Ripple Effect And Its Response To The Ad-based Supply Chain

From 1980 onwards, advertising industry in our country has developed dramatically. According to the statistics, China spent 243.9 billion Yuan in advertisement, leading to become the third major advertising market in the whole world in 2005. Advertisement as a strategy of non-price competition plays more and more important role in both enterprises and consumers.However, the competition of advertising among companies becomes fierce and cutthroat. The sole corporation has to cooperate with others, such as suppliers, manufacturers, retailers, et al., to survive or even make profit in the heated market. Therefore, today's competition among enterprises has changed into the competition among supply chains. In order to sharp the supply chain's competitive advantage, each member in the supply chain should try their best to gain the supply chain's maximum profit.Nevertheless, one of the members in the supply chain will alter its strategy, for instance, the investment of advertisement, due to the ever-changing market circumstances. This alternation will trigger ripple effect in the whole supply chain, which will influence other members'investment of advertising, selling price, final demand and so on. Since the ripple effect in the supply chain will cause extra cost, the total profit of the chain will be affected too. Hence the previously best choice of the whole supply chain may no longer bring about the optimum profit.In this paper, the best strategies and optimum profits of each member of the supply chain will be discussed in the static situation. Then, when one of the members changes its behavior, there will be the ripple effect in the supply chain. The author will measure this effect, and at last will suggest an reasonable way to evaluate the performance of the whole supply chain after the ripple effect.