International Marketing, 5th Edition

U.S. ETCs should be able to compete with Japanese trading companies. At least, they will be more competitive. The new competitiveness is due to the fact that they are able to overcome financing and antitrust problems previously encountered by other similar entities. EMCs and Webb Pomerene associations have not grown satisfactorily because of lack of financing and antitrust restrictions. The ETC Act allows banks to hold equity positions in ETCs. The benefits of the participation of banks in export trading include financial resources, branch networks, and market information.

ETCs are able to obtain binding antitrust preclearance for specified export activities. The prior antitrust immunity creates a favorable environment for the formation of joint export ventures. Such ventures, through large-scale operations and economies of scale, can reduce cost and risk while promoting efficiencies.

One legal requirement that may harm ETCs' overall performance is that American ETCs must focus primarily on exports. Import activities are secondary and undertaken only when they are needed to promote exports. As a result, ETCs may lack an efficient infrastructure for developing two-way trade and are not as well-rounded and international as their Japanese counterparts.

Japan should be classified as a moderate country. Although Japan scores high on political stability, market opportunity, economic development, and cultural unity, it is not exactly a hot country. With regard to other characteristics, Japan looks more like a cold country because it scores high on legal barriers, physiographic barriers, and geocultural distance.

It is possible that, with all the changes going in Japan, the pressure from its trading partners to remove legal barriers may be great enough to make Japan move in the direction of ‘hot’ category, albeit slowly.

The foreign automobile segment is a good example of the relationship between product image and channel width. The distribution channels of Volkswagen and Porsche should not be the same due to their different target markets. Whereas Volkswagen, as an economy and mass car producer, requires an intensive channel, Porsche, with its high price tag in excess of $20,000, does not need that kind of distribution. Subsequently, when Porsche decided to enhance its image by severing its U.S. ties with Volkswagen which handled Porsche distribution, it then tried to lure 130 of Audi's 320 dealerships as exclusive dealers. As a matter of fact, studies have shown that Porsche can cover 80 percent of the U.S. market with as few as 50-80 dealerships. This is a legitimate assumption since consumers are willing to go through considerable effort to seek out prestigious products even when they are not readily available.

Honda, in its attempt to trade up with its Acura brand, needed a distinct image to build snob appeal for Acura. Toward this goal, it created a new division with a separate dealer network to handle the more expensive automobile. Honda's strategy thus prevents Honda dealers from mingling the two brands.

The strategy is also appropriate because the company wants Honda dealers to be small-car specialists, unlike GM's dealers which must carry parts for and offer services to many kinds of cars, large and small. The strategy circumvents state laws as well since some states require showrooms of the same brand to be at least ten miles apart. The success of Acura seems to confirm that Honda's strategy is a correct one.

Sony's effort is a good illustration of the benefits and problems derived from having multiple or parallel channels. On the one hand, it employs middlemen in its regular, long channel. On the other hand, it has begun to add the second and direct channel.

From manufacturers' standpoint, it is only natural that they all want to utilize all channels that can contribute to corporate sales and image. In the case of Sony, such a goal becomes even more critical because the consumer-electronics business is maturing.

Sony claims that the purpose of the Chicago Gallery is to further strengthen its positive image by offering in-depth product information, demonstrations, and services. The Gallery showcases Sony's full product line, including new Sony technologies that many retailers have yet to carry (e.g., Data Discman — books on compact discs). Because retailers, as a rule, emphasize price rather than product features, Sony wants to make the demand for its product less price elastic. According to the president of Sony Consumer Products Group, Sony must explain why its products deserve to be ‘higher-value purchases’. The Gallery allows the firm to explain its premium technology for image building. In other words, the new channel is more of a promotional tool than a distribution tool.

From the perspective of Sony's retailers, it is hardly surprising that they have a cause for concern: their own supplier may take sales away from them and may create price war which hurts profit margin. To allay such fears, Sony has stated that the goal of the Gallery is not to make money but rather to make consumers comfortable with Sony's products, making them want to buy Sony's products regardless of the retail outlets. If this goal is accomplished, it will benefit both Sony and its retailers. To assure retailers that Sony is not a competitor, Sony's Gallery sells products at full retail price and even steers shoppers toward local Sony dealers who usually have lower prices. This strategy, if executed properly, should allow Sony to bolster its positive image, keep its premium price, minimize dealer conflict, and maintain dealer loyalty.

It should be noted that Apple has been successful in using its own Apple stores to showcase its new products.

In spite of all the criticisms, gray marketers do serve useful marketing functions. For manufacturers, gray marketers help distributing surplus goods and perform some of the service functions. As a matter of fact, many manufacturers tolerate or even encourage the practice of gray marketing.

For consumers, gray marketers provide an alternative — essentially the same product for a lower price. They promote the free enterprise system.

This assignment can be tied to the discussion of price equalization in Chapter 3. The discrepancy of prices in two countries for the same product causes gray marketing to exist which in turn narrows the price differential. Gray marketers thus bring about more uniform prices.

Theoretically, gray marketers' marking may be potentially harmful to seals and the watch movement. Realistically, there is no reason why gray marketers cannot utilize proper care and control in opening the watches. The criticism is also not persuasive given the fact that such watches, when repaired by Seiko or its authorized dealers, must be opened as well. If the procedure were indeed harmful, no watch can be repaired, and Seiko should make its watches tamperproof.

One thing that Seiko can do is to reverse its policy of not selling watches to discounters. In return, Seiko can ask discounters to stop carrying gray-market watches. Another strategy is to simply reduce production so as to force up prices which gray marketers must pay.