Strategies Selection And Equilibrium Analysis Of Dominant Manufacturer In Dual-Channel Supply Chain

Since the market competition is becoming fierce and the supply chain management theories are becoming mature, researches on how to improve the competitiveness of enterprises under supply chain environment have become the worldwide research hotspots. This paper investigates the dominance strategies exerted by the dominant manufacture for maintaining its dominant position in the channel system composed of two manufacturers and one retailer, which is operating substitutable products and what influences they have on members of the whole channel system and the consumers. Three most widely used competitive strategies in management practice:wholesale price dominance strategy, channel dominance strategy and advertising promotion strategy are modeled and analyzed. The wholesale price strategy and channel strategy are adopted as dominant manufacturer’s dominance strategies.When the weak manufacturer doesn’t advertise, first we set up a basic model, i.e. non-dominance strategy model as the benchmark, then analyze the equilibrium results of the wholesale price strategy and channel strategy, and finally discuss the optimal strategy choice for dominant manufacturer. It shows that only the dominant manufacturer can necessarily benefit from the wholesale price dominance strategy. Furthermore, both dominant manufacturer and retailer can benefit from the channel dominance strategy, and consumers can also benefit from it. The channel dominance strategy, however, is not always the optimal choice for the dominant manufacturer. Whatever dominance strategy is it, the weak manufacturer will suffer loss, but in channel dominance strategy, the market share proportion of weak manufacturer will increase under certain circumstances.When the weak manufacturer advertises for promotion, firstly we solve the equilibrium outcomes of wholesale price strategy and channel strategy to test whether they can still effectively resist the weak manufacturers’ advertising promotion. Research results show that it is consistent with the conclusion without weak manufacturer’s advertisement; the difference lies in the fact that the weak manufacturer’s advertising promotion efforts narrow the profits gap with the dominance manufacturer.Secondly, we probe into the situation when the dominant manufacturer also advertise along with the wholesale price strategy, all members in the channel will benefit while customers will suffer damage because of the high price. But if the dominance manufacturer advertises along with channel strategy, the retailer will be the only beneficiary, the dominant manufacturer suffers losses and it has no influence on the weak manufacturer.Finally, we analyze the optimal choice among the five strategies for the dominant manufacturer, when the dominance manufacturer’s barging power is weaker or equal to that of the retailer’s, he prefers a joint strategy of wholesale price and advertising. When the dominant manufacturer’s barging power is stronger (about0.645higher) than that of the retailer’s and the product substitution rate is low, his optimal choice is channel-dominance strategy. The weak manufacturer achieves maximum profit when the dominant manufacturer adopts promotional advertising strategy only, that is to say the weak manufacturer suffers losses in any dominance strategy, and the retailer’s optimal benefit is related to his barging power.