IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-23-00560.html
   My bibliography  Save this article

Customer-friendly sales division, transfer pricing, and the direct channel in the divisionalized firm

Author

Listed:
  • Jumpei Hamamura

    (Kwansei Gakuin University)

  • Momoe Hayashi

    (Momoyama Gakuin Unversity)

  • Koki Wada

    (Momoyama Gakuin University)

Abstract

In this note, we assess the usefulness of transfer pricing in the divisionalized firm, which is composed of the headquarters and customer-friendly sales division. In particular, based on recent management practice, we assume the existence of a direct channel to provide the products to the consumer. From our analysis, we find that while the divisionalized firm always opens a direct channel to reach the consumer, the customer-friendly sales division does not improve the profit without the transfer pricing. In particular, we obtain that the manipulation of transfer price yields that the total profit does not depend on the level of emphasis of the customer by the sales division. In other words, the headquarters coordinates the supplied quantity using the transfer pricing under the direct channel. This result indicates the importance of internal transfer pricing to manage the divisionalized firm in a recent situation.

Suggested Citation

  • Jumpei Hamamura & Momoe Hayashi & Koki Wada, 2024. "Customer-friendly sales division, transfer pricing, and the direct channel in the divisionalized firm," Economics Bulletin, AccessEcon, vol. 44(3), pages 932-939.
    • Handle: RePEc:ebl:ecbull:eb-23-00560
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2024/Volume44/EB-24-V44-I3-P70.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Wei-yu Kevin Chiang & Dilip Chhajed & James D. Hess, 2003. "Direct Marketing, Indirect Profits: A Strategic Analysis of Dual-Channel Supply-Chain Design," Management Science, INFORMS, vol. 49(1), pages 1-20, January.
    2. Matsui, Kenji, 2017. "When should a manufacturer set its direct price and wholesale price in dual-channel supply chains?," European Journal of Operational Research, Elsevier, vol. 258(2), pages 501-511.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yan, Yingchen & Zhao, Ruiqing & Liu, Zhibing, 2018. "Strategic introduction of the marketplace channel under spillovers from online to offline sales," European Journal of Operational Research, Elsevier, vol. 267(1), pages 65-77.
    2. Hu, Xiaoqing & Cai, Jianhu & Yue, Xiaohang, 2024. "Power structure preferences in a dual-channel supply chain: Demand information symmetry vs. asymmetry," European Journal of Operational Research, Elsevier, vol. 314(3), pages 920-934.
    3. Sun, Libo & Jiao, Xiaoting & Guo, Xiaolong & Yu, Yugang, 2022. "Pricing policies in dual distribution channels: The reference effect of official prices," European Journal of Operational Research, Elsevier, vol. 296(1), pages 146-157.
    4. Yan, Wei & Xiong, Yu & Chu, Junhong & Li, Gendao & Xiong, Zhongkai, 2018. "Clicks versus Bricks: The role of durability in marketing channel strategy of durable goods manufacturers," European Journal of Operational Research, Elsevier, vol. 265(3), pages 909-918.
    5. Yingdong Tian & Wensheng Yang & Kun Wen & Dawei Zhang, 2023. "Who is better for single and double coupon promotion? Comparison from dual‐channel and two‐period," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2079-2093, June.
    6. Zheng, Shengming & Yu, Yugang, 2021. "Manufacturer encroachment with equal pricing strategy," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 152(C).
    7. He, Bo & Gan, Xianghua & Yuan, Kaifu, 2019. "Entry of online presale of fresh produce: A competitive analysis," European Journal of Operational Research, Elsevier, vol. 272(1), pages 339-351.
    8. Qing, Qiankai & Deng, Tianhu & Wang, Hongwei, 2017. "Capacity allocation under downstream competition and bargaining," European Journal of Operational Research, Elsevier, vol. 261(1), pages 97-107.
    9. Shangyu Pi & Yang Wang, 2020. "An E-Tailer’s Operational Strategy under Different Supply Chain Structures," Sustainability, MDPI, vol. 12(5), pages 1-20, March.
    10. Chen, Jing & Pun, Hubert & Li, Wei, 2018. "Using online channel to defer the launch of discount retailing store," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 120(C), pages 96-115.
    11. Li, Guo & Li, Lin & Sun, Jiasen, 2019. "Pricing and service effort strategy in a dual-channel supply chain with showrooming effect," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 126(C), pages 32-48.
    12. Zhen, Xueping & Xu, Shuangshuang & Li, Yongjian & Shi, Dan, 2022. "When and how should a retailer use third-party platform channels? The Impact of spillover effects," European Journal of Operational Research, Elsevier, vol. 301(2), pages 624-637.
    13. Lee, Hsiao-Hui & Chang, Tingkai & Jean, Kevin & Kuo, Chia-Wei, 2022. "Channel design and OEM growth in a multi-market setup," European Journal of Operational Research, Elsevier, vol. 296(3), pages 862-872.
    14. LIN, Feng & QIN, Xibei & PU, Xujin & ZHU, Weiwei & ZHUO, Xingxuan, 2021. "Effects of in-house production on channel structures in a co-opetitive supply chain under supply uncertainty," Omega, Elsevier, vol. 103(C).
    15. Lan, Yongquan & Li, Yanzhi & Papier, Felix, 2018. "Competition and coordination in a three-tier supply chain with differentiated channels," European Journal of Operational Research, Elsevier, vol. 269(3), pages 870-882.
    16. Chen, Pingping & Zhao, Ruiqing & Yan, Yingchen & Zhou, Chi, 2021. "Promoting end-of-season product through online channel in an uncertain market," European Journal of Operational Research, Elsevier, vol. 295(3), pages 935-948.
    17. Liu, Mengqi & Liang, Ke & Perera, Sandun & Huang, Rui & Ghose, Sanjoy, 2022. "Game theoretical analysis of service effort timing scheme strategies in dual-channel supply chains," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 158(C).
    18. Matsui, Kenji, 2020. "Optimal bargaining timing of a wholesale price for a manufacturer with a retailer in a dual-channel supply chain," European Journal of Operational Research, Elsevier, vol. 287(1), pages 225-236.
    19. Jianghua Wu & Yuan Xue & Jiahao Yu, 2024. "A strategic analysis of timing of wholesale pricing and information sharing strategy in dual-channel retailing," Annals of Operations Research, Springer, vol. 338(2), pages 1219-1240, July.
    20. Matsui, Kenji, 2024. "Should competing suppliers with dual-channel supply chains adopt agency selling in an e-commerce platform?," European Journal of Operational Research, Elsevier, vol. 312(2), pages 587-604.

    More about this item

    Keywords

    transfer pricing; divisionalized firm; customer-friendly sales division; dual-channel;
    All these keywords.

    JEL classification:

    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-23-00560. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.