Study Of The Cooperative Advertising And Cost Sharing On Supply Chain

With the development of global economic integration and the increasinglycompeting market, companies are increasingly faced with deteriorating businessenvironment. Networks of cooperation and competition-based market are chosen bymore and more enterprises to make rational and effective use of external resources,achieve complement and strengthen their competitiveness. As a main form ofupstream and downstream enterprises to expand the market competitiveness,cooperative marketing wins wide attention by international industry and the academiafield. Base on this background, and this paper attempts to solve the followingquestions:1. How will the manufacturer and retailer decide their respectiveadvertising expense?2. What affects do the types of market have on members of thesupply chain on the decision of advertising expense?3. Will upstream anddownstream enterprises make cost-sharing on cooperative advertising? If they do,what are the factors that influence the ratio and how much will the ratio be?4. Whatfactors does the cost-sharing ratio depend on when there is uncertainty in market？Take cooperating advertising including global advertising and local advertisingmode for example, the following assumptions are made in this paper: First, there isonly one supply chain with a manufacturer and a retailer. The manufacturer decideswholesale prices and global advertising, while local retailers determine retail pricesand advertising costs. Second, it is a manufacturer-Stackelberg game model, whichmeans the manufacturer makes decisions first, and retailers follow the manufacturer.Third, the market demand function has the form of the Cobb Douglas productionfunction, and it is influenced by price, local advertising costs and global advertisingexpenses together. The retailing price has negative effects on demand function, andlocal as well as global advertising both have positive effects on demand function.Fourth, the output of manufacturer is equal to that of retailer, and is equal to thedemand of market.Based on the assumptions above, we created three models (different assumptionswith different models as they discuss different problems), namely: cooperatingadvertising model on a single supply chain, a cost-sharing model on cooperatingadvertising considering inventory, and the cost-sharing model on cooperatingadvertising with demand uncertainty. In the cooperating advertising model of a single supply chain, we get the global and local advertising expenses. In the cost-sharingmodel on cooperating advertising considering inventory, we solve the localadvertising expenses and the retailer’s cost-sharing ratio; In the cost-sharing model oncooperating advertising with demand uncertainty, we solve three equilibrium resultson three different cases:1.no advertising efforts are made by the retailer,2. advertisingefforts are made by the retailer, but manufacturer does not share marketing costs,3.advertising efforts are made by the retailer, and manufacturer shares marketing costs.The optimal strategies are discussed, and the range of probability of success ofpromotional efforts when making marketing efforts of retailers is better than make noefforts,which offers theoretical reference to retailer on whether to do advertising.