Published by MBA Skool Team, Last Updated: April 24, 2013
What is Grey Market?
A grey market, in simple terms, is the buying of a good in one market and selling it in another market to benefit from the difference in prices prevailing in the 2 markets. It is also known as a parallel market. It is the selling of a good through a distribution channel which has not been authorized to sell that good by the original manufacturer. Although it is legal, it is unofficial and unauthorized. Grey marketing could occur within a country but it is becoming increasingly prevalent across countries among international brands with high price differentials and low costs of transportation, tariffs, taxes etc.
Grey markets tend to develop in markets where information about the prices of similar goods like cars, designer goods, consumer durables etc are cheap and easy to obtain. Small firms see grey marketing as a viable international strategy to compete against larger firms with the limited resources they have at their disposal. For example, in the United Kingdom, the grey market is mainly characterized by the import of secondhand sports car models from Japan/Singapore, which were either never released in UK or were highly priced due to their performance.
3 main types of Grey Marketing are:
Imported manufactured goods which are unavailable or very expensive in the host country
Unissued securities which are not yet traded in the official markets
Unregulated trading in commodity futures (crude oil)
Hence, this concludes the definition of Grey Market along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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