The Benefits of Competitive Upward Channel Decentralization

Liu, Yunchuan; Tyagi, Rajeev K.

doi:10.1287/mnsc.1110.1311

Cited by 103 publications

(41 citation statements)

References 32 publications

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“…On the other hand, while the decentralized structure can help international contractors gain a competitive advantage by lowering the cost, the adoption of such a structure may expose international contractors to the quality spillover, which can harm their profitability by improving the quality level of local contractors. Different from the conclusions of Liu and Rajeev [32], their findings show that a decentralized supply chain structure On the other hand, when LMC has already adopted the subcontracting strategy, IMC's adoption of the subcontracting strategy may not bring increased profit. The new profit will be dependent on the coefficient of the cost spillover effect of LMC and IMC, as well as the magnitude of the quality spillover effect, as shown in Figure 4.…”

Section: Discussioncontrasting

confidence: 89%

“…Recently, two studies are identified to use the Hotelling model to investigate the supply chain structure. Liu and Tyagi [32] used the Hotelling model to study the upward-decentralized supply chain structure and proposed the theory of strategic benefits, finding that while upstream businesses have no cost advantage, downstream businesses can still benefit from upward channel's decentralization. In addition, Hara and Matsubayashi [33] used the Hotelling model to analyze the relationship between retailer and manufacturer and studied the decision of introducing premium store brands.…”

Section: Literature Reviewmentioning

confidence: 99%

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Achieving Economically Sustainable Subcontracting through the Hotelling Model by Considering the Spillover Effect

Zhu

Shi

et al. 2018

Sustainability

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In the process of internationalization of construction contractors, international enterprises as main contractors (IMC) need to consider whether part of the contract should be subcontracted to local subcontractors (LSC) to gain a competitive advantage when competing with local main contractors (LMC). The involvement of local subcontractors can usually help reduce cost through the cost spillover effect. However, it should be noted that the share of local subcontractors with local main contractors with an inferior quality may lead to quality spillover. The Hotelling model is therefore adopted to investigate the subcontracting decisions of main contractors considering both cost and quality spillover effects. Many scenarios are simulated and the results show that LMCs with inferior quality can always choose the subcontracting strategy to obtain increased profit regardless of the strategy that IMCs adopt. On the other hand, IMCs need to balance the cost spillover of subcontracting and the quality spillover for improving the quality level of LSCs. The results are useful for contractors to make decisions that are relevant to the adoption of subcontracting strategies to obtain competitive advantages.

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Section: Discussioncontrasting

confidence: 89%

Section: Literature Reviewmentioning

confidence: 99%

Achieving Economically Sustainable Subcontracting through the Hotelling Model by Considering the Spillover Effect

Zhu

Shi

et al. 2018

Sustainability

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“…Proposition shows that consumers’ desire for fairness in a transaction may deviate a manufacturer's distribution strategy from direct selling to agent selling, a result consistent with the observed coexistence of both distribution channel structures in the business practice while in contrast to the result of the traditional literature without consideration of consumer behavior (e.g., benchmark models in McGuire and Staelin , Su and Zhang , and Liu and Tyagi ). According to the traditional literature (Liu and Tyagi , McGuire and Staelin , Su and Zhang ), agent selling leads to double marginalization effect that potentially reduces the ordering quantity and hurts the manufacturer. However, when consumer fairness concern is taken into consideration, it is the double marginalization effect that gives rise to a higher level of fairness perception because of the increased product procurement cost.…”

Section: Results and Analysissupporting

confidence: 62%

The Impact of Consumer Fairness Seeking on Distribution Channel Selection: Direct Selling vs. Agent Selling

Wang

Liu

et al. 2018

Production and Operations Management

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imchen@ust.hk C onsumers seek for not only base functionalities of products they buy but also fairness in transactions. In this work, we investigate how such fairness-seeking behavior affects a manufacturer's distribution channel structure selection. Specifically, the manufacturer can sell the product directly to consumers (named direct selling) or via a middleman retailer (named agent selling). The manufacturer then decides which distribution channel to adopt with an aim to maximize his profit. Under a newsvendor framework, the distribution channel structure endogenizes the procurement cost and thus impacts consumers' fairness perception and willingness to pay. Interestingly, we show that it may be in the manufacturer's best interest to downward decentralize his distribution channel by adopting agent selling when consumers are extremely fairness-minded. However, when the consumer's fairness concern is weak, direct selling is preferred by the manufacturer. We further show that the above results qualitatively hold when we take into consideration the downstream competition, the dominance of the manufacturer in retail pricing and the heterogeneity of the consumers in their fairness seeking.

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“…For example, Su and Zhang [29] believe that a decentralized supply chain under a wholesale price contract has a higher performance than a centralized supply chain under the consideration of strategic consumers. Liu and Tyagi [30] studied the impact of upstream supply chain channel decentralization on the supply chain when competitive enterprises can outsource production to their upstream suppliers. Results show that when the production is endogenous, downstream enterprises can still benefit from the decentralized channels of the upstream.…”

Section: Channel Structure Strategymentioning

confidence: 99%

Channel Structure Strategies of Supply Chains with Varying Green Cost and Governmental Interventions

2019

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Environmental concerns make enterprises pay more attention to green manufacturing. The emerging green supply chain inevitably will compete with the traditional supply chain. In order to evaluate the competitiveness of supply chains and the impact on channel structure strategy, we develop four game models for two competing supply chains according to their channel structure strategies. Green marginal manufacturing cost, demand sensitivity of green level, and governmental interventions are considered. We study how retail prices, green levels, and profits are influenced by channel structure choice and governmental interventions. Analytical results indicate that the substitutability of products affects channel structure strategy. When the substitutability of products is relatively low, centralization-centralization is the unique Nash equilibrium. However, when the substitutability of products is relatively high, both centralization-centralization and decentralization-decentralization are the Nash equilibriums. Centralization-centralization is a prisoner dilemma, while decentralization-decentralization can make the green supply chain achieve optimal profit. Then, the green marginal manufacturing cost and demand sensitivities of the green level play important but different roles in channel structure strategy of the competing supply chains. Further, whether Nash equilibriums are the optimal strategy depends on governmental intervention. Relatively severe governmental intervention might realize a relatively higher green level, but may not always achieve the lowest retail price for the green supply chain. However, a relatively moderate governmental intervention might achieve a relatively lower green level.

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The Benefits of Competitive Upward Channel Decentralization

Cited by 103 publications

References 32 publications

Achieving Economically Sustainable Subcontracting through the Hotelling Model by Considering the Spillover Effect

Achieving Economically Sustainable Subcontracting through the Hotelling Model by Considering the Spillover Effect

The Impact of Consumer Fairness Seeking on Distribution Channel Selection: Direct Selling vs. Agent Selling

Channel Structure Strategies of Supply Chains with Varying Green Cost and Governmental Interventions

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