Retailer’s Optimal Price Negotiation Strategy For Supply Chain With Competing Manufacturers

There are two major trends of Chinese retail industry in recent years. On the one hand, with the environment of national macroeconomic growth slower, E-commerce expansion and competition in the industry increasing, bringing great challenge to our retailing firms. Most of the traditional retail enterprises have no choice but close locations even the leading enterprise. On the other hand, with the intensification of market segmentation and product differentiation is more and more obviously, the customer demand has been increasingly. Retailers largely become the price maker and able to influence market demand. Especially the large retailer, act as an increasingly important position in the market.Based on the literature review, this paper studies a two level supply chain with two competing manufacturers and one retailer, the common retailer as the Stackelberg leader sells both manufacturers’ substitute products. This paper develops three pricing decision models by considering manufacturer’ production cost information sharing strategy separately. The pricing policies of the retailer are analyzed by building the expected revenue models for both manufacturers and retailer. By solving models, we obtain the optimal price strategy of the retailer under each circumstance. After that we make comparative analyses for the optimal decisions, future refines the management significance and value of the results.Conclusions show that the retailer is better off by adopting price negotiation strategy with manufacturers respectively while none of two manufacturers sharing their production cost information or only one does. The retailer can earn the highest profit by adopting joint price negotiation strategy while both manufacturers sharing their production cost information as well as the lower cost manufacturer. For manufacturer, because of lower cost, higher cost manufacturer benefits more than the other. For the lower cost manufacturer, its profit is minimal when only he shares the cost information, higher while none of manufacturers want to share production cost information with retailer. For the higher cost manufacturer, whether sharing the production cost information depending on some relevant parameters. But when the potential market demand sufficient, the higher cost manufacturer should share the production cost information to obtain the optimal profit.