When e-commerce platforms engage in Internet of Things (IoT) services and operate agency sales businesses, how to choose centralized or decentralized organizational structures for private label (PL) encroachment.
In this study, we develop a game-theoretic model to analyze the impact of centralized versus decentralized organizational structures of platforms on investment in their own-brand IoT products.
We find that under a centralized structure, the platform invests in PL IoT products with lower functionality than the national brand (NB) to mitigate internal competition. In contrast, under decentralization, the IoT division may invest in PL IoT products with higher or lower functionality than the NB. The platform prefers a decentralized structure only when competition is low and unit IoT service fee is high. Interestingly, PL IoT encroachment benefits the manufacturer under both structures. Furthermore, we extended our analysis to incorporate subscription-based charging mode, organizational decision before encroachment decision, sequential pricing, wholesale pricing model and encroachment costs associated with IoT technology.
Our results offer novel insights into the strategic interplay between organizational design and brand competition for e-commerce platforms.
