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Strategic interaction of original equipment manufacturers between outsourcing and purchasing in a quality-differentiated market
- Source :
- PLoS ONE, PLoS ONE, Vol 17, Iss 1, p e0262678 (2022)
- Publication Year :
- 2022
- Publisher :
- Public Library of Science, 2022.
-
Abstract
- Economic globalization has swept the whole world. To focus on their main business, enterprises that are referred to as original equipment manufacturers (OEMs) outsource non-core production activities to contract manufacturers (CMs). By constructing a two-level supply chain consisting of two competing OEMs and one upstream CM, the strategic interaction of the OEMs between outsourcing and purchasing is studied. Specifically, the CM can offer custom- and predefined modes of original equipment manufacturing (namely, CO mode and PO mode, respectively). The former mode enables OEMs to determine product quality, while the latter only allows them to purchase from several quality configurations. The results show that, first, since the CO mode allows the adopter to lead the product design, whether to choose this mode depends on the required R&D cost. Interestingly, however, a lower R&D cost does not necessarily result in the adoption of the CO mode if the product quality difference is small under the PO mode. Second, the optimal purchasing strategy of an OEM is indifferent to the outsourcing mode (CO and PO) of its rival but significantly affected by the quality cost. However, compared to the PO mode, choosing the CO mode would cause the competitor to suffer more profit losses. Third, differing from the prior literature, this paper finds that when the downstream OEM can make quality decisions, although this may lead to profit loss of the contract manufacturer in some channels, it could benefit the CM overall.
- Subjects :
- Quality Control
Procurement
Economics
Imaging Techniques
Science
Raw Materials
Materials Science
Decision Making
Equipment
Social Sciences
Research and Analysis Methods
Cognition
Industrial Engineering
Photography
Psychology
Humans
Materials
Communication Equipment
Multidisciplinary
Economic Competition
Commerce
Cognitive Psychology
Biology and Life Sciences
Outsourced Services
Consumer Behavior
Contract Services
Outsourcing
Physical Sciences
Medicine
Engineering and Technology
Cognitive Science
Cell Phones
Management Engineering
Research Article
Neuroscience
Subjects
Details
- Language :
- English
- ISSN :
- 19326203
- Volume :
- 17
- Issue :
- 1
- Database :
- OpenAIRE
- Journal :
- PLoS ONE
- Accession number :
- edsair.doi.dedup.....c1fafefa629c22d8572b9da3e2ca887b