Name
Title | ||
|---|---|---|
Direct Marketing, Indirect Profits: A Strategic Analysis of Dual-Channel Supply-Chain Design |
Abstract | ||
|---|---|---|
he advent of e-commerce has prompted many manufacturers to redesign their traditional channel structures by engaging in direct sales. The model conceptualizes the impact of customer acceptance of a direct channel and the degree to which customers accept a direct channel as a substitute for shopping at a traditional store, on supply-chain design. The cus- tomer acceptance of a direct channel can be strong enough that an indepent manufacturer would open a direct channel to compete with its own retailers. Here, direct marketing is used for strategic channel control purposes even though it is inefficient on its own and, surprisingly, it can profit the manufacturer even when so direct sales occur. Specifically, we construct a price-setting game between a manufacturer and its independent retailer. Direct marketing which indirectly increases the flow of profits through the retail channel, helps the manufacturer improve overall profitability by reducing the degree of inefficient price dou- ble marginalization. While operated by the manufacturer to constrain the retailer's pricing behavior, the direct channel may not always be detrimental to the retailer because it will be accompanied by a wholesale price reduction. This combination of manufacturer pull and push can benefit the rein equilibrium. Finally, we show that the mere threat of introducing the direct channel can increase the manufacturer's negotiated share of cooperative profits even if price efficiency is obtained by using other business practices. (Supply-Chain Management; Channels of Distribution; Internet/Direct Marketing; e-Commerce; Applied Operations Research; Competitive Strategy; Game Theory ) |
Year | DOI | Venue |
|---|---|---|
2003 | 10.1287/mnsc.49.1.1.12749 | Management Science |
Keywords | Field | DocType |
strategic channel control purpose,indepent manufacturer,strategic analysis,manufacturer pull,direct marketing,dual-channel supply-chain design,customer acceptance,direct channel,independent retailer,traditional channel structure,retail channel,direct sale,indirect profits,competitive strategy,supply chain management,game theory,e commerce,profitability | Economics,Direct marketing,Competitive advantage,Microeconomics,Communication channel,Channel conflict,Supply chain management,Profitability index,Supply chain,Profit (economics) | Journal |
Volume | Issue | ISSN |
49 | 1 | 0025-1909 |
Citations | PageRank | References |
203 | 12.53 | 3 |
Authors | ||
3 | ||
Name | Order | Citations | PageRank |
|---|---|---|---|
| Wei-yu Kevin Chiang | 1 | 305 | 17.28 |
| Dilip Chhajed | 2 | 339 | 27.21 |
| James D. Hess | 3 | 224 | 15.20 |