Should a domestic firm carve out a niche in overseas markets? Value of purchasing agents

Xiutian Shi, Jianxi Tang and Ciwei Dong

European Journal of Operational Research, 2022, vol. 300, issue 1, 85-94

Abstract: Given the increased purchasing powers in overseas markets and the existence of purchasing agents, international brands may reconsider their entering strategies. In this paper, we use a game-theoretical approach to investigate the strategy of an international brand to carve out a niche in overseas markets with considering of purchasing agents and multinational tax rules. At the beginning, the brand serves the domestic market only, and the purchasing agent acts as a domestic consumer but resells the product to the overseas market. To enter the overseas market, the brand can choose to operate an overseas store itself or sell through a cross-border e-commerce platform, with the existence of the purchasing agents. We derive the optimal strategies for the brand and the impacts of purchasing agents. Our results show that the brand prefers to enter the overseas market once the two overseas strategies are profitable but sticks to domestic market under certain circumstances, which depends on the tax policy and consumers’ valuation discount of buying from an agent. For the optimal overseas strategies of the brand, selling through a platform is more likely to be a profitable option than managing an overseas store. When both overseas strategies are profitable, the brand’s optimal choice depends on tax rules only. Interestingly, the brand does not always have the motivation to drive the purchasing agents out of the overseas market by adjusting retail prices. The existence of purchasing agents may help achieve a win-win situation for the brand and consumers under certain conditions.

Keywords: Production; Supply chain; Selling strategy; International tax and tariff (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:300:y:2022:i:1:p:85-94

DOI: 10.1016/j.ejor.2021.07.019

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