Does Market Familiarity Bless Multinational in Strategic Competition

Chul-Woo Kwon and Harvey Lapan

Staff General Research Papers Archive from Iowa State University, Department of Economics

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.

Keywords: Multinationals; Taste difference; Market familiarity; Strategic advantage (search for similar items in EconPapers)
Date: 2008-02-17
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Published in Japan and the World Economy, January 2011, vol. 23 no. 1, pp. 58-62

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Journal Article: Does market familiarity bless multinational in strategic competition? (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:32486

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