Optimal Bundling And Store-brand Introduction Strategy In A Distribution Channel

It has been more and more popular to study the interface of operations manage-ment and marketing.This thesis considers the interaction of supply chain contract and marketing strategy.We consider two different supply chains,traditional reselling supply chain and agency-selling supply chain.Besides,two popular marketing strate-gies,bundling strategy and store-brand strategy are analyzed in the two different supply chains.Firstly,this thesis analyzes the bundling problem considering the retailer's com-mitment ability in the traditional reselling supply chain.We consider a retailer who sells two products from two independent manufacturers under a wholesale-price con-tract.We start with a two-stage Stackelberg game model,but additionally assume that the manufacturers have zero marginal costs(i.e.,information goods).We find that the retailer will comm it to bundling if and only i f the two products are strong complements when the retailer has the ability to convey a credible commitment about its bundling strategy.Besides,the retailer's bundling option always benefits the manufacturers and the retailer as long as the retailer has the commitment ability.However,the bundling op-tion always benefits the manufacturers but hurts the retailer because of manufacturers'strategic pricing if the complementary level between two products is in the medium range when the retailer does not have the commitment ability.Then we extend our model with positive marginal costs.We find the results are robust when the retailer has the commitment ability.But the results will change if the retailer does not have the commitment ability.The retailer's bundling option may create a lose-lose case for the manufacturers and the retailer under positive marginal costs when the retailer cannot convey a credible commitment about its bundling strategy.Secondly,this thesis considers the bundling problem in the agency-selling sup-ply chain.Bundling strategy has been widely adopted by online retail platforms under agency selling where the suppliers pay a commission fee to the platform to gain ac-cess and sell directly to consumers.We study the optimal bundling strategy for a retail platform through which two independent manufacturers distribute their products.The manufacturers first set their product prices,subsequently,the platform decides whether to offer the bundled product and the price of the bundled product if it is offered.By analyzing a two-stage Stackelberg game,we find that the platform adopts the bundling strategy only when the manufacturers' product prices are above a threshold.Addition-ally,the manufacturers set high prices to induce the platform to offer bundled products only when the commission rate is sufficiently high.Thus,the retail platform is more likely to adopt the bundling strategy for product categories with high commission rates.Besides,having the bundling option may hurt the platform's profit,but it would always benefit the manufacturers.This is because the availability and viabi lity of the bundling option on the retail platform may lead the manufacturers to strategically raise their prices to induce the platform to adopt the bundling strategy for their products.Finally,this thesis studies the downstream retailer's optimal store-brand introduc-tion decision in the tradition reselling supply chain and agency-selling supply chain.Wholesale-price contract is used in a traditional reselling supply chain.Under wholesale-price contract,the upstream manufacturer sets the wholesale price,then the downstream retailer determines whether to introduce the store-brand and sets the retail price for the national-brand and store-brand if the retailer chooses to introduce store-brand.We find that the retailer introduces the store-brand only when the wholesale price decided by the manufacturer is high.Besides,the retailer's store-brand introduction option is al-ways beneficial to the retailer but harmful to the manufacturer in a traditional reselling supply chain.Revenue-sharing contract is used in the agency-selling supply chain.Un-der revenue-sharing contract,the upstream manufacturer can set the retail price for the national-brand and the downstream platform shares a fixed proportion of the total rev-enue of the national-brand.In addition,the downstream platform can decide the retail price for the store-brand if the platform chooses to introduce the store-brand.We find that the store-brand introduction option is always harmful to the manufacturer but not always beneficial to the platform.The platform's store-brand introduction option some-times leads to a lose-lose outcome for the platform and the manufacturer.With above research findings,this thesis makes contributions from the following three aspects:(1)There is little research that considers the impact of the retailer's com-mitment on the optimal bundling strategy in a traditional reselling supply chain.Our work considers the impact of commitment and finds that the retailer may be worse off because of the bundling option if the retailer lacks the ability to credibly precommit to bundling or no bundling.(2)Although the agency-selling supply chain has received considerable attention,there is little research that considers the retail platform's opti-mal bundling strategy in an agency-selling supply chain.Unlike traditional reselling,the manufacturer,rather than the retail platform,determines the retail prices under agency selling.Our results show that the manufacturers may strategically set the retail prices to induce the platform to offer bundled products.Additionally,the retail platform's bundling option may hurt the platform.(3)In the research of the retailer's store-brand introduction strategy,there is little literature that considers the interactions of contract type and the retailer's store-brand introduction strategy.We analyze the retailer's opti-mal store-brand introduction strategy in two different supply chains,traditional reselling supply chain and agency-selling supply chain.Our results show that the store-brand in-troduction option is always harmful to the manufacturer but beneficial to the retailer in a traditional reselling supply chain while the store-brand introduction option may be harmful to both the retailer and manufacturer in an agency-selling supply chain.