Research on pricing and recycling decision of closed-loop supply chain under the mergers and acquisitions between competing manufacturers

Abstract

Based on the increasingly popular practice background of corporate mergers and acquisitions (M&A), the feasibility of M&A strategy is studied in the closed-loop supply chain (CLSC) in combination with the different financial strength of competing manufacturers. By constructing a game model in CLSC under three modes of the decentralized decision-making with well-capitalized manufacturers, the decentralized decision-making with a capital-constrained manufacturers and the M&A between competing manufacturers, the paper analyzes the influence of bank loan interest rate and M&A coefficient on the optimal decision and revenue to calculate the conditions that competing manufacturers need to meet to implement the M&A strategy. It finds that: firstly, with the increase of bank loan interest rate, the capital-constrained manufacturers will increase the wholesale price to obtain higher returns, and meanwhile reduce the recycling rate of old products to reduce the capital investment, but the well-capitalized manufacturers will also lower wholesale prices, but they will increase the recycling rate of old products to reduce production costs. Secondly, with the increase in bank interest rates, the revenue of capital-constrained manufacturers decreases, while the well-capitalized manufacturers increase. Thirdly, when competing manufacturers can increase market power or improve core production technology to reduce costs after mergers and acquisitions, they will increase the recycling of old products and reduce the wholesale price of products to gain more market share. Moreover, the better performance of the M&A strategy, the higher the benefits of closed-loop supply chain members will be. Finally, whether manufacturers are capital constrained or not, the M&A strategy are not always beneficial to the manufacturers. And whether the M&A strategy is beneficial or not is related to market demand parameters, recovery cost parameters and merger coefficient. But when these parameters meet certain conditions, the competitive manufacturer’s M&A strategy can benefit all members of the closed-loop supply chain.