ABSTRACT
How do they do it? Volume, volume, volume! Counterfeit goods are produced for markets all around the world. For example, Chinese counterfeiters have targeted Africa as a place to sell knock-off inexpensive consumer products such as shoe polish, pens, and tiny soap packages. A Ugandan manufacturer sells toothbrushes for 20 cents, with a 3-cent margin, but is still beat out by Chinese knock-offs.1 The Ugandan manufacturer’s sales declined from about two million to only 800,000 in the two years since the knock-offs began to appear. In many ways counterfeiting mirrors globalization trends themselves-capital is spread to new markets, and they contribute low-cost labor to make products cheaply, before moving up the value chain. This is in many ways the story of China too. But it is more than that. Counterfeiting today combines skilled labor and product knowledge with good distribution networks. The results can be impressive and attractive to “consumers.” For example, factories in China can copy a new Callaway golf club in less than a week. Sony PlayStation controllers or Cisco router interface cards take only a little longer. As one expert said, “if you can make it, they can fake it.” Mitsubishi Elevators Co. was called by a building owner who wanted to buy a maintenance contract on an elevator. When they came out to inspect it and do initial work on it they discovered that it was a fake. The trouble is that counterfeiters are getting better and better at faking it. Bogus producers are getting so good that even company execs say that it “takes a forensic scientist to figure it out.” GM, for example, had to cut apart brakes and batteries and do chemical analysis to find out whether products were real. Sometimes this is due to the sheer skill of the counterfeiter, other times it might be that former Chinese licensees keep the designs and blueprints of Western partners and go into business for themselves. New Balance, for example, recently sued a contract manufacturer in Guangzhou for selling knock-offs as far away as Australia and Europe. Even the fake Gucci, Versace, and Rolexes have various grades of quality.
