Abstract
This study explores the pricing decisions of substitutable products for two competing supply chains in the presence of an online channel. Each supply chain consisting of a single manufacturer and an exclusive retailer and one of the manufacturers distributes products through the online channel. We examine optimal decisions under five scenarios to explore how the strategic cooperation between two manufacturers at the upstream horizontal level or with the retailer at the vertical level affects product pricing decisions and the performance of two supply chains? The results reveal that decisions for cooperation with competing manufacturers and opening an online channel are correlated. In the absence of an online channel, cooperation with their respective retailer can lead to a higher supply chain profit. However, if a manufacturer opens an online channel, then cooperation with competing manufacturers can lead to a higher supply chain profit. Under the vertical integration, total supply chain profit might be lower compared to a scenario where members in each supply chain remain independent. Consumers also need to pay more for products.
Highlights
Direct-sales strategies are gaining popularity among manufacturers, after the enormous rise in internet and web technology use due to easy accessibility
This study aims to understand the combined effect of strategic integration decisions at both the horizontal and vertical levels in the presence of an online channel
Ref. [35] made an effort in this direction, but the authors considered a two-manufacturer-single-retailer SC setting. Strategic integration decisions both at the horizontal and vertical levels are studied by researchers and practiced in the business world, a complete overview regarding their impact in the presence of a dual channel under SC competition is missing
Summary
Direct-sales strategies are gaining popularity among manufacturers, after the enormous rise in internet and web technology use due to easy accessibility Many manufacturers sell their products through the traditional retail store as well as through an online channel [1,2,3]. This study aims to understand the combined effect of strategic integration decisions at both the horizontal and vertical levels in the presence of an online channel. Our main contributions are as follows: First, only a few researchers in the literature explored the pricing problem of substitutable products under SC competition in the presence of an online channel. Strategic integration decisions both at the horizontal and vertical levels are studied by researchers and practiced in the business world, a complete overview regarding their impact in the presence of a dual channel under SC competition is missing. All key proofs and additional symbols used to represent analytical expression are provided in the Appendix H
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