The document discusses the gray market and its negative effects on brand reputation. The gray market is defined as the unofficial distribution of genuine products. While legal, it is unauthorized by the original manufacturer. Gray market goods can damage brands by offering discounts that steal customers and revenue. It also strains manufacturer and dealer relationships and can cause legal issues if products are incompatible with local markets. Effective solutions are needed to protect brand reputation from gray market effects, such as enterprise risk management and brand intelligence tools to quickly identify unauthorized sales that damage the brand.

1. The Gray Market Effect on Brand Reputation
Parallel markets or the gray market as this is generally referred to, is defined as “the trade of
any commodity through distribution channels which, while legal, are unofficial, unauthorized, or
unintended by the original manufacturer”. Though this has been present in the business world,
recent years have seen it become ubiquitous. Irrespective of the type of products from mundane to
life saving, all are available through the gray market. With globalization having paved way for the
enterprises to spread their business far and wide, the parallel markets to have gained a large foothold.
While the authorized markets are already affected by the decline and flow with the changes in
exchange rate, price differentials, and changing supply conditions, these are also challenged by the
parallel imports. Though the gray market products are genuine, the sale of these products through the
wrong channels creates havoc for the enterprises and their struggle to get hold of adequate data for
remedial actions.
The inflow of grey market products adversely affects the manufacturers in a number of ways:
● By damaging the trademark and brand reputation - Goods and services that command a
premium price if offered by the gray markets at discounts will lead to the brands losing their
customers, revenue and their brand image.
● Straining the manufacturer and dealer relationship – The gray markets threaten the dealer
markets and this has an adverse effect on the business relationships
● The gray market goods though manufactured genuinely may not be compatible with the
markets where they are sold, leading to legal liabilities for the brand owners.
● Parallel imports also disrupt the marketing strategies of the brand owners.
Even though enterprises have taken strategic actions and governments have placed stringent
compliance regulations to counter the importation of goods by unauthorized dealers, this alone is not
enough.

2. Like the counterfeited goods, the grey market products also affect the brand reputation of the
company. More than often enterprise lose significant market share in their inability to find effective
solutions to protect their brand reputation. It is thus imperative that top management realize the
impact on short and long term revenue goals and take adequate steps towards effective brand
management. Leading service providers have developed enterprise risk management solutions that
can help enterprises protect their brand reputation. The use of enterprise brand intelligence helps to
shorten the process of finding gray market product sales. Further by prioritizing and identifying the
violator enterprises can take effective actions against perpetrators who damage the brand reputation.
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