Production-Marketing Strategies for American-Japanese Firms in Competition.

This paper presents a model that considers joint production- marketing strategies for two firms, one American and one Japanese, who compete with each other in the American and Japanese markets. By an "American" firm we mean one that faces a convex production cost and a linear inventory holding cost. By a "Japanese" firm, we mean one that faces a linear production cost and that holds no inventory; that is, the firm operates on a "Just-In- Time" (JIT) system. Each firm is assumed to continuously vary over-time both its total production rate and its price in each market in view of an unstable pattern of seasonal demand in each market. The qualitative implications of our findings include the following. The American firm should produce at a constantly increasing rate, where its production rate is at first greater than its total demand rate, and then is less than its total demand rate. The overall effect will be to build up inventory for a while, and then to draw down inventory for a while. When inventory reaches zero, the American firm should begin following a "Zero Inventory" policy by producing just enough to meet its total demand requirements. The American firm's price in each market will increase until around the middle of the season, and then will decrease toward the end of the season. The Japanese firm always sets its production rate equal to its demand rate, which will be increasing then decreasing over the season. The Japanese firm's pricing policies are similar to the American firm's policies: the price in each market will increase and then decrease.