Research On Manufacturer's Encroachment And Retailer's Promotion Strategies

How to optimize channel design to better engage in production activities has always been the focus of manufacturer's decision making.Manufacturers can choose to distribute products only through retailers,or they can choose to invade the market and distribute products directly to consumers.Manufacturers must consider not only their own factors(such as channel costs,management capabilities,etc.)but also the impact of the decisions made by other supply chain members.This paper examines the impact of retailer's promotion strategies on manufacturer's encroachment.Retailer's promotional strategies typically include two,price strategies and non-price strategies.If the retailer only chooses a price promotion strategy,then higher demand can be achieved by lowering the price;if the retailer uses a non-price promotion strategy at the same time,higher market demand can be achieved by lowering product prices while increasing consumer loyalty,consumer preferences,etc..It can be seen that whether retailers use non-price strategies to influence market demand is different,and thus the impact on manufacturer's encroachment is different.This paper studies this.First,this paper examines a supply chain system consisting of one manufacturer and one retailer.We explore interaction of encroachment with sales promotion between the manufacturer and the retailer.The manufacturer establishes a direct channel to encroach the market or not.The retailer decides to use non-price promotion or not.We find that: the manufacturer's encroachment and the retailer's price promotion(DP),or the manufacturer's encroachment and the retailer using non-price promotion(DB)is the possible Nash equilibria.The equilibrium depends on the selling cost sold through the direct channel and the consumer's preference for the retailer.DB is more likely to be in equilibrium,and bring greater utility for consumers.Manufacturer's encroachment has become inevitable,and retailers have to pay more and more attention to the use of non-price strategies.Among the non-price strategies,store brands are gaining favor from retailers.Therefore,this paper further studies the interaction between the typical representative of non-price strategies—the store brands strategy and the manufacturer's encroachment.We still explore a supply chain consisting of one manufacturer and one retailer.The retailers need to decide whether to introduce their own brands under manufacturer's encroachment.Research shows that if the basic demand for direct channel is high,retailers do not introduce their own brands;if the basic demand of the direct channel is in the middle range,the retailer introduces its own brand when the channel relationship is weak,and does not introduce its own brand when the channel relationship is strong;if the basic demand for direct channel is low,when the degree of product substitution is high,retailers introduce their own brands.When the degree of product substitution is low,retailers introduce when the basic needs of their own brands are large,and do not introduce their own brands when the basic needs of their own brands are small.The conclusions obtained in this paper will be applied to analyze the choice and transition of the manufacturer encroachment and the retailer's promotion.