Brand Franchise Supply Chain Partnership Based on Online and Offline Integrating Strategy

Rong Wang

Antai College of Economics & Management, Shanghai Jiao Tong University, Shanghai, China..

DOI: 10.4236/ajibm.2013.34050                

Abstract

Taking advantage of online shopping affecting major parameters of corporate business including customer experience, customer word-of-mouth diffusion and customer complaints sharing, price elastic of consumer demand, and consumer brand loyalty, this paper focuses on the role of brand franchise supply chain partnership in the online and offline integrating environment. The findings suggest that the transfer payment shall be the critical contract clause to coordinate the brand franchise supply chain partnership to implement Pareto optimal strategy on VMI policy. Moreover, the optimal transfer payment has a strong positive relativity with the complementary of the online-offline shopping and VMI scale economic effect, whereas negative relativity with the substitutability of the online-offline shopping and VMI holding cost. The more VMI scale economic effect enhances, the larger online-offline integrating shopping market shares and the more system revenue shall be obtained in the brand franchise supply chain whereas taking advantage of the less transfer payment. The more VMI holding cost decreases, the larger online-offline integrating shopping market shares and the more system revenue shall be obtained in the brand franchise supply chain whereas taking advantage of the less transfer payment.

Keywords

Brand Franchise Supply Chain; Transfer Payment Contract; Online-Offline Integrating Strategy; VMI Policy; Scale Economic Effect

Conflicts of Interest

The authors declare no conflicts of interest.

References

[1]	ITU, “History and Growth of the Internet from 1995 till Today,” International Telecommunications Unions, Geneva, 2013.
[2]	J. Alba, J. Lynch, B. Weitz, C. Janiszewski, R. Lutz, A. Sawyer and S. Wood, “Interactive Home Shopping: Consumer, Retailer, and Manufacturer Incentives to Participate in Electronic Marketplaces,” Journal of Marketing, Vol. 61, No. 3, 1997, pp. 35-53. doi:10.2307/1251788
[3]	E. Brynjolfsson and M. D. Smith, “Frictionless Commerce? A Comparison of Internet and Conventional Retailers,” Management Science, Vol. 46, No. 4, 2000, pp. 563-585. doi:10.1287/mnsc.46.4.563.12061
[4]	A. Chaudhuri and M. B. Holbrook, “The Chain of Effects from Brand Trust and Brand Affect to Brand Performance: The Role of Brand Loyalty”, Journal of Marketing, Vol. 65, No. 4, 2001, pp. 81-93. doi:10.1509/jmkg.65.2.81.18255
[5]	A. M. Degeratu, A. Rangaswamy and J. Wu, “Consumer Choice Behavior in Online and Traditional Supermarkets: The effects of Brand Name, Price and Other Search Attributes,” International Journal Research in Marketing, Vol. 17, No. 1, 2001, pp. 55-78. doi:10.1016/S0167-8116(00)00005-7
[6]	CNNIC, “The 31st Statistical Report on Internet Development in China,” China Internet Network Information Center, Beijing, 2013.
[7]	M. L. Roberts and D. Zahay, “Internet Marketing,” Wadsworth Publishing Company, Inc., Belmon, 2012.
[8]	Harris Interactive, “The Annual Customer Experience Impact Report,” RightNow, 2012, pp. 1-6.
[9]	C.-C. Chang and Y.-C. Chin, “Comparing Consumer Complaint Responses to Online and Offline Environment,” Internet Research, Vol. 21, No. 2, 2011, pp. 124-137. doi:10.1108/10662241111123720
[10]	P. J. Danaher, I. W. Wilson and R. A. Davis, “A Comparison of Online and Offline Consumer Brand Loyalty,” Marketing Science, Vol. 22, No. 4, 2003, pp. 461-476. doi:10.1287/mksc.22.4.461.24907
[11]	P. K. Chintagunta, J. Chu and J. Cebollada, “Quantifying Transaction Costs in Online/Offline Grocery Channel Choice,” Marketing Science, Vol. 31, No. 1, 2012, pp. 96-114. doi:10.1287/mksc.1110.0678
[12]	G. Rothery, “The Matchmaker,” Marketing Age, 2008.
[13]	J. Chu, P. Chintagunta and J. Cebollada, “A Comparison of Within-Household Price Sensitivity across Online and Offline Channels,” Marketing Science, Vol. 27, No. 2, 2008, pp. 283-299. doi:10.1287/mksc.1070.0288
[14]	N. Granados, A. Gupta and R. J. Kauffman, “Online and Offline Demand and Price Elasticities: Evidence from the Air Travel Industry,” Information Systems Research, Vol. 23, No. 1, 2012, pp. 164-181. doi:10.1287/isre.1100.0312
[15]	X. Li, B. Gu and H. Liu, “Price Dispersion and LossLeader Pricing: Evidence from the Online Book Industry,” Management Science, Vol. 59, No. 6, 2013, pp. 1290-1308. doi:10.1287/mnsc.1120.1642
[16]	Gérard P. Cachon, “Supply Chain Coordination with Contracts,” In: S. Graves and T. de Kok, Eds., Handbooks in Operations Research and Management Science: Supply Chain Management, Chapter 6, North-Holland, Amsterdam, 2003.
[17]	Y. Wang, “Overview of Supply Chain Contract Problem Driven by Customer Demand,” Journal of Management Sciences in China, Vol. 8, No. 2, 2005, pp. 68-76.
[18]	B. A. Pasternack, “Optimal Pricing and Return Policies for Perishable Commodities,” Marketing Science, Vol. 4, No. 2, 1985, pp. 166-176. doi:10.1287/mksc.4.2.166
[19]	K. L. Donohue, “Efficient Supply Contracts for Fashion Goods with Forecast Updating and Two Production Modes,” Management Science, Vol. 46, No. 11, 2000, pp. 1397-1411. doi:10.1287/mnsc.46.11.1397.12088
[20]	T. Taylor, “Supply Chain Coordination under Channel Rebates with Sales Effort Effects,” Management Science, Vol. 48, No. 8, 2002, pp. 992-1007. doi:10.1287/mnsc.48.8.992.168
[21]	H. Krishnan and R. Kapuscinski and D. A. Butz, “Coordinating Contracts for Decentralized Supply Chains with Retailer Promotional Effort,” Management Science, Vol. 50, No. 1, 2004, pp. 48-63. doi:10.1287/mnsc.1030.0154
[22]	Y. Bassok and R. Anupindi, “Analysis of Supply Contracts with Total Minimum Commitment,” IIE Transactions, Vol. 29, No. 5, 1997, pp. 373-381. doi:10.1080/07408179708966342
[23]	K. Moinzadeh and S. Nahmias, “Adjustment Strategies for a Fixed Delivery Contract,” Operations Research, Vol. 48, No. 3, 2000, pp. 408-423.
[24]	Gérard P. Cachon and Martin A. Lariviere, “Contracting to Assure Supply: How to Share Demand Forecasts in a Supply Chain” Management Science, Vol. 47, No. 5, 2001, pp. 629-646. doi:10.1287/mnsc.47.5.629.10486
[25]	G. D. Eppen and A. V. Iyer, “Backup Agreements in Fashion Buying: The Value of Upstream Flexibility,” Management Science, Vol. 43, No. 11, 1997, pp. 1469-1484.
[26]	G. P. Cachon and R. Swinney, “The Impact of Strategic Consumer Behavior on the Value of Operational Flexibility,” In: S. Netessine and C. Tang, Eds., Operations Management Models with Consumer-Driven Demand, Chapter 14, Springer-Verlag, New York, 2009.
[27]	A. A. Tsay, “The Quantity Flexibility Contract and Supplier-Customer Incentives,” Vol. 45, No. 1, Management Science, 1999, pp. 1339-1358. doi:10.1287/mnsc.45.10.1339
[28]	J. M. Milner and Panos Kouvelis, “Order Quantity and Timing Flexibility in Supply Chains: The Role of Demand Characteristics,” Management Science, Vol. 51, No. 6, 2005, pp. 970-985. doi:10.1287/mnsc.1050.0359
[29]	R. Wang, “Analysis of Supply Chain Contract Clauses on Supplier Flexibility,” Proceedings of 14th International Conference on Management Science & Engineering, ICMSE’07, 20-22 August 2007, Harbin, pp. 627-632.
[30]	D. Barnes-Schuster, Y. Bassok and R. Anupindi, “Coordination and Flexibility in Supply Contracts with Options,” Manufacturing & Service Operations Management, Vol. 4, No. 3, 2002, pp. 171-207. doi:10.1287/msom.4.3.171.7754
[31]	G. P. Cachon and M. A. Lariviere, “Supply Chain Coordination with Revenue-Sharing Contracts: Strengths and Limitations,” Marketing Science, Vol. 51, No. 1, 2005, pp. 30-45.
[32]	R. Wang, “Analysis of Revenue Sharing Contracts with Uncertain Demand in Supply Chain,” Proceedings of 13th International Conference on Management Science & Engineering, ICMSE’06, 5-7 October 2006, Lille, pp. 522-525.
[33]	C. X. Wang and M. Benaroch, “Supply Chain Coordination in Buyer Centric B2B Electronic Markets,” International Journal of Production Economics, Vol. 92, No. 4, 2004, pp. 113-124. doi:10.1016/j.ijpe.2003.09.016
[34]	S. Netessine and N. Rudi, “Supply Chain Choice on the Internet,” Management Science, Vol. 52, No. 6, 2006, pp. 844-864. doi:10.1287/mnsc.1060.0512
[35]	R. Wang, J. Ji and X. G. Ming, “R&D Partnership Contract Coordination of Information Goods Supply Chain in Government Subsidy,” International Journal of Computer Applications in Technology, Vol. 37, No. 3-4, 2010, pp. 297-306. doi:10.1504/IJCAT.2010.031945
[36]	L. Chen, “Dynamic Supply Chain Coordination under Consignment and Vendor-Managed Inventory in RetailerCentric B2B Electronic Markets,” Industrial Marketing Management, Vol. 42, No. 4, 2013, pp. 518-531. doi:10.1016/j.indmarman.2013.03.004