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Minolta Camera Revised Case Solution & Answer

Minolta Camera Revised

How ‘Grey Market’ works?

The grey market is an unofficial distribution channel through which goods are traded from one location to another. Although the process is not illegal, but it creates certain degree of problem for the headquarters and also for the distribution companies in which the product is delivered. As discussed in the case, the grey market works by appointing a number of sailors that come at the Hong Kong ports and purchase products from retailers. Since the product remains duty free for sailors, therefore they do not have to pay taxes for the products to transfer the goods.

Furthermore, these products are then purchased by smugglers who provide commission to sailors for their work. Similar transactions are made through airline stewardesses and pilots. These smugglers then sell products to company-owned and non-company owned retailers for a less price since taxes the products had remained cheaper due to being tax-free.

Option Listing

The company has three valid options through which it could resolve the problems of grey export which has been raised by the US market and the German market. The first option that remains include eliminating the price difference which exist between the various countries. In this way, the lower prices of products would not affect consumers since similar prices would be offered.

The above table describes that the company would increase the export price FOB Japan for Hong Kong, while it would decrease the FOB price for the US and German market. This way, the company would be able to minimize the gap between the actual retail price for the Hong Kong and other markets. The particular strategy would decrease smuggling from the Hong Kong market because it would be expensive for the sailors and other individuals to purchase the product from retailers.

The second option includes placing strong control over its distribution through a 50-50 joint venture with Goddard a distributor which is present in Hong Kong. Many of the distributors have complained about the lack of control from the headquarters which has resulted in the particular situation.

The third and the last option includes selling of the products under different model names and shapes and design from the Far East and the Far West. This shall allow consumers to easily distinguish from one model to another and would refrain from purchasing a model which would not have been marketed by the company through its advertisement.

Recommendation

It is recommended that the company shall adopt the last option which focuses upon selling a slightly different brand in the Far East region as compared with the selling of a brand in the Far West region. The idea shall remain on increasing awareness amongst consumers to purchase those products and models for cameras which are only presented in the advertisement conveyed by the company.

Secondly, this strategy would also serve beneficial for Minolta for the longer period of time as to differentiate a product across two countries and to develop a product according to the likes and dislikes of a consumer. Focusing on the development of a brand according to the consumers’ expectation would allow the company in gaining huge advantages and revenues since it would be hugely attractive for its consumers.

This strategy would also be posing another advantage for different advertisement techniques that varies according to the taste of the local country. Previously, the company would offer advertisements that are made just in Japan. This shift in strategy would allow the company to increase its sales as the promotional strategy would target according to the desires and needs of its consumers.

Justification

The advantages for the particular option includes targeting the details and specification of each consumer present in a separate market despite of applying the same rule of standardization on the Far East and Far West countries. The company would be able to design a product according to the specification of each market. This strategy shall also resolve the problems of grey exports as consumers would know that which product they would have to buy. Any dissimilar products would eventually lead to a consideration of an inferior product.

Although the particular strategy is good for the longer period of time, but it requires process re-engineering steps and huge amount of capital to establish a production capability that could produce different model products for different markets. The company would need to establish many production units and manufacturing plants and design different advertisement and marketing techniques to target a market. Each market would exceed in great amount of capital.

Conclusion

Minolta Camera is facing problem regarding smuggling of its products from the Hong Kong region to different parts of the country to United States and German market. This has resulted in the decrease sales for distributors present in these market and the relationship with its consumers are becoming weak. Therefore, the company is provided with various options as to resolve the current issue. However, the best alternative that has been suggested is to provide different model products and different advertisement strategies for each country as this would result in increasing consumer’s knowledge about purchasing a right product.

Exhibit: VRIO Analysis

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