Product protection pays
Even in times of crisis, companies set store by innovation. They are willing to protect their innovations yet are surprisingly reluctant to take action against rights infringements. Above all, they doubt whether the battle against product pirates will be economically worthwhile. Analyses show that the total damage incurred by counterfeit products considerably exceeds the cost of taking action against them.
Product piracy lowers the price of original products
Unfortunately, the decision of whether to take costly measures against product piracy is still rarely based on cost-effectiveness calculations. It makes sense, however, to balance the monetary damage caused by counterfeiting against the costs of fighting product and brand piracy. Hans Joachim Fuchs and Zhou Shuquin (Chinabrand Consulting) recently described how to determine costs and benefits in the specialist magazine "China Contact". They show that manufacturers can easily evaluate the damage if they analyse how and where losses can arise. Short-term sales losses have a major impact, as clients deliberately choose the cheaper copies. This in turn can force producers to reduce the price of the originals.
It pays to fight the pirates
This can eventually threaten a company's continued existence. Brands then also lose value through downtrading and the image is tarnished through poor quality materials and workmanship. The losses rise further if manufacturers are made liable for damage caused by counterfeits and compensation claims are submitted. The authors conclude that, in most cases, the costs involved in fighting counterfeits are lower than the total damage they can cause. It pays, therefore, to take action against product piracy. But senior managers in many companies are not yet sufficiently aware of the extent of the potential damage and the highly favourable cost-benefit ratio of measures taken against product piracy.
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