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1、DirectMarketing,IndirectProfits:AStrategicAnalysisofDual-ChannelSupply-ChainDesignWei-yuKevinChiang•DilipChhajed•JamesD.HessDepartmentofInformationSystems,UniversityofMarylandatBaltimoreCounty,Baltimore,Maryland21250DepartmentofBusinessAdministration,UniversityofIllinoisatUrbana–Champaign,Champaign
2、,Illinois61820DepartmentofBusinessAdministration,UniversityofIllinoisatUrbana–Champaign,Champaign,Illinois61820kevin@wchiang.net•chhajed@uiuc.edu•jhess@uiuc.eduheadventofe-commercehaspromptedmanymanufacturerstoredesigntheirtraditionalTchannelstructuresbyengagingindirectsales.Themodelconceptualizes
3、theimpactofcustomeracceptanceofadirectchannel,thedegreetowhichcustomersacceptadirectchan-nelasasubstituteforshoppingatatraditionalstore,onsupply-chaindesign.Thecustomeracceptanceofadirectchannelcanbestrongenoughthatanindepentmanufacturerwouldopenadirectchanneltocompetewithitsownretailers.Here,dire
4、ctmarketingisusedforstrategicchannelcontrolpurposeseventhoughitisinefficientonitsownand,surprisingly,itcanprofitthemanufacturerevenwhensodirectsalesoccur.Specifically,weconstructaprice-settinggamebetweenamanufactureranditsindependentretailer.Directmarketing,whichindirectlyincreasestheflowofprofitsthrou
5、ghtheretailchannel,helpsthemanufacturerimproveoverallprofitabilitybyreducingthedegreeofinefficientpricedoublemarginaliza-tion.Whileoperatedbythemanufacturertoconstraintheretailer’spricingbehavior,thedirectchannelmaynotalwaysbedetrimentaltotheretailerbecauseitwillbeaccompaniedbyawholesalepricereducti
6、on.Thiscombinationofmanufacturerpullandpushcanbenefittheretailerinequilibrium.Finally,weshowthatthemerethreatofintroducingthedirectchannelcanincreasethemanufacturer’snegotiatedshareofcooperativeprofitsevenifpriceefficiencyisobtainedbyusingotherbusinesspractices.(SupplyChainManagement;ChannelsofDistri
7、bution;Internet/DirectMarketing;e-Commerce;CompetitiveStrategy;GameTheory)1.Introductionvoicethebeliefthatordersplacedthroughamanu-TherapiddevelopmentofcommerceontheInternetfacturer’sdirectchannelareordersthatsho