نقش استراتژی در سمت تقاضا در رقابت های کیفی
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|6870||2013||21 صفحه PDF||سفارش دهید||5747 کلمه|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : International Journal of Production Economics, Available online 4 June 2013
The research questions studied in this paper concern the role of demand side strategy for a firm engaged in duopolistic competition in quality and price. A demand side strategy research looks towards markets and consumers unlike the traditional resource side strategy research that looks upstream – into the firm's resources and its supply side. We examine whether following a demand side strategy would benefit the firm, the consumers or both. In a market where two firms are competing with each other, we first find the equilibrium quality and price levels for the traditional case where the two firms optimize their own profit function. We use this case as a benchmark case for comparison. Next, we let one firm (the lower quality firm) adopt a demand side strategy operationalized by an objective function where the profit is augmented by consumer surplus. The equilibrium results show that a demand side strategy would increase the product quality level in the market, and improve the adopter firm's competitiveness at the same time increasing the market consumer surplus. We also study the case where the higher quality firm adopts demand side strategy and compare the results with the two cases mentioned above. Overall, we find that adopting a demand side strategy would benefit the adopter firm's profitability and the consumers. We, therefore, find evidence of what the strategy literature has been predicting about the role of demand side strategy.
Currently, research in demand side strategy is getting a lot of attention in the strategic management field. Demand side strategy research looks towards markets and consumers, which is opposite to a resource side strategy research that looks upstream — into the firm’s resources and its supply side. In this context, researchers make a distinction between value capture and value creation. Value capture is concerned with the structure and resource ownership in the value system (see Bowman and Ambrosini, 2000, Bowman and Ambrosini, 2010, Priem, 2001 and Priem, 2007). Activities that capture value in a firm include primary activities in a supply chain like purchasing, operations, sales and service (Bowman and Ambrosini, 2007). In general, the resource based view (RBV) strategy focuses on value capture ( Makadok and Coff, 2009 and Lockett et al., 2009). Value creation, on the other hand, focuses on the consumer side of the operation. Recent strategy literature is focusing on the theory that the economic value is gained mainly by the use of consumers (Kor et al., 2007). Consumer focus, therefore, is a viable strategy for the firms. These researchers argue that value creation is supported by a “demand side” strategy. According to Priem and Swink (2012), a demand side research is concerned with a firm’s value creation rather than value capture. Value creation is determined by consumers’ perception of the utility from the firm’s end product. It has been argued in the research that focusing on value creation by following a demand side strategy will enhance the utility for the consumers and, therefore, should improve the profitability of the firm. Recently, a number of industry examples of firms using value creation are found. Google Android has increased its worldwide smart-phone market share from 33% in 2010 to 75% in 2012, while its main competitor Apple IOS holds a market share of only 15% as of 2012. The success of Android can be attributed to its unique strategy that is fully concerned with customers’ needs. First, its open source code and liberal licensing allow the software to be freely modified and customized to meet individual consumer needs. Secondly, since Android fully authorizes customers to customize these products to maximize their utility, Android crated a large community of developers writing applications (apps) that in turn improves the quality and functionality of the software and eventually enhances its competitive advantage. Another example is that of the retailer Tesco. Tesco’s success in the past decades has been attributed to the demand side strategy that focuses on customers. Tesco collects customers’ consumption behavior information from its loyalty card, called “Clubcard” and then categorizes them into around 5000 subgroups. These form the market segments ranging from “Tesco Value” to “Tesco Finest”. Tesco’s strategy to focus on people enhances its consumers’ utility and in turn gains customer loyalty and thus competitive advantage. In this paper, we develop a model to analytically test whether it is really beneficial for a firm to follow a demand side strategy. As the design quality level of a product is one of the most important attributes for a consumer to choose a product, it is important for the firm to design and offer a product with the optimum level of quality. Higher quality will increase the utility of the product and attract more customers. On the other hand, offering a product with a higher level of design quality will be costlier, as the cost of the product would increase with the design quality level (Mukhopadhyay and Kouvelis, 1997). Higher cost, in turn, will result in higher prices which would deter some customers from buying the product. This implies that an optimal quality level exists. Our paper is concerned with the interaction between quality and price in a duopoly. We first derive the optimum policies in a benchmark case where both firms follow the traditional policies of maximizing their own profits. Next, we derive a model where one of the firms, in turn, follows a demand side strategy which maximizes the sum of its own profit and the consumers’ utility. We compare the profitability of the firm that follows the demand side strategy with that in the benchmark case where no demand side strategy is followed. This paper is organized as follows. In Section 2, we briefly review the relevant literature. In Section 3, we develop our duopoly model. In Section 4, we solve the benchmark case to obtain optimum policies. The demand side strategy model is developed in Section 5 which is then compared with the benchmark case. In Section 6, we extend our model to study a Stackelberg price leadership game case. Section 7 concludes the paper highlighting managerial insights and further research directions.
نتیجه گیری انگلیسی
In this paper, we consider a duopoly where two firms are competing on quality and price in a market where consumers’ preferences are heterogeneous and random. We have studied the effect of adopting a demand side strategy on the design quality level offered by both firms and their profitability and overall market efficiency measured by the total consumer surplus in the market. While demand side strategy is being studied in the strategy literature as a means of value creation as opposed to the conventional resource based view of value capture, ours is the first study in supply chain management area, specifically applied to quality competition. To follow a demand side strategy in supply chain management, a firm should not just maximize its own profit but also maximize the sum of its own profit and the expected consumer surplus. This is the way we operationalize the demand side strategy of “looking downstream from the focal firm” (Priem et al., 2012). In our duopoly, the firms have differential quality levels and therefore have price differences. We study the two cases where in the first case, the firm with lower quality level adopts demand side strategy while the higher quality firm does not. In the next case, roles are reversed. The optimum results in terms of quality level, profits and the resultant market consumer surplus are then compared with a benchmark case where neither firm adopts demand side strategy and follows the traditional own-profit maximization strategy. The results bring out interesting managerial guidelines. The lower quality firm should follow a demand side strategy and increase its utility level. This will increase its profitability. It will also increase the supply chain efficiency by raising the level of consumer surplus. The overall quality level in the market will also increase. If the higher quality firm adopts demand side strategy, it will see similar increase in its profitability, but overall quality level in the market will go down. In either case, the market will benefit from increased consumer surplus. For further research, it will be interesting to study what happens when both firms adopt demand side strategy simultaneously. As in our analysis, we found opposite effect on quality increase, the overall effect on quality when both firms adopt the demand-side policy will be an important result. It will also be interesting to see if our results would be different in some way if the firms are differentially efficient in improving quality meaning that their quality cost parameters have unequal values.