SUPPLY CHAIN MODELS AND CHANNEL STRATEGIES FOR DISTRIBUTING TANGIBLE AND INTANGIBLE PRODUCTS WITH THE INTERNET-ENABLED MARKET

The Internet has opened new channels for market competition, meanwhile posing new challenges to many traditional supply chain management insights. Many new business initiatives have emerged to take full advantage of the Internet channel to complement or substitute the traditional channel for business. For example, drop-shipping is an arrangement whereby an e-tailer accepts orders for products, and then pays a manufacturer or distributor to ship the product to the customer. One distinguishing feature of the drop-shipping channel is that the e-tailer does not hold any inventory. Compared to the traditional channel, the customers' online shopping penetration has effects on the performance of the drop-shipping channel. Our study focuses on the strategic differences between the two channels and identifies conditions under which the drop-shipping channel outperforms the traditional channel. As a comparison, we also study the centralized channel performance of each channel. Our analysis provides some insights as to when the Internet channel could be an effective substitute or complement to the traditional channel of supply chain management. A unique phenomenon of the information economy is the use of Internet-enabled markets to distribute information goods such as music and videos. Although the online store model is the predominant channel for distributing digital contents, emerging offline transactions through personal computing devices such as portable media players in users' wireless vicinity present new opportunities. We develop a model to study the strategic interaction between the two distribution channels for digital products. We first consider price as a sole differentiating variable in the channel structure. We next introduce service as a second differentiating factor. Particularly, we address the strategic tradeoff in the dual channel pricing and service provision. We further identify conditions when the dual channel outperforms the single channel and when the service-enhanced channel structure dominates the price-only channel structure in terms of the overall channel profits. Finally, we extend our model to deal with demand uncertainty. We consider two scenarios with different commitment regimes regarding channel structural choices and prices. Our analysis also provides practical implications about when information acquisition generates the most significant benefit in channel operations