Leadership, Dominance, and Preeminence in a Channel Structure with a Common Retailer

Abstract

As firms embrace collaborative principles, partners of varying strengths and standing are coming together to deliver products effectively to consumers. In a two-tier collaborative channel, a partner's relative standing is manifest in the order in which wholesale and retail prices are determined; in turn, standing influences a partner's ability to achieve profits. We propose a framework, based on two factors that specify the strength of partners across channel tiers (channel leadership) and within a tier (echelon dominance) and together determine a partner's standing in the pricing process, to effectively study various channel strength scenarios. Our analysis of Stackelberg games corresponding to these scenarios reveals interesting insights regarding the impact of channel leadership and echelon dominance, both individually and jointly. For instance, we show that the presence of a dominant player in the upstream manufacturing tier benefits both the dominant and the weak manufacturers. The leadership-dominance framework also allows us to study the effect of a retailer's sequencing of its pricing of the two manufacturers' products. By embedding the retailer's timing choices in channel strength scenarios, we find that both the retailer and weak manufacturer prefer that the retailer set prices for the two products simultaneously; in contrast, the echelon-dominant manufacturer benefits from the retailer sequentially pricing the manufacturers' products. Our analysis also covers preeminent channel leaders that control both wholesale and retail prices, finding that preeminent partners achieve significant gains and consumers benefit from low retail prices. Moreover, the weak manufacturer benefits from the presence of a preeminent manufacturer.

Supply chain leadership: A systematic literature review and a research agenda

“…The SCL concept is much broader than a power or domination-based concept of channel leadership as it focuses on the collaborative behaviours of a firm which seeks to improve the performance of the entire supply chain (Defee et al, 2009;Defee, 2007). Nonetheless, it should be noted that channel leadership concept focuses very much on the downstream element in a supply chain, with particular emphasis on the marketing and distribution functions (Fang et al, 2018;Genc and Giovanni, 2017;Guo et al, 2017). As such, it can be seen as operating on a 'subset' of the whole spectrum of action of SCL as per our definition; thus, the channel leadership concept lacks the holistic perspective which is intrinsic to the SCL concept.…”

Channel configuration in a complementary market under different power structures

“…Shi, Zhang, and Ru (2013) show that the impact of power structure on supply chain performance depends on both the expected demand and demand shock. Fang, Gurnani, and Natarajan (2018) consider decision sequences both across channel tires (channel leadership) and within a tier (echelon dominance) and compare the relative impact on channel performance. Unlike these papers, we define three power structures through the decision sequences of channel configuration.…”

Effects of Parallel Importation and Power Structures on Price Competition in Duopolistic Supply Chains

“…With the outbreak of the COVID-19 epidemic, the latter gradually came to account for 50% of the market share and decided on the price of masks together with 3M, which can be considered a Nash game. Another example is the battle between Pepsi and Coca-Cola, in which the two are evenly matched for market share in some countries, while the market in other countries has earned Pepsi (or Coca-Cola) wide favor for consumers' taste preferences [18]. Namely, power structures, including Nash and Stackelberg games, prevail and influence stakeholder competition.…”