Manufacturer Encroachment Research Articles

Retailer information sharing under manufacturer encroachment and production cost reduction

AbstractThis study investigates retailer's sharing decisions concerning ex ante information about demand when the encroaching manufacturer can reduce production cost. Equilibrium information sharing decisions with encroachment are quite different from that with no encroachment. The encroaching manufacturer's cost reduction efficiency is key to determine equilibrium results, and these thresholds regarding cost reduction efficiency depend on competition intensity between the encroaching manufacturer's direct channel and retailer channel. Furthermore, through investigating the encroachment decisions of the manufacturer, we prove that the equilibrium information sharing decisions under encroachment is robust in general.

Manufacturer encroachment and extended warranty provision

This study focused on the interactions between manufacturer encroachment and extended warranty (EW) provision by examining the manufacturer's optimal encroachment decision with or without the extended warranty and the optimal EW provision decision under encroachment or no encroachment. Based on the combination of the two strategies, this study discussed four different models in which the manufacturer and retailer act as the Stackelberg leader and follower, respectively. It was shown that the manufacturer always finds it optimal to offer EW without encroachment. However, under encroachment, the manufacturer's motivation to offer EW weakens. Furthermore, when EW is not offered, the manufacturer can benefit from encroachment if the selling cost of the product is not sufficiently high. When the selling cost of EW is low, the manufacturer's motivation for encroachment strengthens. As the selling cost becomes moderate to high, offering EW weakens the manufacturer's motivation for encroachment. Our analysis reveals that for different values of the co-payment rate and the manufacturer's selling costs of products and EW, encroachment and EW provision may reinforce or impair each other. Therefore, manufacturer has to pay attention to the influence of one decison on another decision.

The effect of common ownership among supply chain parties on decision-making and surplus with manufacturer encroachment

In the financial economics field, several studies assess the effect of common ownership on the economic consequence, decision-making of firms, and social performance. In this situation, based on recent supply chain practices and manufacturer encroachment, we examine the effect of common ownership on supply chain parties composed of a retailer and a manufacturer and social performance. From our model analysis, we demonstrate that manufacturer encroachment improves the retailer’s profit under specific economic environments, while generally, manufacturer encroachment harms the retailer’s profit because the manufacturer obtains market share through a direct channel. Additionally, we demonstrate that increasing common ownership improves total surplus in a specific case. Therefore, our analysis does not only propose the positive effects of common ownership among all vertical supply chain parties for supply chain coordination, as opposed to what is indicated by the real world, but also implies that society should accommodate common ownership among supply chain parties in specific economic environments from the perspective of total surplus.

Manufacturer Encroachment on a Sustainable Supply Chain under Asymmetric Green Information

This paper investigates manufacturer encroachment on a sustainable supply chain, where the manufacturer holds exclusive information on product greenness and is responsible for both corporate social responsibility (CSR) and greening. The manufacturer and the retailer play a signaling game whereby CSR effort and wholesale price serve as joint green signals. Findings reveal that, firstly, encroachment induces higher CSR efforts from manufacturers. When customers exhibit a strong CSR preference, the resulting CSR increment leads to increased offline demand and drives up both wholesale and retail prices in a mutually beneficial manner. This phenomenon is referred to as the CSR effect, yielding a win-win encroachment. Secondly, when signaling product greenness to highly CSR-sensitive customers, the high-greenness manufacturer principally distorts her CSR effort downward to an extent unprofitable for the low-greenness manufacturer to mimic and subordinately distorts the wholesale price downward to counter CSR-induced demand decrement and mitigate CSR cost pass-through downstream. Finally, the win-win encroachment pattern is characterized by encroachment profit and signal expense sharing, with encroachment strengthening downward-distorted signaling while signaling weakens the CSR effect. These insights contribute valuable guidance for green manufacturers in CSR decision-making, which functions as a component of green signaling and facilitates transitioning to dual-channel sustainable supply chains.

Manufacturer encroachment in a vertically differentiated market with competing retailers and counterfeiter

AbstractThis study investigates the encroachment strategy of a manufacturer with multiple competing retailers in the presence of a counterfeiter who produces an imitated product in a vertically differentiated market wherein the counterfeits and authentic products differ in quality. We derive some intriguing results that uncover the strategic effects among manufacturer encroachment, counterfeiting, and retailer competition. First, having the option to encroach may hurt the manufacturer himself but benefit the counterfeiter in the presence of competing retailers. Second, increased counterfeit similarity shrinks the beneficial encroachment region for the manufacturer but may widen the beneficial region for the retailer. However, the intensified retailer competition always shrinks the beneficial region for them. Third, the individual retailer's (manufacturer's) profit increases (decreases) with counterfeit similarity when the manufacturer chooses encroachment. Conversely, consumer surplus (social welfare) exhibits an inverted U‐shaped (U‐shaped) pattern with counterfeit similarity under encroachment threat. Moreover, the profits and welfare may jump with counterfeit similarity because of the change in the encroachment strategy wherein retailer competition alters the jump points.

The influence of manufacturer encroachment on the supply chain: the conditional role of traditional retailer retail service investment

PurposeThis paper investigates the dual interactive effects of manufacturer encroachment on the supply chain and retailer provision of retail services.Design/methodology/approachConsider a supply chain dominated by manufacturers, retailers, and e-commerce platforms, with the manufacturers selling the same product online and offline. Utilizing Stackelberg’s game theory, examples of wholesale and retail prices and profits of participants in the supply chain under different channels are analyzed. An effective encroachment strategy for manufacturers facing different retail service investment strategies of traditional retailers is given.FindingsWhen traditional retailers do not invest in retail services, they will lose more profit due to competition with the manufacturer. At this time, the retailer does not want the manufacturer to encroach. The traditional retailer’s investment in retail services will enhance its and the manufacturer’s profits, incentivizing the manufacturer to pursue an aggressive expansion strategy.Originality/value(1) Considers a situation where the selling efficiency of the manufacturer is lower than that of the traditional retailer. (2) The interaction between traditional retailers’ retail service investment strategies and manufacturers’ encroachment strategies is investigated where the manufacturer is the dominant player. The three modes of online direct sales, resale, and third-party platform agency are compared to provide a basis for decision-making on different types of manufacturers’ encroachment. (3) Offline retail services not only directly increase sales in the offline market but also indirectly have a negative effect on the online market.

The interaction between manufacturer encroachment and gray market

With the rapid development of retail platforms, many manufacturers use retail platforms to encroach into the retail market (i.e., a type manufacturer encroachment) and gray market is increasingly prevalent in various industries. This paper considers a manufacturer who directly sells product 1 in the domestic market and sells product 2 through an incumbent retailer in the overseas market and a gray marketer can divert product 1 across markets without authorized (we call it gray market). In this paper, we examine the interaction between manufacturer encroachment and gray market. We find that when the domestic price of product 1 is sufficiently low, the gray marketer can successfully enter the overseas market without and with encroachment. Second, regardless of whether there is a gray market threat, the manufacturer has an incentive to encroach through retail platform when the commission rate is low. Moreover, the manufacturer’s incentive to encroach varies with the domestic price of product 1 and gray market threat. Finally, manufacturer encroachment can reduce the scale of the gray market and even eliminate the gray market under certain conditions. The gray marketer always suffers from manufacturer encroachment while the retailer can benefit from manufacturer encroachment.

Manufacturer encroachment and carbon reduction decisions considering cap-and-trade policy and retailer investment

Manufacturer encroachment and carbon reduction decisions considering cap-and-trade policy and retailer investment

Manufacturer encroachment in a platform supply chain: An analysis of synergy effect, dysergy effect, and mutual exclusivity effect

AbstractThe prosperity of internet sales is stimulating a phenomenal growth of retail platforms and manufacturer encroachment. Encroachment spawns channel competition, potentially threatening the platform's profit, which in turn induces a series of countermeasures by the platform. Motivated by this trend, we develop a game‐theoretical model to explore the strategic and tactical interactions between a manufacturer and a platform, in which the manufacturer determines encroachment strategy and quality differentiation tactic, and the platform determines sales mode strategy and information sharing tactic. We find that the manufacturer is profitable and the platform is damaged from encroachment. Furthermore, the manufacturer's quality differentiation tactic can propel the platform to select reselling that indirectly enhances post‐encroachment profitability. In contrast, sales mode and information sharing can be mono or jointly utilized by the platform to counter encroachment. Significantly, we provide a novel inspection method to systematically analyze the cumulative performance of the platform's two countermeasures by introducing the synergy effect, dysergy effect, and mutual exclusivity effect. Interestingly, we highlight that the performance of mono‐countermeasures may be even more effective than that of combined countermeasures to mitigate the platform's loss caused by encroachment. This finding enriches not only the analytic understanding of received wisdom about whether more countermeasures can invariably hold competition edges but also provides useful managerial guidelines for strategic interaction research. Moreover, the manufacturer's increased encroachment capabilities may promote the platform to shift from reselling to agency selling, which reveals that manufacturer encroachment may be a critical factor in the popularity of agency selling.

Demand forecast information sharing with manufacturer encroachment

This study explores the interplay between the manufacturer’s encroachment strategy and the retailer’s information sharing strategy in a supply chain, wherein both the upstream manufacturer and downstream retailer possess private demand forecast information. The manufacturer has the option to establish a direct selling channel to encroach on the end market, and the retailer can decide whether to share private information with the manufacturer. We consider four scenarios and derive the corresponding equilibrium outcomes of firms. Theoretical research results show that when the manufacturer opts not to encroach, neither the manufacturer nor the retailer will voluntarily share their demand information. In contrast, if the manufacturer encroaches, they will reach an information sharing agreement under certain conditions. Once such an agreement is reached, the manufacturer can benefit more from encroachment. If information sharing is not achieved, the manufacturer encroaches only if his unit direct selling cost is lower than a certain threshold. In addition, fierce competition among channels encourages the manufacturer to encroach. Based on the abovementioned works, we conduct numerical studies to analyze the impact of forecast accuracy on the profits and information sharing value of the manufacturer, the retailer and the whole supply chain. These results offer valuable management insights for firms. For example, the improved forecast accuracy is beneficial to both firms. Moreover, as the channel substitution rate increases, not only the possibility of manufacturer encroachment increases, but both the manufacturer and the whole supply chain also get more profits from it.

Investment in Data Analytics with Manufacturer Encroachment

Online retail platforms such as Amazon and Tmall have the ability to create personalized recommendations based on the consumer’s browsing history, purchase history, and preferences by investing in data analytics capability. In practice, manufacturers may encroach on the retail market through the agency channel that sells products directly to online consumers in addition to wholesale products to retail platforms through the reselling channel. In this study, we develop a game-theoretic model to study the interplay between the manufacturer’s encroachment and the online retail platform’s data analytics capability investment. Our outcomes reveal that the conditions for the manufacturer to encroach become more lenient if the platform invests in data analytics capability, and we show that the investment in data analytics capability can lead to a Pareto improvement and the manufacturer can free ride on the platform’s investment. Moreover, we found that the manufacturer’s encroachment always creates more incentives for the platform to enhance the investment level in data analytics capability. Our research in this study provides useful insights for managers to make encroachment decisions and data analytics capability investment decisions with the manufacturer who sells through the online retail platform.

Contract manufacturer encroachment and its impact on OEM’s sales mode and social welfare in a platform-based supply chain

Contract manufacturer encroachment and its impact on OEM’s sales mode and social welfare in a platform-based supply chain

Manufacturer encroachment under distributional fairness concerns

AbstractDominant retailers' squeeze results in very low profits for manufacturers in the traditional reselling channel, which raises manufacturers' significant concerns about profit fairness. This paper studies the manufacturer's encroachment strategy under fairness concerns by virtue of a game‐theoretical model, in which a manufacturer sells its products to a dominant retailer who resells them to consumers in the traditional reselling channel. Besides, the manufacturer can sell its products through a direct channel, i.e., manufacturer encroachment. The equilibrium solutions and profits under different scenarios are derived to check the interplay between fairness concerns and manufacturer encroachment. Some interesting results are obtained. First, fairness concerns can reduce the motivation of the manufacturer to encroach the market. Second, manufacturer encroachment always harms the retailer in the absence of fairness concerns, while it can benefit the retailer in the presence of fairness concerns. Third, the manufacturer's profit always decreases with the direct selling cost in the case without fairness concerns, while it may increase in the case with fairness concerns. These results obtained are robust when the decision timing or fairness concerns model is changed.

The Impact of Platform’s Information Sharing on Manufacturer Encroachment and Selling Format Decision

Motivated by recent practice observations, we consider an incumbent manufacturer who has an existing wholesale contract with an e-commerce platform, which the latter sells as a private label product in its online marketplace. In this context, the manufacturer launches its follower product, which will coexist alongside the private label product on the platform. We study the interplay between the manufacturer’s choice of selling format (i.e., reselling or agency) and how this choice influences the platform’s decision to share (or not to share) demand information with the manufacturer (i.e., information sharing policy). In particular, we examine how the platform’s information-sharing policy, depending on its perceived information accuracy, impacts the manufacturer’s selling format decision. Using game-theoretic analyses, we find that under low perceived information accuracy, the manufacturer adopts the agency format when the commission rate is low but the reselling format when the commission rate is high. However, the platform withholds the demand information. More interestingly, when the commission rate and perceived information accuracy are both high, the manufacturer switches from the reselling to the agency format and this induces the platform to share demand information. This benefits both the manufacturer and the platform with the Pareto-improving zone expanding when perceived information accuracy is at least moderate but shrinking when the market size potential of the follower product increases. Ultimately, both parties can benefit from information sharing once in business and when the commission rate is high. The platform should also invest in greater information accuracy in such conditions.

Contract manufacturer encroachment via the customer‐to‐manufacturer strategy under different platform selling modes

AbstractThis paper considers an outsourced supply chain comprising a contract manufacturer (CM), an original equipment manufacturer (OEM) and an online platform. In addition to providing contract manufacturing services to the OEM, the CM enters the market using the customer‐to‐manufacturer (C2M) strategy. Two baseline models and four encroachment models with different selling modes are modeled to explore the interaction among CM encroachment, selling modes and the C2M strategy. We find that the CM will always encroach if brand substitution is sufficiently high. However, the CM will still encroach despite brand substitution being low if the platform charges the OEM a high commission rate in Scenario PR. The results also show that the CM may increase or decrease the wholesale price charged to the OEM according to his dependence on the OEM channel and direct channel. Finally, we find that after CM encroachment, the OEM is worse off, while the platform may be better or worse off. The profits of the CM, OEM, and platform decrease if customers are more concerned about production flexibility. Our work provides guidance for CM encroachment from the perspective of channel choice and product strategy and offers managerial insights into C2M practice.

Manufacturer Encroachment Strategic Analysis with Platform Service Inputs: An Agent-Based Scenario

This paper considers the agency selling channel in a supply chain under platform service investment. We construct Stackelberg game models to study the impact of the manufacturer’s encroachment strategy on supply chain members. Research results indicate that the encroachment strategy always has a positive impact at the levels of the manufacturer and platform service, which should dynamically change in response to the manufacturer’s action; the platform may actively implement a service strategy without encroachment, while the platform should be cautious in providing services to avoid backlash when encroachment occurs; the high commission rate may prompt the platform to increase the service effort and hinder manufacturer encroachment; when the channel substitution rate is high, both the manufacturer and platform may suffer from it and hence they should slow down their strategy implementation and consider cooperation; when the elasticity coefficient is large and the service cost is high, it may hinder the platform from providing services and the manufacturer may take the opportunity to encroach and thus seize the market.

Retailer information sharing with green manufacturer encroachment in a hybrid supply chain

AbstractWe consider a hybrid supply chain with a manufacturer and an online retailer with rich demand information. The manufacturer invests in green products and sells them not only through retailers that then sell to customers (reselling) but also directly to consumers via retailers by paying a proportional fee (agency selling). The retailer first decides whether to share demand information with the manufacturer, who then decides whether to encroach. We show that a manufacturer is willing to encroach when the entry cost is small if the retailer chooses not to share information. However, with the increase in the entry cost, the manufacturer could still encroach if the retailer shares information. We also find that a manufacturer that is more efficient at producing green products is more likely to encroach. Moreover, when the entry cost is sufficiently small or large, the retailer prefers to share information with the manufacturer when the greening investment efficiency is high or the efficiency is low but the proportional fee is large. Nevertheless, when the entry cost is moderate and the competition intensity is small, sharing information is better for the retailer even if the efficiency is low and the proportional fee is small. Finally, we observe that consumer sensitivity to the direct channel, differences in agency selling price and direct selling price, and imperfect retailer information do not influence decisions in specific circumstances. Furthermore, adjusting the encroachment order or ex post sharing impacts the decision‐making, with the magnitude of impact depending on certain supply chain parameters.

Equilibrium strategies of sharing CSR in a supply chain with manufacturer encroachment

Purpose Motivated by the real-world practice of the thriving e-commerce, manufacturers are transcending traditional boundaries of merely producing and selling directly by implementing encroachment. Concurrently, supply chain (SC) members who overlook the corporate social responsibility (CSR) sharing will be left behind, which is closely linked to their profits. This paper aims to investigate a better way to share CSR under the scenarios of manufacturer encroachment and no-encroachment.Design/methodology/approach This paper constructs game-theoretic models in a SC consisting of a manufacturer (M) and a retailer (R), where the manufacturer can sell products by retailing, and may sell directly by implicating encroachment. The manufacturer and retailer jointly consider whether to share CSR and the proportion of it by taking consumer surplus into account. Furthermore, equilibriums for each model are derived using backward induction. Then, the authors analyse the impact of CSR sharing proportion and compare the equilibrium outcomes under different scenarios. Finally, the numerical analyses are presented to verify the results.Findings Several interesting results are found in this paper. First, the retailer shares more CSR can benefit SC members and social welfare when the manufacturer does not implement encroachment. However, the results may change which is decided by the unit cost of encroachment when the manufacturer does so. Second, the proportion of CSR shared by manufacturer and the unit cost of encroachment has an interactive impact on equilibrium outcomes. Finally, both manufacturer encroachment and SC members share CSR may be the best for the perspective of SC members and consumers.Practical implications Based on the analytical results, this paper provides novel managerial implications to assist manufacturer and retailer in determining the optimal strategies for CSR sharing and encroachment. Furthermore, the appropriate proportion of CSR shared by manufacturer and the unit cost of encroachment may let manufacturer, retailer and consumer surplus achieve a win-win-win situation.Originality/value To the best of the authors’ knowledge, this paper is the first attempt to explore the strategy of CSR sharing under the scenarios of manufacturer encroachment and no-encroachment.

Who will undertake corporate social responsibility in supply chain encroachment? Manufacturer or retailer

AbstractAs the sustainable economy has become more of a consensus, supply chain members, both manufacturer (e.g., Apple, Huawei, Xiaomi, Nike, and P&G) and retailer (e.g., Uniqlo, Walmart, and Bravo), are concentrated on corporate social responsibility (CSR). The literature in this area has investigated the role of CSR, but the optimal preference for CSR concern of supply chain members is not well understood, especially when manufacturer sells directly by implementing encroachment. This paper studies the optimal preference for CSR concern of supply chain members with considering manufacturer encroachment. We develop the supply chain with a manufacturer (M) and a retailer (R), where the manufacturer sells products via a retail channel which in turn sells them to the final consumers. The manufacturer can also implement encroachment to meet consumers directly. Meanwhile, by considering the manufacturer or retailer may have CSR concern, we explore four scenarios using a game‐theoretic framework. Several interesting findings are as follows. First, for the sake of profits, retailer CSR should be encouraged, which may achieve Pareto improvement under certain conditions. Notably, manufacturer encroachment may narrow the “win–win” situation. While for the sake of environmental protection and consumer well‐being, manufacturer CSR should be encouraged. Second, manufacturer implementing encroachment may not be blind, because it may be worse for itself when retailer has CSR concern. Third, manufacturer CSR may aggravate the cannibalization effect of encroaching, while retailer CSR may relieve it.

Strategic analysis of manufacturer encroachment in dual-channel supply chains with platform service

This paper considers a dual-channel supply chain with two members, comprising a manufacturer and an online platform. We mainly investigate the influence of various key system variables on manufacturer encroachment strategy and all members’ optimal decisions through Stackelberg game models. Our findings show that, regardless of the size of each parameter, the encroachment strategy is always optimal to the manufacturer; the manufacturer may be motivated to choose the direct selling channel and the platform may opt for the agency selling channel due to a high commission rate. Moreover, when the inter-channel substitution rate is high, the encroachment strategy has a diminishing positive effect on the manufacturer and an increasing negative effect on the platform so that the platform may temporarily benefit from the manufacturer encroachment; in cases where the inter-channel substitution rate is not high, the encroachment strategy always yields advantages for the manufacturer while causing disadvantages for the platform. In addition, if the elasticity coefficient is large, both the manufacturer and the platform are inclined to the reselling channel, that is, if the platform service cost is high, it is advisable for the platform to reduce its investment of service to avoid negative effect.