Model analysis of business process integration: take Chinese after service industry's endogenous networking as an example

This paper studies the phenomena of corporation's subcontracting part of their business when facing indeterminate demands. A model based on the observation of retailer's after service networks in China is presented. By comparing the social service costs between the two arrangements with and without the participation of the third party, we can see that the efficiency of subcontracting additional peak-load businesses lies mainly in complementary effects of workforce, which is scale economics that led to by indeterminacy. The third party's advantage lies in businesses offsetting to each other complimentarily when serving different retailers. As to the welfare an effect of this endogenous reform, our conclusion is that no one loses with the appearance of this kind of organizational form.