Rev. March 1, 1981
Minolta Camera Co., Ltd.
"We have got to fix this problem," said Mr. Katsusaburo Nakamura as he read the letter he had just received from one of his company's European retailers (see Exhibit 1). It was July 1971. Mr. Nakamura was the manager of the International Division of the Minolta Camera Co., Ltd., a leading manufacturer of camerasand camera accessories, headquartered in Osaka, Japan. The letter he was reading came from Mr. Wilfried Reuter,1 president of a large camera dealership in Germany with stores in Cologne, Düsseldorf, and Essen. Mr. Reuter, who had recently visited the Minolta headquarters in Osaka, complained about the fact that sizeable quantities of Minolta cameras moved through unofficial channels from HongKong to Germany, where they were sold at prices substantially below Minolta's official suggested retail prices. Mr. Reuter's letter was not the first of its kind that Mr. Nakamura had received. A number of other authorized dealers in Europe and in the United States had voiced similar complaints about unfair price competition because of an inflow of Minolta cameras through irregular channels. Invirtually all of these cases the source of the problem seemed to be that merchants in Hong Kong bypassed Minolta's regular distribution system by exporting directly to camera retailers abroad. The basis of these export transactions was the significant price difference for Minolta cameras that existed between Hong Kong and Japan on the one hand, and Europe and the United States on the other. Mr.Nakamura estimated that these "grey exports," as he called the movement of Minolta cameras through irregular channels, accounted for less than 10% of Minolta's total camera sales. A disturbing fact, however, was that the magnitude of these transactions, while hard to measure, seemed to be increasing rather than decreasing. Just a few days ago Mr. Nakamura had received a letter from one of Minolta'sexclusive distributors in Europe. The distributor was very concerned that in trying to sell Minolta cameras to the retail accounts in his country he frequently found himself competing against unauthorized exporters in Hong Kong. Attached to the letter was a piece of direct mail promotion that one of these exporters, Inter Export Enterprises, had sent to major camera retailers in the distributor'scountry (see Exhibit 2). The distributor commented: I wish to emphasize that similar direct mail is regularly coming into our market from firms in Hong Kong offering photographic equipment at exceptionally low prices. We are obviously concerned at these overseas firms selling in our market as the recent increase in such selling by overseas outlets causes great discounting to take place in our marketand also reduces our market possibilities. There is nothing illegal whatsoever in companies, such as Inter Export, exporting to our country but, like other official photographic equipment distributors, we are being heavily affected because of this unreasonable practice.
Certain names, places, and financial data have been disguised.
This case was prepared by Ulrich Wiechmann as the basisfor class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 1976 by the President and Fellows of Harvard College. Distributed by HBS Case Services, Harvard Business School, Boston, Mass. 02163. All rights reserved to the contributors. Printed in the USA. 1
Minolta Camera Co., Ltd.
MinoltaCamera Co., Ltd. was one of the leading Japanese manufacturers of still and movie cameras, lenses and camera accessories. Founded in 1928, the company reached a 1970 sales volume of ¥22.8 billion.1 Sales of cameras, lenses and accessories accounted for 82% of this volume. The remaining 18% were predominantly sales of electrostatic office copiers; a small fraction of total company sales was...