the authorized channel member. Here
is the big dilemma to take the right decision.
 The product: Aurora Lotion
Aurora lotion was a high quality, all purpose lotion for women. It was applied by being spread
lightly over the skin of the face, arms, legs, and other parts of the body and then rubbing gently
until the lotion was completely absorb into the skin. It was manufactured by Smythe-Dabney
International Ltd,UK. The company stressed in its advertising that aurora relived dryness due to
sun, wind, water or detergents and made skin fill soft, clean and gentle to touch. It also stated
that th effect of the lotion were longer lasting then competitive products. The secret of auroras
long lasting effectiveness was a unique formula which allowed the lotion to penetrate the skin
more completely than other competing brands.

AURORA lotion was the brand leader in a growing line of beauty products which included hand
lotion, mosturiture and bath preparations.PPF imported to 200 000 bottles were 120 000 bottles
were parallely imported by grey markets.

Market Briefing
Switzerland is a small, topographically rugged country in the centre of western Europe. The
swiss enjoyed relatively high standard of leveling with per capita GNP of SFr. 22500. That was
the highest leaving cost in Europe in 1975. The population was 6.4 million people, 3.28 million
people among them were women and the majority portion of them were adults, The target market
aurora lotion.
 The Manufacturer
The parent company for PPF was Smythey-Dabney international (SDI) Ltd, with headquarters
outside London. A keen sensitivity to the needs of both consumers and channel distribution
caused the company’s directors to search continually for ways to make their products and
services more competitive. They quickly earn a reputation for having the company’s product in
stock in a timely fashion, providing a valuable service for their distributor. The basic guideline of
corporate management were

 Increase unit volume of sales in all product lines

 Maintain historic direct margins
 Keep corporate overhead expenses low
 Give management of subsidiary companies the authority of decision making of strategic
matters with consultation with corporate management.

The Authorized Channel Member

PPF was responsible for the marketing of aurora and other SDI products in Switzerland. The
organization was small with 14 people in all comprising a sales force, marketing department.
PPF had a margin of 20% of their revenues from aurora products

The Reason of Parallel Importing

Parallel importing is mainly motivated by the high demand of any product. Aurora lotion had the
same case. Seeing a high demand of aurora lotion in Switzerland, the local independent
importers send their man to UK to buy the aurora products from wholesale market of UK. The
main reason were

 Retail prices were higher on the continent then in Britain

 SDI conducted aggressive promotion in the united kingdom each month, and the
resulting average level of wholesale prices was lower than in Europe, were such
promotions occurred less frequently
 Value of the british pound against SFr were decreased that time

The parallel Import Process

The parallel importers bought aurora products from wholesale from UK, In the price of the
market of UK. Besides they got they got volume rebate so their cost were very low. landed cost
of per bottle were SFr 3.70 were they directly sold them to the competitors of PPF with a high
margin rate.
 Available alternatives to solve the dilemma
John farechild had some alternatives in his hand :

 Lower PPF’s recommended selling price for aurora lotion to distributor the suggested
price were SFr 5
 Cutting the subsidiary advertising budget. Though the product were well known and
popular, It was justified to have an alternative to cut cost from advertising
 Trimming the sales force. Train the subsidiary sales force for work in a more competitive
market place
 Rising the prices of other products.

My recommendations

Through the case analysis, I have understood the dilemma of John Fairchild. He had to eliminate
the irritating parallel import for the betterment of the subsidiary, other hand the existence of the
parallel marketers proved the inefficiency of PPF, and was also profitable issue for the UK main
branch.

So, above all the alternatives, I suggest for the alternative of cutting the unnecessary cost of
advertising by PPF, so their gross profit will be higher, and the distributors will not be
unsatisfied. The threat of parallel importers for the PPF will be minimized, and also the parent
company can have the same margin from their subsidiary.