Identifying Antecedences and Consequences of Developing a Gray Market for Samsung Brand Home Appliance Products in Iran

Document Type : Research Paper


1 PhD Candidate, Department of Business Management, Shahr-e-Qods Branch, Islamic Azad University, Tehran, Iran.

2 Assistant Prof., Department of Business Management, Shahr-e-Qods Branch, Islamic Azad University, Tehran, Iran


Gray markets refer to those markets where multinational brands are distributed throughout the local markets of a country through unofficial sources of brand activity. Consequently, companies that are responsible for distribution of multinational brands in the host country will face difficulties. Given that consumers tend to gray markets to buy the original brand at lower prices during economic fluctuations in particular countries, it is impossible to eliminate gray markets, (Dasu et al., 2012). On the other hand, the lack of appropriate management of such markets and the passive approach of multinational companies toward such markets undermine the value of those international brands in the host countries and undervalue branding efforts. In our country, gray markets also exist and have significant economic consequences. The home appliance market is one of the most critical existing gray markets in Iran, which has emerged due to a lack of screening and extensive activities in the illegal distribution of home appliance brands. Samsung home appliance company is regarded as one of the international companies that has suffered accordingly. Gray markets that do not provide adequate support and following services for consumers have caused problems for the Samsung brand. This problem-oriented study on the gray market for Samsung home appliance products intends to address why such gray markets have emerged despite various marketing activities by Samsung Company. This study aims at identifying antecedents and consequences of the existence of gray markets for Samsung products.
The present empirical study is developmental in terms of purpose and qualitative in terms of data collection. This research has been conducted according to the grounded theory. The research sample includes a group of managers working at Sam Service Company and university professors who were selected by purposeful sampling. The data were collected through interviews and then coded in three levels of open, axial, and selective coding. Eventually, the results were coded into five categories of causal, contextual, and intervening conditions, as well as strategies and consequences based on Strauss and Corbin model.
Causal conditions include economic fluctuations and lack of screening in the country's entrance refers to the critical phenomenon of emergence of gray market. Contextual conditions entail rules and regulations and also consumers’ culture. Intervening conditions include empowerment of legal intermediaries and consumers’ awareness. Strategies encompass customized and passive production strategies. And finally outcomes include sales performance and brand value. The research findings indicated that there were not adequate necessary advertisement to persuade buyers from intermediaries and sales agents; besides, Samsung company has focused its advertisement on their products instead of official distributors. Therefore, it is very important to reconsider and invest in advertising and communication to inform customers about the significance of buying from official suppliers. Focusing on creating a consumer culture corresponding to service quality and reducing the risk of product problems can also strengthen consumer culture and reduce consumer risk-taking to buy from gray markets. In terms of laws, there are not adequate restrictive laws leading to the formation of the gray market in the field of home appliances, and in particular Samsung brand.
The results of this study showed that it is necessary to address the specific economic conditions of the host market, the extent of distributing channels and supply of products of the main company, creating a culture of buying from official channels, familiarizing customers with follow-up service, and establishing systems to engage customers accordingly. In terms of theoretical participation, findings of this study can be considered in the application of necessary theories related to customer engagement for international companies. The lack of constant communication between Sam Service Company and its customers has established a sense of Service Company for customers rather than a company that is the official provider of products. It leads to the image that customers should only refer to the company when there is a problem and they need repair services. Therefore, it is related to the natural dissatisfaction caused by product problems or service failure. However, in case of creating customer engagement systems, a continuous and coherent relationship is established with the parent company and the official representative can increases the brand value. It also results in incentives such as loyalty discounts, customer club points, and etc. during future purchases. It causes customers to disregard gray markets and turn to official markets, and also leads to constant communication with customers.


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