From Supply Chains to Supply Ecosystems: Implications for Strategic Sourcing Research and Practice

Traditionally, sourcing decisions such as what to buy and from whom to buy it were viewed as clerical in nature. Today, however, many executives view sourcing decisions as strategic and these decisions are being made from more prominent positions within firms. Indeed, over time more companies are embracing the concept of strategic sourcing—making acquisition decisions with the intent of creating value and achieving a competitive advantage. In this article, we introduce the Special Topic Forum articles on strategic sourcing and performance. Each offers important implications for strategic sourcing research and practice. An overall implication is that some traditional supply chains appear to be giving way to supply ecosystems, which represent a set of interdependent and coordinated organizations that share common adaptive challenges and that collectively shape the creation and nurturing of a sourcing base that contributes to competitive advantage and superior performance. We offer several theoretical perspectives that hold promise for explaining supply ecosystem functioning and outcomes. In terms of practice, firms need to adapt their strategic sourcing to this evolution or run the risk of being weakened.     

Strategic Investment Decisions under Uncertainty,Tacit Collusion and Product Differentiation

This paper examines the effects of uncertainty, tacit collusion and product differentiation on strategic investment policy. The model demonstrates the equilibrium under competitive investments and under cooperative investments. In competitive investments, two firms compete by investing to preempt each other, and ultimately one firm invests earlier than its rival. In cooperative investments, two firms invest simultaneously and collude on their outputs. Cooperative investments are likely to be sustainable only under conditions of high volatility of future demand, low probability of market extinction and high degree of product differentiation, while competitive investments are sustainable for any set of these parametric values.     

Technical Change and the Equilibrium Profit Rate in a Market with Sequential Bargaining

The Marxian theory of the tendentially falling rate of profit is shown to be consistent with a competitive equilibrium scenario for labor markets in which wages are determined by sequential bargaining within a stationary matching process. The central result establishes that if trade is possible, there exists a set of individually rational capital-using, labor-saving technical innovations which lower the equilibrium rate of profit if adopted universally. The model yields as an important special case wage conditions under which the universal adoption of any such innovation reduces the equilibrium rate of profit.     

Product Differentiation,the Volume of Trade and Profits under Cournot and Bertrand Duopoly

This article analyses how product differentiation affects the volume of trade under duopoly using Shubik-Levitan demand functions rather than the Bowley demand functions used by Bernhofen (2001). The drawback of Bowley demand functions is that an increase in product differentiation increases the size of the market so the increase in the volume of trade may be the result of the increase in the size of the market rather than the increase in product differentiation per se. The Shubik-Levitan demand functions have the advantage that an increase in product differentiation does not increase the size of the market, but consumers still have a ‘love of variety’. It is shown that the volume of trade in terms of quantities falls with increasing product differentiation when the trade cost is relatively low, but rises with increasing product differentiation when the trade cost is relatively high. Among the results, it is shown that the trade liberalisation is more likely to be profitable under Cournot duopoly than under Bertrand duopoly for differentiated products with a positive trade cost.     

Transportation,freight rates,and economic geography

We investigate the role of competitive transport markets in shaping the location of economic activity and the pattern of trade. In our model, carriers supply transport services for shipping manufactured goods, and freight rates are set to clear transport markets. Each carrier must commit to the maximum capacity for a round-trip and thus faces a logistics problem as there are opportunity costs of returning empty. These costs increase the freight rates charged to firms located in regions that are net exporters of manufactured goods. Since demand for transport services depends on the spatial distribution of economic activity, the concentration of production in one region raises freight rates to serve foreign markets from there, thus working against specialization and the agglomeration of firms. Consequently, a more even spatial distribution of firms and production prevails at equilibrium when freight rates are endogenously determined than when they are assumed to be exogenous as in the literature.     

Transportation, freight rates, and economic geography

We investigate the role of competitive transport markets in shaping the location of economic activity and the pattern of trade. In our model, carriers supply transport services for shipping manufactured goods, and freight rates are set to clear transport markets. Each carrier must commit to the maximum capacity for a round-trip and thus faces a logistics problem as there are opportunity costs of returning empty. These costs increase the freight rates charged to firms located in regions that are net exporters of manufactured goods. Since demand for transport services depends on the spatial distribution of economic activity, the concentration of production in one region raises freight rates to serve foreign markets from there, thus working against specialization and the agglomeration of firms. Consequently, a more even spatial distribution of firms and production prevails at equilibrium when freight rates are endogenously determined than when they are assumed to be exogenous as in the literature.     

Economic growth with demand saturation and “endogenous” demand creation

In this article, we present a model of economic growth through “demand creation” in the face of “demand saturation,” by representing demand saturation by an S‐shaped logistic function and reckoning the firm's R&D as an activity to determine the probability of product innovation, that is, of demand creation. By defining the parameter of birth rate of a new product as the probability that a new product is derived from an existing one and identifying the time path of this parameter with the firm's R&D plan, we derive the optimal R&D plan and examine the growth rate of the firm's expected total revenue along this optimal plan. We then find that the optimal birth rate of a new product is influenced positively by the speed of diffusion of demand and the initial level of demand but negatively by the unit cost of production and the interest rate and that the growth rate of the firm converges to the optimal birth rate of a new product.     

Economic valuation of product features

We develop a market-based paradigm to value the enhancement or addition of features to a product. We define the market value of a product or feature enhancement as the change in the equilibrium profits that would prevail with and without the enhancement. In order to compute changes in equilibrium profits, a valid demand system must be constructed to value the feature. The demand system must be supplemented by information on competitive offerings and cost. In many situations, demand data is either not available or not informative with respect to demand for a product feature. Conjoint methods can be used to construct the demand system via a set of designed survey-based experiments. We illustrate our methods using data on the demand for digital cameras and demonstrate how the profits-based metric provides very different answers than the standard welfare or Willingness-To-Pay calculations.     

The Intelligence Gap: What the Multinational Enterprise Can Learn From Government and Military Intelligence Organizations

Over the past several decades, companies have spent literally trillions of dollars acquiring the latest technologies and building their internal information processing and analysis capabilities. And yet with all this expenditure of time, money, and effort, large enterprises are still caught off‐guard on an almost daily basis because they fail to anticipate critical developments in their competitive environment. This shortcoming can be mitigated by adopting an intelligence mind‐set. This article provides an overview of seven specific problems concerning the use of business intelligence in the multinational enterprise (MNE) and discusses the corresponding best practices found in professional intelligence organizations. It closes with some suggestions on implementing those best practices in the MNE. © 2014 Wiley Periodicals, Inc.     

我国蔬菜出口的增长效应分析

本文运用恒定市场份额模型(CMS),对我国蔬菜出口贸易变动进行阶段分析,以寻找蔬菜出口增长的主要原因。实证结果发现,进口国的需求扩大是我国蔬菜出口持续增长的主要影响因素;商品结构效应对出口的阻碍作用逐渐减小;竞争力效应对1992-1997年期间的蔬菜出口增长具有重要作用,但对其它时期蔬菜出口增长效果不明显。对竞争力效应的近一步分解发现,新鲜蔬菜等传统优势产品竞争力效应下降,而加工蔬菜等产品竞争力效应增长。根据分析,最后提出针对性政策建议。     

BOOK REVIEWS

Purpose: Companies engage in business relationships for a variety of reasons, including specialization, product development, and building competitive networks. Research has demonstrated that mergers and acquisitions (M&As) may challenge ongoing business relationships. The purpose of this article is to investigate whether and how competition authorities consider business relationships when evaluating M&As.

Methodology: The article uses the documentation from 450 M&As reported to the Swedish competition authority to capture the way in which an authority evaluates M&As. The Swedish competition authority evaluation corresponds to other national and international evaluation procedures.

Findings: The findings indicate that the competition authorities neglect an important aspect of business life, namely companies forming business relationships. The competition authorities evaluate M&As on the basis of risk for price increases, and consequently disregard such issues as heterogeneity in demand and offerings, and values built into existing business relationships.

Originality/Value/Contribution: The article contributes to research on business relationships through exploring how a public authority deals with such relationships. It also contributes to research on mergers and acquisitions through examining how these activities are evaluated by competition authorities. Furthermore, the article contributes to competition research by reflecting on competition law concerning M&A regulations in relation to business relationships.     

Empirical investigation of channel reactions to brand introductions

We investigate how incumbent manufacturers and retailers alter their pricing behavior in response to new product introduction. In performing our analysis, we need to be cognizant of the fact that the observed price changes can be due to entry-induced changes in a) demand conditions or b) costs or, on the other hand, to the competitive behavior of c) manufacturers and/or d) the retailer. In order to separate these four changes, we posit that manufacturer and retailer pricing is an outcome of maximizing a combination of shares and profits. This enhanced objective function allows us to measure competitive conduct benchmarked as less or more competitive than under the Bertrand-Nash framework. Our empirical analysis is based on the toothpaste category for the time period January 1993–February 1995. During this period, there were three brand introductions in two rounds of entry. Using the estimates from the demand and the supply model, we compute the changes in the retail and wholesale prices that are attributable to changes in demand conditions, manufacturer and retailer competitive conduct, and cost changes. These results support our conjecture that inferring the change in conduct solely based on a change in observed prices is likely to be erroneous. For the first new brand entry, we find that the brand introduction did not significantly increase competition between manufacturers. As a result, the balance of channel power between the manufacturers and the retailers remained unaltered. Both retailer and manufacturer profit margins increased after the first entry. However, subsequent to the second entry, retailer share of channel profits increased at the expense of the manufacturers; manufacturers even saw a decline in their absolute profit margins. We believe that this research will provide insight for manufacturers and retailers regarding how the various channel participants are likely to react to new product introduction. Furthermore, policymakers interested in understanding competitive reactions to new product introduction should find this research useful.     

Software to support business teams

Organizations are increasingly using the business team concept to gain competitive advantage. Collaboration support software is gaining acceptance as a viable tool among both researchers and practitioners, and an opportunity exists to investigate the specific needs of teams: users working in longitudinal time frames on a variety of tasks. In this article, team software requirements are first derived from a theoretical perspective: office automation and task literature are used to identify a set of domain-independent individual tasks. Group process literature is then used to develop a set of collaborative tasks composed of these individual task components. These individual and collaborative tasks are aggregated with team task and communication support requirements to develop requirements for an integrated software environment that effectively supports business teams. Design considerations for a comprehensive team support system are outlined, a prototype implementation is described, and project contributions and key future research considerations are summarized.     

The Impact of Article Method Type and Subject Area on Article Citations and Reference Diversity in JM,JMR, and JCR

It has been argued that the scientific status of the marketing discipline is reflected in both the ability of its articles to be cited and the degree to which its articles draw from a diverse set of reference sources. We combine a content analysis of a sample of 561 JM, JMR, and JCR articles with a citation analysis and reference analysis of those same articles to investigate the impact of article method type and subject area on article citation rates and reference diversity. Our results reveal that verbal-theory and field study papers are both more likely to be cited and more likely to draw from a wide variety of journal and disciplinary reference sources. The results also reveal that services/customer satisfaction and general theory and philosophy of science articles are generally more likely to be cited than other subject areas, although services/customer satisfaction articles are also less likely to rely on a diverse set of references.     

VOLATILITY STRUCTURES OF FORWARD RATES AND THE DYNAMICS OF THE TERM STRUCTURE1

For general volatility structures for forward rates, the evolution of interest rates may not be Markovian and the entire path may be necessary to capture the dynamics of the term structure. This article identifies conditions on the volatility structure of forward rates that permit the dynamics of the term structure to be represented by a two-dimensional state variable Markov process. the permissible set of volatility structures that accomplishes this goal is shown to be quite large and includes many stochastic structures. In general, analytical characterization of the terminal distributions of the two state variables is unlikely, and numerical procedures are required to value claims. Efficient simulation algorithms using control variates are developed to price claims against the term structure.     

Marketing as a Determinant of Long-Run Competitive Success in Medium-Sized U.K. Manufacturing Firms

Over the last decade or so, many studies have highlighted the important role that marketing plays in contributing to a firm's competitive success. Thus, this article aims to examine the contribution of marketing to the competitive success of forty two British medium-sized manufacturing firms at two time points, 1987/88 and 1997/98, in order to determine any success factors that are durable over time. The investigation is based on mail surveys and in-depth interviews undertaken within the same set of firms at both dates. The findings identify eight specific marketing practices that might well be described as key determinants of success. However, they also draw into question several of the traditional tenets of successful marketing.     

Are treble damages double damages?

The antitrust laws provided for treble damages, a penalty that encourages wronged parties to bring private suit on a matter presummedly vested with a public interest. This paper demonstrates that as interpreted by the courts the treble damage penalty is only double the full welfare loss suffered by actual and potential customers if three conditions are met: 1) the commodity is produced under constant cost conditions, 2) the monopoly price is set so as to maximize profits, and 3) the demand curve is linear. The implications of relaxing these assumptions are evaluated. The analysis is illustrated with data for Wall Products Co. v. National Gypsum, 1971.     

New product planning: Lessons from Japanese experience

Japan has derived a reputation as a market that is extremely difficult to enter. However, this belief tends to promote neglect of the study of other factors—important among which is that of the competitive styles of Japanese companies. An issue that is particularly germane is that of product strategy. This article reports on research that was performed among a sample of foreign consumer products' companies in Japan. The article explores the theme that effectiveprodud strategy in Japan requires cultural sensitivity, as well as an ability to cope with the aggressive, technical led approaches of Japanese companies that comprise the competitive set.     

Adjustment costs and theory of investment under uncertainty

It is shown that the stochastic investment rule for the price-setting monopolist facing random demand differs from the deterministic rule, due to the presence of the covariance of the marginal utility of profits and the MRTS between capital and labor. For the risk-neutral quantity-setting monopolist, the optimal current investment under random demand is shown to be greater than that under deterministic conditions, given that production technology is of the Cobb-Douglas type with constant returns to scale. When random wages and prices follow first-order autoregressive schemes, the risk-neutral competitive firm's current investment level is shown to be at least equal to that under certainty.