Product Design Strategy with Commonality by Considering Customer-Choice Behavior in Supply Chain

Xuemei Zhang (), Yao Wei (), Jiqiong Liu () and Gang Chen ()
Additional contact information
Xuemei Zhang: School of Business, Anhui Provincial Key Laboratory of Regional Logistics Planning and Modern Logistics Engineering, Fuyang Teachers College, Fuyang, Anhui 236037, P. R. China
Yao Wei: School of Business, Anhui Provincial Key Laboratory of Regional Logistics Planning and Modern Logistics Engineering, Fuyang Teachers College, Fuyang, Anhui 236037, P. R. China
Jiqiong Liu: School of Business, Anhui Provincial Key Laboratory of Regional Logistics Planning and Modern Logistics Engineering, Fuyang Teachers College, Fuyang, Anhui 236037, P. R. China
Gang Chen: School of Management, University of Science and Technology of China, Hefei, Anhui 230026, P. R. China

Asia-Pacific Journal of Operational Research (APJOR), 2015, vol. 32, issue 05, 1-22

Abstract: Product design decisions have significant impact on a firm's competitive edge. This paper investigates the condition under which component commonality is a profitable product design strategy for a firm by considering customer-choice behavior in the supply chain environment. The design configuration with commonality can lower manufacturing cost, but it also reduces product differentiation and revenue. While the customer-choice behavior with utility maximization will impact the retailer's product pricing, we analyze a stylized model of the manufacturer who designs a product family consisting of two products for two market segments with different valuations of quality. By explicitly considering the interrelationship between customer's utility and retail price, we find that commonality strategy is conditionally profitable. Theoretical research reveals that the optimal product design strategy depends on the marginal valuations of customer-choice behavior and the cost-coefficient of the common component determined by the supplier. An example is used to illustrate how some supply chain parameters impact the optimal product design strategy.

Keywords: Commonality; product design; customer-choice behavior; supply chain (search for similar items in EconPapers)
Date: 2015
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0217595915500372
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:apjorx:v:32:y:2015:i:05:n:s0217595915500372

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0217595915500372

Access Statistics for this article

Asia-Pacific Journal of Operational Research (APJOR) is currently edited by Gongyun Zhao

More articles in Asia-Pacific Journal of Operational Research (APJOR) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().