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Should national brand manufacturers produce private labels?

Should national brand manufacturers produce private labels? Purpose – The purpose of this paper is to examine the question, “should national brand manufacturers produce private labels?”. Anecdotal evidence shows that though this is a common question for managers in different industries and countries, managers and companies react differently to it. As such, there are national brand manufacturers that produce private labels and others whose policy is to produce only branded products. Design/methodology/approach – This paper examines this question through the construction of a model, focusing especially on the effects of producing private labels on manufacturers' profits when their provision may affect both the consumers' perception of the quality of the private label and the national brand manufacturer's costs. Findings – The analysis allows for different degrees of competition in the retail market, and for linear and non‐linear pricing. Practical implications – An important novel practical implication of these results is that national brand manufacturer' gains from producing private labels are increasing with the concentration of the retail market. Another implication derived from our model is that national brand manufacturers should be more enthusiastic about producing private labels when independent manufacturers may produce a good whose perceived quality is closer to that of the national brand. Originality/value – The results presented in this paper may help managers to identify key variables that may affect the profitability of producing private labels. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Modelling in Management Emerald Publishing

Should national brand manufacturers produce private labels?

Jorge Tarziján
Journal of Modelling in Management , Volume 2 (1): 15 – Mar 20, 2007
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References (14)

Publisher
Emerald Publishing
Copyright
Copyright © 2007 Emerald Group Publishing Limited. All rights reserved.
ISSN
1746-5664
DOI
10.1108/17465660710733059
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to examine the question, “should national brand manufacturers produce private labels?”. Anecdotal evidence shows that though this is a common question for managers in different industries and countries, managers and companies react differently to it. As such, there are national brand manufacturers that produce private labels and others whose policy is to produce only branded products. Design/methodology/approach – This paper examines this question through the construction of a model, focusing especially on the effects of producing private labels on manufacturers' profits when their provision may affect both the consumers' perception of the quality of the private label and the national brand manufacturer's costs. Findings – The analysis allows for different degrees of competition in the retail market, and for linear and non‐linear pricing. Practical implications – An important novel practical implication of these results is that national brand manufacturer' gains from producing private labels are increasing with the concentration of the retail market. Another implication derived from our model is that national brand manufacturers should be more enthusiastic about producing private labels when independent manufacturers may produce a good whose perceived quality is closer to that of the national brand. Originality/value – The results presented in this paper may help managers to identify key variables that may affect the profitability of producing private labels.

Journal

Journal of Modelling in Management – Emerald Publishing

Published: Mar 20, 2007

Keywords: Labelling; Brand management; Profit

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