Research On Vertical Product Differentiation Competitive Strategy Of Manufacturer In Dual-Channel Supply Chain

With the development of e-commerce,both in the non-durable goods and durable goods fields,more and more manufacturers have established online direct sales channels,forming a dual-channel model where traditional retail channels and online direct sales channels coexist.Under the dual-channel model,manufacturers and distributors not only have upstream and downstream supply relationships,but also form a horizontal competitive relationship.As a result,many channel conflicts arise.In real life,many manufacturers have already adopted the vertical product differentiation strategy to enter the retail market to reduce channel conflicts.But academically,few scholars have studied the longitudinal product differentiation strategy of manufacturers in the dual-channel model.At the same time,although the research on dual channels has become a hot topic in supply chain research,the research on quality differences in dual channels is still rare.Therefore,this paper supplements the dual-channel study by assuming that manufacturers have the flexibility to choose to sell different quality products through different channels and that consumers have a quality preference for products to study the vertical product differentiation strategies of manufacturers under the dual-channel model.The shortcomings in the field extend the scope of product differentiation strategy research.First,the paper establishes a dual-channel model with a manufacturer and a distributor.Manufacturers sell higher(lower)quality products through direct sales channels,sell lower(higher)quality models through traditional retail channels,and then use the two models of this paper.The equilibrium results are compared with the results of Arya's models where the manufacturer does not encroach on the retail market and encroaches with homogenous products.The results of this paper show that,compared to selling lower-quality products directly or offering homogeneous products through both channels,an effort by the manufacturer that is too aggressive in its attempt to encroach on the retail market(i.e.,selling higher-quality products directly)not only decreases the retailer's profits but also reduces the manufacturer's own profitability.Furthermore,we find that,compared with offering homogeneous products through both channels,selling lower-quality products directly is always beneficial for the retailer but hurts consumers.Then in the fourth chapter,the product durability was introduced and a two-cycle dual-channel supply chain model was established.The conclusions obtained is completely different with the conclusions obtained in the field of non-durable goods.In Chapter 5,when considering the dealer leasing model(when the distributor distributes the product to the consumer through leasing),the manufacturer's vertical product differentiation strategy has the same effect on the manufacturer and the distributor as considering the product durability model.This study finds that in the field of durable goods and when considering the dealer leasing model,for manufacturer,when manufacturer's direct selling costs are moderate,high-quality encroachment strategy is the best choice for manufacturer compared to homogeneous encroachment and low-quality encroachment strategy and low-quality encroachment strategy is always suboptimal.It is more favorable for the distributor when manufacturer adopts low-quality encroachment.Contrary to common intuition,the vertical product differentiation strategy is not always effective,and does not always allow the manufacturer or retailer to obtain higher profits.Under certain conditions,compared to encroaching the retail market with high-quality product,the manufacturer distributing homogeneous products through traditional retail channel and its own e-channel can make both manufacturer and distributor achieve a win-win situation.These conclusions suggest that manufacturers must be cautious when considering vertical product differentiation strategies to mitigate channel conflicts.