Research On Product Pricing With Valueadded Service And Coordination Mechanism In Supply Chain

With the arrival of the buyer’s market, the competitions between enterprises become more intense, the traditional competition strategy is unable to meet the diversified consumer demands. Many enterprises and scholars start to analyze the impact of non-price factors on the supply chain strategy, and the value-added service is one of the most important factors. The differentiation of value-added services provided by enterprises can increase product utilities, enhance customer satisfaction and loyalty, and improve market competitiveness. Based on the related theory about the supply chain management and the value-added service,this paper adds the value-add service into the market demand function, and discusses the optimal strategies and the coordination mechanism of supply chain members.Firstly, the paper considers the supply chain composed by one manufacturer and one retailer, and builds a mathematical model with the product price and the valueadded service. The manufacturer follows a Stackelberg game with the retailer under two conditions that the manufacturer dominates and the retailer dominates, then the optimal pricing and value-add service level in the supply chain are obtained when the manufacturer provides the value-add service to customers, and the influence of the service cost coefficient on the supply chain strategies though simulation example is analyzed. The study shows that the manufacturer will not pursue a high level of valueadded service blindly. Only when the market demand is sensitive to the value-added service, or the cost coefficient of manufacturers’ value-added service is low, they will improve the service level to cater for the consumer market. On the contrary, they will reduce the product cost and take a low-cost strategy.Secondly, the alternative product is considered into the supply chain strategy on the basis of above research, the supply chain is extended into two competitive manufacturers and one retailer. Analyzing the optimal strategy of supply chain members under different market structures when manufacturers compete in product prices and services simultaneously, and the further analysis is given by a simulation example. It shows that enterprise’s supply chain strategy will be affected by the service cost coefficient of itself and the competitor, but the influence of its competitor is relatively smaller. At the same time, the manufacturer reduces the service cost coefficient will get more profits for the manufacturer and the retailer, but its competitor will be adversely affected.Finally, the coordination mechanism that the manufacturer outsources the valueadded service to the retailer who has the advantage of providing services is discussed,and the simulation example is used to analyze its feasibility. It finds that the manufacturer prefer to cooperating with the retailer who has a lower service cost coefficient, and supply chain cooperative enterprises can get more profit from the coordination mechanism, but the competition manufacturer’s profit will be reduced.