The Research On Conditions For Innovation-oriented Changes In Supply Chains

China's economy faces many difficulties, such as the aging of its population, labor costs rise, weak competitiveness. The only way to solve these difficulties is innovation-oriented changes. China's economy changing to innovative economy relies on the companies in the supply chain changing to innovative companies. However, the goal of the companies is to achieve more profits. The key of innovation-oriented changes is to stimulate these companies to change to innovative companies. Apple Inc. is a high-tech enterprise in the cell phone industry.The performance of it in technology research and development and product innovation is very well. In China's cell phone industry, several cell phone companies' capability in technology research and development and product innovation has been large improved, such as HUAWEI, vivo and OPPO. However, others are not good at technology research and development and product innovation. Telecom operators as the dominant role in the supply chain, have the responsibility to stimulate cell phone companies to change.So, the supply chain model is constructed, which contains a cell phone manufacture and a telecom operator. The manufacture sells the cell phone to telecom operator. Then, consumers buy the cell phone from telecom operator and pay telephone fee to telecom operator. Telecom operator achieves more profits by traditional marketing, process innovation and product innovation. Thus, supply chains under traditional marketing setting, process innovation and product innovation settings are modeled by Stackelberg games with dominating distributers and equilibrium solutions are solved analytically. By comparing the profits of the three settings, conditions for succeeding in changing into sustainable developments based on innovations are put forward. Results show that when the market is sensitive to marketing, Pareto areas of both innovation modes are cut down sharply. But if the market is quite willing to pursue new products, the product innovation mode may still outperform traditional marketing activities. When the market is slow to marketing, Pareto areas of innovations can become quite large. The selection between process and product innovations depends on cost sharing rates between partners for developing innovations and the market sensitivity to new products etc. Finally, some management insights are presented for the entrepreneurs and policy makers.