Effects of supply chain competition on firms' product sustainability strategy

The competition between supply chains becomes increasingly popular with the development of economic globalization. Sustainable development is an important issue and attracts considerable attention from industrial and academic communities, especially under the competitive environment, because of the huge and rapid assumption of natural resources and global warming. In this study, we consider a setting with two competitive supply chains, and each chain is consisted of an upstream firm and a downstream firm. The two downstream firms compete with each other only at the product sustainability level. Using a theoretical game model, we explore how supply chain competition affects firms' strategy on product sustainability and profits by considering four cases in which the supply chains can be integrated either vertically or horizontally. Results show that the existence of horizontal competition, vertical competition, and competition between sustainable products play important roles in determining firms' decisions. In particular, the existence of horizontal competition can stimulate firms to increase the level of product sustainability and improve the supply chain system's profit under some conditions. However, the presence of vertical competition will stop firms from improving the product sustainability level but increase the performance of supply chain system under certain conditions. Depending on the degree of competition between sustainable products, the supply chain can strategically decide whether or not to integrate the system either vertically or horizontally. (C) 2020 Elsevier Ltd. All rights reserved.