Counterfeiting risk to overseas supply chains

4 October 2013
Mark James“Is it a coincidence that we saw a large spike in counterfeiting after we opened a new manufacturing facility there?” brand owner, luxury goods. It is a country rife with gangs. They have diversified away from drugs and now deal in extortion and, more increasingly, counterfeiting as well” brand owner, pharmaceuticals. “The message I try and get across is: if you believe that your product is so good consumers will buy it, the counterfeiter is thinking exactly the same, so you need to reduce the risk by securing the supply chain” regulatory body, healthcare. These are just some of the comments we jotted down in conversations with brand owners, industry bodies and law enforcement over the last six months. Our recent survey into UK consumer attitudes concerning counterfeit goods points to a nation happy to buy a large range of fake products, and increasingly looking online to do so. But as companies expand into overseas markets, and supply chains become more fragmented, how can they retain their intellectual property? Understanding the nature of the threats in each market is important. The single biggest mistake we’ve seen firms make over the past decade is their reliance on poor or inaccurate information. In many countries the advance information companies need for their research may not be readily available. And, if information is available, it may unreliable. The media might seem the obvious place to start gathering objective facts and figures. But media ownership in fast- rising markets is often entangled with the business interests and ambitions of political leaders or influential families. The results can be that UK companies gather weak or misleading information. Understanding the media ownership ‘tree’ is essential. Knowing everything you can about your business partners is also crucial, especially if expanding overseas. Another mistake is assuming the business environment in the new location will resemble that of the UK. Power is often distributed in very different ways. Political corruption is a further risk. This is an area in which you would expect multi-nationals to have an advantage because of the resources available to them, but this is not always the case. Finally, corruption and bribery are activities found all over the world (including the UK) but the ways they manifest themselves can be very different. Charging into a new market without understanding local dynamics won’t endear you or your firm to the established order The key is to be fully prepared and fully informed so that you the journey for you and your business is not something to fear, but truly the opportunity you want it to be. Mark James, assurance manager, PwC.
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