Horizontal Outsourcing Of Incumbent And Brand Building Of Entrant

As China's Contract Manufacturer(CM)companies continue to integrate themselves into the global value chain,they have obtained foundry dividends,providing capital for the transformation and upgrading of themselves.However,these companies,which are vulnerable to economic fluctuations,are in the low value-added part of the value chain,and their homegrown brands are not favored in the Chinese market.Therefore,it is imperative to explore the transformation and upgrading of China's CM enterprises and build their own brands.Based on the above-mentioned actual background,this paper introduces relevant theories and concepts related to horizontal outsourcing of production,supplier invasion,brand building,and production learning effects.Furthermore,it analyses a supply chain that is built on the basis of those theories and concepts and consists of outsourcing enterprises of incumbent brands and manufacturers of entrant brands.This paper builds four decision-making models under the following situation: whether the entrant brand has brand investment or whether the incumbent brand is horizontally outsourced.It uses the reverse solution to solve the equilibrium result,then perform equilibrium analysis and numerical analysis.The main conclusions obtained are as follows: Frist,the incumbent brands tend to Stark quantity competition,which will increase their income,while the entrant brands tend to Cournot model quantity competition,which will make them invest more in brand building;Second,the results of outsourcing enterprises of incumbent brands is classified into reducing costs and suppressing the brand investment of manufacturers of entrant brands;Third,the horizontal outsourcing of incumbent brands is beneficial to both sides of the supply chain but it will reduce the number of products of entrant brands;Fourth,the lower the production cost of entrant brands under production learning effects,the higher the level of brand investment.