Product Differentiation And Operations Strategy For Price And Time Sensitive Markets
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Product Differentiation And Operations Strategy For Price And Time Sensitive Markets
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Author : Sachin Jayaswal
language : en
Publisher:
Release Date : 2009
Product Differentiation And Operations Strategy For Price And Time Sensitive Markets written by Sachin Jayaswal and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
In this dissertation, we study the interplay between a firm's operations strategy, with regard to its capacity management, and its marketing decision of product differentiation. For this, we study a market comprising heterogeneous customers who differ in their preferences for time and price. Time sensitive customers are willing to pay a price premium for a shorter delivery time, while price sensitive customers are willing to accept a longer delivery time in return for a lower price. Firms exploit this heterogeneity in customers' preferences, and offer a menu of products/services that differ only in their guaranteed delivery times and prices. From demand perspective, when customers are allowed to self-select according to their preferences, different products act as substitutes, affecting each other's demand. Customized product for each segment, on the other hand, results in independent demand for each product. On the supply side, a firm may either share the same processing capacity to serve the two market segments, or may dicate capacity for each segment. Our objective is to understand the interaction between product substitution and the firm's operations strategy (dedicated versus shared capacity), and how they shape the optimal product differentiation strategy. To address the above issue, we first study this problem for a single monopolist firm, which offers two versions of the same basic product: (i) regular product at a lower price but with a longer delivery time, and (ii) express product at a higher price but with a shorter delivery time. Demand for each product arrives according to a Poisson process with a rate that depends both on its price and delivery time. In addition, if the products are substitutable, each product's demand is also influenced by the price and delivery time of the other product. Demands within each category are served on a first-come-first-serve basis. However, customers for express product are always given priority over the other category when they are served using shared resources. There is a standard delivery time for the regular product, and the firm's objective is to appropriately price the two products and select the express delivery time so as to maximize its profit rate. The firm simultaneously needs to decide its installed processing capacity so as to meet its promised delivery times with a high degree of reliability. While the problem in a dedicated capacity setting is solved analytically, the same becomes very challenging in a shared capacity setting, especially in the absence of an analytical characterization of the delivery time distribution of regular customers in a priority queue. We develop a solution algorithm, using matrix geometric method in a cutting plane framework, to solve the problem numerically in a shared capacity setting. Our study shows that in a highly capacitated system, if the firm decides to move from a dedicated to a shared capacity setting, it will need to offer more differentiated products, whether the products are substitutable or not. In contrast, when customers are allowed to self-select, such that independent products become substitutable, a more homogeneous pricing scheme results. However, the effect of substitution on optimal delivery time differentiation depends on the firm's capacity strategy and cost, as well as market characteristics. The optimal response to any change in capacity cost also depends on the firm's operations strategy. In a dedicated capacity scenario, the optimal response to an increase in capacity cost is always to offer more homogeneous prices and delivery times. In a shared capacity setting, it is again optimal to quote more homogeneous delivery times, but increase or decrease the price differentiation depending on whether the status-quo capacity cost is high or low, respectively. We demonstrate that the above results are corroborated by real-life practices, and provide a number of managerial implications in terms of dealing with issues like volatile fuel prices. We further extend our study to a competitive setting with two firms, each of which may either share its processing capacities for the two products, or may dedicate capacity for each product. The demand faced by each firm for a given product now also depends on the price and delivery time quoted for the same product by the other firm. We observe that the qualitative results of a monopolistic setting also extend to a competitive setting. Specifically, in a highly capacitated system, the equilibrium prices and delivery times are such that they result in more differentiated products when both the firms use shared capacities as compared to the scenario when both the firms use dedicated capacities. When the competing firms are asymmetric, they exploit their distinctive characteristics to differentiate their products. Further, the effects of these asymmetries also depend on the capacity strategy used by the competing firms. Our numerical results suggest that the firm with expensive capacity always offers more homogeneous delivery times. However, its decision on how to differentiate its prices depends on the capacity setting of the two firms as well as the actual level of their capacity costs. On the other hand, the firm with a larger market base always offers more differentiated prices as well as delivery times, irrespective of the capacity setting of the competing firms.
Product Differentiation And Capacity Cost Interaction In Time And Price Sensitive Markets
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Author : Tamer Boyaci
language : en
Publisher:
Release Date : 2007
Product Differentiation And Capacity Cost Interaction In Time And Price Sensitive Markets written by Tamer Boyaci and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
In this paper, we study a profit-maximizing firm selling two substitutable products in a price and time sensitive market. The products differ only in their prices and delivery times. We assume that there are dedicated capacities for each product and that there is a standard industry delivery time for the regular (slower) product. The objective of the firm is to determine the delivery time of the express (faster) product and appropriately price the two products, taking into consideration the impact of delivery time reduction on capacity requirements and costs. We develop a model that integrates pricing and delivery time decisions with capacity requirements and costs, and study scenarios where the firm is constrained in capacity for none, one, or both product(s). We showhowpr oduct differentiation decisions are influenced by capacity costs, and howthe firm should adapt its differentiation strategy in response to a change in its operating dynamics. We first identify a market characteristic that governs the optimal pricing structure. We then showthat the degree of product differentiation depends on both the absolute, as well as the relative values of the capacity costs. Provided that the capacity cost differential remains the same, higher capacity costs induce less time differentiation and less price differentiation. An increase in capacity cost differential increases price differentiation, but decreases time differentiation. The optimal prices depend, in addition to the above, on the market characteristic. We find that prices can actually decrease when the firm incurs capacity-related costs. We also explore the impact of substitutability on product differentiation, and illustrate our results in a numerical study.
The Product Differentiation Marketing Strategy Defined The Benefits Of Companies Using A Product Differentiation Marketing Strategy In Foreign Markets And Internet Marketing Tactics That Can Help Brands
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Author : Dr Harrison Sachs
language : en
Publisher:
Release Date : 2020-03-02
The Product Differentiation Marketing Strategy Defined The Benefits Of Companies Using A Product Differentiation Marketing Strategy In Foreign Markets And Internet Marketing Tactics That Can Help Brands written by Dr Harrison Sachs and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-03-02 with categories.
This essay sheds light on the benefits appertaining to utilizing a product differentiation marketing strategy in foreign markets and identifies internet marketing tactics that can help brands facilitate the successful implementation of the product differentiation strategy in foreign markets. "Product differentiation is a marketing strategy that businesses use to distinguish a product from similar offerings on the market. For small businesses, a product differentiation strategy may provide a lasting competitive advantage in a market dominated by larger companies. For instance, the the product differentiation strategy also allows business to compete in areas other than price" (Kelchner) which ultimately allows brands to create perceived value and charge premium prices for their products. Moreover, the implementation of a successful product differentiation strategy fosters "brand loyalty among customers. Furthermore, this marketing strategy may create the perception that there's no substitute available on the market. Although competitors may have similar products, a product differentiation strategy that focuses on the quality or design differences which other products do not have allows brands to attain a competitive advantage in the market, as customers view the product as unique" (Kelchner). The successful implementation of the product differentiation strategy allows brands to also cultivate brand equity, positive brand recognition, and brand growth. Moreover, brands can attain profit maximization when they are able to successfully distinguish themselves from their competitors and offer services and products that customers are willing to pay top dollar for based on perceived value and uniqueness. The utilization of the product differentiation strategy has allowed many companies to financially flourish, such as Apple and Microsoft. Internet marketing tactics, such as posting video content onto social media websites that flaunt the unique product lines and sending out email blasts that highlight the merits of the products, can be employed to help brands facilitate the successful implementation of the product differentiation strategy in foreign markets.
Manufacturing Service Operations Management
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Author :
language : en
Publisher:
Release Date : 2003
Manufacturing Service Operations Management written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with Electronic journals categories.
The Economic Theory Of Product Differentiation
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Author : John Beath
language : en
Publisher: Cambridge University Press
Release Date : 1991-02-22
The Economic Theory Of Product Differentiation written by John Beath and has been published by Cambridge University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 1991-02-22 with Business & Economics categories.
There are few industries in modern market economies that do not manufacture differentiated products. This book provides a systematic explanation and analysis of the widespread prevalence of this important category of products. The authors concentrate on models in which product selection is endogenous. In the first four chapters they consider models that try to predict the level of product differentiation that would emerge in situations of market equilibrium. These market equilibria with differentiated products are characterised and then compared with social welfare optima. Particular attention is paid to the distinction between horizontal and vertical differentiation as well as to the related issues of product quality and durability. This book brings together the most important theoretical contributions to these topics in a succinct and coherent manner. One of its major strengths is the way in which it carefully sets out the basic intuition behind the formal results. It will be useful to advanced undergraduate and graduate students taking courses in industrial economics and microeconomic theory.
Product Differentiation And Non Price Competition
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Author : Norman J. Ireland
language : en
Publisher: Wiley-Blackwell
Release Date : 1987-01-01
Product Differentiation And Non Price Competition written by Norman J. Ireland and has been published by Wiley-Blackwell this book supported file pdf, txt, epub, kindle and other format this book has been release on 1987-01-01 with Business & Economics categories.
Developing New Products And Services
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Author : Lawrence Sanders
language : en
Publisher: Business Expert Press
Release Date : 2011-10-14
Developing New Products And Services written by Lawrence Sanders and has been published by Business Expert Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-10-14 with Business & Economics categories.
This book will focus on the up-front activities required for product and service differentiation, the learning methodologies that contribute to arriving at that differentiation, and the role that technology plays in implementing the process. The book will show how technology factors into such entrepreneurial activities as engaging in business planning and utilizing creativity and innovation, and how creative innovation, in turn, is achieved and enhanced through an understanding of two different modes of learning: "learning about" and "learning by doing". A successful product introduction depends on an efficient supply chain, a strong brand, and the ability of a manufacturer or provider to differentiate it successfully in the marketplace. New Product and Services Development demonstrates how differentiation, this last critical component, can be secured by the strategic use of technology and by engaging in two key learning methodologies.
Innovative Computing And Information
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Author : Minli Dai
language : en
Publisher: Springer
Release Date : 2011-08-30
Innovative Computing And Information written by Minli Dai and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-08-30 with Computers categories.
This six-volume-set (CCIS 231, 232, 233, 234, 235, 236) constitutes the refereed proceedings of the International Conference on Computing, Information and Control, ICCIC 2011, held in Wuhan, China, in September 2011. The papers are organized in two volumes on Innovative Computing and Information (CCIS 231 and 232), two volumes on Computing and Intelligent Systems (CCIS 233 and 234), and in two volumes on Information and Management Engineering (CCIS 235 and 236).
Rational Queueing
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Author : Refael Hassin
language : en
Publisher: CRC Press
Release Date : 2016-03-23
Rational Queueing written by Refael Hassin and has been published by CRC Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-03-23 with Business & Economics categories.
Understand the Strategic Behavior in Queueing SystemsRational Queueing provides one of the first unified accounts of the dynamic aspects involved in the strategic behavior in queues. It explores the performance of queueing systems where multiple agents, such as customers, servers, and central managers, all act but often in a noncooperative manner.T
Industrial Engineering And Production Management
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Author : Martand T Telsang
language : en
Publisher: S. Chand Publishing
Release Date :
Industrial Engineering And Production Management written by Martand T Telsang and has been published by S. Chand Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on with categories.
For close to 20 years, Industrial Engineering and Production Management has been a successful text for students of Mechanical, Production and Industrial Engineering while also being equally helpful for students of other courses including Management. Divided in 5 parts and 52 chapters, the text combines theory with examples to provide in-depth coverage of the subject.