Research on Advertising and Pricing in E-Supply Chain Under Different Dominant Modes

Yuyan Wang; Zhaoqing Yu

doi:10.21078/JSSI-2018-058-11

Article

Research on Advertising and Pricing in E-Supply Chain Under Different Dominant Modes

Yuyan Wang and Zhaoqing Yu

Published/Copyright: March 15, 2018

Published by

Become an author with De Gruyter Brill

Author Information

From the journal Journal of Systems Science and Information Volume 6 Issue 1

Abstract

The E-supply chain is formed gradually along with the development of network, which is getting more attention among enterprises with unique advantages. Three E-supply chain operation modes are constructed in this paper, then the optimal pricing and advertising strategies under those modes are studied and compared, which are demonstrated with numerical examples. The results of comparison and analysis show that: Selling price, network platform service level, advertising investment and the profits of manufacturer, network platform and E-supply chain all increase with advertising effectiveness of stimulating demand growth. Under centralized decision-making mode, service level is highest, advertising investment is largest and the profit of E-supply chain is highest as well. When manufacturer leads decentralized decision-making mode, not only network service level, advertising investment and the profit of manufacturer can gain better results, but also profit of network platform can be higher while the advertisement effect of increasing demand is big enough. Additionally, it is confirmed that centralized decision-making is better than decentralized decision-making for system operation. Besides, decentralized decision-making mode led by manufacturer is superior to it led by network platform on the condition that advertisement effect is obvious.

Keywords: E-supply chain; dominant mode; advertising strategy

Supported by the National Natural Science Foundation of China (71501111), the Natural Science Foundation of Shandong Province (ZR2014JL046)

Acknowledgements

The authors gratefully acknowledge the Editor and anonymous referees for their insightful comments and helpful suggestions that led to a marked improvement of the article.

References

[1] Chiang W Y K, Chhajed D, Hess J D. Direct marketing, indirect profits: A strategic analysis of dual-channel supply-chain design. IIE Transactions, 2005, 37(5): 407–427.10.1287/mnsc.49.1.1.12749Search in Google Scholar

[2] Thomas P, Alt R. Successful use of e-procurement in supply chains. Supply Chain Management: An International Journal, 2005, 10(2): 122–133.10.1108/13598540510589197Search in Google Scholar

[3] Sherer S A. From supply-chain management to value network advocacy: Implications for E-Supply Chains. Supply Chain Management: An International Journal, 2005, 10(2): 77–83.10.1108/13598540510589151Search in Google Scholar

[4] Iyer K N S, Germain R, Claycomb C. B2B e-commerce supply chain integration and performance: A contingency fit perspective on the role of environment. Information & Management, 2009, 46(6): 313–322.10.1016/j.im.2009.06.002Search in Google Scholar

[5] Valverde R, Saade R G. The effect of E-supply chain management systems in the North American electronic manufacturing services industry. Journal of theoretical and applied electronic commerce research, 2015, 10(1): 79–98.10.4067/S0718-18762015000100007Search in Google Scholar

[6] Lu Q, Liu N. Effects of e-commerce channel entry in a two-echelon supply chain: A comparative analysis of single- and dual-channel distribution systems. International Journal of Production Economics, 2015, 165: 100–111.10.1016/j.ijpe.2015.03.001Search in Google Scholar

[7] Araneda F C, Lustosa L J, Minner S. A contract for coordinating capacity decisions in a business-to-business (B2B) supply chain. International Journal of Production Economics, 2015, 165: 158–171.10.1016/j.ijpe.2015.03.016Search in Google Scholar

[8] Siddiqui A W, Raza S A. Electronic supply chains: Status & perspective. Computers & Industrial Engineering, 2015, 88: 536–556.10.1016/j.cie.2015.08.012Search in Google Scholar

[9] Kiselicki M, Josimovski S, Joncheski L. Implementation of internet technologies in the supply chain of SEMs in macedonia. Journal of Sustainable Development, 2015, 5(13): 69–87.Search in Google Scholar

[10] Xie J, Neyret A. Co-op advertising and pricing models in manufacturer-retailer supply chains. Computers & Industrial Engineering, 2009, 56(4): 1375–1385.10.1016/j.cie.2008.08.017Search in Google Scholar

[11] Ahmadi A, Hoseinpour P. On a centralized advertising model for a supply chain with one manufacturer and one retailer. European Journal of Operational Research, 2012, 219(2): 458–466.10.1016/j.ejor.2011.06.032Search in Google Scholar

[12] Aust G, Buscher U. Cooperative advertising models in supply chain management: A review. European Journal of Operational Research, 2014, 234(1): 1–14.10.1016/j.ejor.2013.08.010Search in Google Scholar

[13] Zhao L, Zhang J, Xie J. Impact of demand price elasticity on advantages of centralized advertising in a two-tier supply chain. International Journal of Production Research, 2016, 54(9): 2541–2551.10.1080/00207543.2015.1096978Search in Google Scholar

[14] Yan R. Centralized advertising, pricing strategy and firm performance in the e-marketing age. Journal of the Academy of Marketing Science, 2010, 38(4): 510–519.10.1007/s11747-009-0171-zSearch in Google Scholar

[15] Yan R, Cao Z, Pei Z. Manufacturer’s centralized advertising, demand uncertainty, and information sharing. Journal of Business Research, 2016, 69(2): 709–717.10.1016/j.jbusres.2015.08.011Search in Google Scholar

[16] Wang Y Y. Research on advertising coordination mechanism in direct marketing closed-loop supply chain (in chain). Journal of Industrial Engineering and Engineering Management, 2013, 27(4): 205–213.Search in Google Scholar

Appendix

Appendix 1 Proof of Conclusion 4

Comparing the optimal selling price of Parts 3.1 and 3.2, we can get

p1∗−p2∗=4δ2(α−βc)+ρ[4βγ2−8βδ2+δ2γ2+δ4]8β(4β−δ2),

which can be rewritten as

p1∗−p2∗=4δ2(α−βc−2βρ)+ρ[γ2(4β−δ2−γ2)+(γ2+δ2)2]8β(4β−δ2).

By the known, α − βc > 0, α denotes market saturation, big positive number. So it’s easy to prove p^1∗ − p^2∗ > 0.

Then compare p^1∗ and p^3∗,

p1∗−p3∗=−2γ2(α−βc)+ρ[8β2−γ4+δ4+2β(γ2−3δ2)](4β−δ2)(4β−δ2−γ2)=−γ2(2α−2βc−2βρ+ργ2)+ρ(4β−δ2)(2β−δ2)(4β−δ2)(4β−δ2−γ2).

By solving p^1∗ = p^3∗, we can get critical value

δ1=2β−γ2(2α−2βc−2βρ+ργ2)ρ(4β−δ2),

which is point B in Figure 2.

Therefore, by means of solving process of δ₁, we can compare p^2∗ and p^3∗ to get the other critical value δ₂.

p3∗−p2∗=(4α−4βc)(δ2+γ2)−ρ(4β−δ2−γ2)(4β+δ2+γ2)8β(4β−δ2−γ2).

Let p^3∗ = p^2∗, we have

δ2=4β−γ2−(4α−4βc)(δ2+γ2)ρ(4β+δ2+γ2).

Appendix 2 Proof of Conclusion 5

v2∗−v1∗=δ2ρ(4β−δ2)+2(2α+ργ2−2βc−2βρ)ρ(4β−δ2)−2(2α+ργ2−2βc−2βρ)16(4β−δ2)2.

By the known, α − βc > 0, α denotes market saturation, big positive number, then

ρ(4β−δ2)−2(2α+ργ2−2βc−2βρ)<0.

As a result, v^2∗ − v^1∗ < 0, that is, v^1∗ > v^2∗,

v3∗−v1∗=δ22(4β−δ2)(α−βc)+4β−δ2−γ2(2α+ργ2−2βc−2βρ)4(4β−δ2)24β−δ2−γ22⋅2(4β−δ2)(α−βc)−4β−δ2−γ2(2α+ργ2−2βc−2βρ).

Just like the proof process of v^1∗ > v^2∗, it is obvious to get the conclusion of v^3∗ > v^1∗.

Appendix 3 Proof of Conclusion 6

s2∗=ρ2γ216=14s1∗,s1∗−s3∗=γ2ρ4β−δ2−γ2+2(α−βc)ρ4β−δ2−γ2−2(α−βc)44β−δ2−γ22.

By the known, it’s easy to prove s^1∗ − s^3∗ < 0, namely s^3∗ > s^1∗.

Appendix 4 Proof of Conclusion 7

πm1∗−πm2∗=4βρ(8α−8βc−8βρ+3ργ2+ρδ2)(γ2−δ2)+(4α−4βc−4βρ+ργ2+ρδ2)2δ264β(4β−4δ2)>0,πe1∗−πe2∗=ρ(8αδ2+ρδ4+5ρδ2γ2−8βcδ2−12βρδ2−4βργ2)16(4β−δ2)=ρδ2(8α−8βc−8βρ+ρδ2+ργ2)+4ρ(δ2γ2−βδ2−βγ2)16(4β−δ2).

If advertising investment elastic coefficient is small enough, πe1∗<πe2∗ will be obtained. However, as advertising investment elastic coefficient increases, the relationship between πe1∗ and πe2∗ turns out just the opposite. Considering πm1∗>πm2∗, it is easy to prove π^1∗ > π^2∗.

Received: 2017-2-24

Accepted: 2017-6-20

Published Online: 2018-3-15

Published in Print: 2018-3-26

You are currently not able to access this content.

Articles in the same Issue

https://doi.org/10.21078/JSSI-2018-058-11

Keywords for this article

E-supply chain; dominant mode; advertising strategy