Manufacturers’ channel competition with retailer demand-enhancing service

Abstract

Manufacturers’ channel competition with service is examined in this paper. Specifically, the authors consider channel competition within a supply chain comprising two manufacturers and one single retailer where each manufacturer can choose to sell its products either directly to the end market (online channel, say) or through the potential retail channel, based on the profit maximization criterion, which is influenced by exogenous market conditions, such as the degree of competition, etc. Furthermore, the retailer provides additional demand-enhancing service to promote the manufacturer’sproducts distributed via it. If only one of the manufacturers sells products through the retailer, its products will be promoted by the additional retail service, which poaches demand of products of the manufacturer who adopts direct online channel. Products of both manufacturers are supported by the retailer’s promotional service when both distribute their product through the common retailer. Finally, some managerial implications are derived from numerical analyses of our model, which explain the phenomena in practice and conclude the paper.