WHY A GLOBAL COMPETITOR CAN DEFEAT A DOMESTIC-ONLY FIRM

WHY A GLOBAL COMPETITOR CAN DEFEAT A DOMESTIC-ONLY FIRM

• A one-country firm cannot effectively defend its market share in the long-term against a global firm because
  • Global or multicountry rival can use profits earned elsewhere to subsidize price cutting in domestic firm’s profit sanctuary
  • If domestic firm retaliates with matching price cuts
    • It erodes its own profitability in its ONLY profit sanctuary

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