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Abstract
To investigate the impact of different strategies adopted by the merged firm on supply chain members, we consider a two‐tier supply chain involving two suppliers and multiple manufacturers. Different from most studies, manufacturers, downstream in the supply chain, are asymmetric and produce differentiated products. Due to the differences between products, the postmerger manufacturer can choose focus strategy to generate synergy effect or differentiation strategy to implement price collusion. We give equilibrium results for the supply chain under different strategies. Theoretical analysis shows that for supplier, no matter which strategy is chosen, the price sensitivity for suppliers will increase. Surprisingly, the merger has the opposite effect on the profits of two suppliers under differentiation strategy. Regarding the strategic options after the merger, our research indicates that with the increased substitutability between products, shifting from differentiation strategy to focus strategy should be taken by the postmerger manufacturer. In addition, when focus strategy is chosen and the synergy effect is weak, or when differentiation strategy is chosen and the substitution between products is small, the merger may be beneficial to nonparticipating manufacturers.
Highlights
Mergers and acquisitions are the product of fierce competition between firms and an important strategy to enhance competitive advantage
Equilibrium Results under Focus Strategy. is subsection shows equilibrium results in the supply chain when the postmerger manufacturer chooses focus strategy. e research of [3, 8, 39, 40] has elaborated on the synergy effect caused by mergers. erefore, we would not go into details about the source of synergy effect. e marginal cost reduction caused by synergy effect can increase the merged firm’s marginal profit and market share
We explore the effect of the horizontal merger on the supply chain under different strategies by combining theoretical analysis and numerical analysis
Summary
Mergers and acquisitions are the product of fierce competition between firms and an important strategy to enhance competitive advantage. Horizontal mergers occur between firms that are at the same level of the supply chain and produce homogeneous or substitute products. In the process of satisfying consumer demand for products, many firms have formed specialized division of labour and cooperation, improving production efficiency and enhancing the ability to resist market fluctuations [1]. In the vertical dimension of the supply chain, upstream and downstream firms form a supply-demand relationship, and in the horizontal dimension, there are many firms competing with each other in the intermediate product market or the final product market. E equilibrium result of supply chain is formed by the interaction between upstream and downstream firms and between firms at the same level. This study investigates the effect of different strategies adopted by the merged firm on all firms in the supply chain
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