Research On Several Marketing Problems With Durable Goods In Dual-channel Supply Chains

In recent years, following the development of the Internet and informationtechnology and the growth of third party logistics providers, a growing number ofmanufacturers have found it attractive to supplement their preexisting retail channelswith an e-channel. This tendency is particularly noticeable in the market for durablegoods, for example, in USA, there are almost42%of manufacturers of durable goods,such as Apple, IBM, HP and General Electric Company, have adopted dual-channelsupply chains to market their products. The same tendency can be found in China, manybrand name manufacturers, including Haier, Lenovo, Changhong and TCL, that canmarket durable goods by their dual channels supply chains. It should note that, differentfrom those manufacturers with non durables, durable goods manufacturers usuallyconfront the effects from products durability, leasing and selling strategies choice, andremanufacturing, when they market the durable products in the market. Yet, despitethese emerging trends, little literature on the dual-channel supply chain pays attention tothe issues of product durability, leasing and selling strategies choice, and productsremanufacturing. We therefore develop several models to analysis the problems ofmarketing durable goods with above issues and address their impacts on the interactionsbetween manufacturer and dealer.Specifically, in chapter III, we firstly develop a dual-channel model in which amanufacturer that can sell directly by its own e-channel and indirectly via anindependent dealer and address how product durability and the channel structure createstrategic issues that are significantly different from those in managing a dual channel fornondurables. Put differently, in this chapter, we intend to answer the followingquestions: Under what conditions is it optimal for a durable goods manufacturer to openan e-channel? What is the implication of product durability in the manufacturer’s choiceof e-channel? How does the addition of an e-channel affect manufacturer’s and dealer’sperformance? It is note that our game-theoretic model nests Arya et al.(2007)[Arya etal.,2007. The bright side of supplier encroachment. Marketing Science26(5):651-659.]as a special case when product durability reduces to zero and thus generalizes it to thedurable goods setting. The equilibrium solutions indicate that, when the product isdurable, both parties’ profitability strongly depends on product durability and directselling cost. In particular, we find that, compared to encroach the dealer’s market by direct selling online, it is optimal for the manufacturer to open an inactive e-channel thatserves only as an information medium. Moreover, we find that, contrary to Arya et al.’s(2007) results, if product durability is moderate, for any direct selling cost,manufacturer’s encroachment is always detrimental to the dealer, and thus its bright sidedisappears. In addition, our theoretical shows that both parties’ profitability is higherwhen product durability is sufficiently low or sufficiently high, and lower whendurability is intermediate.In chapter IV, we extend the model in chapter III to address certain strategic issuesassociated with leasing and selling. Specifically, we consider a two-period dual-channelmodel in which a manufacturer sells a durable product directly through both amanufacturer-owned e-channel and an independent dealer who adopts a mix of sellingand leasing to consumers. Our results show that to avoid the time inconsistency problem,in the single channel model, the monopolist (dealer) should not sell the products butlease them that consistent with Coase’s conjecture, that is, because leasing allows themonoplist to charge a higher price for second-period products and increases hisprofitability on first-period products, the dealer is better off leasing products in Period1.However, when the manufacturer encroaches into the market, the optimal policy for thedealer is determined by the direct selling cost: when cost varies, the dealer’s optimalpolicy is pure leasing, pure selling, or hybrid mix of both. Among other results, we findthat both the dealer and the supply chain may benefit from the manufacturer’sencroachment. Our results also indicate that both the market structure and the nature ofcompetition have an important impact on the player’s (dealer’s) optimal choice ofleasing and selling.Finally, in chapter V, we consider a manufacturer sells new units through anindependent dealer but with two options for marketing remanufactured products:(1)marketing through its own e-channel (Model M) or (2) subcontracting the marketingactivity to a third party (Model3P) and investigate how different channel structures formarketing remanufactured products affect all parties’ profitability as well as theenvironmental performance. Specifically, in this chapter, we address the followingresearch questions: From the profit-maximization perspective, how do different channelstructures for marketing remanufactured products affect all parties’ profitability? Whichis better for the manufacturer, dealer, and third-party? And from the environmentalimpact angle, how do different channel structures for marketing remanufacturedproducts affect the environmental performance? Which is better for our environment? A central result we obtain is that although Model M is always greener than Model3P,firms have less incentive to adopt it because both the manufacturer and dealer may beworse off when the manufacturer sells remanufactured products through its owne-channel rather than subcontracting to a third party. Extending both models to cases inwhich the manufacturer interacts with multiple dealers further reveals that the moredealers in the market, the greener Model M relative to Model3P.