Strategic Technology Choice and Capacity Investment Under Demand Uncertainty

This paper studies the impact of competition on a firm’s choice of technology (product-flexible or product-dedicated) and capacity investment decisions. Specifically, we model two firms competing with each other in two markets characterized by price-dependent and uncertain demand. The firms make three decisions in the following sequence: choice of technology (technology game), capacity investment (capacity game), and production quantities (production game). The technology and capacity games occur while the demand curve is still uncertain, and the production game is postponed until after the demand curve is revealed. We develop best-response functions for each firm in the technology game and compare how a monopolist and a duopolist respond to a given flexibility premium. We show that the firms may respond to competition by adopting a technology which is the same as or different from what the competitor adopts. We conclude that contrary to popular belief, flexibility is not always the best response to competition—flexible and dedicated technologies may coexist in equilibrium. We demonstrate that as the difference between the two market sizes increases, a duopolist is willing to pay less for flexible technology, whereas the decision of a monopolist is not affected. Further, we find that a firm that invests in flexibility benefits from a low correlation between demands for two products, but the extent of this benefit differs depending on the competitor’s technology choice. Our results indicate that higher demand substitution may or may not promote the adoption of flexibility under competition, whereas it always facilitates the adoption of flexibility without competition. Finally, we show that contrary to intuition, as the competitor’s cost of capacity increases, the premium a flexible firm is willing to pay for flexibility decreases

The Flexibility and Specialization of Resources - Competitive Strategies of Materials Decoupling Points of a Network Supply Chain of Metallurgic Products

AbstractThe configuration of the supply chain which realizes the postponed production strategy, requires consideration of the issue of formation of network relations in order to increase the supply potential. The increase in the number of network relations shaped by materials decoupling point of the supply chain can be a consequence of an endeavour to reduce the logistic costs, improvement in the level of the customer service or an increase in innovativeness. In the model presented in the article the authors considered the issue of reducing logistic costs with the established high level of the customer service, taking into account the problem of the flexibility of resources

Manufacturing technology, lean and strategic flexibility the silver bullet for Malaysia lean manufacturers

The purpose of this paper is to conceptually propose the elements that constitute an ideal manufacturing strategy framework needed by Malaysian manufacturing sector.Malaysian manufacturing sector has so far underwent various challenges and exhibited fluctuating performance as reaction to these challenges.This paper is the product of an extensive literature review done on previous researches on the subject of manufacturing strategy and performance.In this review, the subject matter was comprehensively studied, and thoroughly discussed from the strategic perspective of Malaysian manufacturing sector.This paper manages to provide a fundamental framework, for expert in the area of manufacturing strategy and performance, emphasizing on the complementary effect of multiple strategies on performance.The subject approach is relatively new in Malaysia, however based on previous studies and the critical impact of manufacturing towards the economic health of Malaysia, the sector is in dire need of suitable and favorable manufacturing strategy in order to continue to compete globally. Malaysian manufacturing sector is still lacking of a strategic approach on its national manufacturing direction and guideline, to serve as the launching pad for the sector's sustainable growth.This paper not only ventures into a new perspective of strategy-performance research, but it also explores the possibility of studying different complementing strategies impact on the performance of manufacturers

Carbon Tariffs: Impacts on Technology Choice, Regional Competitiveness, and Global Emissions

Carbon regulation is intended to reduce global emissions, but there is growing concern that such regulation may simply shift production to unregulated regions, potentially increasing overall carbon emissions in the process. Carbon tariffs have emerged as a possible mechanism to address this concern by imposing carbon costs on imports at the regulated region's border. Advocates claim that such a mechanism would level the playing field whereas opponents argue that such a tariff is anti-competitive. This paper analyzes how carbon tariffs affect technology choice, regional competitiveness, and global emissions through a model of imperfect competition between "domestic" (i.e., carbon-regulated) firms and "foreign" (i.e., unregulated) firms, where domestic firms have the option to offshore production and the number of foreign entrants is endogenous. Under a carbon tariff, results indicate that foreign firms would adopt clean technology at a lower emissions price than domestic producers, with the number of foreign entrants increasing in emissions price only over intervals where offshore foreign firms hold this technology advantage. Further, domestic firms would only offshore production under a carbon tariff to adopt technology strictly cleaner than technology utilized domestically. As a consequence, under a carbon tariff, foreign market share is non-monotonic in emissions price, and global emissions conditionally decrease. Without a carbon tariff, foreign share monotonically increases in emissions price, and a shift to offshore production results in a strict increase in global emissions.Carbon regulation; Carbon leakage; Technology choice; Imperfect competition

Econometric Analysis of Pricing and Operational Strategies

This dissertation contains three essays. The first essay, entitled Pricing and Production Flexibility: An Empirical Analysis of the U.S. Automotive Industry, uses a detailed dataset of the U.S. auto industry to examine the relationship between production flexibility and responsive pricing. Our analysis shows that deploying production flexibility is associated with a reduction in observed discounts and with an increase in plant utilization. Our results allow quantifying some of the benefits of production flexibility. The second essay, entitled An Empirical Analysis of Reputation in Online Service Marketplaces, uses a detailed dataset from a leading online intermediary for software development services to empirically examine the role of reputation on choices and prices in service marketplaces. We find that buyers trade off reputation and price and are willing to accept higher bids posted by more reputable bidders. Sellers primarily use a superior reputation to increase their probability of being selected, as opposed to increasing their prices. Our analysis shows that the numerical reputation score has a smaller effect in situations where there exists a previous relationship between buyer and seller, when the seller has certified his or her skills, when the seller is local, or in situations that prompt higher interpersonal trust. The third essay, entitled The Effects of Product Line Breadth: Evidence from the Automotive Industry, studies the effects of product line breadth on market shares and costs, using data from the U.S. automotive industry. Our results show a positive association between product line breadth and market share and production costs. Beyond the effects on production costs, we study the effect of product line breadth on mismatch costs, which arise from demand uncertainty, and we find that product line breadth has a substantial impact on average discounts and inventories. Our results also show that platform strategies can reduce production costs and that a broader product line can provide a hedge against changes in demand conditions

Capacity optimization of an innovating firm

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Pricing Strategy and Quick Response Adoption System with Strategic Customers

This study determined the competitive advantage of a quick response (QR) system when a firm faces forward-looking customers with heterogeneous and uncertain valuations for a product, uncertain demand, and two selling periods. We identify two classes of pricing strategies, namely, no-price commitment strategy and price commitment strategy. Interestingly, the unique equilibrium is proven to exist if and only if most customers have high tastes on a product’s value. We also prove that when customers possess beliefs about the markdown in the second period being smaller enough, a firm obtains a high profit with price commitment; otherwise he obtains a high profit without price commitment. Moreover, we distinguish the competitive advantage of a QR system from two strategies. When a firm uses no-price commitment strategy, the value of QR system in the first period decreases and in the second period increases with customer’s strategic behavior. When a firm provides price commitment, the value of QR system in the first period may increase, decrease, or decrease first and then increase with customer’s strategic behavior. And the value of QR in the second period under price commitment strategy decreases or rises first and then decreases with customer’s strategic behavior

Mediating impact of manufacturing technology, lean and strategic flexibility on manufacturing performance

In respect of Malaysian lean manufacturer; there has been insufficient research on what are the winning formulate to overcome the mounting challenges from the business environment. In this study, three identified strategies i.e lean, manufacturing technology and strategic flexibility, that could positively improve manufacturing performances, are investigated in depth. The research approach used was quantitative with data analyzed using SmartPLS.Results from this study also emphasize several interesting quasi - paradoxical relationships which implied that Malaysian lean manufacturers prefer a cautious approach towards manufacturing technology implementation, preferring to incorporate technology in a more stable business environment and view strategic flexibility as unfavorable toward performance improvement.In conclusion, this study manages to produce a strong predictive strategy-performance model, which explains the mediation impact of manufacturing strategies on external environmental factors and manufacturing performance