Supplier Encroachment Deterrence Through a Target-Oriented Retailer

We investigate the interaction between the retailer’s target-based preference and supplier encroachment. The retailer might be risk-neutral (expects maximum profit) or target-oriented (maximizes his potential to achieve the target profit), and the sup- plier can be encroachment or non-encroachment. We characterize the retailer’s target- oriented behavior using a CVaR-satisficing metric and a game theoretical framework. We find that the retailer setting an appropriate target is beneficial to supplier encroachment. In particular, when a retailer has a specific target, the target-oriented retailer can make the encroaching supply chain reach the same efficiency as the centralized encroaching system. Different fromprevious studies, when the retailer’s target is high, the target-oriented retailer performs worse in the encroaching supplier than the non- encroaching supplier. In addition, if the retailer’s target and demand variability are low, the performance of encroaching supplier and target-oriented retailer will perform better than that ofnon-encroaching supplier and target-oriented retailer, thus achieving a win-win situation. We can provide managers with essential guidance: i) the target- oriented retailer performs worse in some cases when supplier encroachment; ii) whether the encroaching supplier and the encroaching supply chain can benefit fromthe target- oriented retailer depends on his ambition to set target; iii) whether a win-win situation canbe achievedbetween an encroaching supplier and a target-oriented retailer depends on the range of the retailer’s target and demand variability