An investigation of the effects of government incentives to implement the car's green technology : a supply chain management perspective

This research project investigates the influence of government incentive on supply chain behaviour from an operations research perspective, providing insights into government green policy making and supply chain management. In the car industry, government green incentive is used to facilitate corporate investment in green technology in the supply chain by financial support chain supply parties. The existing literature has limited understanding of how government ought to provide incentives efficiently and how the supply chain should respond to these incentives. This project is first to analyse the decision making of all the participating parties in the government incentive project. It provides suggestions for government policy makers and illustrates managerial implications for supply chain operational strategies. This research study is divided into three parts, Preliminary Study 1, Preliminary Study 2 and Main Study 3. Preliminary Study 1 and Preliminary Study 2 constructed the initial incentive model, based on which a comprehensive incentive model is built and analysed in Main Study 3. Preliminary Study 1 confirmed the influence of government incentive on supply chain decision making. A two-stage game theory model is established to formulate supply chain behaviour on the basis of a mathematical modelling technique. Preliminary Study 2 is focused on practical information collection by adopting semi-structured interview. 11 interviews were conducted in the car industry including suppliers and manufacturers in Taiwan. The collected data is used to provide the necessary information for the establishment of the simulation model in Main Study 3. All the components and assumptions of the incentive model are verified by the implications of Preliminary Study 2. Finally, in Main study 3, a multiple period optimisation-simulation incentive model is built to simulate the decision-making process of incentive projects. The findings of this project indicate that government incentives have a positive effect on green technology improvements in the supply chain. Four incentive strategies have been proposed in response to different market scenarios of the government’s green policy making. The High incentive strategy leads to the best green technology improvement in the supply chain. However, when the government has limited budget for green incentives, it is suggested that the Manufacturer Focus strategy or Supplier Focus strategy is implemented instead of the incentives being equally distributed in the supply chain. It was found overall, that the best strategy of incentive policy is associated with the cost of green technology in the supply chain and the green car market size. Further findings indicated that government incentives also indirectly affect supply chain pricing strategies. It was found that as incentives increase, green technology level rises, and the supply chain increases its pricing to respond to the costs. Based on this finding, this study suggests that the government should provide incentives to the consumers directly when the economy depresses and consumers’ greenness sensitivity is low. For the supply chain, and based on different market scenarios, the implications of optimal green technology and pricing decision are proposed. Finally, it is suggested that supply chain parties should consider the incentive circumstances of their upstream and downstream in order to optimise their own profit when the government provides green incentive to the supply chain.