Manufacture's Developing Strategy of International Market under Parallel Importation

doi:10.12005/orms.2023.0040

Abstract

Abstract: A growing number of firms are developing international market strategies to keep advantages in the fierce global competition. In many of the multinational firms, some are successful and some may fail. There are many reasons for failure, and gray market is one of important factors. This paper investigates the impacts of parallel importation on firms' developing strategy of international market under gray market, where the manufacturer sells product directly in a domestic market in the presence of an international market. The two markets are separate and there remain differences between them. We consider two cases for the market disparity: ITD case where the domestic market is high-end market and international market is low-end market, DTI case where the domestic market is low-end market and international market is high-end market. The gray market forms once the third-party imports the products from low-end market to high-end market. This paper aims to answer the following questions: What's the optimal international market development strategy for manufacturer under ITD and DTI cases? How does gray market affect the firm's international market development strategy and price decisions under ITD and DTI cases?
We establish three models in each case: the case where the manufacturer does not develop international market and third-party does not parallel import, the case where the manufacturer develops international and third-party does not parallel import, the case where manufacturer develops international market and third-party parallel imports. Through comparative analysis, we explore manufacturer's developing strategy of international market. The results show that in the ITD case, it is not always beneficial to develop international market. When the market disparity is relatively small, the manufacturer will choose to develop international market, when the market disparity is relatively large, the manufacturer will not develop international market. However, in the DTI case, it is always beneficial for the manufacturer to develop international market. Besides, the findings also show that third-party will parallel import only when the market disparity is relatively large and gray market always decreases the profits of manufacturer and whole supply chain. In the ITD case, if the manufacturer develops the international market and the third-party parallel imports, the gray market will decrease the product price in the domestic market but increase the product price in the international market. By contrast, in the DTI case, if manufacturer develops the international market and the third-party parallel imports, the gray market will increase the product price in the domestic market but decrease the product price in the international market.
This paper studies the impact of parallel importation on the manufacturer's international market development strategies, which makes contributions to the gray market and international market development in theory and practice. We introduce gray market into international market development research, and investigate the impact of parallel importation on firms' international market development strategy, which promotes a new development of interdisciplinary field. In addition, we consider the differences of domestic and international markets and show the differences of manufacturers' international market development strategies under ITD and DTI cases. This provides a reliable theory for firms' international market development decision-making. Although the above contributions are made, our results are subject to limitations and thus can be further supplemented. For example, this paper considers a third-party parallel importation, future research could consider a situation where an authorized retailer, such as eBay, Kmart, and Costco may also engage in gray market. In addition, we consider a market structure consisting of one manufacturer, and future study could consider a setting where the manufacturers compete in both domestic and international markets.

Key words: parallel importation, gray market, developing strategy, game theory

摘要： 本文研究了经销商窜货对制造商国际市场开发战略的影响。考虑了两种情形:国内市场为高端市场而国际市场为低端市场(ITD情形),国内市场为低端市场而国际市场为高端市场(DTI情形)。研究发现:(1)不存在窜货时,制造商总是选择开发国际市场;(2)存在窜货时,制造商是否开发国际市场取决于不同的市场差异情形。在DTI情形下,制造商总是选择开发国际市场。在ITD情形下,制造商开发国际市场并非总是有利可图,若市场差异较小,制造商选择开发国际市场,若市场差异较大,制造商选择不开发国际市场;(3)经销商并非总是选择窜货,当市场差异较小时经销商不窜货,而当市场差异较大时经销商窜货。

关键词: 窜货, 灰色市场, 开发战略, 博弈论

CLC Number:

F272

DING Long, HU Bin, YUAN Hongping. Manufacture's Developing Strategy of International Market under Parallel Importation[J]. Operations Research and Management Science, 2023, 32(2): 15-21.

丁龙, 胡斌, 袁红平. 考虑窜货影响的制造商国际市场开发战略[J]. 运筹与管理, 2023, 32(2): 15-21.

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