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Grey Market by Mind Map: Grey Market

1. Grey Market is the products which are legally sold but without the consent of the brand (Woodburn, n.d.).

2. Reason for Gray Market

2.1. 1. Unavailable Goods( Examples of Grey Marketing Activities, 2021)

2.1.1. Some goods may be not available in a given regions due strategic decisions by the manufacturer. If there is a demand for this product in that region this would trigger a grey market for that good

2.2. 2. Temporary Demand (Examples of Grey Marketing Activities, 2021)

2.2.1. If a product's demand exceeds the products supply temporarily sellers may resort to outsourcing the product for profit motives. This will also result in a grey market for that given good.

2.3. 3. Price Differences (Examples of Grey Marketing Activities, 2021)

2.3.1. Manufacturers set prices in region where they know consumers are likely to pay more. To combat this sellers might import the same product from another region (not from the manufacturer however). The seller might be able to sell the product for a lower price than the market price while making a profit

3. Gray Goods vs Smuggled Goods

3.1. 1. The main difference between smuggled goods and gray goods is smuggled goods are illegal while gray goods are legal.

3.2. 2. Tax and duty is paid on gray goods while no sort of tax or duty is paid on smuggled goods

4. Impacts of Gray Market

4.1. Authorized Dealers

4.1.1. 1. Authorized Dealer have to bear the overhead costs of marketing. With unauthorized sellers selling grey goods in the market it increases competition for the authorized dealers. This results into less motivation for the authorized seller to sell the goods (Gray Market Goods May Leave Your Company Feeling Blue (Or Seeing Red), 2021).

4.1.2. 2. Authorized sellers might have to provide warranty coverage and after sale services for goods they have not sold (Gray Market Goods May Leave Your Company Feeling Blue (Or Seeing Red), 2021).

4.2. Manufacturer/ Exporter

4.2.1. 1. The manufacturer's brand image could be damaged if the gray goods do not meet customer standards (Gray Market Goods May Leave Your Company Feeling Blue (Or Seeing Red), 2021).

4.2.2. 2. Presence of a gray market of a good tends to spoil the relationship between a manufacturer and an authorized dealer as dealers due to parallel pricing will have no motivation due to increased competition (Myers, 1999).

4.3. Individual Consumers

4.3.1. 1. Consumers may loose confidence in the manufacturer if the goods are available at huge discounts (Woodburn, n.d.).

4.3.2. 2. Gray market provides a cheaper option for consumers. As gray goods have less value compared to the market price consumers would prefer the cheaper option.

5. Example

5.1. If the price of a product, let's say a Huawei phone, is cheaper in China compared to Malaysia. An importer can import that phone to Malaysia and sell it for a price which is lower than the price set by the brand in Malaysia. This makes the Huawei phone a grey good.