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Does market familiarity bless multinational in strategic competition?

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Author Info

  • Kwon, Chul-Woo
  • Lapan, Harvey E.

Abstract

This paper considers a competition between two multinationals (U, J) who compete in a third market (K). The multinationals have identical cost structures, but differ in that J comes from a country that is "taste-similar" to K, and hence produces products that match more closely the preferences of K residents. This similarity gives J an advantage in K's market, and if only one firm enters, J can earn higher profits. However, we show: (i) K may benefit more from the entry of the market-familiar firm (U), and (ii) in a strategic competition between the two firms, the market-familiarity may be a strategic disadvantage.

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Bibliographic Info

Article provided by Elsevier in its journal Japan and the World Economy.

Volume (Year): 23 (2011)
Issue (Month): 1 (January)
Pages: 58-62

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Handle: RePEc:eee:japwor:v:23:y:2011:i:1:p:58-62

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Web page: http://www.elsevier.com/locate/inca/505557

Related research

Keywords: Multinationals Taste difference Market familiarity Strategic advantage;

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References

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  1. Daniel M. Bernhofen, 2001. "Product differentiation, competition, and international trade," Canadian Journal of Economics, Canadian Economics Association, vol. 34(4), pages 1010-1023, November.
  2. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May.
  3. Laszlo Tihanyi & David A Griffith & Craig J Russell, 2005. "The effect of cultural distance on entry mode choice, international diversification, and MNE performance: a meta-analysis," Journal of International Business Studies, Palgrave Macmillan, vol. 36(3), pages 270-283, May.
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Cited by:
  1. Kwon, Chul-Woo, 2013. "An optimal production method for penetrating foreign markets: Standardization, localization, and flexible technology," Economic Modelling, Elsevier, vol. 33(C), pages 398-406.

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