Revelation for green product operation strategy of a retailer under different reliability levels of servicing the market

Abstract

To a great extent, the risk of enterprises’ green strategy implementation lies in the demand uncertainty of green products and the competition pressure from non-green products. This paper studies a green strategy implementation problem of a retailer working with a supplier introducing a new green product into the market of a congeneric non-green product under uncertain demands. The reliability level of serving the market (RLSM) is defined to characterize the reliability of market supply satisfying uncertain demand. Under different RLSMs, the models based on the profit risk level of retailer (PRLR) are built. For any given RLSM and PRLR, the optimal order quantity of the non-green (green) product is not less than its market demand, rather than exactly equal to it, which is the result of the retailer’s tradeoff between the profit maximization and reliability condition. The RLSM and PRLR directly influence the decisions and potential profits of the retailer and supplier. According to some of these influences, the retailer can adopt proper RLSM and PRLR to accelerate the process of her green product operation strategy. Finally, a condition is provided for both the retailer and supplier having an incentive to implement the green product operation strategy because under which it is triple-win for the supplier, retailer and environment.