Impact of Channel Power and Fairness Concern on Supplier's Market Entry Decision

12 Pages Posted: 24 Apr 2018

See all articles by Baozhuang Niu

Baozhuang Niu

School of Business Administration, South China University of Technology

Qinquan Cui

affiliation not provided to SSRN

Jie Zhang

Guangdong University of Finance and Economics

Date Written: February 2017

Abstract

In a two-stage supply chain comprising a supplier and a retailer, we incorporate the concepts of channel power and fairness concern to analyze the supplier’s decision on whether to open an online direct channel or not. With an online channel, the supplier competes with its retailer in a dual-channel system, but the retailer may shift part or all orders to another supplier as the counteraction. Otherwise, the supplier only obtains the wholesaling profit but loses that from the online market. Taking the retail prices and the quality of the online product as decision variables, we show that the introduction of a direct channel leads to the decline of online product’s quality and retail price. Interestingly, we find that the retailer’s profit may be decreasing in its channel power. Comparing the outcomes with those from pure competing channels, we find that the retailer’s order shifting strategy may result in a lose–lose situation for the two firms, but it can be a credible threat to the supplier’s market entry. We also find that the supplier’s fairness concern may effectively reduce its incentives to open an online channel.

Keywords: supply chain management, dual channel, quality decision, market entry, fairness concern

Suggested Citation

Niu, Baozhuang and Cui, Qinquan and Zhang, Jie, Impact of Channel Power and Fairness Concern on Supplier's Market Entry Decision (February 2017). Journal of the Operational Research Society, Vol. 68, Issue 12, 2017, Available at SSRN: https://ssrn.com/abstract=3161472 or http://dx.doi.org/10.1057/s41274-016-0169-0

Baozhuang Niu

School of Business Administration, South China University of Technology ( email )

Wushan
Guangzhou, AR Guangdong 510640
China

Qinquan Cui

affiliation not provided to SSRN

No Address Available

Jie Zhang (Contact Author)

Guangdong University of Finance and Economics ( email )

21 Luntou Road
Guangzhou, Guangdong 510320
China

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
0
Abstract Views
114
PlumX Metrics