Investment Strategy in a Closed Loop Supply Chain: The Case of a Market with Competition between Two Retailers

Abstract

Abstract:To survive in the ceaseless cycle of competition, businesses have developed strategies to become sustainable. These strategies include reusing products, which can lead not only to the creation of economic benefits but also to improvements in a corporation's social and environmental responsibility. Product reuse can also increase the profit earned on new products by compensating customers who bring in old products to buy new ones, as the ensuing remanufacturing process allows for the reuse of materials and thus drives down costs. As businesses have come to recognize these values, the marketing competition to retrieve used products from customers has intensified. This research focuses on identifying effective compensation strategies to determine the appropriate advertising investment and trade-in value in a market where two homogeneous retailers compete. Retailers advertise to secure more customers to trade in their used products and to generate more trade-in sales than competitors do. A retailer's results may vary according to its competitor's investment strategy, which makes it useful to employ information on past competitor investment patterns to plan future investment strategies. However, as competitors using one another's information may intensify the competition, better investment results could be obtained by ignoring competitor investment information. Therefore, this study suggests four competition strategies that determine the advertisement costs and trade-in allowance spent by retailers and discusses the difference in the profits obtained by the retailers under each of the four strategies.

A Sustainable Closed-Loop Supply Chain Decision Mechanism in the Electronic Sector

“…De Giovanni and Zaccour [8] showed that both the retailers and the manufacturer in a closed-loop supply chain can benefit when they share the cost of the efforts to increase the return rate. Yoon and Jeong [9] identified effective compensation strategies to determine the appropriate advertising investment and trade-in value in a market where two retailers compete in the closed-loop supply chain. Qiang et al [10] investigated the closed-loop supply chain network with decentralized decision-makers consisting of raw material suppliers, retail outlets, and the manufacturers, and derived the optimality conditions of the various decision-makers.…”

A System Dynamics Model to Evaluate Effects of Retailer-Led Recycling Based on Dual Chains Competition: A Case of e-Waste in China

“…Li [42] compares the member profits and environment performances in closed-loop supply chain with recycling by manufacturer, retailer and third party, recognizing the optimal recycling mode with the combination of different competitive intensity and recycling compensation price parameters. Yoon and Jeong [43] propose four competition strategies to explore the advertisement costs, trade-in allowance of retailers and the difference in the avenue.…”