Confront with manufacturer encroachment: The impact of big data techniques on product design enhancement

Abstract

The booming of the global retailing industry attracts many manufacturers to encroach on the market by opening direct channels. Many scholars have widely studied manufacturer encroachment but the strategic interplay between manufacturer encroachment and retailer BDTs deployment-an issue to be reckoned with in the era of big data, is not well understood. Assuming that the retailer may deploy BDTs to assist the manufacturer in improving product design capability, we explore how the retailer’s option of deploying BDTs affects manufacturer encroachment. We find that the retailer has three deployment decisions based on different deployment costs and the manufacturer’s encroachment strategies: unconditional deployment, conditional deployment, and no deployment. We show that there are two effects of the option to deploy BDTs on manufacturer encroachment. The first is the incentive effect where BDTs deployment stimulates the manufacturer to encroach, occurring in the situation of unconditional deployment. The second is the deterrence effect where BDTs deployment deters encroachment, occurring in the circumstance of conditional deployment. More interestingly, the manufacturer will give up encroaching thoroughly to stimulate the retailer to deploy BDTs under some conditions. We also study several model extensions to show that the major findings of the base model are robust.