Impact of Strategic Cooperation under Competition on Green Product Manufacturing

Abstract

This study explores the optimal pricing and investment decision for two competing green supply chains, both consisting of a manufacturer and an exclusive retailer. Our focus is to explore, does the strategic integration decision with rivals at the horizontal level or with partners at the vertical level have any effect on green product types? The results reveal the following insights: retailer-retailer strategic integration at downstream level leads to a sub-optimal total supply chain profit and green quality level for a development-intensive green product. Two competing manufacturers can produce products at a higher level if they are vertically integrated with respective retailers. Manufacturer-manufacturer integration at upstream level sometimes leads to higher profits and product quality level if cross price-elasticity of consumers is high. However, an opposite phenomenon is observed while they are selling for a marginal-intensive green product, horizontal integration can improve green quality levels, but supply chain members will receive a lower profit. Therefore, selection of green product types and strategic integration decision are interrelated to achieve the profit maximization goal along with the aim to offer products at a higher green quality level. Vertical integration strategy can outperform horizontal integration strategy, especially if cross-price elastic for green products remain high.