Journal
OMEGA-INTERNATIONAL JOURNAL OF MANAGEMENT SCIENCE
Volume 116, Issue -, Pages -Publisher
PERGAMON-ELSEVIER SCIENCE LTD
DOI: 10.1016/j.omega.2022.102802
Keywords
Store brand introduction; Quality differentiation; Power structure; Dual -channel supply chain
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This paper examines a dual-channel supply chain consisting of a manufacturer, a retailer, and a direct channel, focusing on whether the retailer introduces a store brand (SB) and how it impacts profitability. Game-theoretic models are developed to analyze the introduction incentive and power structure. The findings reveal that the retailer's introduction of the SB depends on the quality and inter-brand substitutability. Interestingly, increasing the retailer's power may not incentivize SB introduction.
In this paper, we consider a dual-channel supply chain that consists of a manufacturer selling national brand products to customers through a retailer and a direct channel. The main issues addressed here are whether the retailer in such a context will introduce a store brand (SB) and if so, how would quality dif-ferentiation and power structure shape the introduction incentive and firm profitability. To this end, we develop game-theoretic models based on whether the SB is available and which firm has a prior claim to the profit-maximizing prices. Analysis of the equilibrium outcomes shows that the retailer is profitable to adopt the introduction strategy only when the quality of the SB exceeds certain values. Counterintuitively, increasing the retailer's power may not incentivize SB introduction. We reveal that there are thresholds associated with inter-brand substitutability below which the dominant retailer has fewer incentives to introduce the SB. Interestingly, the retailer when finding SB introduction is favorable may express prefer-ences for power, abdicate power initiatively, or strive to be the game follower to improve profitability - a phenomenon that never arises in the absence of the SB. Although the manufacturer sustains losses from SB introduction, under some circumstances those sufferings can be alleviated by relinquishing possession of power to the retailer. Additionally, our key findings remain valid under positive production costs or when the retailer introduces high-quality SB products. (c) 2022 Elsevier Ltd. All rights reserved.
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