Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 30, 2017 erstellt
Description:
We study how an original equipment manufacturer's (OEM's) direct selling channel can serve as an instrument to enhance product accessibility in developing countries. With respect to global sourcing, people in developing countries play an important role as suppliers, but not necessarily as end consumers. In this paper, we consider an OEM manufacturing products for a brand buyer that operates in two markets: the domestic market in which the OEM resides, and the international market (i.e., other mature markets). The OEM can offer the brand at a discount price in exchange for using the excess capacity to produce products under the OEM's brand and also sells the product through the OEM's own selling channel. Contrary to first-order intuition of market cannibalization, we find that the OEM direct selling channel can be a win-win-win strategy for the brand (gaining higher profit premium in the international market), the OEM (gaining higher market coverage), and people in the domestic market (higher product accessibility). Such insights are generally robust, even when we consider a cost for the OEM's selling channel, as well as consider a price constraint from the brand, such that the OEM avoids selling the same product at too low a price