Equilibrium analysis of marketing strategies in supply chain with marketing efforts induced demand considering free ridi
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METHODOLOGIES AND APPLICATION
Equilibrium analysis of marketing strategies in supply chain with marketing efforts induced demand considering free riding Hua Ke1 · Ying Jiang1
© Springer-Verlag GmbH Germany, part of Springer Nature 2020
Abstract Retailers can make marketing efforts to increase the market demand, but the results from their activities are generally uncertain and influenced by free riding. This paper considers marketing strategies in a two-echelon supply chain under free riding, where a manufacturer sells products through two competitive retailers who have different powers. The dominant retailer will decide whether to make marketing efforts, and the following retailer will choose whether to follow the decision of the dominant retailer. We establish our demand functions relying on the price and marketing efforts, and then build six decentralized game models to examine how marketing strategies and power structures (manufacturer-dominant and retailer-dominant) affect supply chain members’ performances. It is found that, for the dominant retailer, he will make marketing efforts if free riding is not severe. As for the following retailer, in retailer-dominant structure, he will also make marketing efforts if the dominant retailer makes that, while his strategy varies with the degree of free riding in manufacturer-dominant structure. We also show that if the dominant retailer wants to make marketing efforts, he will make the same level of marketing efforts regardless of his market base and competitor’s decision. Keywords Marketing efforts · Free riding · Power structure · Supply chain
1 Introduction In the current market, fragmented industries exist in many areas of economic activity, such as some traditional service industries (e.g., fast food, laundry), and some retail businesses (e.g., Walmart, Watsons). The characteristics of the fragmented industries are scattered, and the company has no economies of scale. If a company can overcome the fragmentation, then his return will be very high. The specific ways to overcome fragmentation include chain operations or franchising. Watsons is a typical case of success using the above ways. It is China’s largest retail chain of health and beauty products with more than 3,200 stores and more than 64 million members in 438 cities across China. These chain retailers of Watsons have unified management and unified Communicated by V. Loia.
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Ying Jiang [email protected] Hua Ke [email protected]
1
School of Economics and Management, Tongji University, Shanghai, China
pricing, while some retailers dominate the region because of their strong information resources and market base (Wang et al. 2018). When a customer enters these dominant retailers, he has a deeper understanding of a certain product and desire to buy through the marketing efforts (e.g., promotion) of the clerk, but for some reasons, he has not successfully purchased; for example, his place of residence is far from the retailer, and the product is not convenient to carry. At the same time, the custom
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