Competitive analysis for online choice of foreign production strategy

Motivated by a sequential choice of foreign production strategies (CFPSs) in an actual decision for entering the lesser-known foreign markets, this article proposes two online models to analyze an optimal online strategy where the objective is to minimize the cost to supply the total demand of the foreign market. A basic online model for the CFPS problem with exporting (EXP) and wholly owned subsidiary (WOS) is developed to show how the transport/tariff cost and the entry/exit cost affect the switching timing and the competitive ratio of the online strategy. We investigate the online model where the firm can choose the joint ventures (JVs) besides EXP and WOS. Our results show that online strategies may not necessarily transition from EXP to JV mode. The decision-makers need to determine whether to transition from EXP to JV mode based on the cost characteristics among the three modes of EXP, JV, and WOS.