Dual-channel Supply Chain Coordination Research Of Durable Goods Base On Network Externality

Our life has experienced earth-shaking changes since the birth of the Internet twenty years ago. At the beginning, the Internet was a relatively independent industry, but electrical commerce and information technology have been developing so rapidly that the integration of traditional industry and the Internet industry become inevitable. The original way to integrate two industries was manufacturers simply selling products via the Internet, however, today the Internet thinking is introduced into not only the marketing model and the commercial rule of a company but also strategic planning. It is crucial that traditional industry starts the Internet process from being phased out, as well as manufacturing industry.Before the Internet, there was severe information asymmetry between the seller and the buyer. Nowadays the seller is able to contact his client directly to seek the demands, while a buyer has access to the information of a product. Consumers who purchased the same product with network externality compose a network which benefits everyone within. Due to the quality of durable goods, the network is often stable and the network externality is quite obvious. In narrow sense, durable goods are high-valued products which do not quickly wear out such as vehicles and merchanical equipment. The era of the Internet enriches the definition of durable goods by creating virtue durable goods such as cellphone numbers and QQ numbers. Durable goods in this paper refers to entity durable goods with network externality, for instance, computers, laptops, network television and relevant products, etc. The thrive of the Internet and electrical commerce makes it possible for manufacturers like IBM, Lenovo to sell product via dual channels. Online channel explores potential demands and profit, establishs the communication from which manufacturers, retailers and consumers feed back to each other, facilitating the suppliers predict the market and developing effective product stragety. Considering the points above, the dissertation will discuss the durable goods product strategy with network externality and conduct a dual channel supply chain coordination research.Firstly, given a competitive market comprised of a strong incumbent manufacturer and vulnerable entering manufacturer, the impacts of network externality, durability and differentiation to equilibrium price, market shares and production are discussed. The consequence implies that the incumbent manufacturer gains the maximum profits when the two manufacturers produce homogeneous product, while the entering manufacturer gains the minimum profits. Hence, Manufacturers are inclined to produce products as differentiated as possible. Considering the network externality, product durability of both manufacturers will be reduced as sales period progresses.Secondly, assume that demand is based on effectiveness, consumers' value evaluation on products of inconsistent durability in different sales period is analyzed in order to obtain the demand distribution function and establish dual channel supply chain model. Then the total profit of the supply chain is calculated under the centralized decision and decentralized decision circumstances. The consequences of numerical simulation indicate that the total profit of three demand distribute circumstances is sensitively inconsistent to network externality and durability.Given the total profit in decentralized decision circumstance does not meet the result in centralized decision, return mechanism is introduced to optimize the supply chain profit. Finally, the effectiveness of the coordination supply chain model is verified by numerical simulation.