A strategy analysis in dual-channel supply chain based on effort levels

Abstract

We present an analytical framework to analyze two scenarios in dual-channel supply chain: manufacturer in a dominant position, retailer in a dominant position. Focusing on retailer's sales effort, manufacturer's online sales effort and brand effort, we model competitive decision making in both scenarios as two-stage sequential games between competing manufacturer and retailer. Our analysis indicates that compared with online sales effort, manufacturer always needs more incentive to adopt brand effort. And if manufacturer uses brand effort, its wholesale pricing will be enhanced, while the retailer will need more sales effort. Our results also point out when manufacturer adopts brand effort will enhance the total market products pricing. But, when the manufacturer is at a disadvantage, the impact on the products pricing will be reduced. From the viewpoint of market demand, we find that manufacturer and retailer's preference is completely opposite. Manufacturer always has more incentive to use online sales effort, while retailer prefers manufacturer to adopt brand effort. Furthermore, we also find when manufacturer in dominant position, the impact of its strategy choices on the total market demand will be decreased.