International Perspectives on Counterfeit Trade

Many executives may feel that they have a pretty good grasp of the reasons why people make or purchase counterfeit goods. In effect, these senior managers rely on their own values and their understanding of business models to form conclusions about counterfeiting and to develop strategies to combat it. However, Peggy Chaudhry, an associate professor of management and operations at Villanova University, and Stephen Stumpf, the Fred J. Springer Chair in Business Leadership at Villanova, argue in their January 2008 working paper, Executive Assessment of Counterfeit Trade in Five Countries: Examining the Multi-Faceted Motives of Piracy and Consumer Demand, that this approach could lead to mistakes when protecting intellectual property and valuable brands. It turns out that the motives executives ascribe to pirates and their customers can vary by country. If executives’ perceptions of the factors driving counterfeit trade in their respective countries are correct, global organizations need to realize that, when it comes to combating counterfeit trade, what works at home may not work as well in another market.

To test managerial perceptions regarding counterfeit goods, the authors examined executives’ views of both the supply and demand sides. They questioned more than 200 executives from five regions — the United States, New Zealand, South Africa, Tahiti and Australia — to determine if executive perceptions of the counterfeiting problem differed based on region. The researchers found that not only did the perceptions of the problem (motivating factors for pirating) differ by country, but so did the solutions (marketing, pricing, packaging features) that senior managers deemed most effective. While profit was most often seen as the top motivating factor for creating counterfeit products, executives’ views of the importance of other issues, such as strict enforcement of intellectual property laws, varied from region to region. For instance, South African executives saw the notion that intellectual property applies only to more developed economies as a more important factor contributing to counterfeit supply than executives in the other four countries did. Similarly, South African executives felt that a low level of income and/or education was a more important reason that consumers were willing to buy counterfeit goods than American executives did.

Given these differences in opinion as to the nature of the problem, it is not surprising that the poll also revealed a difference in the way executives believed counterfeiting problems should be handled. For example, U.S. executives thought packaging and pricing solutions were most effective. However, their New Zealand counterparts deemed it most effective to educate the public about the benefits of the genuine product through advertising and marketing. This difference in the way executives perceive the problem suggests that counterfeiting requires multiple solutions, not only in one region, but across a global organization. The authors identify four general tactics that will help companies address counterfeiting more effectively.

First, organizations should establish dialogues with other companies about the effectiveness of anti-counterfeiting strategies in various regions. Nurturing such relationships in multiple regions as well as joining associations such as the International Anti-Counterfeiting Coalition can help organizations stay current as to the most effective strategies to protect their IP.

Second, companies should attempt to reduce demand for counterfeit goods with marketing campaigns aimed at consumers. Possible marketing tactics, the authors write, include “fear, peer pressure, [an emphasis on the] low quality of the fake product, role models, and a negative association to organized crime.”

In addition, corporations should seek publicity about the enforcement of IP laws, to counter the perception that counterfeiting laws are rarely enforced. Citing recent prosecutions can instill fear in consumers and producers of counterfeiting merchandise, lowering both supply and demand.

Finally, companies should help the public and policy-makers understand that counterfeits are also a problem in industries such as pharmaceuticals and airplane parts. For example, the authors cite an estimate that 2% of all the airplane parts installed every year are counterfeit. Such statistics challenge what the authors call the “fakes are fun” perception of those consumers who associate counterfeit products primarily with knockoffs of designer fashion items.

By addressing these four issues, companies can affect both the supply and demand aspects of counterfeit trade. However, to curb the rise in counterfeit goods, executives will need to tailor their anti-counterfeiting actions to the piracy and consumer demand dynamics of different country markets. As the authors stress, “One size does not fit all.”

For more information, contact Peggy Chaudhry at peggy.chaudhry@villanova.edu.