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Quality differentiation with manufacturer encroachment: is first mover always an advantage for retail platform?

Lixi Zhou (School of Business, East China University of Science and Technology, Shanghai, China)
Tijun Fan (School of Business, East China University of Science and Technology, Shanghai, China)
Lihao Zhang (Logistics Research Centre, Shanghai Maritime University, Shanghai, China)
Luyu Chang (Logistics Research Centre, Shanghai Maritime University, Shanghai, China)

Industrial Management & Data Systems

ISSN: 0263-5577

Article publication date: 13 December 2022

21

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Keywords

Acknowledgements

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).

Citation

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

Publisher

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Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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