Could Encroachment Be a Profitable Retailing Strategy for a National Brand Suffering the Store-Brand Introduction?
We consider the store-brand introduction in a two-echelon supply chain consisting of a manufacturer (him) and a retailer (her), in which he sells the national brand in the incumbent retail channel and she endogenously determines whether to introduce her own store-brand, and further study manufacturer encroachment motivated by the store-brand introduction. Analytical results show that the retailer introduces the store-brand if and only if her sales cost advantage is large enough, or if her sales cost advantage is not large but her production cost disadvantage is also not excessive. The manufacturer may choose to sell the national brand directly in response to the retailer’s new brand introduction although he may not be able to sell anything himself. In equilibrium, when the retailer introduces the new store-brand, it is in her interest not to give up selling the national brand, and it is also in the manufacturer’s interest to cooperate with the incumbent retail channel continually even when he is able to sell the national brand directly. Manufacturer encroachment caused by the store-brand introduction does not necessarily harm the retailer’s interest. Moreover, numerical studies show that, a smaller brand substitution can push up the retailer's enthusiasm to introduce the new brand, while a larger brand substitution does not necessarily push up the manufacturer's enthusiasm to sell the national brand directly in response to the new brand introduction
Year of publication: |
2022
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Authors: | Yang, Jiaquan ; Fang, Jinyu ; Su, Jiafu ; Chen, Shan ; Hu, Sensen |
Publisher: |
[S.l.] : SSRN |
Saved in:
freely available
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