Can Knockoffs knockout your business (HBR case study solution)

Knockoffs: a copy or imitation, especially of an expensive product.

Counterfeiting: the activity of making illegal copies of things such
as bank notes, DVDs, or official documents.
Splinters: a small thin sharp piece of wood, metal or glass that has broken off a larger
piece
Battering: to hit somebody/something hard, many times
Cantonese: a form of Chinese spoken mainly in south-eastern China (including Hong
Kong).
Stalked: to follow a person over a period of time in a frightening or annoying way
Problem: Counterfeiting of ruffin products is on the rise. The company’s CEO is
obsessed with putting a stop to it. How far should he go?

Character-1: Ted Dwayne, client service director for Brand Protection Services Limited,
used his law enforcement and private investigation experience to safeguard his clients
from acts of counterfeiting. Working on the existing case from the past year and
presently based in Hong Kong, he is tracking down the sting operation to identify the
culprits who are copying his client’s products and seizing all of those products without
anyone getting to know about it.

While the local police captured a few of the culprits working as street vendors, they
were not able to find the main link, which Ted can assist with.

Ted, as a part of his investigation, was closely monitoring the activities of a few of the
criminals who were involved in the theft of purses, shoes, and watches worth more than
$10 million on the streets of Northern Georgia and a series of tunnels difficult to
navigate under New York’s Chinatown. From there, he followed a trail and came to this
waterfront warehouse in Hong Kong town filled to the brim with knockoffs of high-quality
goods and brands. This initiative helped police find many critical clues and evidence
related not only to clothing and jewelry but also cosmetics and pharmaceuticals that
might act as a threat to people’s health and lives. This was indeed a great success, but
it was only up to the dragon’s tail (a very small achievement). Upon further investigation,
it was found that there is a big globalized network that is active and is mainly
responsible for funding to accelerate the crime rate from the streets to international
terrorism.

Ted was pretty much sure that even if the main link is cut off, it is expected to grow to its
full potential again. In the U.S., the cases have doubled in the recent past, which clearly
signifies that the situation is getting worse and not better in any sense.
As the lockdown continued, Ted made his way to the building and called his client to
give him the report.

Character-2: Bill Bronson. Attended the phone call, and the time on the clock was 4:20
AM in Dubai. Since he is the CEO of Ruffin, the world’s leading provider of clothing,
accessories, and recreational equipment for today’s explorers, he spends a
considerable amount of time traveling the globe, and this is the reason he was
comfortable picking up the call at this time as well.

Ted informed Bill that the raid went down and they recovered over 100 tons of stuff. Bill
listened to this conversation very carefully and was stunned for a few moments, but he
also felt satisfied that the culprits had been identified who were responsible for ripping
off his products. This was more prevalent as his own life was put in danger once when
there was a knockoff of his company’s diving watch 19 months ago. Bill was able to
recall a tragic incident when he went 80 feet below the surface of Subic Bay in order to
explore the wrecks of the USS New York, and the oxygen supply was limited, which
would have lasted only for 20 minutes. He found out that the dive watch he used did not
belong to his company and was a fake product (useless in operation). He has
undergone treatment for three days to get back to his original state. After his recovery,
he immediately fired Ruffin's marketing director, who had given him the dive watch to
see if he was able to detect the knockoff of the product.

After that, Bill hired detectives to find out the source of the fakes and track down illegal
replicas across the entire product range. He finally used his publicity to expose
organizations and people in government bodies who were equally responsible for
making this happen. Even after two years, it was difficult for the world to believe that a
business tycoon could so easily be deceived. He is responsible for taking Ruffin's
business to a new height of success and making it number one in terms of
manufacturing and supply of adventure gear and clothing. Questions were raised over
his capability and ability to manage the business portfolio.

Dubai case: The city has multiple shopping centers, with many more on the way. This
was the perfect location for Bill to launch his marketing campaigns. After his discussion
with Ted, he moved to the gold souk to meet Kamil Zafir (Character 3), who was in
charge of operations for Ruffins in the Middle East regions, and Nels Volgren (Character
4), the company’s design in-charge. Nels was in town to discuss the technical aspects
of Ruffin's adventure and the retail environment on which the company is currently
focusing. The product range would include equipment related to scuba diving, mountain
climbing, river rafting, etc. all at one place.

Bill found both of them easily in the marketplace. Once they greeted each other, a
random person came near them and offered watches, mentioning that they were of high
quality and taking the names of reputed brands in the global market. Bill shouted at him
and asked him to get off the spot, and he decided to do something in this regard. Kamil
said that here they have made a serious effort to keep the copycats out, and if (Bell) you
make trouble, we might lose the cooperation that we have seen so far in terms of our
launch of the adventure project.

The design chief then said that they have done a top-to-bottom review of the design of
all their products, and it will be extremely difficult or nearly impossible for the culprits to
copy the design in the next 12 months. The logo of the company will be woven into
fabrics rather than embroidered and will be laser etched onto product surfaces with a
fine texture that consumers can feel. Special tags will be put inside the plastic used for
making the product so that the code can be read from any location, which further helps
in the analysis of the product life cycle (PLC). A special code of 24 digits is mentioned
on the product, which will enable the customer to verify the authenticity of the product
once he or she enters the code online. Bill was very excited after listening to this plan,
and he inquired about the cost that customers needed to bear and whether it will be
reasonable or not.

Nels said that the product will not be cheap, but they are trying to maintain the price as
compared to a small percentage of their retail price. The costly components would be
sourced from reputed suppliers, making sure that they are all doing the right things in
the same way. Kamil added that they are doing spot checks on their contractor’s raw
material orders, and if it is sensed that they are ordering in excess, it is pretty much
clear that they are selling the material in black or gray markets.

Research showed that in recent years, as many as 1/3 of customers had mistakenly
purchased the fake products. The technology, if implemented, would improve the
condition somewhat, but there is a greater probability that this technology will also get
masked very easily in the coming years.

Ruffins had bought the laser etching machine from a Chinese supplier, and it is quite
obvious that the counterfeiters will also do the same thing. The thing that was troubling
Bill was that 2/3 of customers are willing to buy a replica of a ruffin product if the price is
set at a lower end and would also recommend this to their friends and family members.
This acts as an element of motivation for the sellers who are selling fake products on
the streets. Will consumers get to know the reality ever?

Beijing case: Two weeks later, Bill was in Beijing for a Ruffin’s sponsored promotional
event. People were wearing various different kinds of ruffled coats, which he is pretty
sure are fake as his company has launched only a dozen designs to date.

Bill met Lily Wang, director of East Asian sales and operations. Lily said that the sales
are tremendous and are getting doubled every year, but this will not last for long until we
add several retail stores quickly. This is acting as a bottleneck for business. Even
if the people are wearing fake ruffin products, they are acting as a source of promotion
for their brand in this cut-throat competitive world, which in one sense is good for us as
people residing in rural areas also know about our products, which is a good sign. Bill
claimed that this should be considered a lost sale. Highlighting this issue of fake
products will enable our customers to think about how a genuine product could be
copied so easily, and they will lose trust in our brand, said Lily. If we reduce the price to
eliminate counterfeiters, we are only hurting our brand image in the market which will
lead to loss of money.

He was worried about how long his employees would need to take time off to serve as
witnesses and how long he would be personally involved in this case.

How far should Bill take this case of counterfeiting?

Case study discussion:

Make a list of the problems mentioned in the case study. Discuss what theories to use
and why to use them by explaining the theories. Lastly give solutions to the problems
keeping in mind the discussed theories.

List of problems:

1.Loss of sales

2.Counterfeiters have become more sophisticated. Consumers cannot identify the

difference between the real thing and the fake.

3.The company’s reputation is at stake when consumers associate the inferior product
with the original brand.

4.Consumers leave negative reviews for their knock-off product on the legitimate
company’s website and product listings. If these negative reviews happen on Amazon
OR some other e-commerce platform, they do double damage.

5.With combined listings, customers can unknowingly buy a knockoff from the official
listing. Finally, these counterfeits risk your relationships with other businesses.

6.For many years, the administration was not able to trace down the main link, which is
exaggerating the growth of counterfeiting and international terrorism across the globe.

7.There is a well-established globalized network that acts as a source of funding for

promoting these illegal activities, which need to be busted by adopting and executing
strong policies and measures.

8.There is a lack of transparency, willpower, determination, and coordination among the

various departments appointed to keep a check on these activities.

9.In some cases, the company itself wants these fake products to proliferate into the
market on the assumption that this will increase their brand value and more and more
people will buy their product, resulting in revenue generation and profit maximization.
10.This act of counterfeiting luxury products on a large scale will undoubtedly enable
the customer to wonder how a genuine brand can be so easily copied, and this will
make them lose trust in the brand in the long run.