The Effects of Gray Markets in the International Product Distribution Systems

Abstract

The problem of gray markets has become one of the main concerns to many global marketing firms. Many of the distribution goals of today’s firms in the international arena have been thwarted by the activities and issues of gray marketing. This work, therefore, analyzes the incidence of gray markets in the international distribution system. The study is guided by the following objectives: to examine if gray marketing  affects product defection as well as encourage increasing customers’ complaint; to examine the effects of gray markets activities on the availability of goods in certain part of the world; and to ascertain whether the realization of distribution objectives in the international marketing environment is affected by the incidence of gray market. To achieve the objectives spelled out, the study utilizes descriptive research. The questionnaire was the main research instrument that the study used to sift data from a sample of 50 respondents who were consumers. Based on the analyzed data, the following findings were made: that gray market  affects product defection and hence, it leads to increasing customer complaints of certain product in the foreign markets; that gray market leads to negative  availability of good in certain parts of the world; and that, gray market affects the realization of distribution goals and objectives of some organizations in international marketing environments.  Guided by the findings, the study concludes that gray markets have a very strong effect on the international distribution Systems, causing dumping of good in certain target foreign markets and leading to non-realization of place utility objective by some global firms. The study recommends that gray markets should be minimized through utilization of internet technology, lowering costs to reliable distributors and as well ensuring effective selection of middlemen.

Keywords: gray market, distribution, international systems and parallel importing.