Download The Model Study of Dairy Marketing Channel Based on Flexible

The Model Study of Dairy Marketing Channel Based on Flexible
Relationship Quality
HOU Shuxia
Business school, Inner Mongolia Finance and Economics College, Hohhot, China, 010070
[email protected]
Abstract: China’s dairy industry is staying a critical period for comprehensive upgrade the quality and
competitiveness; the competition has evolved from one part of the industrial chain into the whole
marketing network. So, the research focus based on efficiency and effectiveness, rights and conflict on
dairy marketing channels at present should also be shifted into alliances and relationships, in which all
sectors of the dairy marketing channel relationship between stakeholders, especially flexible relationship
quality, gradually become a research priority. Flexible relationship quality of dairy marketing channels
as starting point, the article constructs the relational marketing channels according to China’s dairy
market situation at present. It points out that marketing channel is an integral part in the supply chain
from any relationship between the related industries, which can integrate and coordinate member
relationship and achieves integrated management cross-organization. Therefore, the relational marketing
channel of dairy based on the harmonious relationship of farmers, dairy processing enterprises,
intermediary, consumers and government is a realistic option.
Keywords: flexible relationship, relationship quality, dairy marketing channels
1. Introduction
A dairy marketing channel is an important carrier to achieve ultimate value of dairy products, which
plays an essential role on efficiency for the entire dairy industry. Traditional dairy marketing channel
model has shown some problems, which has been extended the unstable relationship into the various
sectors, which serious obstacle the overall quality and enhancing competitiveness to China’s dairy
industry. With the increasing competition, thus, a relational marketing channel is called for. The main
purpose of relational marketing channels is to improve the whole efficiency of marketing, to understand
and operate the relationship between the manufacturer and other channel members from the perspective
of strategic alliances based on profits of all sectors, to strengthen channel control by cooperation,
win-win and communication, to create more value products and services for customers, and ultimately
achieve company’s strategic intent.
2. Model of Flexible Relationship Quality in Dairy Marketing Channel
The study of flexible relationship quality between different sectors in dairy marketing channels can be
seen as the relationship quality issue of B2B. Cai rong and Zhou jieru (2007) disclosed that there are
two determinates of relationship quality in B2B environment. One is the interpersonal variables existing
in between the seller characteristics and described relationship behavior, which is a decisive role in the
relationship of buyers and sellers. The relationship quality considering the nature of the relationship
between trading organizations is another staying in the premise, which includes common objective,
social ties and relationship benefits, and investment and so on. Actually, the ultimate goal of relationship
quality in dairy marketing channel is establishing the flexible relationship with high-quality between
each link. These flexible relationships include production and processing sectors, and processing and
marketing sectors.
2.1 Coupling Model Based on MOOD
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The Mood approach of Multi-variable dynamic coupling in physics can be used to take the study of
above two factors on relationship quality. Relationship quality measurement is equivalent to Coupling
Factor (CF) measurement. It can be defined as follows:
CF stands for the index of flexible relationship quality about all links,

CF=  ∑  q 2 jΦ j −
 j 
∑δ
2 ij
i

X ij   w 2

∑
q2 jΦ
j
j
 
+ ∑  q3k β k −
 k 
∑δ
im
3 ik

D im y km   w3

∑q
3k
k
Where, δ2ij is the equivalent standard yield based on unit product (i) in factory; δ3ik is the equivalent
standard yield based on unit product (i) in distribution center(k) Φj is the capacity of standard products
in each factory; βk is maximum distribution of distribution center(k); w1，w2 is weight coefficient of
capacity utilization, its value between 0-1. Constraints as follows:
∀r, v
2
Arvj ≤ Ψrv
；
∑
j
∑τ X ≤∑ A
ri
ij
i
rvj
∀r, j
v
∑δ
Xij ≤ Φjq2j
2 ij
∀j
i
ξ ij q 2 j ≤ Xij ≤ ζijq 2 j
αkq 3k ≤ ∑ δ 3ikDimykm ≤ βkq 3k
∀i, j
∑y
∀m
∀k
im
km
=1
k
Xij = ∑ Cijk
∀i, j
∑C
= ∑ Dim
∀i
= ∑ ykmDim
∀i, k
k
ijk
jk
∑C
ijk
j
m
m
Xij , Cijk , Arvj ≥ 0
q2 j , q3k , ykm = 0or1
∀i, v, j , k
∀j , k , m
（）
（ 3）
（ 4）
（ 5）
（ 6）
（ 7）
（ 8）
（ 9）
（10）
（11）
（12）
the above (2) shows raw material supply constraints, in which Ψrv is the capacity of producing raw
material(r) from suppliers(v); the above (3) shows raw material transportation constraints, τri is the
utilization of each raw material(r) based on unit product(i); the above(4) is production constraints; the
above(5) is production control, which ξij and ζij is the minimum and maximum scale of production
about product(i) in factory(j) respectively; the above(6) ensures the distribution in center bewteen the
maximum size and minimum size, in which αk and βk means respectively the minimum and
maximum distribution volume in distribution center(k); the above(7) ensures that each zone of
customers is the only distribution center; the above(8) is to ensure the equal number of transportation
and production; the above(9) ensures that all needs are met; the above(10) ensures that the needs of each
zone from customers are met.
In reality, we can deal with the flexible of relationship quality as a constraint. That means
decision-makers can choose flexible expectation value (ε) appropriately between 0 and 1. Then,
CF≥ε
(13)
So, flexible level of relationship quality can be expressed as to obtain the minimum of objective
function(1) under the constraints (3)-(13), which solves the optimization of Cijk , Arvj Xij, q3k and
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βk
（ 1）
ykm.
However, we must note what the above validation flexible relationship quality still has three basic
characteristics: dynamic, controllable and limited. Thus, the flexible relationship should be a kind of
flexible based on cooperative game, in which the distribution of benefits is a key, because the key of
flexible coupling in dairy marketing channel is the relationship of cooperative game based on
distribution of benefits and coordination.
2.2 Flexible Relationship Quality Based on Cooperative Game Model
According to cooperative game theory, to construct a compromise allocation scheme based on
comprehensive consideration of the interests of all parties has a certain rationality, guidance and
superiority. This compromise allocation scheme is not the traditional average distribution, nor the
distribution based on the proportion of investment costs, but the distribution based on importance in the
cost-effective production process of every cooperative relationship link, which is called as Shapley
value method. The algorithm is as follows:
Suppose set I={1 2 3 … n}, any subset (any possible portfolio of n players) corresponds real-valued
function of S portfolio(be expressed as v(s)), in which v(s) means what gets the maximum benefits by
coordinating the capacity of members, and meets
，，， ，
，
calls [I v] as cooperative strategy for n individuals, v is the eigenfunction for strategy. Usually, we can
suppose
and
in Shapley value method, to receive allocation benefits of the various partners under the cooperation I
known as the Shapley value because it is consistent with and meet the symmetry, validity and additive,
and the only value. Denoted Φ (ν) = (φ1 (ν), φ2 (ν), φ3 (ν) ⋯, φn (ν)), in which φi (ν) means what getting
allocation benefits of NO.i member under the cooperation I. So,
∣∣
S is all subsets which are contained the players i in I. n! is factorial, which is the player number in the
set S. S-i means desirable benefits after the member reduction i in the S. w( s ) is seen as weighting
factor. v(s) is the benefits of subset S.
However, there is still some uncertainty in practice like natural conditions, production cycle, production
output and consumer demand, etc., leading to the risks which should be subtracted from the obtained
distribution by Shapley. So, the plan can be amended as follows
What the bearing risk of partners is R=1/n, that means each member is all bearing the same risk in the
ideal situation.
Suppose the interests of individual partners is v (i), what the bearing risk of partners in reality is
i=1 2 3 … n, interpolation between
and the bearing risk is
, so
， ，，， ，
, that means partners have higher risk in real cooperation than ideals, which
Then known, when
should distribute more interests for it,
. Similarly, when
, that means
partners have lower risk in real cooperation than ideals, which should deduct the interests corresponding
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for it,
.
To sum up, there is the interests’ equation taking into account not only the importance of the core
competitiveness of different parties for the cooperative interests, but also the impact of the risk factors
on interests distribution as follows:
Obviously, Shapley model provides an effective method, which achieves the match between benefit
distribution and risks in the original basis of shared interests, thus reducing a number of unfavorable
factors in order to lay a solid foundation for the sustained and stability development of the entire chain.
The study of flexible relationship quality in dairy marketing channel which has changed the traditional
and simple game relationship has connected enterprises with other channel members as a whole, which
implements a called “cooperation game” channel structure and relationship with paying more attention
the interests of all parties from “benefit-sharing and risk-sharing” currently to “reasonable
benefit-sharing and risk-sharing with reason”. Such structures and relationships decreases channel costs,
meanwhile establishes an effective and rapid response mechanism, thereby reducing market risks in
operation and improving the efficiency.
3. Conclusion
In the increasingly fierce competition, dairy marketing channel has a significant improvement, which is
not longer a simple sales channel. Enterprises must include it in strategic development plan in order to
achieve the changes from short-term interests to the combination of short and long term interests.
Domestic and foreign enterprises proved in practice that dairy marketing channel is a bilateral and
interaction process, which means manufacturers and vendors are not able to impose their business
philosophy on any link of channels. In addition, consumers become more rational and have more
options due to the rise of consumer power.
To sum up, considering all features on starting and ending point of dairy marketing are both consumers,
that the ultimate goal focusing behavioral factors is to obtain the corresponding economic benefits by a
good working relationship, and vision of pursuiting profit maximization, information sharing, advanced
logistics information system, business and personal integrity, and collaboration in the relational
marketing channel, this article sets up dairy marketing channel based on relationships as follows
Bilateral dependence
Communication
Credit
Agreement
Dairy
Farmers
Communication
Credit
Dairy
Cooperatives
Communication
Communication
Credit
Credit
Agreement
Manufacturers Agreement
Consumers
Vendors
Agreement
Bilateral governance
The first is synergistic effect. The members of relational marketing channel can obtain higher interests
respectively by crediting each other without prejudice to the interests of all parties, thus improving their
marketing effectiveness and efficiency of the marketing channels. The empirical research of Prof.
Nirmalga Kwmar from Swiss International College shows that manufacturers maintaining a good
relationship with distributors can get more competitive advantages. His research divides vendors into
two categories: high credit vendors to manufacturers and low credit vendors to manufacturers. The result
shows that the vendors with high credit is better than those with low credit, which means that different
credit relationship between manufacturers and vendors have greater differences on looking for new
supply sources, delivering on the manufacturer’s credit, selling product line width, and the assessment
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vendor performance by the manufacturer.
The second is information sharing. Manufacturers and all parties in the relational marketing channel
have shared, integrated customer information database and feedback system in order to facilitate
communication. All parties can access to comprehensive customer information at a very low cost, and
transfer all market information positively. Because all members in the relational marketing channel are
community of interests, marketing efficiency will be improved by sharing all kinds of information in
database.
The third is sharing capacity. Sharing capacity means that trading on their strengthen each other to
improve their own power in the relational marketing channel. Enterprises intellectual capacity is
following the rule of increasing returns rather than diminishing returns because of the possibility of
trading on its strengthens. So, sharing capacity keeps relational marketing channel to realize the
incremental revenue and improve marketing efficiency to a certain extent.
In summary, marketing channel is an integral part in the supply chain from any relationship between the
related industries, which can integrate and coordinate member relationship and achieves integrated
management cross-organization. Therefore, the relational marketing channel of dairy based on the
harmonious relationship of farmers, dairy processing enterprises, intermediary, consumers and
government is a realistic option.
Notes:
This paper is funded by National Planning Project of Philosophy and Social Science project
No.06BJY063
（
）
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