Supply Chain Management – Unilock Case Study
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Q&H and Unilock are two detergent manufacturers with relatively stable demand throughout the years. With stable demand and pressure on price by competitors, choosing a time to run a promotion can be especially difficult. The models for 9-5 help Q&H make this decision, while considering the actions of their main competitor, Unilock. The understanding of Game Theory is an essential part of this decision. A promotion for Q&H does no run in isolation, and will cause Unilock react and thus affect the amount of customers Q&H could gain from their promotional decision. It is evident through the model that if Unilock were to run a promotion, they would take away 50% of Q&H’s demand / consumption in that period. Thus, if the two companies cannot collude, it is important to assume the worst case scenario; Q&H should act as if Unilock will always seek to work against them.
Assuming no promotion occurs by either of the companies, the annual profit for Q&H is $1,607,850. However, given the nature of the competition, it is highly unlikely for Unilock not to take advantage of the opportunity if Q&H decides not to run a promotion. Thus, if Unilock promotes in April and Q&H does not promote at all, Q&H’s profits will be $1,366,250. Given the consumption effect, the percentage change between the two profits is 15%, which is not a huge difference, but a manager will still seek to avoid this. If Q&H were to promote in April and Unilock does not promote all year, Q&H’s profit is $1,520,174. However, if Unilock, again, does not promote all year but Q&H decides to run their promotion in June instead of April, their profit will be $1,611,294. From these conclusions, it is clear that the month in which Q&H promotes is important for their profits, independent of Unilock’s decisions.
If both firms promote in April, the profit for Q&H is $1,466,410, with a combined profit of $2,932,820. If both firms promote in June, the profit for Q&H is $1,477,050 with a combined profit of $2,954,100. If Q&H promotes in April but Unilock promotes in June, Q&H’s profit is $1,297,774, with a combined profit of $2,709,188. If Q&H promotes in June and Unilock promotes in April, Q&H’s profit will be $1,411,414, with the same total profit of $2,709,188. Thus, the “piece of the pie” is remaining the same size, but the allocation of profit is shifting between the businesses.
It is beneficial for Q&H to try to collaborate with Unilock to produce the best outcome for each of the businesses. Given the governments regulations on collusion and competition, a collaboration between the two companies is highly unlikely. However, if this were the case, the best decision would be