Manufacturer’s Equity Investment and Encroachment Strategies: An Analysis of Factors Affecting Co-competition Relationships with Retailers

Currently, manufacturer’s equity investment and channel encroachment are progressively common phenomena in real life. The study focuses on the manufacturer’s optimal comprehensive operational strategy in a game model involving a manufacturer and a retailer, where the manufacturer possesses equity investment and encroachment options. The study yields the following insights: First, the manufacturer may choose to establish a direct distribution channel only when the demand improvement resulting from equity investment is relatively low. Conversely, the manufacturer refrains from entering the end retail market if the demand enhancement is significant. Second, the manufacturer’s encroachment capacity is constrained by equity investment, and manufacturer encroachment is always detrimental to the retailer due to intensified market competition. Finally, the manufacturer chooses to invest only when the investment cost falls below a specific threshold, while the retailer rejects the equity investment agreement when the demand improvement is relatively low but the entry cost is relatively high.