Internet channel entry: A strategic analysis of mixed channel structures

Weon Sang Yoo, Eunkyu Lee

Research output: Contribution to journalArticle

99 Scopus citations

Abstract

By analyzing various alternative mixed channel structures composed of a monopoly manufacturer and online and offline outlets, we investigate how the specific channel structure and varying market conditions moderate the impact of Internet channel entry on the channel members and consumers. As an extension of Balasubramanian's model [Balasubramanian, S. 1998. Mail versus mall: A strategic analysis of competition between direct marketers and conventional retailers. Marketing Sci. 17(3) 181-195], our game-theoretic model captures the fundamental difference between two different channel types and consumer heterogeneity in preference for the Internet channel use. The equilibrium solutions indicate that Internet channel entry does not always lead to lower retail prices and enhanced consumer welfare. We also find that an independent retailer might become worse off after adding its own Internet outlet under certain market conditions. We find that the impact of the Internet channel introduction substantially varies across channel structures and market environments. We explain these varied results by proposing a framework of five key strategic forces that shape the overall impact of the Internet channel introduction.

Original languageEnglish (US)
Pages (from-to)29-41
Number of pages13
JournalMarketing Science
Volume30
Issue number1
DOIs
StatePublished - Jan 1 2011

Keywords

  • Channels of distribution
  • Game theory
  • Interchannel coordination
  • Internet marketing

ASJC Scopus subject areas

  • Business and International Management
  • Marketing

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