Competitive strategy and production strategy of the original equipment manufacturer and the third-party remanufacturer in remanufacturing

ABSTRACT

Many researchers have examined the relationship between the original equipment manufacturer (OEM) and the third-party remanufacturer (TPR) and found that is mutually beneficial or competitive. This paper aims to study the competitive strategy and production strategy of the OEM and the TPR. The OEM’s competitive strategy is to change their competitive intensity by investing in pricing power of new components. For this problem, two different competitive strategies are proposed: Investment strategy and Non-investment strategy. Two models are established based on competitive strategies, and their analytical solutions are obtained by Stackelberg game. Comparing the two competitive strategies found that only when the investment cost and cost of new components both are low, can the OEM adopt Investment strategy. The Investment strategy have a threefold effect on the OEM: increasing profit, reducing cannibalization, and blocking the TPR’s entry. It is also found that as the cost of new components increases, the OEM may shift its competitive strategy from Investment to Non-investment. At the moment of competitive strategy shift, the production strategy may change discontinuously. Finally, comparing the environmental effect found that which competitive strategy is environmentally friendly only depend on the discount factor and the environmental advantages of the remanufactured product.

KEYWORDS:

• Remanufacturing
• competitive strategy
• production strategy
• environmental impact
• stackelberg game

Acknowledgments

This research was supported by the National Natural Science Foundation of China under Grant Nos. 71771080, 71521061, 71790593 and 71988101.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. Available online: http://www.shinhomerm.com/index.html

2. Available online: https://oa.zol.com.cn/747/7470905_all.html (accessed on 28 June 2020).

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [71771080,71521061,71790593,71988101].