Quiz 13: Buying Merchandise
Students should consider these issues when consulting The Gap on sourcing decisions: Country of Origin Effect, Foreign Currency Fluctuations, Tariffs, Foreign Trade Zones, Cost of Carrying Inventory, Transportation Costs, Quality Control, Collaborative supply chain management, and International Human Rights and Child Labor Violations. Given the choice between sourcing in Mexico, China, and the United States, various combinations of these issues will influence the advice I will give pertaining to sourcing in any one of these various countries. For example: China might be a problematic choice because of its history of human rights abuse, but is also a good choice because labor is comparatively inexpensive. Similarly, Mexico might be problematic because of instability of its currency, but a positive choice on the issue of tariffs due to the passage of NAFTA and less costly expenses than might be incurred by being close to the United States. The United States might be the best choice when accounting for every one of the aforementioned issues and other issues, but labor is expensive and unions may be difficult to deal with. The corporate priorities of The Gap would also have to be accounted for given the relative advantages and disadvantages that exist for sourcing in any country.
There is large amount of illegal trading and trafficking that takes place in the world no matter how strict the regulations are. There are business firms that deal into banned products and also illegally undertake business activities in the disguise of legal business. The difference among counterfeit, gray-market and black-market merchandise can be described by stating that counterfeit refers to the process of making exact imitation of a valuable or expensive product so as to defraud and deceive. The counterfeit product is created with cheap material; however, it looks exactly like the original product made with excellent quality material. Gray-market refers to the market wherein the goods either manufactured by the brand owner or with its consent are sold outside the authorized distribution channel. This activity is normal and the products sold in the gray market are considered as illegal trade activity. Black-market refers to the market where illegal or banned products like drugs, flesh trade, guns and ammunitions, etc. are sold and are exchanged illegally. Only the selling of illegal products in the black market is not legal because the products that are sold in black market are banned and not allowed by the government regulations. When products like arms and ammunitions are sold unauthorizedly in black markets, it is termed as illegal. However, counterfeit and gray-market products are not illegal because there are government authorized distribution centers and channels wherein counterfeit and gray-market products are openly sold with license. These products are sold by making the buyers properly aware about the product's genuineness and its fake status. This way selling of counterfeit and gray-market products are considered as legal. An individual does not believe that selling of this type of merchandise should be allowed because selling of counterfeit products defrauds the innocent customers as not every customer is aware of availability of copied products in the market, and this might fool around the customers as they might buy the counterfeit product considering it as original. Same is the case with black market products which should not be sold at all as selling of arms and ammunitions, drugs, flesh trade is completely illegal and unauthorized. Even the gray-market products should be disallowed to be sold because it is not right to break the authorized distribution channel of the manufacturer or seller and to sell the same products outside at increased or decreased rate. It creates risk for the reputation of the manufacturer and the image of its products comes at stake. An individual would not purchase a counterfeit wallet because when fake products are bought, it increases the daring of the sellers and they get highly engaged in the selling of counterfeit products. No matter even if counterfeit wallet is available at less price as compared to the original product, still, the individual would not buy it as he does not want to encourage selling of such products in the market. Even in case of counterfeit car part or prescription medication, the individual would not opt for such products owing to its fakeness and copied form. These types of products malign the entire selling and buying process and defrauds the customers. Even the original manufacturers face loss when such products exist in the market.
Manufacturers of apparels mostly offer their products to be sold through stores. The store-owners buy the products from the manufacturers and sell them in their stores using their own brand to name the apparels. Considering both the retailer as well as customer's perspectives, the advantages of manufacturer's brand name can be that the products with manufacturer's brand are easily available and can be easily found by the buyers. When the manufacturer puts the label of its brand over its products, the products are perceived of high-quality as compared to private-label items. The manufacturer's brand name carries more societal value as compared to store brand name. On the other hand, the advantages of store brand name can be that the owner of the store can sell the products on its name and can enjoy the popularity and appreciation related with that product. With the increase in the product's popularity and sales, the profitability of the store increases. Considering both the retailer as well as customer's perspectives, the disadvantages of manufacturer's brand name can be that the products that are offered at manufacturers' brand name are often costly as compared to the store brand name or generic name. However, the disadvantage of the store brand name can be that if any of the products sold by the store over its brand name comes out to be of bad quality, then the entire brand range of the store will get affected and the customers would make a bad impression and perception about the products offered by the brand name of the store. As a result, the store's sales will decrease and its related profitability.