THE GRAY FERRARI

Karagouni Magda
Koutoulogeni Athina
Mastori Christiana
Savva Ioulia
• The case is about Ferrari’ s Gray Market in the United States. A gray
market is the trade of a commodity through distribution channels which,
while legal, are unofficial, unauthorized, or unintended by the original
manufacturer.
• USA uses a unique set of standards and regulations for automotive safety
and emissions, which differ significantly from the internationalized
ECE Regulations used throughout the rest of the world.
• Vehicle manufacturers thus face considerable expense to type-certify a
vehicle for U.S. sale. This cost particularly impacts low-volume
manufacturers and models, most notably the makers of high end sports cars
like Ferraris.
• National Highway Traffic Safety Administration and
United States Environmental Protection Agency regulations criminalize the
possession of a vehicle not meeting U.S. Federal Motor Vehicle Safety
Standards.

The gray market provided an alternate method for Americans to

acquire desirable vehicles, and still obtain certification
 Question 1
Gary Roberts, a Costa Mesa, California,
importer stated: “Ferrari’s control
freaks ought to cooperate with importers
and let the free market take care of
itself.” Comment.
 Answer
• Gary Roberts believes that Ferrari is attempting to control
demand by stopping gray imports into the United States . With
this statement he makes an allusion of control for profit to
Ferrari, accusing it as being “control freaks”.

• There were similar statements too. For example Doug

Pirrone, president of Berlinetta Motorcars in Huntington, New
York, alleges Ferrari’s goal is “to control the market, insure a
monopoly, fix the prices and eliminate all competition.”

• Ferrari, was categorically rejected this abuse which was done

both by the registered importers and the owners.
• With gray imports American buyers were able to gain
30 - 40% on Ferraris, as a result of the stronger
dollar at the time.

• Buyers must receive the car through a registered

importer that can convert the cars to satisfy the
American safety standards for a fee.
• Ferrari claims that gray imports:
 Have no impact on authorized dealers’ profits
 Actions taken are really to protect the company’s
reputation.

• Ferrari’s Robinson said free trade isn’t the paramount

issue-protecting Ferrari and its customers are what’s
important. He claimed that “This is not a covert way of
addressing gray importers. This is just a way of informing
the proper authorities of our concerns

 To conclude, since the majority of Ferrari’s success is

mainly due to its reputation for race cars, Ferrari’s
reaction seems as logical and truly their best option at
the time
 Question 2
Does Ferrari’s case prove that requiring
that products be delivered only through
approved distribution channels ensures
the highest quality for the customer?
 Answer
• Ferrari’s case proves that requiring that products to be
delivered only through approved distribution channels
ensures the highest quality for the customer, because:

 When customers go through a registered importer of

Ferrari they rely on importers' knowledge and skill of
converting the automobile according to US regulations
and safety standards.
 For example, Ferrari has found that some unregistered
importers stated that doors on all 550’s are identical, but
doors on non-U.S. cars are not fitted with side-impact
protection bars. A safety feature that a buyer of foreign
race car would most likely want to take advantage of.
• “Ferrari has serious reservations whether
modifications to non- U.S. cars proposed by
importers are sufficient to meet U.S. safety and
emissions requirements”, said Stuart Robinson,
president and CEO of Ferrari North America.

• "We have some serious safety concerns, and

ultimately at the end of the day, it's the Ferrari name
that's on the car," said Wertheim.

So, only by going straight through Ferrari and its

approved distribution channels will the buyer be
assured of its product’s quality.
• When the customer buys through
distribution channels is more
confident about the safety of the
product.
• High quality is accompanied
with high servicing offered by
Ferrari
• The customer doesn’t have a
personal contact with the
automobile company and trusts
his money in an independent
business. This is a risk for him
because he doesn’t have a clear
view of how safe and
authoritative is his investment.
 Question 3
Given its loss, what alternative actions
are open to Ferrari?
 Answer
Given the situation that has been created Ferrari has no other
choice rather than adjust and find a way to protect it’s
reputation.

1. An alternative action is to create a subsidiary which will deal with

the adjustment of Ferrari to the standards of pollution and safety
that America requires.

 This company will manufacture an amount of parts (for example

bumpers , seat-belt warning systems) that are appropriate for
American standards for every different model of Ferrari.
 These parts will be available through the already existing
Ferrari’s distribution channel (through Ferrari’s dealers) and this
will be a guarantee about their quality.
2. A second alternative action is the following:
Ferrari has a legendary reputation and consultant loyalty.
So it can remain to the Ferrari purpose:

“The secret of profitability is not to sell a lot, but rather to

sell a specific offering to a specific group”.

 Client relationship: Cars should continue

to sell to specially selected exiting clients.
 Ferrari can find strong support through its
Web Site and its fun club, that have great
power and are very well structured.
 Finally, there is a third alternative action for
the company concerning gray markets:
3. Ferrari could buy out the unauthorized stores
which sell registered imported Ferrari parts
and add them in the official channel of
Ferrari’s distribution.
THANK YOU