Abstract
This paper investigates the strategic cooperation of two competitive suppliers with different abilities and a weak main manufacturer in Complex Products Systems (CoPS), where a main manufacturer signs a revenue-sharing contract based on a relationship-specific investment with the stronger supplier. The stronger supplier provides one key element to the main manufacturer and encroaches on the downstream market by producing substitutable final products simultaneously. We consider multi-period decisions, by building different models based on centralized, decentralized, and cooperative decisions. The equilibrium strategies are characterized under downstream competition, and optimal cooperation strategies are derived by building multi-period game models. The results show that strong cooperation can enhance the economic performance of each individual as well as the whole supply chain. The weak main manufacturer would face the risk of strong suppliers’ supply interruptions when the competitive degree of suppliers and downstream competition are fierce enough under decentralized decisions. Additionally, the gap in the abilities of the two competitive suppliers reduces the main manufacturer’s profitability. However, the revenue-sharing contract based on a relationship-specific investment can motivate the strong supplier to establish cooperation relationship and improve both stakeholders’ profitability. Moreover, strategic cooperation is efficient to prevent the strong supplier encroaching on downstream and has a positive impact on boosting the weak main manufacturer’s market share. Meanwhile, nurturing a domestic supplier is an effective measure for improving competitiveness and indigenous technological capability of the main manufacturer in CoPS. Finally, some useful management sights on cooperation strategy and optimal decisions are derived.
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The authors really appreciate the editors and the referees for their valuable comments and suggestions that have greatly improved this article. This work was partially supported by the National Natural Science Foundation of China under Grant Nos.71171112 and 71502073, the Postgraduate Research and Practice Innovation Program of Jiangsu Province under Grant KYCH17_0223 and China scholarship council under Grant No.201806830048.
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Jinhua Zhou is is a PhD candidate in the College of Economics and Management at Nanjing University of Aeronautics and Astronautics. She received her BS and MS degree in management science and engineering at Lanzhou University of Technology in 2013 and 2016 respectively. Her research interests are supply chain management, game theory, and modeling on complex product systems. Her research papers have been published in journals including Control and Decision, International Journal of Simulation-Systems, Science & Technology, etc.
Jianjun Zhu is a professor in the College of Economics and Management at Nanjing University of Aeronautics and Astronautics. He received his PhD degree in system engineering at Northeastern University. His research interests are supply chain management, decision making, and modeling on complex product systems. His research papers have been published in journals including Information Science, Information Fusion, etc.
Hehua Wang is a lecturer in the School of Business at Jinling Institute of Technology. She received his PhD degree in management science and engineering at Nanjing University of Aeronautics and Astronautics. Her research interests are supply chain management, decision making, and modeling on complex product systems. Her research papers have been published in journals including Control and Decision, Information Science, etc.
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Zhou, J., Zhu, J. & Wang, H. Strategic Cooperation with Differential Suppliers’ Ability under Downstream Competition in Complex Products Systems. J. Syst. Sci. Syst. Eng. 28, 449–477 (2019). https://doi.org/10.1007/s11518-019-5422-z
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DOI: https://doi.org/10.1007/s11518-019-5422-z