Optimal manufacturing and market strategies of multinational firms in response to government intervention

In an increasingly globalised business environment, optimising manufacturing and market strategies has become crucial for multinational firms (MNFs) seeking competitive advantages over local firms. Of particular significance is understanding how intervention in emerging economies impacts cross-border supply chains. Therefore, this study examines a cross-border supply chain featuring an MNF from an industrialised nation and a rival from an emerging economy. Under different government interventions, the analysis encompasses two manufacturing strategies – offshore manufacturing (OFM) and onshore manufacturing (ONM) – across four distinct marketing structures. Key findings reveal that: (1) In the absence of government intervention: (i) under ONM, newly introduced metrics of cost pressure and competition pressure effectively determine market access criteria for both the MNF and its rival; (ii) a clear threshold emerges for manufacturing strategy selection, with the MNF opting for ONM below this threshold and OFM above it. (2) Government interventions yield varying effects: (i) while government subsidies (GS) do not influence the MNF's manufacturing strategy choice, it creates two distinct scenarios regarding the rival's revenue sources; (ii) technical trade barriers (TB) implementation increases the likelihood of OFM adoption by the MNF, and their combined effect may compel the MNF to withdraw from the emerging market under certain conditions.