DOCSLIB.ORG

Competitive Exclusion in Category Captain Arrangements

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Competitive Exclusion in Category Captain Arrangements COMPETITIVE EXCLUSION IN CATEGORY CAPTAIN ARRANGEMENTS Working Monograph1 Gregory T. Gundlach Coggin Distinguished Professor of Marketing University of North Florida & Senior Fellow American Antitrust Institute [email protected] and Alex G. Loff Researcher University of North Florida [email protected] August 30, 2018 1 We thank Riley T. Krotz, Ph.D. Student, University of Tennessee, for his helpful comments and suggestions in the preparation of this monograph. 1 COMPETITIVE EXCLUSION IN CATEGORY CAPTAIN ARRANGEMENTS Table of Contents PREFACE .................................................................................................................................. 5 CHAPTER 1. INTRODUCTION ............................................................................................ 6 CHAPTER 2. CATEGORY MANAGEMENT .................................................................... 12 DEFINITION AND NATURE ......................................................................................................................... 12 OBJECTIVES AND GOALS ............................................................................................................................. 13 ORIGIN AND DEVELOPMENT ..................................................................................................................... 14 PERSPECTIVE AND APPROACH ................................................................................................................... 15 OPERATION AND MANAGEMENT .............................................................................................................. 16 ADOPTION AND SCOPE ............................................................................................................................... 17 TRENDS AND INFLUENCES ......................................................................................................................... 17 BENEFITS AND EFFICIENCIES ..................................................................................................................... 18 CHAPTER 3. CATEGORY CAPTAIN ARRANGEMENTS ............................................... 21 NATURE AND SCOPE .................................................................................................................................... 21 SELECTION AND STRUCTURE ...................................................................................................................... 23 GOVERNANCE AND COMPENSATION ........................................................................................................ 25 ROLES AND RESPONSIBILITIES ................................................................................................................... 27 MOTIVATIONS AND GOALS ......................................................................................................................... 31 OUTCOMES AND VALUE .............................................................................................................................. 35 CHAPTER 4. KEY SOURCES OF CONCERN FOR CATEGORY CAPTAIN ARRANGEMENTS ................................................................................................................ 40 FACIAL REDUCTION OR ELIMINATION OF COMPETITION ...................................................................... 40 INHERENT CONFLICTS OF INTEREST ......................................................................................................... 41 OPPORTUNITIES FOR SELF-INTEREST SEEKING ...................................................................................... 43 POTENTIAL FOR SUBTLE FORMS OF OPPORTUNISM ................................................................................ 45 CHAPTER 5. THE POWER OF CATEGORY CAPTAINS ................................................ 46 TYPES OF POWER .......................................................................................................................................... 46 Market (i.e., horizontal) power ..................................................................................................................... 46 Interfirm (i.e. vertical) power ......................................................................................................................... 47 Interplay of market and interfirm power ........................................................................................................ 47 SOURCES OF POWER ..................................................................................................................................... 48 Market-based sources .................................................................................................................................... 49 Interfirm-based sources .................................................................................................................................. 51 Role of information asymmetries .................................................................................................................... 53 DIMENSIONS OF POWER .............................................................................................................................. 55 Continuum of power and practice .................................................................................................................. 55 Context and structure of power ...................................................................................................................... 57 Dynamics and evolution of power .................................................................................................................. 59 CHAPTER 6. EXCLUSIONARY CONDUCT AND PRACTICES BY CATEGORY CAPTAINS .............................................................................................................................. 60 2 DENYING OTHERS FROM COMPETING FOR THE CATEGORY CAPTAIN ROLE ...................................... 62 RECEIVING AND MISUSING RIVALS’ SENSITIVE INFORMATION ............................................................. 63 Sharing information with others in the captain’s organization ........................................................................ 65 Sharing information with other suppliers ....................................................................................................... 65 ENGAGING IN IMPROPER RECOMMENDATIONS AND RELATED ACTIONS ........................................... 66 Recommendations to remove or reduce rivals’ products .................................................................................... 67 Exclusive dealing .......................................................................................................................................... 70 Tortious conduct against rivals ...................................................................................................................... 72 DISADVANTAGING RETAILER’S STORE BRANDS AND THE SUPPLIERS OF STORE BRANDS ................. 73 CHAPTER 7. MANAGERIAL SAFEGUARDS AGAINST EXCLUSION IN CATEGORY CAPTAIN ARRANGEMENTS ............................................................................................. 74 SAFEGUARDS INVOLVING ALTERNATIVE CATEGORY CAPTAIN ARRANGEMENTS .............................. 75 No category captain ...................................................................................................................................... 76 Co-captains, validators, advisors, and nonleader captains ............................................................................... 77 Third party advisors and consultants ............................................................................................................. 78 Hybrid arrangements .................................................................................................................................... 79 SAFEGUARDS AGAINST DENYING OTHERS FROM COMPETING FOR CATEGORY CAPTAIN ROLE ...... 80 Insuring that other suppliers are considered for the role ................................................................................... 80 Prohibitions on payments and negotiated arrangements .................................................................................. 80 Termination clauses, discontinuance rights, and time limits ............................................................................ 81 SAFEGUARDS AGAINST A CATEGORY CAPTAIN RECEIVING AND MISUSING RIVALS’ SENSITIVE INFORMATION ............................................................................................................................................... 81 Firewalls and controls on sharing information ................................................................................................ 81 Confidentiality requirements and protections .................................................................................................. 82 Prohibitions on the receipt, disclosure, and use of information ......................................................................... 83 Selection criteria and confidentiality assessments ............................................................................................. 83 SAFEGUARDS AGAINST A CATEGORY CAPTAIN ENGAGING IN IMPROPER RECOMMENDATIONS AND RELATED ACTIONS ....................................................................................................................................... 83 Requirements of objectivity and impartiality ..................................................................................................
Load more

Recommended publications
  • E-Commerce Category Leadership
    E-Commerce Category Leadership A New Approach to Retailer and Supplier Collaboration for Digital and E-Commerce Growth An industry best practices report published by The Partnering Group and sponsored by The Category Management Association ECL Table of Contents Introduction 1 ECL Collaborative Planning Process 6 E-Commerce Analytics 18 Digital Marketing 26 Site Merchandising 33 Digital Assets 39 Supply Chain 45 People and Skills 50 Actions for the Industry 54 Glossary of Terms 56 *This report, its recommendations and its tools are provided for information purposes only and their use offers no guaranteed financial or business outcomes. This report is copyright of TPG. © 2018 The Partnering Group Inc. All rights reserved. All diagrams and templates herein are solely copyright of TPG with exception of those specifically agreed upon for licensing to The Category Management Association (CMA) under a separate agreement. Introduction Purpose E-Commerce has become mission critical for today’s consumer products retailers and suppliers. This report is written for retailers and suppliers who want to drive e-commerce growth by working collaboratively to improve the digital shopping experience end-to-end. The goal of this report is to equip trading partners with industry leading methods and processes for e-commerce collaboration that will increase trust and alignment with growth, simplification and speed as key outcomes. For retailers, this report offers a clear, step-by-step approach for building growth plans with suppliers including internal resources required and how to set supplier expectations for the engagement. For suppliers, this report provides clarity on how and where to engage with retailers productively as well as the toolkit of people, skills, data and systems to support the work.
    [Show full text]
  • Unit 9 Category Management
    Retail Operations and Store Management-II UNIT 9 CATEGORY MANAGEMENT Structure 9.0 Objectives 9.1 Introduction 9.2 What are Categories 9.3 The Concept of Category Management 9.4 Relationship of Different Goals with the Category Management Process 9.4.1 Example of Different Goals for a Retail Business 9.4.2 Category Management as an Independent Function 9.5 Influence of Category Management on Other Functions 9.5.1 The Category Management 8-step Process 9.6 Need and Benefits of Category Management 9.6.1 Who Benefits from Category Management? 9.6.2 How is Category Management Used? 9.7 Let Us Sum Up 9.8 Keywords 9.9 Answers to Check Your Progress 9.10 Terminal Questions 9.11 Further Readings 9.0 OBJECTIVES After going through this unit, you should be able to: ● discuss the concept of Category Management; ● discuss the category and Their Definitions; ● analyse the relationship of Different Goals with Category Management; ● discuss the influence of Category Management on Other Functions of Retail; and ● describe the Need and Benefits of Category Management. 9.1 INTRODUCTION Category management has become an important concept in the current scenario. You must be witnessing that a small retailer has to deal with many different products with different characteristics making the task further difficult for the retailer. Retailers have to handle retail categories at many different levels like product class, product categories, sub-product categories, styles, brands, SKUs. Further at the level of strategic management, group level, country and regional level, and finally at individual store level.
    [Show full text]
  • How Vendors Allocate Marketing Dollars
    How Vendors Allocate Marketing Dollars Best Practice White Paper Category Management Association 2013 Why read this paper? Actions to consider This paper addresses at a high level some of If you are a retailer: marketing’s most intriguing issues: How do 1) Ask your vendor account team to marketers determine the resource allocation compare your account P&L with those by brand, by country, by retailer and by of other retailers to ensure that you are marketing element. being treated fairly Most brand marketers and most retail 2) Generate a higher ROI via superb execution thereby justifying a higher category managers are focused on share of brand spending spending the funds allocated to them. This paper helps them understand the 3) Encourage category-building plans C-suite spending rationale determining incorporating shopper insight work to what resources ultimately trickle build shopper traffic and loyalty and down to the brand and then out to the your sales and profits. Be open to retailer. learning and to new ideas. The not so surprising conclusion is that If you are a supplier: management commits resources 1) Know your ROI by marketing where returns are judged to be element/option, whether it be a TV highest in the short term or of most commercial on a Hispanic network or a display at Kroger. Know the up to date strategic value long term. For software services that provide this example, does the $250K spent on a information. TV spot on Dancing with the Stars have 2) Know your account P&L’s and be sure a +/- ROI vs.
    [Show full text]
  • The Competitive Consequences of Using a Category Captain
    The Competitive Consequences of Using a Category Captain Sanjay K. Dhar Jagmohan S. Raju Upender Subramanian Yusong Wang1 [Under Review at Management Science] 1 Sanjay K. Dhar is James H. Lorie Professor of Marketing, Graduate School of Business, University of Chicago, Chicago, IL 60637 (Phone: (773) 702-3005, Fax: (773) 702-0458, Email: [email protected]). Jagmohan S. Raju is Joseph J. Aresty Professor of Marketing, The Wharton School, University of Pennsylvania, Philadelphia, PA 19104 (Phone: (215) 898-1114, Fax: (215) 898-2534, E-mail: [email protected]). Upender Subramanian is a doctoral candidate in Marketing, The Wharton School, University of Pennsylvania, Philadelphia, PA 19104 (Phone: (215) 898-5252, Fax: (215) 898-2534, E-mail: [email protected]). Yusong Wang is Assistant Professor of Marketing, School of Management, Fudan University, P.R. China. (Email: [email protected]). Correspondence about the paper should be addresed to [email protected]. The Competitive Consequences of Using a Category Captain Abstract Many retailers these days designate a national brand manufacturer as a "category captain" to help them manage the entire category. The category captain is involved in decisions that a¤ect not only its own brands, but also those of its rivals. We analyze a setting where two manufacturers supply to a single retailer, and examine the competitive consequences when the category captain is engaged in one of the following three activities: (1) provision of demand enhancing services (2) sharing of superior demand information, and (3) collaborating in pricing decisions. Contrary to concerns raised in previous literature, we …nd that a category captain’s involve- ment in pricing decisions or providing demand enhancing services does not necessarily lead to undesirable outcomes: consumers bene…t from pricing collaboration and, under some conditions, the rival manufacturer bene…ts from demand enhancing services even when these services favor the category captain’s brand at the expense of the rival’s.
    [Show full text]
  • Revolutionizing Category Management by Embracing AI
    WHITE PAPER Revolutionizing Category Management By Embracing AI ABSTRACT Applied to the important planning process known as category management (CatMan), an emerging class of cross-enterprise AI capabilities can enhance the output of all functions within the consumer-packaged goods (CPG) managerial ecosystem. That makes an AI platform more than just an analytical tool. Because it enables cross-enterprise management and enhances competitive differentiation, CPG executives need to understand why and how to focus the power of AI on specific business- aligned use cases. Written by Gordon Wade, in collaboration with r4 Technologies Revolutionizing Category Management by Embracing AI Table of Contents Executive Summary 3 Shopper Behavior and New Market Realities Complicate CPG Management 4 Organizational Silos Hinder a Cross-Enterprise Approach in an Age of Rapid Change 5 What Is AI? 5 What Is Cross-Enterprise Management? 6 Cross-Enterprise Capabilities Are Fundamentally Transforming CatMan 6 Applied properly, several AI capabilities can enhance CatMan dramatically 6 Identifying changes in shopper behavior and developing insights rapidly 6 Making merchandising decisions at the most granular levels 7 Improving store-level forecasting 7 How These Capabilities Affect Each Step in the CatMan Process 7 Examples of Driving Volume and Profit, Using AI and CatMan Principles 8 Sample use case #1: A factory accident creates a profitability and customer-satisfaction conundrum 8 Sample use case #2: Optimally introducing a new product line 8 Sample use case
    [Show full text]
  • Category Management the Effective Way of Managing Retail Business
    2010 Category Management The Effective Way of Managing Retail Business This thesis comprises 15 ECTs credits and has been written as a compulsory part of the program; Master of Science with a major in Business and Economics with a specialization in Applied Textile Management, 60 ECTS Credits. Sanuwar Rashid The University of Boras 5/26/2010 Category Management: The Effective Way of Managing Retail Business. Sanuwar Rashid ( [email protected] ) Master thesis The Swedish School of Textiles University of Borås Swedish School of Textiles 501 90 Borås visiting address: Bryggaregatan 17 Supervisor Professor Heikki Mattila ( [email protected] ) Tampere University of Technology, Finland Examiner Professor Håkan Torstensson ( [email protected] ) University of Borås, Sweden Date June 2010 i ACKNOWLEDGEMENT First, I would like very much to thank everyone who contributed to accomplishment of the work both directly and indirectly. In my family area, I dedicate this work to my parents and elder brother. I would like to take this opportunity to thank my wife, Dr. Ferdousi Akter Rupaly, for being by my side and always valuing what I have done and the decision I made. She has been my best friend during all seasons even in the distance. In my academic area, I would like to thank my supervisor; Professor Heikki Mattila for his super wise professional advice, rectification and support. I would like to offer special thanks and appreciation to Prof. Håkan Torstensson for his ingenuity and support at the initial stage of this thesis. I would also like to express my sincere gratitude to all my teachers during the master degree specially Jane McAndrew, Jonas Larsson, Simonetta Carbonaro, Jan Carlsson, Joel Peterson, Anders Heden, Christian Votava , Dag Ericsson, David Goldsmith and Rudrajit Pal.
    [Show full text]
  • Building a Category Management Capability
    Building a Category Management Capability UPS Supply Chain SolutionsSM Our Insight. A UPS Supply Chain Solutions White Paper Copyright © 2005 United Parcel Service of America, Inc. All Rights Reserved. No part of this publication may be reproduced without the prior written permission of UPS Supply Chain Solutions. Imagine 50 or 100 years ago: The corner grocery store owner knew every one of his shoppers in the neighborhood. He knew their families, as well as their likes and dislikes. He could easily discern shopping patterns, including favorite entrees, side dishes, spices, drinks, health and beauty products, even favorite brands. The owner did not need a loyalty program or frequent shopper cards. He knew all of the The shift of power to the important information and either remembered it or jotted it down. Based on this consumer and the associated information, the owner could design a store layout that met customer needs, economics demand a category increased sales and maximized profits. management approach that focuses first on the consumer In essence, the corner store owner practiced category management. The store was and second on methods to organized and customized around categories of products that focused on the meet consumers’ demands, consumer and were known to sell at a certain rate depending on time of year, needs and requirements. special events and personal requests from consumers who were also neighbors and friends. Obviously, time has changed neighborhoods, consumers, consumer families, consumer habits, manufacturers and the entire retail industry. Tremendous advances in transportation, distribution, manufacturing, product design, retail stores and information technology have changed the shopping experience as a whole.
    [Show full text]
  • The Impact of Category Management On
    Suman Basuroy, Murali K. Mantrala, & Rockney G. Walters The Impact of Category Management on Retailer Prices and Performance: Theory and Evidence Category management (CM) is a recent retail management initiative that aims at improving a retailer’s overall per- formance in a product category through more coordinated buying, merchandising, and pricing of the brands in the category than in the past. Despite tremendous retailer and manufacturer interest in the process of CM and its rapid adoption in the industry, much uncertainty exists about the consequences of CM for channel members. The pres- ent study focuses on how a shift to CM by a retailer affects its equilibrium prices, sales, and profitability in a com- petitive retail setting. On the basis of an analysis of a model of two competing national brand manufacturers that supply two competing common retailers, the authors find that one retailer’s adoption of CM increases its average unit price of the category and reduces its sales volume and revenues. However, this retailer can still enjoy an increase in its gross margin profits as competing manufacturers’ wholesale prices fall in the process. Also, the CM adopter’s profits are greater than those of a symmetric competing retailer that follows the traditional brand-centered management of a product category when the interbrand competition is high but interstore competition is low. Apply- ing the intervention analysis methodology, the authors empirically test several of these analytical findings, employ- ing a unique data set that contains information about a supermarket chain’s weekly average unit prices and sales of the laundry detergent category before and after this product category was moved to CM by the retailer.
    [Show full text]
  • Making Category Management More Practical Ron Larson
    CORE Metadata, citation and similar papers at core.ac.uk Provided by Research Papers in Economics Making Category Management More Practical Ron Larson The historical roots of the category-management supermarkets reduced duplicate items a little, they concept can be traced back more than 20 years. could boost category sales. Stores that eliminated The concept came to the forefront in the early too many “duplicate” items experienced category 1990s as part of the Effi cient Consumer Response sales declines. Therefore, an optimal level of va- (ECR) initiative. One of the early diffi culties was riety exists that may be slightly below what many to defi ne category management, and many, some- supermarkets are offering. Category management what confl icting defi nitions have been presented attempts to identify the optimal level of variety for (Dussart 1998). Harris and McPartland (1993) a retailer. said it consists of three interrelated elements: a Early success stories encouraged retailers and philosophy for strategically managing a business manufacturers to adopt category management. In that recognizes categories as strategic business 1997, Giant (Landover) said they were pleased with units, a process through which retailers and sup- the concept and were expanding their efforts (Chain pliers jointly develop category plans, and an or- Store Age 1997). It helped Supervalu reduce items ganizational concept that dictates the integration in test stores by 12 percent and increase category of buying with merchandising. This paper uses a sales by 6.5 percent (Purpura 1998). In 2003, Spar- simplifi ed “process” defi nition: category manage- tan claimed category management was the key to ment is the use of sales data, buyer profi les, and rebuilding their retail business (Ghitelman 2003).
    [Show full text]
  • End-To-End Category Management Best Practices End-To-End Category Management Best Practices
    End-to-End Category Management Best Practices End-to-End Category Management Best Practices Category Management was created in the 90’s aiming to develop relationships between retailers and suppliers, however, the scope and objectives differ significantly from one retailer to another. While Category Management could provide significant value and benefits, the number of organizations considering Category Management as a “Planogram Factory” remains high. Meanwhile, it should be considered as a strategic path for growth by both retailers and suppliers as it stands at the heart of their operations, trying to satisfy the most important person on Earth – their shopper! Setting up the right strategy becomes a win-win process. Blue Yonder Microsoft We’re in the era of the consumer— Microsoft enables digital transformation for the era of and time is the new currency. an intelligent cloud and an intelligent edge. Its mission is to empower every person and every organization on Blue Yonder empowers world-leading companies the planet to achieve more. through a seamless end-to-end commerce experience enabled through AI and ML, providing companies the ability to predict, plan and fulfill demand through a modern, responsive and synchronized supply chain. SES-imagotag 3DVR For 25 years, SES-imagotag has been the trusted 3DVR Solutions (3DVRS), a Blue Yonder Global Alliance partner of retailers in using digital technology in stores. Partner, is a retail technology company who specialise SES-imagotag, the worldwide leader in smart digital in visualisation. 3DVRS’ software works as a plugin to labels and pricing automation, has developed a the Blue Yonder category management suite.
    [Show full text]
  • The Anti-Competitive Effects and Antitrust Implications of Category Management and Category Captains of Consumer Products
    Chicago-Kent Law Review Volume 79 Issue 3 Symposium: "Law &": Philosophical, Psychological, Linguistic, and Biological Article 35 Perspectives on Legal Scholarship October 2004 The Anti-Competitive Effects and Antitrust Implications of Category Management and Category Captains of Consumer Products Leo S. Carameli Jr. Follow this and additional works at: https://scholarship.kentlaw.iit.edu/cklawreview Part of the Law Commons Recommended Citation Leo S. Carameli Jr., The Anti-Competitive Effects and Antitrust Implications of Category Management and Category Captains of Consumer Products, 79 Chi.-Kent L. Rev. 1313 (2004). Available at: https://scholarship.kentlaw.iit.edu/cklawreview/vol79/iss3/35 This Notes is brought to you for free and open access by Scholarly Commons @ IIT Chicago-Kent College of Law. It has been accepted for inclusion in Chicago-Kent Law Review by an authorized editor of Scholarly Commons @ IIT Chicago-Kent College of Law. For more information, please contact [email protected], [email protected]. THE ANTI-COMPETITIVE EFFECTS AND ANTITRUST IMPLICATIONS OF CATEGORY MANAGEMENT AND CATEGORY CAPTAINS OF CONSUMER PRODUCTS LEO S. CARAMELI, JR.* INTRODUCTION Throughout the 1990s, the retail sale of consumer product goods in the United States underwent a sea change. Grocers merged with other grocers, leading to increased market concentration.' Controlling more shelf space than ever before, these new mega-grocers now pos- sess proportionally greater influence over consumer product manu- facturers.2 Manufacturers have responded with strategies designed to strengthen their relationships 3 with the retailers, offering numerous services along with the products they sell.' One frequent response is * J.D., Chicago-Kent College of Law, Illinois Institute of Technology, 2004: B.S., Busi- ness Economics and Management Information Systems.
    [Show full text]
  • Analysis of Trends, Challenges and Best Practices in Contemporary Retailing:A Case of TESCO Group
    International Journal of Business and Management Invention (IJBMI) ISSN (Online): 2319 – 8028, ISSN (Print): 2319 – 801X www.ijbmi.org || Volume 7 Issue 12 Ver. 1 ||December 2018 || PP—09-14 Analysis Of Trends, Challenges And Best Practices In Contemporary Retailing:A Case Of TESCO Group Surbhi Khirbat, R. Ramanjaneyulu, Dr. Sweta K. MSc (International Marketing Strategy), M.Phil (Management), PGDMAssistant Professor (Marketing), Amity University, MBA (Marketing), UGC NET Qualified, (PhD),Lecturer (Marketing), EThames Degree College (Affiliated to Osmania University, Hyderabad) PhD, MBA,Assistant Professor, Amity University, Corresponding author: Surbhi Khirbat ABSTRACT:Retail sector is a significant contributor to the growth of any economy. With consumers taking more control by influencing the industry dynamics, retail is expected to change rapidly in the coming years. Brand loyalty, multi-channel shopping, convenience shopping and technological changes are few trends to look out for in the next five years. The following paper looks at the Retail industry, its current trends and the challenges it poses. It highlights the consumer buying behaviour, changing patterns of the industry and other relative aspects. Irrespective of the volume of the business, any small retailer can flourish and become the most competent player in the industry, thereby leaving little scope for a big giant like TESCO to grow and flourish in the emerging markets. Whilst covering the most prevalent practices and research methods, this analysis critically evaluates them by taking into consideration the future strategies needed for growth of TESCO PLC, for its operations in India and across the globe as an international retailer. The conclusion drawn states that in the future both online and offline channels will have their relevance for consumers; channel integration being its major characteristic.
    [Show full text]