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Price competition and service hitchhiking dual channel coordination mechanism

Author: SunZuo
Tutor: AiXingZheng
School: University of Electronic Science and Technology
Course: Management Science and Engineering
Keywords: dual channel price competition service free-riding revenue-sharing quantity discount
CLC: F724.6;F224
Type: Master's thesis
Year: 2011
Downloads: 286
Quote: 3
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Abstract


Along with the rapid popularization of the Internet, consumers’ online shopping habits are changing: In the past most of them prefer to learn about products through the Internet before go to the hypostatic stores ; Currently the opposite is true, the customers usually go in stores, consult and experience, then to compare similar products and purchase online. Due to the lack of direct contact with the products, the logistics distribution and after-sales service also has been much criticized, therefore, more and more virtual Internet companies began to establish hypostatic shop to break through the bottleneck of e-commerce. Meanwhile, the traditional channel companies have also began to try Internet marketing. Dual-channel strategy has become the trend of enterprise, it would cause a channel conflict. There is no meaning to simply consider how to resolve channel conflict, the fundamental way is enterprise should constantly strengthen channel management and adjust marketing strategy, to achieve a win-win status instead of conflict and competition.We analyze dual-channel e-commerce environment for horizontal and vertical conflict,we also consider the potential dual-channel market share, price competition and service free-riding behaviors, and explore possible revenue sharing contracts and quantity discounts to improve the performance of dual-channel, the main research results are as follows:Considering the centralized decision-making, the high cost of services will reduce the overall gain of dual channel, price competition undermines the benefits of system, two-way free-riding behavior increases the overall revenue. Manufacturer achieves minimum income at a certain potential market share of traditional channel.From the decentralized decision-making’s perspective, when the dual channel potential market share is similar, enterprise will strategically cut price and even make price war, homogenization competition is intense, the interests of both parties have suffered damage. When it refer to potential market share of traditional channels, the manufacturer of small share gains to be significantly higher than the larger, and this shows that high market share of the electronic channels will benefit manufacturers. When the potential market share of traditional channels is larger, as the manufacturer’s revenue enhancement and increased price competition, manufacturers will benefit from intense price competition. No matter how big the potential market share of traditional channel, free riding behavior will lead to service overflow so that both sides benefit.Considering the price competition and the two-way free riding behaviors of services, we introduced the quantity discount contract, revenue sharing to coordinate the dual channel supply chain. At certain conditions, manufacturers can adjust the revenue sharing proportion or quantity discount rate to guide the retailer to accept the contract, in order to achieve win-win situation. We found that the proportion of revenue sharing and the rate of quantity discount contract are different as the scale of dual-channel potential market shares. Finally, we show related cases to provide a reference implementation.

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CLC: > Economic > Economic planning and management > Economic calculation, economic and mathematical methods > Economic and mathematical methods
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