Incidents of Gray Market Activity Among U.S. Exporters: Occurrences, Characteristics, and Consequences

Each year, the value of gray market products sold throughout the world runs into the billions of dollars. Past research has stated that exporters of manufactured goods can hardly afford to ignore the possibility of this phenomenon due to the often severe effects on their sales volume, margins, and relationships with distributors and end-users. Through a survey of export managers of manufacturing firms, coupled with a series of qualitative interviews, this study investigates how organizational specific, control specific, and market specific factors drive gray market activity, and in turn explores the effects of unauthorized distribution on export performance. Several factors are shown to evaluate the potential of unauthorized distribution in their export markets, namely the centralization of decision making, the degree to which the product is standardized, channel integration, and channel control. International experience, market volatility, and the number of markets served were found to have no effect on gray market activity, this contrary to traditional thinking. Furthermore, the effects of gray market activity on strategic versus economic performance is shown to be significantly different. Each of these issues is discussed in detail, along with the implications for export managers.

[1]  Greg M. Allenby,et al.  ON THE ADOPTION OF DRP. , 1992 .

[2]  Preet S. Aulakh,et al.  The Use of Process and Output Controls in Foreign Markets , 1995 .

[3]  Daniel C. Bello,et al.  The Effect of Output Controls, Process Controls, and Flexibility on Export Channel Performance , 1997 .

[4]  J. J. D. Dana,et al.  Advance-Purchase Discounts and Price Discrimination in Competitive Markets , 1998 .

[5]  H. Gatignon,et al.  Modes of Foreign Entry: A Transaction Cost Analysis and Propositions , 1986 .

[6]  Daniel C. Bello,et al.  Control Mechanisms Within Export Channels of Distribution , 1995 .

[7]  Bernard J. Jaworski,et al.  Control Combinations in Marketing: Conceptual Framework and Empirical Evidence , 1993 .

[8]  W. Ouchi,et al.  Organizational Control: Two Functions. , 1975 .

[9]  Anthony C. Koh,et al.  Variations in export performance due to differences in export marketing strategy: Implications for industrial marketers , 1988 .

[10]  T. Bonoma.  Case Research in Marketing: Opportunities, Problems, and a Process , 1985 .

[11]  Louis P. Bucklin,et al.  Modeling the international gray market for public policy decisions , 1993 .

[12]  S. Tamer Cavusgil,et al.  Product and Promotion Adaptation in Export Ventures: An Empirical Investigation , 1993 .

[13]  D. Dillman.  Mail and telephone surveys : the total design method , 1979 .

[14]  Robert G. Cooper,et al.  The Impact of Export Strategy on Export Sales Performance , 1985 .

[15]  F. Scherer,et al.  Industrial Market Structure and Economic Performance. , 1971 .

[16]  Norman B. Macintosh,et al.  International Marketing Effectiveness of Technology-Oriented Small Firms , 1980 .

[17]  Gregory T. Gundlach.  Exchange Governance: The Role of Legal and Nonlegal Approaches across the Exchange Process , 1994 .

[18]  Gert Assmus,et al.  How to Address the Gray Market Threat Using Price Coordination , 1995 .

[19]  J. Vickers.  Regulation, competition, and the structure of prices , 1997 .

[20]  Preet S. Aulakh,et al.  Antecedents and Performance Implications of Channel Integration in Foreign Markets , 1997 .

[21]  K. Eisenhardt.  Building theories from case study research , 1989, STUDI ORGANIZZATIVI.

[22]  P. M. Podsakoff,et al.  Self-Reports in Organizational Research: Problems and Prospects , 1986 .

[23]  Philip J. Rosson,et al.  Manufacturer-Overseas Distributor Relations and export Performance , 1982 .

[24]  Dale F. Duhan,et al.  Gray Markets and the Legal Status of Parallel Importation , 1988 .

[25]  M. Porter.  Competition in Global Industries , 1986 .

[26]  H. Gatignon,et al.  The multinational corporation's degree of control over foreign subsidiaries : an empirical test of a transaction cost explanation , 1988 .

[27]  Vern Terpstra.  THE EVOLUTION OF INTERNATIONAL MARKETING , 1987 .

[28]  Franklin R. Root,et al.  Entry strategies for international markets , 1986 .