Two analytical essays in distribution channels

Pao Yue-kong Library Electronic Theses Database

Two analytical essays in distribution channels

 

Author: Fang, Dalu
Title: Two analytical essays in distribution channels
Degree: Ph.D.
Year: 2017
Subject: Strategic planning.
Marketing.
Business logistics -- Management.
Hong Kong Polytechnic University -- Dissertations
Department: Dept. of Management and Marketing
Pages: xi, 98 pages : color illustrations
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b2949926
URI: http://theses.lib.polyu.edu.hk/handle/200/8838
Abstract: Essay 1: A Signaling Model of Co-Branding with an Ingredient Supplier - In the real world, product quality may not be readily observable to consumers. For example, without actually using a computer for a long time, consumers are unlikely to be able to assess its durability. In such situations, consumers often use brand name (as well as price) as a cue to infer quality. In the PC industry, co-branding strategy is commonly observed. Producers such as Lenovo, Dell and Hewlett-Packard display not only their own brand name ("host brand") on their computers, but also those of some key ingredients provided by independent suppliers ("ingredient brand") (e.g., a Intel CPU sticker and a Nvidia Graphics sticker). Consumers therefore may use both the host brand and the ingredient brand to infer the quality. The objective of this research is to investigate a manufacturer's incentives to co-brand with an ingredient supplier for signaling purposes. To explore the optimal conditions for co-branding and their implications for quality signaling we develop a series of game theoretical models. In our model, while a manufacturer produces a final product, the quality of the product is determined by an ingredient and unobservable to some consumers. We consider two possibilities for the ingredient: it is of high quality and has brand equity, and it is of low quality and has no brand equity. We also consider two addtional costs associated with manufacturer's co-branding strategy: a lump sum cost of contracting with the ingredient supplier, and a variable cost of labeling the ingredient brand on the final product. We derive the manufacturer's optimal strategies under the scenarios with ingredient co-branding or without it (i.e., price signaling only). Our model provides the conditions under which the manufacturer prefers to facilitate an ingredient co-branding strategy over the non-cobranding strategy when ingredient co-branding is an available option for the manufacturer. In the process, we address the following questions: What are the advantages of ingredient co-branding in quality signaling when it compares to noncobranding signaling? How manufacturer capitalize the ingredient brand equity? How does wholesale price and two additional cost in co-branding make impact on manufacturer's strategy equilibrium? Our research makes following contributions to the literature. First of all, this paper enriches the quality signaling literature by provide an analytical model to signaling quality through ingredient branding, and add one more framework to adopt quality signaling in channel context. Second, we demonstrate how manufacturer facilitate ingredient co-branding strategy to signaling the product quality, and how brand equity is capitalized in the process. Third, our findings provide theoretical and managerial implications for the rational behind ingredient co-branding strategy.
Essay 2: Advance Selling in a Supply Chain - Advance selling has gained much popularity in recent years. Developing closely alongside Internet technology, advance selling enables sellers to expand the market by serving consumers who are not accessible with traditional spot selling. Conversely, due to the temporal separation between purchasing and consumption, consumers incur a disutility in advance buying, which puts a downward pressure on price and makes advance buying particularly appealing to price-sensitive, low-end consumers. In this paper, based on these two stylized facts and abstract from capacity and information issues, we develop a direct seller model and a bilateral-monopoly supply chain model to investigate a seller's advance selling strategy (i.e., spot selling only, advance selling only, or both spot and advance selling) and how the seller's decision is affected by a supplier. Analysis shows that because a supplier is motivated to induce the market equilibrium that is most favorable to itself, it has important impact on the downstream firm's advance selling strategy. The two firms consider different factors when making their respective decisions. The seller will adopt it only if advance selling is able to yield a positive margin, whereas the supplier's decisions on the wholesale price and whether to use the wholesale price to change the seller's strategy are dependent on advance selling's ability to expand the market size. Conventional wisdom suggests that due to the double marginalization problem, a seller in a supply chain is faced with a high marginal cost that discourages the seller to adopt advance selling to expand the market and price-discriminate consumers. We show that this is not necessarily the case in our model. We elucidate the conditions under which a seller in a supply chain has greater incentives to adopt a spot and advance selling strategy than a direct seller.

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