In a complex and ever-changing market environment, manufacturers’ channel encroachment and retailers’ market entry strategies are crucial for business development. This paper aims to explore the strategic interaction mechanism between manufacturers and retailers under an asymmetric market structure, particularly focusing on how the two parties reach equilibrium strategies when manufacturers decide whether to implement channel encroachment and retailers choose whether to enter high-potential markets and to identify the conditions for achieving a “win-win” situation.
This study constructs a game theory model to depict the sequential decision-making process between manufacturers and retailers under asymmetric information and cost structures. By introducing the “plundering effect” and the “competition effect,” the study systematically analyzes the impact of changes in channel encroachment costs on manufacturers’ strategy shifts and examines the evolution paths of equilibrium strategies under different market conditions. The research also specifically investigates the boundary conditions for manufacturers implementing encroachment strategies and their disturbance to the overall equilibrium structure.
The study finds that (1) retailers generally tend to adopt market entry strategies, which often also enhance manufacturers’ profits; (2) contrary to conventional views, higher channel encroachment costs do not necessarily suppress manufacturers’ downstream encroachment behavior and their impact is diverse; (3) under specific parameter conditions, both parties can achieve a “win-win” equilibrium and (4) although the range of equilibrium strategies fluctuates significantly with market conditions, the changes always follow a stable pattern, indicating high robustness of the findings.
The originality of this paper lies in integrating the “plundering effect” and the “competition effect” into the channel encroachment and market entry interaction framework under an asymmetric market for the first time, revealing the non-monotonic impact mechanism of encroachment costs on manufacturers’ strategies. At the same time, it systematically depicts the structural evolution of equilibrium strategies under different market conditions, providing new theoretical insights into strategy coordination among supply chain members and offering practical managerial implications for firms in formulating channel and market expansion strategies.
