With the development of e-commerce and mobile payment, platform sales become unstoppable, and many manufacturers also encroach on online market by establishing direct selling channels. Channel conflict intensifies in online market and quality differentiation and is widely used in business practice as an effective way to alleviate such a competition. The authors study a retail platform's sales strategy and interactions with an upstream manufacturer's encroachment strategy in this paper. Unlike most online marketplace and encroachment research, product quality selection is also engaged in the present research to capture the motivation above.
The authors analyze a game-theoretical model that the platform as the first/second mover participates in strategic decision-making, and then jointly decides the product quality level with manufacturer.
The authors find that encroachment always profits the manufacturer and almost hurts the platform. Interestingly, the first-mover advantage can help the platform guide the manufacturer encroachment and promote a “win–win” situation when product quality level is relatively slight or obvious. Nevertheless, the second-mover advantage can help the platform alleviate the profit loss caused by encroachment when product quality level is moderate. Furthermore, suffered from encroachment loss, the platform can make a credible threat by sales termination to restrain manufacturer encroachment.
This paper innovatively explores the strategic interaction between manufacturer encroachment and quality differentiation in a platform supply chain, and further analyzes the first-mover advantage in this interaction, which fills the gaps of previous platform research and has great significances to enterprise production and operational decision in business practice.
The authors sincerely thank the editor in chief, Prof. Hing Kai Chan, and three anonymous reviewers for their constructive comments and suggestions that help improve the quality of the study. This study was funded in part by the National Natural Science Foundation of China (72032001, 71971137), Chenguang Program of Shanghai Municipal Education Commission (20CG56) and Scientific and Innovative Action Plan of Shanghai (22692110700, 21692109300).
Zhou, L., Fan, T., Zhang, L. and Chang, L. (2022), "Quality differentiation with manufacturer encroachment: is first mover always an advantage for retail platform?", Industrial Management & Data Systems, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IMDS-07-2022-0403
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