What Is Coordination And Coordination

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Various articles have shown how the level of coordination among members of a “one-manufacturer and one-retailer” supply chain affects the effectiveness of advertising efforts on profits. Jørgensen and Zaccour (1999) compared perfect Nash pricing and advertising strategies between non-coordination and coordination strategies, where the retailer’s stock of advertising goodwill follows the Nerlove-Arrow model. For both strategies, Jørgensen and Zaccour found that optimal advertising efforts are the same for both members, decrease linearly over time, and are positive as long as the stock of goodwill advertising does not exceed a threshold. In addition, the equilibrium stock of advertising goodwill and the advertising rate converge. However, when comparing quantitatively results between both scenarios, the authors found that: i) the retailer charges a higher price in the non-coordinated case, ii) advertising decreases linearly with stock of goodwill advertising slower in the non-coordinated case, iii) goodwill and advertising converge to higher values in the coordinated case, and iv) advertising is higher in the coordinated than in the non-coordinated case as long as the goodwill stock does not exceed a threshold, whereas the opposite holds after that threshold. Thus, in words of the…show more content…
In addition, the model assumed that the manufacturer invests only in national advertising to build brand image, whereas the retailer invests only in local advertising to shape consumers’ purchase behavior in stores. However, the image that a retailer conveys to customers may affect the brand image of the products he sells (Pettijohn et al., 1992), whereas the manufacturer may also perform short-term advertising efforts to convince final customers to
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