Outsourcing And Pricing Decisions With Market Competition

This paper studies the outsourcing strategy of firm in the competition of supply chain.Our study discusses how the decision-making of supply chain is influenced by factors such as outsourcing strategy and market price competition.We set up two kinds of competing for supply chain by three game models:(1)two competitive supply chains are centralized(both companies do not use the outsourcing);(2)supply chain are decentralized(both firm use the outsourcing);(3)one supply chain is the centralized,another is a decentralized supply chain(a business outsourcing,another enterprise did not use outsourcing).Each company uses retail outsourcing.We use two competitive models:(1)the quantity competition model(Cournot quantity competition),(2)price competition model(Bertrand retail competition).under the same structure of supply chain structure,we find that when the firm using the quantity competition model,they will have higher sales without outsourcing,and they can gain profit advantage in this game.In addition,we also find that when the market competition is fierce in price competition mode,these two outsourcing decentralized structures are not only the equilibrium solution of the enterprise but also the balance of supply chain solutions.When the market competition is more intense,if other competitors in the supply chain adopt the outsourcing strategy,the enterprise will not benefit from the outsourcing strategy.Unlike traditional supply chain management,we find that centralized supply chain management doesn't always mean better.In fact,when the market is competitive,decentralized decisions may be better for the company(leader of Stackelberg-game)and the entire chain.we studied the outsourcing under Cournot quantity competition about the retailer's order decision problem deeply.We suppose that with the compose of two manufacturers and one retailer in the supply chain,the two manufacturers in a linear function in the market competition,the retailer pays to the manufacturer‘s profit model for bilateral model.When the market size is not disturbed,the retailer's orders for the two products are symmetrical.When the market demand increases or decreases,the manufacturer's cost will increase or decrease,and the retailer's order quantity will increase or decrease,so as to maximize profit.Through a large number of analysis,we find that there are different purchase quantity decisions under different market disturbances.