New Product Development And Pricing Strategies In Dual Channel Supply Chain Considering Competition Under E-Commerce Environment

Abstract:We view the dual channel manufacturer of new products as the research object, and establish a decision-making model considering the competition in the product market by using expected utility theory, the cooperative game theory, optimization theory and methods integratedly to discusses decision-making of new product quality and pricing problem under different channel structure and the launching problem of new product with different quality, and study the product development and pricing strategies when the dual channel manufacturer and retailer cooperate as an supply chain alliance.Firstly, we built the market demand function under single traditional channel and dual channel environment respectively and studied the manufacturer’s new product quality and pricing decisions when the channel is vertically integrated or decentralized by extending the Salop Circular Model and considering the condition of the existed retailer selling similar products. It shows that different channel structure has a significant influence on the new product quality, and when consumer’s online shopping convenience is great and the online shopping discount is small, the online direct selling price can be higher than the retail price. Finally, the numerical analysis shows that manufacturer’s profit in dual channel under decentralized decision making may be less than that in the traditional channel under vertical integration, but is generally superior to the traditional channel under decentralized decision making.Secondly, aiming for the launching problem of new products with different quality in dual channel, we consider the situation that the manufacturer can choose to develop products both with high and low quality. We find that launching both high quality products in dual channel is always better than launching both low quality products in dual channel, and product differentiation strategy is always better than single product strategy. When the online shopping utility discounts is great and the online shopping convenience degree is small, the manufacturer launching low quality product in online but high product offline is better off. But when the online shopping utility discounts is very small and the online shopping convenience degree is great, he manufacturer launching high quality product in online but low product offline is better off.At last, we established the new product decision model under the supply chain alliance, and find that the prices under supply chain alliance are lower than the corresponding prices under decentralized decision making, and the existed product demand under supply chain alliance is less than that under decentralized decision making, the new product demand under the online direct channel demand is greater than the decentralized decision making but the new product demand under retail channel is unchanged. Supply chain alliance lower the profit of existed product, and when production cost sharing ratio and compensation ratio satisfy certain conditions, the manufacturer and retailer to form cooperative alliances can effectively eliminate the effect of double marginalization, and make both parties benefits at the same time to achieve pareto improvement. Finally, we also found that when retailers to participate in production cost allocation and compensation ratio is small, the new product quality is the largest, and large than that under decentralized decision making.This paper contains thirteen pictures,two tables and one hunderd and thirteen references.