Strategies for Improving the Capabilities of a Weak Main Manufacturer in Complex Products Systems

Abstract

This paper examines possible strategies for helping a weak main manufacturer to improve its indigenous technological capabilities. We consider two competitive suppliers and one main manufacturer that exhibit differential abilities within a supply chain of complex product systems (CoPS). The weak main manufacturer is focused on encouraging a powerful supplier to license its technology to a domestic supplier and on cultivating a relationship with the domestic supplier. We have designed a cost-sharing (no-licensing, NL) contract and a technology licensing (TL) contract to facilitate cultivation of the supplier relationship and cooperation with regard to technology. The optimal decisions and comparative analysis are characterized under a scenario of cost-sharing and technology licensing based on a benchmark model. The results show that both contracts are effective with respect to technology cooperation and supplier cultivation. However, additional findings show that the most efficient scenario is associated with the TL contract. Numerical examples have been employed for analyzing the validity of a variety of strategies. as well as determining the effect of key parameters on optimal decisions. Useful management insights regarding cooperation strategy and optimal decisions are also obtained.