Essays on operations-marketing strategy

• Main Author: Alptekinoglu, Aydin
• Format: Dissertation
• Language: English
• Subjects: business administration, management; business administration, marketing; operations research
• ISBN: 0496995294; 9780496995295

Recent advances in manufacturing and information technologies have given rise to an immense proliferation of buying options, not only in product variety, but also in sales channels and delivery leadtime alternatives. My dissertation explores these three aspects of operations-marketing strategy: channel, variety and time.
Chapter 1 is about multi-channel distribution. To capture customers in different market segments, many firms distribute their products via multiple channels involving in-store, mail-order and electronic mediums. For evaluating certain distribution strategies arising from multiple channels, I develop and analyze a model of multi-channel distribution under stochastic demand. I illustrate the utility of my analysis with two applications: (1) A store-based retailer expanding into a direct sales channel (e.g. Internet) evaluates its demand fulfillment options between using stores or depots; (2) Two retailers considering a merger-and-acquisition (M&A) quantify the synergy of their M&A in terms of distribution efficiency.
In Chapter 2, I study competition between a mass customizer (MC) and a mass producer (MP) on horizontally differentiated product variety and price. MC has a perfectly flexible production technology; offers any variety within a product space represented by Hotelling's (1929) linear city. MP has a focused production technology; offers only a finite set of products. Firms compete for market share among customers with heterogeneous tastes. First, they simultaneously decide whether to enter the market; next MP designs its product line; then both firms set prices. By fully characterizing the subgame-perfect Nash equilibria of this game, I find that an MP facing competition from MC offers lower product variety compared to an MP monopolist; and that MP can survive this competition even if it has a higher fixed or variable cost of production technology.
Chapter 3 focuses on the time-variety tradeoff. Mass production, the dominant form of making products available in the market, emphasizes standardization (low variety) in the interest of supply chain efficiency, and usually targets zero delivery leadtime via a make-to-stock system. Mass customization offers the opposite proposition: very high variety, but some delay in delivery as it usually involves a make-to-order system. I study competition between a mass customizer choosing leadtime and price, and a mass producer choosing degree of product-mix flexibility, variety and price in order to attract demand that is sensitive to both product variety and delivery leadtime. I find that, compared to their monopoly choice, both firms prefer to reduce the competitiveness of their product offer (by lower variety or slower delivery) in order to soften the price competition under duopoly.