Is producing a private label counterproductive for a branded manufacturer?

Bergès, Fabian; Bouamra‐Mechemache, Zohra

doi:10.1093/erae/jbr006

Cited by 13 publications

(10 citation statements)

References 14 publications

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“…The profits from NB and SB products are ultimately divided between the NB manufacturer and the retailer by the bargaining model. Obviously, the conclusions of Bergès-Sennou [8] and Bergès and Bouamra-Mechemache [9] may not correspond to the business practices that profits are divided in the form of wholesale prices and retail markups. More recently, Hara and Matsubayashi [10] analytically demonstrate that a premium SB, instead of a low perceived-quality SB, can facilitate the production collaboration between retailers and NB manufacturers.…”

Section: Literature Reviewmentioning

confidence: 93%

“…She has two choices: a competitive fringe from a perfectly competitive market (the equilibrium outcomes in this case are denoted with superscript ) and the NB manufacturer (denoted with superscript ). As for the same product quality, in line with many other studies [8,9,33], we assume the NB manufacturer has a comparative advantage in production efficiency relative to the competitive fringe. It is believable that an experienced NB manufacturer can possess a technology or services difference compared with the independent fringe manufacturer when producing a SB [34,35]; economies of scale may be an additional reason for this advantage [7].…”

Section: Modelmentioning

confidence: 97%

“…However, his study only looks at the issue from NB manufacturer's point of view. Departing from Tarziján [7], both Bergès-Sennou [8] and Bergès and Bouamra-Mechemache [9] assume that the NB manufacturer supplying SB can strengthen its bargaining power on NB vis-à-vis the retailer; meanwhile the retailer is also better off with a lower SB supply cost from the NB manufacturer. The profits from NB and SB products are ultimately divided between the NB manufacturer and the retailer by the bargaining model.…”

Section: Literature Reviewmentioning

confidence: 99%

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Store-Brand Production Arrangement Based on the Game Theory

Cheng

et al. 2018

Mathematical Problems in Engineering

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The increasing popularity of store brands is resulting in greater cannibalization of national brands. Thus, national-brand manufacturers are trying their best to confront this trend. At the same time, however, many leading national-brand manufacturers have become involved in the store-brand production of their counterpart retailers. We construct a game-theory-based framework to model the strategic interaction between a leading national-brand manufacturer and a retailer. Besides the national brand, the retailer also has an option for its own store brand to compete with the national brand head to head. There are two choices for the store-brand production available to the retailer: a fringe manufacturer with low production efficiency or alternatively the nationalbrand manufacturer with high efficiency. It is shown that, under certain conditions, there is a win-win situation for both the storebrand retailer and the national-brand manufacturer with the latter supplying the store brand. More interestingly, it is found that the national-brand manufacturer supplying the store brand may lead to a higher likelihood of the store brand introduction. Our study offers an explanation for why more and more national-brand manufacturers supply store brands.

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Section: Literature Reviewmentioning

confidence: 93%

Section: Modelmentioning

confidence: 97%

Section: Literature Reviewmentioning

confidence: 99%

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Store-Brand Production Arrangement Based on the Game Theory

Cheng

et al. 2018

Mathematical Problems in Engineering

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“…There are two alternative choices available to her: a fringe manufacturer (hereafter called "the competitive fringe" for short) that specializes in producing SBs from a perfectly competitive market, and the NB manufacturer in question. In line with many existing studies [2][3][4], as for the same production quality, we assume that the NB manufacturer has a comparative advantage in production efficiency and hence has a lower SB production cost, compared with the competitive fringe. It is believable that relative to competitive fringe manufacturers, experienced large NB manufacturers can possess a technology or services difference in producing a SB within some certain categories [9,13].…”

Section: Modelmentioning

confidence: 99%

“…When the two competing NB manufacturers are differentiated in product quality, Lewin et al [19] reveal that the high-quality NB manufacturer supplying the premium SB and the low-quality NB manufacturer supplying the copycat SB can make all game players better off. Bergès and Bouamra-Mechemache [2] show that when the NB manufacturers have production efficiency advantage and excess capacity, they would be chosen to provide SB and benefit from a more powerful position on NB. Chambolle et al [5] demonstrate that there exists a mutually beneficial arrangement with the SB supplied by the NB manufacturers, which can facilitate category innovation and hence improve quality of both brands.…”

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confidence: 99%

Store-brand introduction and production arrangement in the presence of multiple retailers

Cheng

2020

RAIRO-Oper. Res.

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Store brands play an increasingly important role in retailing business, leading more and more retailers to introduce store brands. Abundant research focuses on competition between store brands and national brands and counterstrategies that national-brand manufacturers can take to counter store-brand introduction. A little research studies the store-brand production issue, however, all under single-retailer scenarios. To approach the real world, we employ game theory to model interaction between a national-brand manufacturer and multiple locally monopolist retailers, one of whom has capability and motivation to introduce a store brand. Five Stackelberg games are build and solved to investigate: how the presence of the non-store-brand retailers affects the store-brand retailer's decision on and profitability in the store-brand introduction; how the store-brand retailer should arrange store-brand production; whether there is a win-win situation where both the store-brand retailer and the national-brand manufacturerare better off with the latter producing the store brand. Accordingly, our study offers a novel rationale for why so many, especially leading, national-brand manufacturers are involved in the store-brand production. Some useful managerial suggestions are proposed on the store-brand introduction and production arrangement. Article published by EDP Sciences c EDP Sciences, ROADEF, SMAI 2020 R. CHENG ET AL.almost exclusively concentrate on producing SBs; the major retailers and wholesalers who operate their own manufacturing plants and provide SBs for their own stores [27]. Empirically, it is shown that NB manufacturers producing their counterpart retailers' SBs is prevalent in the real world. More than half of US NB manufacturers of consumer packaged goods produce SBs as well and provide more than 60% of SBs [18,29]. Then, the question is why NB manufacturers are willing to supply SBs for their retailers, although SBs compete with their own NBs head-to-head, and why the retailer would accept it on the other side. This important question has also been highlighted by Sethuraman and Raju [33] and Sethuraman [32] recently. In the literature, the typical motives for NB manufacturers' involvement in this practice include utilizing excess production capacity [29,38], strengthening bargaining power on NB [3], buffering competition from follower brands [10], and cultivating a better relation with SB retailers [20,39]. In addition, Wang and Wu [40] analytically show that all supply chain members are better off with SB being produced by one of the two competing NB manufacturers, which can mitigate promotional competition between them. When the two competing NB manufacturers are differentiated in product quality, Lewin et al. [19] reveal that the high-quality NB manufacturer supplying the premium SB and the low-quality NB manufacturer supplying the copycat SB can make all game players better off. Bergès and Bouamra-Mechemache [2] show that when the NB manufacturers have production efficiency advantage and excess capacit...

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Pricing Strategy for Store Brands

Huo

2021

Advances in Theory and Practice in Store Brand Operations

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Is producing a private label counterproductive for a branded manufacturer?

Cited by 13 publications

References 14 publications

Store-Brand Production Arrangement Based on the Game Theory

Store-Brand Production Arrangement Based on the Game Theory

Store-brand introduction and production arrangement in the presence of multiple retailers

Pricing Strategy for Store Brands

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