The effect of bi-dimensional power structure on supply chain decisions and performance

Operational decisions made by manufacturers and retailers are often affected by the power relationships of both vertical and horizontal competitions in a supply chain. Although many studies have been carried to assess how the power structure impacts supply chains, most of them only focus on the power dynamics in the vertical competition or horizontal competition. This paper systematically examines the impacts of bi-dimensional power structure on a supply chain. Considering a triadic setting that is made of two rival retailers and a common manufacturer, we compare the equilibriums for the supply chain and individual firms with five different possible power structures. The analysis results show that the bi-dimensional power dynamics have a significant impact. Furthermore, the impacts of the bi-dimensional power structure are also dependent on the nature of customer demand. This work provides important management implications that are supportive for companies to make strategic and operational decisions.