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17 Indian Telecom Industry: Heading Towards a Duopoly? A Case Study on Indian Telecom Sector Appearing to Get in to a Duopoly (Only Two Players)

• Published: August 2022
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Leading Telecoms like Bharti Airtel, Vodafone, and many others have been the victim of difficult government policies, stringent taxations, penalty payments, license cancellations. With the overhead costs of providing wireless network increasing along with other issues, the telecom sector is ridden with problems sure to run them under. No respite from government, lenders to top it the supreme court order to pay back charges have been a clear indication of biased approaches to benefit couple of players, which is the crux of this case. What has to be seen in the analysis is whether this is truly a duopoly scenario or the other Telecom giants weren’t equipped to handle the competition. The business model is it sustainable or is there a better one?

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Woolworths vs Coles: The Australian Supermarket Duopoly

Table of contents.

At the engine of our modern capitalism is competition. Companies fight for market share, customer loyalty, and survival – at the end of the day. And it’s through these epic battles, that we as consumers get better products at better prices over the long term. A great example of this sort of hard-fought competition is the rivalry between Woolworths and Coles in the Australian supermarket space. 

• ‍ ‍ 995 stores
• ‍ 210,067 employees
• ‍ $44.44 AUD billions in revenue FY21 (Australian Food)
• On average 27.8 million customers served per weekN/D
• 800+ stores
• 112,269 employees
• $33.85 AUD billions in revenue FY21 (Supermarkets)

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From Humble Beginnings

Woolworths opened their doors back in 1924 with a single store in Sydney, and a dream to make it big [1] . 3 years later, they opened a second store on the back of the early momentum and officially became a chain. The offering was successful from the beginning because of the perfect match with the consumer requirements at the time. The middle class was growing and as purchasing power increased, so did the demand for supermarkets. Woolworths rode this trend and rapidly scaled across the country, bringing their unique ethos and way of doing business to people the nation over.

By 1959, they had 300 stores in operation, and they had established themselves as a key player in the industry, one that had significant bargaining power when it came to dealing with vendors and suppliers of all kinds. They began to launch their own white-label brands, acquire smaller players, and quickly became a corporation that wielded immense influence in every consumer vertical that you can imagine. Everything from clothing, to food, to drinks, to household items – they worked their way into each, eventually delivering a supermarket experience that was extremely hard to beat.

In 1993, Woolworths listed on the public markets in what was Australia’s largest ever share float at the time. Once again this accelerated the growth of the company and if you fast forward to today, you can see that they haven’t slowed down since.

Coles got started ten years earlier than Woolworths (1914) with much less fanfare [2] . It was a different time economically and founder GJ Coles opened his store in Victoria with a goal of creating a simple and honest store experience for his customers. As they rode the waves of the Great Depression and the aftermath of World War II, they slowly pivoted their offering to target the married women who had now joined the workforce and were looking for a much more convenient and efficient shopping experience, due to the new time constraints.

Under this mandate, they launched themselves headfirst into a range of different industries including foodstuffs, appliances, cosmetics, and so much more. There was no limit to what they would consider and the only thing that mattered was finding out what customers wanted.

One of the key pillars of Coles' philosophy was to be altruistic wherever possible. GF Coles really wanted his creations to do good in society and he was constantly looking to find ways to donate portions of his profits to hospitals, nursing homes, relief funds, and anywhere else where there was a desperate need. He believed that businesses had a social responsibility to the communities that they operated in, and that ethos carried forward into everything they did. It felt like a safe, warm space for customers to get what they needed, while also knowing that a small piece of their shopping would go to support people in more difficult circumstances than they were.

As the years rolled on, Coles expanded their empire, transforming their early success into a national phenomenon. With every new store came better options for customers, more variety in terms of items, and a more streamlined experience all around. If you look at them today, it’s clear that they’ve come a long way from very humble beginnings, and they represent the quintessential modern supermarket chain. It’s been one hell of a ride.

Finding Their Lane

It’s easy to look at how supermarkets like Woolworths and Coles are set up today and assume that it’s always been that way. But that’s simply not the case. The supermarket industry has ebbed and flowed over the years, disrupting itself time and again, while adjusting to the changing consumer needs at every step along the journey.

Small innovations like an in-built car-park, or self-service shopping might be second nature to us now, but it was these titans of industry that brought them to us. The story of the modern supermarket is one that has constantly followed the macro-economic trends of their customers, trying their best to deliver a shopping experience that was not only one of utility but one that would keep you coming back.

At the start, both Woolworths and Coles had a pretty simple objective. In their native Sydney and Victoria respectively, they wanted to understand the local context and provide the exact goods that the locals needed. The target market was extremely narrow and because your customer base was small, you could be very specific with what you did, because of the constant feedback that you would receive on a day-to-day basis.

It was only when both companies began to grow did they have to start thinking much more strategically about how they would position themselves on the national stage. All of a sudden, the things that helped them succeed as small family-owned stores in their respective neighborhoods weren’t relevant anymore. They had to find a lane for themselves that would resonate with a much wider client base, in a radically changing time.

The one key macroeconomic event that caused a dramatic shift was, of course, the impact of World War II. The post-war economy looked very different from what came before. The economic shift notwithstanding, there was a cultural shift in terms of how people went about their lives.

This coincided with the women’s movement which brought more and more women into the workforce, changing the dynamics of what it meant to run a family home. The supermarkets had to change their messaging, their product offering, and everything about them to adapt to the new normal. It required lower prices, bigger variety, and more convenience because with most adults now in the workforce, there wasn’t a lot of time left for grocery shopping.

This cultural shift meant that the supermarket became one focused on efficiency. Could they fit everything under one roof so that customers only had to go to one place? This value proposition alone would draw consumers in – so it became the holy grail.

How do you stock everything?

Of course, the nature of a one-stop shop is that you’re the only one in town. But as Woolworths and Coles were beginning to discover, that wasn’t the case. As their target markets began to overlap, they started to compete with one another for the same customers. Both companies were selling mostly the same products, and so it was about competing on price, in-store experience, and other less tangible features as they scaled across the country.

We’ll dive into this competition in more detail in a bit, once we’ve done some more work setting the foundation for the battle.

Key Takeaway: You must be constantly adjusting to the macro-economic and cultural shifts that are affecting your customers, or you risk becoming detached and eventually made irrelevant.

Innovations

Both Woolworths and Coles were considered significant innovators because they were constantly pushing themselves to improve the customer experience. Some of these were genuinely new and ground-breaking, while others borrowed inspiration from an idea that already existed and repackaged them for the market they were serving. In each case, there was always a sense that they were pioneers in the space, changing what it meant for the Australian middle class to buy their essentials.

Here are some of the key innovations that Woolworths and Coles pioneered:

• Self-Service. This seems completely normal to us now but there was a time where self-service within stores wasn’t a thing. You would have to ask the shopkeeper to get the items that you needed, and the shop wasn’t really set up for browsing. In around 1955, Woolworths introduced the first self-service store where customers could walk up and down the aisles, collecting what they needed, and then they would pay for it at a cash register. This completely reshaped the retail experience, and it was very quickly copied by everyone in the industry because of what it did for efficiency.
• Sales Catalogues. In the early ‘50s, GJ Coles revolutionized the one-stop shop by creating store catalogs that would show every item that was available at a Coles store. This became the key resource for any shoppers in the area and allowed them to browse the store’s offerings from home, plan their shop, and then come in to get whatever they needed. It seems simple to us but at the time it took an awful lot of effort to get it right and they were one of the first companies to do it at scale.
• Freestanding Supermarkets. Both Woolworths and Coles pioneered the freestanding supermarket that wasn’t connected to other establishments and had a big car park for its customers. This points to how big the stores were starting to get and it made sense to get their own premises on which to build these gigantic operations. If you had told someone from the ‘20s that you’d have giant freestanding supermarkets, they would have told you that you were crazy.
• Inventory Tracking. As these two companies moved into the digital age, starting in the 90s, they were both at the forefront of barcode-based inventory tracking which helped to manage the tremendous volume of items coming in and going out of each store. Instead of having to do things manually, a combination of software and barcode scanners helped to automate a lot of the tedious routine tasks and allow for much better data collection which helped to drive business decisions. Of course, we’ve come a long way since then, but these early technological leaps transformed how big retailers did things.
• White Label Brands. Once Woolworths and Coles got to a certain scale, they had various opportunities to improve their margins by creating white-label house brands which they could sell alongside their vendor-supplied alternatives. They had built the trust in their consumer base and by using their negotiation power and good storytelling, both chains created brands that resonated with consumers across the country. Some of them still dominate the market today and while this was not a new idea, it was executed to perfection by both companies – changing the way that mass-market consumables were marketed and utilized.
• Rewards Programs. As these companies started to gather more and more data on their customers, they realized that they could subtly encourage certain behaviors and reward their top customers by creating a customer loyalty program. The trick was to create enough value for consumers so that signing up would be a no-brainer, and then they could benefit from the improved data on the back end. All of this could then be used to improve the experience and create even more customer satisfaction. Today, every store tries to do this, with varying levels of success, but it was these two supermarket chains who really pushed this in the early days.

Those are just a few of the innovations that came out of the rise to the top, and while most of them may seem obvious to us now – they represented leapfrog changes in their time. These innovations are what kept them at the top of the pile and why we’re writing about them right now, as opposed to the other competitors that have faded into the annals of time.

Key Takeaway: What seems obvious to us now represented a game-changing innovation in the past. What new concept can you bring to life today that will look obvious to us in the future? Is there low-hanging fruit that is right in front of you?

Expansion Beyond the Supermarket

It’s also worth noting that neither Woolworths nor Coles stopped at the supermarket. They realized, as many well-known consumer brands do, that their influence is only limited by their imagination. By the time that they were controlling the supermarket industry, they had built up a tremendous amount of brand equity in the minds of consumers that could be relatively easily translated into other endeavors.

We saw expansions into service and petrol stations which aimed to create highly convenient, bite-sized shopping experiences for those who were filling up their cars. Both companies made a range of different acquisitions that either kept running as they were or were integrated into the retail family to bring even more under one roof.

This is not to say that all of these moves succeeded, however. One notable failure that stains the history of Australian retail was an attempt by Woolworths to enter the home improvement space. In order to compete with Bunnings, the market leader, they created a brand called ‘Masters Home Improvement’ through a joint venture with Lowe’s. The idea was to create the same sort of ethos and customer experience that Woolworths customers had become accustomed to but focus it on the world of home improvement.

They couldn’t make it work though, and they proceeded to lose billions of dollars in the process. It was in 2016 when they declared it a failure and exited the market entirely. Interpret this as you will, but from where we’re seated – this looks like a story of a company biting off more than they can chew. While brand strength and operational know-how are powerful, you still have to have a deep understanding of the new industry you’re entering and how to best deliver the service that you need to compete. Woolworths got this one wrong and returned their efforts to the supermarket battle with Coles that rages to this day.

Key Takeaway: Venturing out of your vertical doesn’t always work, no matter how strong your brand is. Do so carefully and with the right research and risk mitigation behind you.

The Battle for Supremacy

If you look back on it now, these two companies seemed destined to come together eventually. Even though they were started in two different places, in different times, the similarities of what they were trying to accomplish, and the philosophy they were applying to get there, were remarkably similar. The moment they started to enter the same towns; they were bound to compete.

In some ways, the competition between Woolworths and Coles has been one that has typified Australian retail. It feels like it’s perfectly positioned for a management consulting case study because of how well-matched the competition has been and how we’ve seen them go toe to toe for years now [3] .

In the 1950s, their combined market share was only 10%. But this quickly rose to 34% by the 1970s and up to 65% by 2008 [4] . The growth seen by both dwarfed anything that the other players could match and so they become somewhat obsessed with one another. If you read any memoirs or stories from the early days, you get the sense that they were at each other’s throats from the very beginning.

Every time one of them developed a new concept or idea, it would cause a ripple effect on the other side, while the other company tried to copy it as quickly as they could. Back and forth they traded innovations in technology, customer experience, operational efficiency, messaging, and much more. Competitive advantages were short-lived because both companies employed teams whose sole job it was to monitor their peer and report back on how things were shifting on that side.

It’s rare that you get these sorts of competitions where both parties are equally strong. Typically you hear the story of a large company bullying a smaller one, or an agile company out-maneuvering a larger one. But here, you had two major corporations, operating at scale, embarking on a constant battle for the next consumer [5] .

A lot of this battle revolved around real estate and foot traffic. As both companies were going after the same customers, they wanted to locate their new stores in the prime locations that would maximize awareness. This is a core part of retail strategy, of course, and both companies were trying to eke out whatever benefits they could from the land they could get their hands on. Shopping centres often welcomed this battle because they were considered anchor tenants and their brands could easily raise the status of any new complex.

However, the battle over real estate has calmed down in the modern era. The differences in plots became much less important, and with enough scale, customers would come directly to the stores intentionally. You didn’t need to capitalize on impulsive window shoppers anymore.

And so, as it often does, the competition came down to price.

The Race to the Bottom

In the world of the supermarket, there is only so much you can do in terms of product differentiation. As the global supply chain democratized access to the major distributors and suppliers, both Woolworths and Coles essentially housed the same items inside their stores. All that remained to compete on was price.

Who could deliver the goods at the lowest price to their customers?

Neither company was doing their own manufacturing, so there were only ever two ways that they could bring down the cost of their goods in any significant way. They could either cut overhead costs or negotiate lower prices from their suppliers.

Both companies were determined to maintain the high quality of their in-store experience and so were very hesitant to touch any of the overhead costs. Not to mention the importance of good people across the organization, which meant that they were not looking to reduce salaries by any stretch of the imagination. Sure, there were some technological advancements that helped, but at the end of the day – they needed to tackle the input costs.

So, that began the race to the bottom.

Woolworths and Coles would go back and forth with suppliers fighting to squeeze margins as best as they could – so that they could pass those savings on to the consumers. Every time that Coles won a slight discount from a supplier, Woolworths would have to fight to match it. Every time Woolworths negotiated better payment terms with a distributor, Coles would scramble to do the same.

The enduring pressure on price started to place a lot of strain on the suppliers that were selling their goods into these chains. But they didn’t really have any bargaining power in these situations because the order volumes were so large that they represented a substantial portion of their overall sales. Having your goods in Woolworths or Coles was not an opportunity that you could easily turn away. And so, piece by piece, these corporations chipped away at the prices and used each other as leverage points along the way.

The War on Milk

The most vivid example of this race to the bottom was the Milk Price Wars. Starting in January of 2011, there began intense competition on milk prices, one of the key staples that any supermarket must be competitive on. Both companies were getting their milk supplies from local Australian farmers, and they continued to push the prices down as far as they could go. At the very bottom, they got all the way to $1 per litre, a price so low that there was barely any money being made at all.

This was great for the consumer, of course, because they didn’t really have any connection with where the milk was coming from – they were just happy to be saving a little bit on their shopping. The farmers were the ones that were hurting.

It wasn’t until the drought in 2019 where we discovered, as a nation, how fragile that industry actually was. The lack of rain placed an immediate strain on many of these farms and because the margins had been so tight for so long, there was no cushion in the system. A substantial number of farmers had been living on the edge and any economic shock was going to topple them over.

This caused an immediate shortage of milk, and it highlighted the potential externalities of these price wars. When you are so determined to lower short-term prices, you trade that off against the long-term stability of the system you’re relying on. And all of a sudden, your supply disappears.

This was the straw that broke the camel’s back [6] and it caused an uproar within Australia. Regulators and advocates for fair competition started to raise their voices and it kickstarted a conversation about the duopoly that continues to this day.

Key Takeaway: Short-term price wars can often have negative long-term effects that you don’t see straight away. Wherever possible, compete on value rather than price – because the incentives are much more productive for you and all your stakeholders.

The Duopoly

The Woolworths – Coles duopoly has caused a lot of controversy in the Australian market because of what it’s done to other players who have tried to enter the space and failed. As we discussed above, both companies used their substantial scale and stature to bring prices down to a level where it is very difficult to compete with, if you don’t have the same infrastructure in place.

A new chain that is just getting started simply can’t get to the same low prices that the two giants can because it is not placing big enough orders and it doesn’t have the brand cache that Woolworths and Coles do. As a result, there is a significant barrier to entry that is impossible to dismantle while Woolworths and Coles control the market [7] .

Now, of course, there are debates on both sides of this and some will say that those complaining are simply not good enough to compete and that this is the nature of the free market. They will back that up by saying that the low prices are benefitting consumers and isn’t that all we’re doing this for anyway?

This line of thinking misses an important nuance though. The reason that we regulate competition as a society is that we want to enable a diversity of choice so that power isn’t centralized in the hands of one or two market players [8] . The moment that corporations get so big that they completely dominate a market, we lose something in terms of being able to inspire the next generation of players to enter that space. And the overall market becomes less robust than we would like it to be.

It’s the milk situation all over again. Are we willing to accept an unstable economic system for the benefit of low prices in the short term? Many say no, but it’s difficult to know how these sorts of things should be regulated, if at all.

What’s clear to see though is that the duopoly may have stunted the growth of the supermarket industry in Australia, not allowing the space for new entrants and further entrenching the existing incumbents in a way that is difficult to turn around.

With that being said, there are some green shoots that point to a potentially positive outcome. Firstly, the public conversation that has developed around the topic will no doubt cause both Woolworths and Coles to carefully consider any new acquisitions that they seek to make. It’s unlikely that they’ll be able to buy smaller players in the way that they’ve done over the years and hopefully, that gives those independent grocers the chance to breathe and grow.

Another aspect is the continued push towards online shopping. The COVID-19 pandemic has accelerated a trend that was happening anyway, and more consumers are buying their groceries online than ever before. This is a brand new business model that allows for new players to compete in ways that they haven’t before. You don’t require huge retail stores or an established brand to capture new customers. The digitization of this process opens up new opportunities that should excite new entrepreneurs and force the incumbents to adapt.

Only time will tell if the duopoly will ever be toppled, but it’s safe to say that the competition between Woolworths and Coles will continue unabated, regardless of what happens on the macro level.

Key Takeaway: Growing too big comes with its own problems and challenges. Be wary of creating monopolies or duopolies which draw the attention of the regulator. Strategic acquisitions should be carefully considered with the wider societal impacts in mind.

The Sentiment of the Australian Public

If you were to poll the average Australian on the street, they probably wouldn’t have any strong feelings on the duopoly because there isn’t a nuanced understanding of exactly how influential these companies are in the general public. Most people simply don’t know how many different brands and companies are owned by Woolworths and Coles.

From a consumer perspective, they are mostly happy because they can get the goods they want, at inexpensive prices, at a place that is convenient for them. This is one of the pernicious aspects of these public goods – no one is aware of the externalities that come with a duopoly like this. And as a result, it can be very difficult to do something about it.

When it comes to comparing the two, this is difficult to get any real data on. Both brands have a loyal base of customers, and they continue to push home their advantage in any way that they can. Currently, Woolworths seems to be a bit stronger than Coles, but this has changed hands numerous times over the years and so it’s not something that we should hang our hat on.

At the end of the day, the Australian retail experience owes a lot to what Woolworths and Coles have done, and they are here to stay – whether we like it or not. By ingratiating themselves into Australian culture and obsessing about delivering a world-class customer experience, they’ve won the battle to become a household supermarket chain.

Key Takeaway: Consumers only really care about themselves. Rational self-interest is something that holds true across most markets and so if you can focus on them – you’ll build a loyal audience.

That brings us to the end of our deep dive into the competition between Woolworths and Coles. This is a story that is not yet over because they continue to battle and innovate against each other to this day, but by looking at where it’s come from you can get a decent sense as to the sorts of strategic moves that are required to grow a company like this.

Let’s recap some of the main takeaways that we discussed:

• You must be constantly adjusting to the macro-economic and cultural shifts that are affecting your customers, or you risk becoming detached and eventually made irrelevant.
• What seems obvious to us now represented a game-changing innovation in the past. What new concept can you bring to life today that will look obvious to us in the future? Is there low-hanging fruit that is right in front of you?
• Venturing out of your vertical doesn’t always work, no matter how strong your brand is. Do so carefully and with the right research and risk mitigation behind you.
• Short-term price wars can often have negative long-term effects that you don’t see straight away. Wherever possible, compete on value rather than price – because the incentives are much more productive for you and all your stakeholders.
• Growing too big comes with its own problems and challenges. Be wary of creating monopolies or duopolies which draw the attention of the regulator. Strategic acquisitions should be carefully considered with the wider societal impacts in mind.
• Consumers only really care about themselves. Rational self-interest is something that holds true across most markets and so if you can focus on them – you’ll build a loyal audience.

Strategically, the way that these two companies have intertwined is fascinating, and it shows just how competition can act as a catalyst for powerful innovation. Having a peer to compare yourself to keeps you honest and keeps you working hard every day to try and outperform.

This is one of the major reasons why duopolies are more interesting than monopolies. When you have one company that dominates a space, they tend to get complacent and they start to take their customers for granted, which opens space for new entrants and disruptors. But when you have two companies battling over time, there is natural accountability that makes for fascinating business outcomes.

We hope that you’ve been able to get some value from this strategy study that you can apply in your own business. The lessons that we can learn from Woolworths and Coles are transferable across all industries and they’re a perfect microcosm of what happens when two heavyweights are going at it in the marketplace.

We wait patiently for the disruptor that will change the game once more, but for now – you’ll have to stick with Woolworths or with Coles.

Product bundling and advertising strategy for a duopoly supply chain: a power-balance perspective

• S.I.: Business Analytics and Operations Research
• Open access
• Published: 09 December 2020
• Volume 315 , pages 1729–1753, ( 2022 )

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• Sarat Kumar Jena   ORCID: orcid.org/0000-0002-6033-5959 1 &
• Abhijeet Ghadge   ORCID: orcid.org/0000-0002-0310-2761 2  

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The paper studies product bundling in a duopoly supply chain network under the influence of different power-balance structures, bundling decisions and advertising efforts on total supply chain profit. Mathematical models comprising two manufacturers and a single retailer are developed to capture the impact of bundling policy and advertisement strategy under three power-balance structures, namely Manufacturer Stackelberg, Retailer Stackelberg and Vertical Nash. Following game theory models and numerical examples, the study found that the total profit of the supply chain is undifferentiated under the manufacturer Stackelberg and Vertical Nash case in the manufacturer bundling and retailer bundling strategies. However, total supply chain profit under manufacturer bundling strongly dominates under retailer bundling in Retailer Stackelberg and Vertical Nash, and remains valid under multiple settings of market size, price elasticity and advertising elasticity. It is also found that manufacturer bundling is significantly affected by advertising effort compared to retailer bundling. The study contributes to the literature interfacing supply chain and marketing by studying bundling policy and advertising strategy simultaneously for homogenous products, under various power-balance structures and price competition.

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1 Introduction

Bundling is a popular strategy adopted in marketing, which combines two or more products or services to maximise the chain’s profit (Bakos and Brynjolfsson 1999 ; Stremersch and Tellis 2002 ; Lancioni et al. 2005 ), though the pricing and advertising of these bundles remains an extremely challenging task. A bundle can consist of a group of complementary products (e.g., shampoo and conditioner; pizza and toppings), vertically differentiated products (e.g., DVD and Blu-ray disk bundle), independently valued products (e.g., coffee with teacup) or substitute products (e.g., two-ticket combination to a successive football match). They can also be made of multiple units of the same products. Bundling can involve product bundling or price bundling (Beheshtian-Ardakani et al. 2018 ). Product bundling defines integrated products that provides extra value to the customers and price bundling consists of a package sold at a discount rate, without any integration of the goods and/or services involved (Adomavicius et al. 2015 ; Giri et al. 2020 ; Jeitschko et al. 2017 ; Vamosiu 2018 ). In addition, depending on the number of items bundled, the nature of such items and the degree of variations, bundling can also reduce consumer costs (Yan et al. 2014 ).

Product bundling offers economic scale as bundle choices and size are significant for both buyer and seller. Typically, three types of product bundling strategies are employed by firms: component strategy, where the retailer or manufacturer offers only the component-wise product; pure bundling strategy, where the retailer/manufacturer sells the product in a bundle, for instance, the television content provider Videocon typically offers its television subscribers free additional access (regional channel) on any devices; and a mixed strategy where the seller offers component as well as bundle products, for example, the selling of hardcover and Kindle editions of books on Amazon independently as well as bundles of hardcover and Kindle editions together (Meyer and Shankar 2016 ; Ma and Mallik 2017 ). Amazon’s bundle of hardcover and Kindle edition of any book is an example of a retail-produced bundle. When a manufacturer adopts an appropriate bundling approach, it is essential to adjust their sales strategy in response to the bundling. However, in today’s competitive business environment, it is typical that a retailer will try to sell bundled products produced by two or more manufacturers to attract more demand (Yan et al. 2014 ). Therefore, in order to maximise its selling, the firm involves an advertising campaign to promote the bundling products.

Advertising helps to promote the characteristics of the bundle product quality, attractive price, discount and other promotions to encourage consumers to buy. Furthermore, most studies discuss that advertising plays a vital role in demand creation and market expansion (Mesak and Darrat 1993 ; Godes et al. 2009 ; Liu et al. 2014 ; Baykasoğlu et al. 2017 ; Chakraborty et al. 2018 ). The seller uses advertising to create awareness about the product, thereby increasing product sales and profit. Almost every company keeps a significant portion of its total budget for advertising (Yenipazarli 2015 ; Jena et al. 2017 ). According to He et al. ( 2011 ), in 2007, manufacturers spent over $25 billion on advertising, compared to $5 billion in 2000. However, it is also crucial for a seller to decide the optimal price and advertising effort of a bundle product, for maximising the sales revenue in a supply chain network. Merely selling high quality products is not sufficient in the current competitive business environment; thus, multiple marketing strategies are adopted by businesses to increase their profitability. Due to the potential impact of such strategies on product price and demand, competition between manufacturers and retailers on bundling price and advertising effort is significantly affected.

Most studies, to date, focus on various models of bundling in supply chain management (e.g., Arora 2008 ; Cataldo and Ferrer 2017 ; Giri et al. 2020 ; Vamosiu 2018 ; Lin et al. 2020 ); though very limited studies have addressed bundling price policy in the supply chain under competition (Chakravarty et al. 2013 ; Chen and Wang 2015 ; Ma and Mallik 2017 ; Vamosiu 2018 ). For instance, Yan et al. ( 2014 ) discuss the bundling pricing policy under a single manufacturer and retailer. In addition, Vamosiu ( 2018 ) analysed a two-product supplier’s incentives to bundle their products considering pure bundling, mixed bundling and independent bundling under imperfect competition against one of their products. None of these works consider the impact of the advertisement element while considering manufacturer bundling and retailer bundling under dual supply chain competition. Simultaneous consideration of product bundling and advertising efforts on internal supply chain competition is distinctly lacking in the academic literature. Therefore, the study proposes to develop an analytical model to optimise total supply chain profit by studying product bundling and advertising strategy in a duopoly competitive supply chain environment. More importantly, the study addresses the effect of the power balance between two manufacturers and a retailer on optimal product prices, advertising costs and total supply chain profit.

This paper considers three power-balance structures/scenarios under product bundling and advertising strategy between two manufacturers and a retailer in the supply chain network. There are three possible power-balance structures/scenarios concerning strategic interactions between a manufacturer and a retailer, namely: (1) Manufacturer Stackelberg (2) Retailer Stackelberg, and (3) Vertical Nash (Lu et al. 2011 ). In general, manufacturers possess more bargaining power than retailers in a market (Ailawadi et al. 1995 ; Ma et al. 2019 ), where each manufacturer chooses the wholesale price using the response function of the retailer and by considering the observed wholesale price of the competitors’ product. Such interactions between supply-chain partners will follow a Manufacturer Stackelberg. On the other hand, in a Retailer Stackelberg, the retailer possesses more negotiating power due to its dominating size or customer loyalty in the supply chain network. In Vertical Nash, neither the manufacturer nor the retailer possesses a larger bargaining power in the negotiation. In this paper, two strategies for the production of a bundle are considered: manufacturer bundling, where a manufacturer produces the bundle; and, retailer bundling, where the manufacturer produces individual products and then retailer produces the bundle from such products.

The paper seeks to address the following research questions:

What is the optimal bundling price and advertising expenditure under three strategic power-balance structures between manufacturers and retailer?

How does the price competition and advertising expenditure influence the total supply chain profit under retail bundling and manufacturer bundling?

The rest of the paper is structured as follows. A brief review of the literature is covered in Sect.  2 . Section  3 discusses key notations and assumptions of the modelling framework. Comparison of the results is presented in Sect.  4 , followed by a numerical example to illustrate the working of the model in Sect.  5 . Section  6 discusses sensitivity analysis and managerial insights. The paper concludes with a discussion on key findings, contribution and future research directions.

2 Literature review

This section provides a brief review on key concepts (bundling, competition and advertisement) interfacing with marketing and supply chain literature.

2.1 Bundling in marketing and supply chain

Marketing and supply chain management literature around bundling mainly considers a single firm in vertical and horizontal supply chains. Hanson and Martin ( 1990 ) developed an optimisation model for the single firm bundle pricing problem. For simplicity, it would be useful to allow the marginal cost of a bundle product. Bakos and Brynjolfsson ( 1999 ) studied the bundling schemes of information goods and found that large bundles may bring significant advantage in the competition for upstream content. McCardle et al. ( 2007 ) explored the effect of bundling on channel profit, considering two standard retail products (basic and fashion) and observed that bundling on profitability relies on individual product demand. Pan and Honhon ( 2012 ), exploring the optimal bundling and pricing strategy for a firm selling vertically differentiated products, discovered the conditions under which a pure bundling and mixed bundling strategy are optimal. Meanwhile, Li et al. ( 2013 ) addressed the bundling sale considering customer heterogeneity and found that mixed partial bundling schemes are superior when compared with the component strategy for information goods.

Girju et al. ( 2013 ), while identifying the effect of channel interaction on the supply chain members’ bundling decision, found that the pure component strategy is the best strategy in most cases. Cao et al. ( 2015 ) addressing the retail bundling strategy in a distribution channel, observed that the manufacturer’s marginal production plays an important role in channel profit considering retailers’ bundling decisions. Prasad et al. ( 2015 ), addressing the impact of mixed bundling strategy against reserved product pricing, found that reserved product pricing profitability depends on the fraction of myopic consumers. Ma and Mallik ( 2017 ) studied bundling of vertically differentiated products in a supply chain, considering a single manufacturer and a single retailer under retailer bundling and manufacturer bundling strategies. They found that total supply chain profit under manufacturer bundling dominates retail bundling. Using mixed-integer nonlinear programming, Cataldo and Ferrer ( 2017 ) analysed a problem faced by a firm in a single market segment to determine the optimal composition and pricing of multiple bundles.

Pure bundling and mixed bundling strategies are better than component strategy according to Xu et al. ( 2018 ), who addressed the firm’s optimal pricing and quality policy under three bundling strategies (i.e., no bundling, pure bundling and mixed bundling). Their results show that pure bundling proves more profitable compared to any other strategy. Hence, in this paper, we consider pure bundling in a supply chain to identify how optimal bundling price and supply chain network/channel profit are affected by price competition. Hurkens et al. ( 2019 ) discuss how bundling affects price competition by considering an asymmetric duopoly, where one firm has symmetric dominance in all of its products. They found that dominant firms benefit from a positive demand size effect of bundling. Taleizadeh et al. ( 2019 ) studied supply chain optimisation considering two pricing strategies such as pricing of complementary products without a bundling policy, and pricing of complementary products under a bundling policy. In the bundling policy, the wholesale and retail prices are lower than the prices without bundling.

Zhang et al. ( 2019 ) analysed the return and refund policy for product and core service bundling, considering two-stage demand uncertainty under a dual supply chain. Consumers can decide to return the default profit through a direct channel. Meanwhile, Liu et al. ( 2020 ) studied a two-stage supply chain consisting of two manufacturers and one retailer, while considering imperfect, complementary products. More recently, Heydari et al. ( 2020 ) discussed coordinated and non-monetary sales promotion in a supply chain, considering the buy one get one free (BOGO) scheme. They found that a coordinated BOGO scheme provides higher supply chain profitability and demand.

Furthermore, Zhou et al. ( 2020 ) evaluated the impact of bundling and pricing strategies of two competing firms under a multi-stage game theoretic model. Here, one firm acts as a leader to determine the product price, before the other firm acts as a follower. In addition, they consider that one firm offers the bundle product, while the other firm offers separate products under an equilibrium system.

2.2 Competition in supply chains

There is a vast amount of literature on competition between different supply chain networks; however, the focus of this paper is on competition within supply chain partners. Interestingly, most of the existing literature discusses chain competition, considering inventory theory and product availability (Mahajan and Van Ryzin 2001 ). Earlier work by Choi ( 1991 ) shows that all the members in the supply chain, including customers, are better off when there is no single dominating player in the supply chain network. Choi ( 1996 ), extended the work by considering the effect of price competition and advertisement simultaneously on bundling decision, finding that most consumer goods are retail-dominated in a chain.

Meanwhile, Chen ( 1997 ) studied the practice of product bundling; in this case, author developed equilibrium theory of product bundling, considering perfect competition under a product-differentiation device. Furthermore, Opornsawad et al. ( 2013 ) addressed the pricing competition strategy for a commoditised product such as drinking water and generic pharmaceutical products under different bargaining power scenarios. Their model considers a duopoly manufacturer and a common retailer for analysing the impact of power balance between manufacturer and retailer under a competitive environment. Roy et al. ( 2018 ) studied a two-echelon supply chain considering duopoly retailers and a common manufacturer under price-sensitive demand with random arrival of customers. They also compared different Stackelberg models, such as Bertrand and Cournot, for maximising the profit of the players in the chain. It is observed that competition between original equipment manufacturers can be better off cooperating as supply chain partners (Pun 2015 ).

Zhou ( 2017 ) proposed a framework for studying pure bundling considering consumer valuation under an oligopoly market. The model suggests how consumer valuation dispersion affects price competition. Meanwhile, Ali et al. ( 2018 ) studied the effect of potential market demand disruption on price and service level for competing retailers considering a Manufacturer Stackelberg game model. They analysed the effect of demand disruption under centralised and decentralised scenarios and found that price and service level investment are significantly influenced by demand disruption. Recently, Vamosiu ( 2018 ) examined bundling strategy, considering two product sellers of a differentiated product under imperfect competition and found that pure bundling emerges as the optimal pricing strategy and competitors maximise their profit under a mixed bundling strategy.

2.3 Advertising in supply chains

Earlier works on bundling advertisements explored the relationship between the traditional practice of bundling advertisements and content provision on the internet (Yuan et al. 1998 ). Koschat and Putsis ( 2002 ) studied audience characteristics and bundling considering the hedonic analysis of magazine and advertising strategy. Huang et al. ( 2002 ) addressed an interesting cooperative advertising model using a game theory approach, where the manufacturer paid for the brand name investment and shared some proportion of the local advertising cost incurred by the retailer. Yue et al. ( 2006 ) studied cooperative advertising in a manufacturer-retailer supply chain considering price deduction by the manufacturer to the customer. Bundling with advertising provides higher performance than bundling without advertising, as evidenced by Yan et al. ( 2014 ) who studied the value of the bundling strategy with advertising for identical and complementary products.

The simultaneous consideration of bundling policy, advertising strategies and competition in a supply chain has not been explored in the extant literature. The closest possible work, previously attempted is by Vamosiu ( 2018 ), which explores optimal bundling under imperfect competition; however, this does not attempt a product bundling policy under various power balances between the manufacturer and retailer. Moreover, Cao and Ke ( 2019 ) studied cooperative advertising considering a single manufacturer and retailer under cost sharing.

2.4 Research gaps

As observed in the above literature, none of these studies have discussed the effect of price competition and advertising expenditure on the optimal bundling price and total supply chain profit under three strategic power-balance structures between manufacturers and retailers. To fill this evident gap, in this paper, the power balance between two manufacturers and a retailer and its impact on optimal bundle product prices, advertising costs and total supply chain profit are examined under a competitive environment. However, some researchers have discussed the effect of competition on total supply chain profit considering the power balance between manufacturer and retailer. However, they did not consider the effect of different power balances between manufacturers and retailers on total profit under pure bundling strategies.

The research discussed in this paper also differs from Ma and Mallik ( 2017 ), Xu et al. ( 2018 ), Giri et al. ( 2020 ), Yan et al. ( 2014 ) and Chakravarty et al. ( 2013 ) by simultaneously considering the effect of advertising strategy and competition on bundling decisions under Manufacturer Stackelberg, Retailer Stackelberg, and Vertical Nash cases. Bundling with power balance between manufacturer and retailer under Manufacturer Stackelberg, Retailer Stackelberg, and Vertical Nash strategies, as such, has not been studied adequately in the supply chain and marketing literature.

3 The model

The model considers a competitive supply chain consisting of two manufacturers and single retailer (including other stakeholders in the network). Both of these manufacturers sell their products to a common retailer who, in turn, sells the products to the end customer. For modelling purposes, it is assumed that this activity occurs in a single period. The objective of the study is to make bundling decisions under price competition and advertising effort in a supply chain context. As a result, the developed model allows either the manufacturer or retailer to produce the bundle from two similar component products and compare the two scenarios. Here, it is assumed that the distance between each retailer is so large that there is no competition among retailers, thus allowing focus on competition between the two manufacturers. The model considers deterministic demand for each bundled product and is sensitive to two factors: (1) retail price; and, (2) advertising expenditure by the retailer. Note that only the advertising efforts by the retailer are considered. Here, pure bundling strategy with manufacturer bundling and retailer bundling is considered.

The assumption regarding the bargaining power possessed by each seller can influence how the pricing game is solved in this model. The bargaining power of the retailer and manufacturer can have a significant influence on supply chain profit. In this paper three forms of bargaining power within the supply chain are considered: (1) Manufacturer Stackelberg (MS), (2) Retailer Stackelberg (RS), and (3) Vertical Nash (VN). The level of bargaining power possessed by each player (as compared to the other firms) in the supply chain is interpreted by whether the manufacturer or retailer is the leader. The player with more bargaining power has the first-mover advantage (called Stackelberg leader), and the player with less bargaining power would have to respond to the leader’s decision. Considering three power-balance scenarios in the model, the study attempts to explore the effect of bargaining power within the supply chain on the manufacturer and retailer bundling strategy.

3.1 Model notations and assumptions

Table  1 shows the notations used for the development of the mathematical model. The demand function is sensitive to price and advertising expenditure during mathematical modelling. Subscripts i , j , s , r , M and R, respectively, to indicate manufacturer 1, manufacturer 2, manufacturer, retailer, manufacturer bundling, and retailer bundling are used throughout paper.

An analytical model is formulated for the supply chain system, where component products are produced by the manufacturer and sold to the retailer under various power balance strategies between manufacturer and retailer. It is essential for the manufacturer to understand the effect of price competition of bundling on manufacturing activities.

Assumption 1

Under retailer bundling, the manufacturer produces a component, and the retailer is responsible for producing the bundle. Whoever in the supply chain produces the bundle incurs the unit bundling cost \( c_{B} \)  ≥ 0 (Ma and Mallik 2017 ). Here, the retailer is not selling any component products to the customer. Let “m” denote the retailer’s sales margin. The retail price can then be expressed as \( p_{Bi} = (w_{ai} + w_{bi} ) + m \) for manufacturer i. Bundling consists of two component products whose whole sale price are \( w_{ai} \;{\text{and}}\; w_{bi} \) for component a and b, respectively. Here, we have assumed that two components’ wholesale prices are equal, such as \( w_{ai} = w_{bi} = w_{i} \) . As a result, we can consider the retail price can be expressed as \( p_{Bi} = 2 w_{i} + m \) and \( p_{Bj} = 2 w_{j} + m \) for manufacturer i and manufacturer j, respectively.

Assumption 2

Under manufacturer bundling, the manufacturer produces bundling with a bundling price \( w_{Bi} \left( {i, j = 1,2, i \ne j} \right) \) , while the retailer sells these bundling products in component products into the market (Ma and Mallik 2017 ; Yan et al. 2014 ). The bundling price is lower than the total price but higher than the component product price (Yan et al. 2014 ). Considering this assumption, here, the retail price can then be expressed as \( p_{i} = w_{Bi} - m \) for manufacturer i \( \left( {i, j = 1,2, i \ne j} \right) \) .

Assumption 3

The unit production cost (c1 and c2) of the two component products are normalized to zero (Yan et al. 2014 ; Ma and Mallik 2017 ).

The manufacturer produces two components and sells them to the retailer. To simplify the computation and the results, comparable to Banciu et al. ( 2010 ), Yan et al. ( 2014 ), Ma and Mallik ( 2017 ), and Xu et al. ( 2018 ), we assume that the unit production cost ( c 1 and c 2) of the two component products are normalised to zero; we also assume that the wholesale price of the two component products is the same. The reason for this is that production costs of component products are not decision variables in our model, and the optimal result will not be affected. This is a valid assumption for information goods and many of the examples discussed previously (e.g., CD, DVD, Blu-ray production where the fixed cost of content development significantly exceeds the variable cost of producing a disc). Whereas, in manufacturer bundling, the manufacturer also produces the bundle from the component products and sells these products to the retailer at a unit wholesale price \( w_{B} \) . For simplicity, the model considers that manufacturers only sell bundling products to the retailer.

Assumption 4

The demand structure is symmetric between two bundled products. Demand for a bundled product is decreasing by the manufacturer’s own retail price and increasing with the competitor’s retail price. Furthermore, the demand for the bundled product is increasing by the retailer’s advertising investment (Yan et al. 2014 ). Here, the paper considers bundled products exclusively under competition.

The demand function of the bundled product, produced by the manufacturer or retailer, is continuous, deterministic and price (and advertising effort) sensitive and assumed to be in the following form: \( D_{Bi} = \left( {\alpha_{n} - \beta_{n} p_{Bi} + \gamma_{n} p_{Bj} + kA} \right) \) . Where \( \alpha_{n} > 0,\beta_{n} > 0,\gamma_{n} > 0, \;and\; k > 0, i \to {\text{manufacturer}}\;1,j \to {\text{manufacturer}} \;2, \left( { {\text{where, in}}\; {\text{short }}\;{\text{form }}\;{\text{we}}\; {\text{represented}} \;i, j = 1,2, i \ne j} \right) . \)

Here, to simplify the computation and results comparable to Yan et al. ( 2014 ), the market size ( \( \alpha_{B} \) ) of bundling product and individual product ( \( \alpha_{i} \) ) are equal \( \left( {\alpha_{B} = \alpha_{i} = \alpha_{n} } \right) \) .

Let \( p_{Bi} \) and A be the selling price and advertising level, respectively. Subscript B is used to denote the bundling product throughout the paper. \( \alpha_{Bi} \) is the market base (i.e., potential demand offered free of charge). \( \beta_{n} \) is the price elasticity of the product, whereas \( \gamma_{n} \) represents the cross-price elasticity between two products. Parameter k measures the effect of expenditure advertising on bundle sales. The larger the value of k , the more efficient the effort of advertising in encouraging customers to purchase (Yan et al. 2014 ).

In this model, the manufacturer can influence demand by setting the wholesale price for bundled products. On the other hand, the retailer can independently influence the selling price and advertising investment of each product. Each channel member in the supply chain expects to maximise his own profit, irrespective of the other. This leads to the following assumptions.

Assumption 5

All members in the supply chain try to maximise their profit as if they have perfect information on the demand and cost structure of the other member (Jena and Sarmah 2014 ; Yan et al. 2014 ).

Assumption 6

Here, it is assumed that the cost of advertising effort by the retailer is \( \theta A^{2} \) (for both component products and bundling products).

Fixed payment A is spent by the retailer for advertising, who sells the bundled product and component products in the market. The cost of advertising level has a decreasing-return property. The advertising effort is usually modelled as a function of the investment in the product (Tsay and Agrawal 2000 ; Yan et al. 2014 ). More effort by the retailer to sell bundle products from the market implies greater investment. Here, \( \theta \) is a positive number. The parameter θ measures the effect of the invested advertising on bundling sales. The larger the value of θ , the more efficient the invested advertising customer’s purchases.

3.2 Manufacturer bundling

Under manufacturer bundling, the manufacturer produces a bundling product from the two component products, a and b , and incurs the bundling cost \( c_{B} . \) Here, the manufacturer decides the wholesale prices and makes advertisements for selling their bundle product. In the second stage, the retailer takes the manufacturer’s wholesale price of the bundle product and then unbundles the product, sets the retail price of each of the component’s product ( \( p_{ai} \,{\text{and}}\,p_{bi} \) for manufacturer i and \( p_{aj} \,{\text{and}}\,p_{bj} \) for manufacturer j, respectively) and, finally, sells these component products into the products. Here, we assume that the retailer sells the products of manufacturer i and manufacturer j with a price \( p_{i} \) \( (p_{ai} = p_{bi} = p_{i} ) \) and \( p_{j} (p_{aj} = p_{bj} = p_{j} ) \) , respectively. Here, it is assumed that the retailer tries to sell the component products with a lower price compared to bundling the product; and that the total selling price of these two component products is higher than the single bundling product. In this case the retailer makes an effort, when advertising, to sell their component products to the retailer. The objective functions of the manufacturer and retailer under a pure bundling strategy are given as follows.

3.2.1 Manufacture–Stackelberg (MS)

Under the assumption, MS, the manufacturer takes the retailer’s reaction function into the consideration of their respective price decisions. Here, retailer reaction function, given a wholesale price \( w_{Bi} \) and \( w_{Bj} \) , can be derived from the first-order condition of ( 3.1 ).

where i , j  = 1,2, i  ≠  j . Since the objective function is concave in nature as \( \frac{{\partial^{2} \pi_{r}^{M} }}{{\partial m^{2} }} = - 8\left( {\beta_{n} - \gamma_{n} } \right) \) , \( \frac{{\partial^{2} \pi_{r}^{M} }}{{\partial A^{2} }} = - 2\theta \) and \( \frac{{\partial \pi_{r}^{M} }}{\partial m\partial A} = - 4k \) , it is solved by the first-order condition and the value of price and advertising effort are as follows:

Solving ( 3.6 , 3.7 ) simultaneously, one can determine the equilibrium value of \( m* \) and \( A* \) are as follows:

It can be seen that the equilibrium of retail margin, advertising and demand of bundle product are a linear function of wholesale price by the manufacturer.

Using the reaction function Eqs. ( 3.8 – 3.9 ), the manufacturers’ equilibrium wholesale price can be derived following the first-order conditions of the respective manufacturers’ profit maximisation problem (Eq. ( 3.2 )].

Solving ( 3.10 ) results in the following wholesale prices.

Likewise, we can discover the optimal value of \( w_{\text{Bj}} \) from the Eq. ( 3.3 ).

Solving Eqs. ( 3.8 , 3.9 , 3.12 , and 3.13 ) simultaneously, the optimal solution of \( w_{Bi}^{*} ,w_{Bj}^{*} ,A^{*} ,\;{\text{and}}\,m^{*} \) can be determined. Finally, the demand quantise for manufacturer i can be determined as:

Considering Eqs. ( 3.14 – 3.18 ), the optimal demand function and total profit can be derived.

3.2.2 Retailer–Stackelberg (RS)

Here, in RS, the retailer becomes the leader and manufacturers the followers. This scenario arises in the market, where retailers’ size is large compared to their suppliers. For example, large retailers like Walmart and Costco can influence each product’s sales by lowering the price. Because of their large market sizes, the retailers can sustain their margin on sales, while holding profit from their manufacturers. In this market, the retailer takes the manufacturers’ reaction function into account for their own (retailer) price decisions. Here, the retailer problem is solved given that the retailer knows the manufacturers’ reactions towards their retail price. From Eq. ( 3.20 ), the optimal wholesale price of manufacturer i is defined as follows.

where i , j  = 1,2, i  ≠  j . Since the objective function is concave in nature as \( \frac{{\partial^{2} \pi_{m}^{M} }}{{\partial w_{Bi}^{2} }} = - 2\beta_{n} \) , it is solved by the first-order condition and the value of wholesale price is as follows:

We can discover the optimal value pf the wholesale price is as follows:

Similarly, we can discover manufacturer 2.

Using the reaction function (Eqs.  3.22 and 3.23 ), the retailer’s equilibrium retail price can be derived from the following first-order conditions of the respective retailer’s profit maximisation problem in (Eq.  3.24 ).

Solving Eqs.  3.22 , 3.23 , 3.26, and 3.28, the optimal solution of \( p_{Bi} * \) , \( p_{Bj} * \) , \( w_{Bi} * \) , \( w_{Bj} * \) and A * can be determined. Finally, the demand quantise for manufacturer i can be determined as:

Considering Eqs. ( 3.29 – 3.33 ), we can derive the optimal value of demand and total profit is as follows: \( D_{i} = \left( {\alpha_{Bi} - \beta_{1} p_{Bi}^{*} + \gamma p_{Bj}^{*} + kA^{*} } \right) \) , where i , j  = 1,2, i  ≠  j .

3.2.3 Vertical Nash (VN)

The Vertical Nash (VN) model is studied as a benchmark to both the Manufacturer Stackelberg and Retailer Stackelberg cases. Here, each manufacturer has equal bargaining power and, thus, makes decisions simultaneously. This scenario arises in small to medium-sized manufacturers and retailers (Lu et al. 2011 ). In this case, a manufacturer does not dominate over the retailer. Thus, the manufacturer’s wholesale price decisions depend on the retailer’s selling price. Meanwhile, retailer price decisions are dependent on the wholesale price. The reaction functions of the retailer and manufacturer are derived in MS and RS respectively. From MS, the manufacturer reaction functions of m and A are given in Eqs. ( 3.8 ) and ( 3.9 ), respectively while, in RS, the manufacturer’s reaction functions for \( w_{Bi} \) and \( w_{Bi} \) are given in Eqs. ( 3.22 ) and ( 3.23 ), respectively. The optimal selling price, wholesale price and advertising level can be derived by solving all these equations simultaneously.

Considering Eqs. ( 3.35 ) to Eqs. ( 3.38 ), the optimal demand function and total profit can be derived.

3.3 Retailer bundling

Under retail bundling, it is considered that the manufacturer produces only two component products, while the retailer produces the bundle from the component products and incurs the unit bundling cost \( c_{B} \) . Here, it is considered that the wholesale price of two components ( a and b) are the same \( w_{ai} = w_{bi} = w_{i} \) for a manufacturer.

3.3.1 Manufacture–Stackelberg (MS)

Under the assumption of MS, the manufacturer takes the retailer’s reaction function into the consideration of their respective price decisions. Here, retailer reaction function, given wholesale price \( w_{i} \) and \( w_{j} \) can be derived from the first-order condition of Eqs. ( 3.43 )–( 3.44 ):

where i , j  = 1,2, i  ≠  j . Since the objective function is concave in nature as \( \frac{{\partial^{2} \pi_{r}^{R} }}{{\partial m^{2} }} = - 4\beta_{n} + 4\gamma_{n} \) , \( \frac{{\partial^{2} \pi_{r}^{R} }}{{\partial A^{2} }} = - 2\theta \) and \( \frac{{\partial \pi_{r}^{R} }}{{\partial p_{Bi} \partial A}} = 2k \) , it is solved by first-order condition and the value of retail margin and advertising effort are as follows:

Solving Eqs. ( 3.45 ) and ( 3.47 ) simultaneously, the equilibrium value of m* and \( A* \) can be determined as follows:

It can be seen that the equilibrium price, advertising and demand of bundle product are linear functions of the wholesale price by the manufacturer. Using the reaction function ( 3.48 – 3.49 ), the manufacturers’ equilibrium wholesale price can be derived from the following first-order conditions of the respective manufacturers’ profit maximisation problem:

Solving ( 3.50 ) results in the following wholesale prices:

Similarly, the wholesale price that can be obtained for manufacturer 2 is derived as follows:

Solving Eqs. ( 3.48 , 3.49 , 3.52 , and 3.53 ), the optimal solution of \( p_{Bi} * \) , \( p_{Bj} * \) and A * can be determined.

Finally, the demand quantise for manufacturer i can be determined as:

where i , j  = 1,2, i  ≠  j .

3.3.2 Retailer–Stackelberg (RS)

In this model, the retailer becomes the leader and manufacturers the followers. Here, the retailer takes the manufacturers’ reaction function into account for its own retailer price decision. Thus, the retailer problem is solved given that the retailer knows the manufacturers’ reactions towards their retail price.

From Eq. ( 3.60 ), the optimal wholesale price of manufacturer i is defined as follows.

Where i , j  = 1,2, i  ≠  j . Since the manufacturer’s profit is concave in \( w_{i} \) , as \( \frac{{\partial^{2} \pi_{m}^{R} }}{{\partial w_{i}^{2} }} = - 8\beta_{n} < 0 \) . Then, from the first order derivation, the optimal wholesale price of component products is obtained as:

Likewise, we can obtain the wholesale price for manufacturer 2 is determined as follows:

Using the reaction function ( 3.51 and 3.52 ), the retailer’ equilibrium retail price can be derived from the following first-order conditions of the respective retailer’s profit maximisation problem Eqs. ( 3.64 – 3.65 ).

Solving ( 3.66 and 3.67 ) results in the following retailer margin and advertising levels are as follows:

Solving Eqs. ( 3.62 , 3.63 , 3.68 , and 3.69 ), the optimal solution of \( p_{Bi} * \) , \( p_{Bj} * \) , \( w_{Bi} * \) , \( w_{Bj} * \) and A* can be determined. Finally, the demand quantise for manufacturer i can be determined as:

Then we can obtain the optimal value of demand.

Proposition 1

Under manufacturer and retailer bundling, the wholesale price increases with advertising elasticity in the RS power structure.

Proposition 1 states that the wholesale price of bundling products increases with advertising elasticity under the Retailer Stackelberg structure. It is observed that the retailer will sell the bundling product at a higher selling price and spend more on advertising for generating additional demand due to the high wholesale price. Refer to “Appendix 1 ” for more information.

Proposition 2

Under manufacturer bundling, the retail margin of bundling products with the cost of advertising decreases in the MS power case, while it increases in the same proportions under retailer bundling.

Proposition 2 states that the retailer margin of bundled products increases by half when their proportion of advertisement costs increases under retailer bundling. The retailer sells bundling products with a higher selling price compared to that of the manufacturer, without bundling, due to their expenditure on advertising and bundling the product. Besides, the retailer wants to spend as much as possible on advertising costs to generate higher revenue (Hong et al. 2015 ). Refer to “Appendix 1 ” for more information.

3.3.3 Vertical Nash (VN)

The Vertical Nash model is studied as a benchmark to both the Manufacturer Stackelberg and Retailer Stackelberg cases. From MS, the manufacturer reaction functions of m and A are given in Eqs. ( 3.48 ) and ( 3.49 ), respectively while, in RS, the manufacturer’s reaction functions for \( w_{\text{Bi}} \) and \( w_{\text{Bi}} \) are given in Eqs. ( 3.61 ) and ( 3.62 ) respectively. The optimal selling price, wholesale price and advertising level can be derived by solving all these equations simultaneously.

4 Comparison of results

The comparison of three different decision models under manufacturer bundling and retailer bundling are presented below. The reason for restricting the two manufacturers to having the same parametric values is to make the comparison of the three decision cases under two bundling models, where the asymmetry between the manufacturers creates problems in making a comparison in the three models. A comparison between all three decision models under manufacturer bundling and retailer bundling models is made.

Observation 1

The ordinal relationship between the optimal selling price and advertising level under manufacturing bundling and retailer bundling are as follows: \( p_{B}^{MSR} \ge w_{B}^{MSM} , \) \( p_{B}^{RSR} > w_{B}^{RSM} \) and \( w_{B}^{VNM} < p_{B}^{VNR} \) . Whereas \( A^{MSM} > A^{MSR} , A^{RSM} > A^{RSR} , {\text{and}} A^{VNM} > A^{VNR} . \)

From Observation 1, it is observed that the equilibrium bundling retail prices are almost indistinguishable between manufacturing bundling and retailer bundling under all three cases. However, the bundling price is higher in retailer bundling compared to manufacturer bundling under the RS and VN cases. Here, the manufacturer sets the lower wholesale price of component products and the retailer produces the bundling product from the component products and sells those bundled products with a higher margin in VN and RS, as compared to MS, to generate higher profit, thereby increasing overall profit from the bundled products. The equilibrium bundling advertising effort level is almost indistinguishable between manufacturing bundling and retailer bundling under all three MS, RS and VN cases. Meanwhile, the advertising effort is higher in manufacturer bundling compared to retailer bundling under all three MS, RS and VN cases which means that the retailer makes more of an effort to sell component products compared to bundle products. Thereby, the demand in manufacturer bundling is higher when compared to that of retailer bundling. As a result, it attracts more customers to purchase bundled products. The results show that firms select manufacturer bundling compared to retailer bundling, while considering MS, RS and VN strategy for their business.

Observation 2

The ordinal relationship between the optimal selling price and advertising level under manufacturing bundling and retailer bundling are as follows: \( p_{B}^{VNR} \le p_{B}^{MSR} \le p_{B}^{RSR} , \) and \( w_{B}^{RSM} \le w_{B}^{VNM} \le w_{B}^{MSM} , \) Whereas \( A^{RSM} < A^{MSM} \le A^{VNM} \) and \( A^{RSR} \le A^{MSR} \le A^{VNR} \)

From Observation 2, it is observed that the equilibrium bundling retail prices, wholesale price and advertising effort are almost indistinguishable between MS, RS, and VN under both retailer bundling and manufacturer bundling strategies. Here, the manufacturer sets the lower wholesale price in VN and RS as compared to MS, in order to increase demand; thereby increasing the saving from bundled products. The retail price is mainly affected by wholesale price and a fraction of the collection rate. The demand in manufacturer bundling is higher, as compared to that of other models, because the advertising effort is higher in the VN case compared to other cases. As a result, it attracts more price sensitivity for the customer, when purchasing bundled products; furthermore, revenue attributed to the coordination can be effectively shared among supply chain members to increase supply, demand and profits.

5 Numerical example

In this subsection, a numerical study is conducted to illustrate the usefulness of developed models and test associated results. Hypothetical but relevant data are used for the numerical example, as obtaining real-time data on multi-attribute variables identified in the model was difficult. This approach is acceptable within academic research, where the possibility of collecting appropriate data for complex quantitative models is very difficult (e.g., Ma and Mallik 2017 ; Xu et al. 2018 ). Also, for the model’s simplicity and to better visualise the behaviour of the proposed model, a sensitivity analysis of the model is conducted. The following parameter values are considered for illustrating the developed models: \( \alpha_{\text{n}} = 120,, \beta_{n} = 40,\theta = .8,\gamma_{n} = 30,c_{B} = 10,{\text{c}}1 = {\text{c}}2 = 0,k = . 6 \) .

The results presented in Table  2 show that the channel profit is higher in manufacturer bundling compared to retailer bundling under price competition. Similar to Ma and Mallik ( 2017 ), manufacturer bundling makes a profit compared to retailer bundling under monopolistic situations. Although they did not consider price competition in their models, it is found that in manufacturer bundling, the individual component retail price is comparatively lower than the bundling price. Furthermore, the selling price of the bundling product in retailer bundling is higher compared to manufacturer bundling. However, the manufacturer makes less profit in retailer bundling compared to manufacturer bundling. The lower advertising effort and bundling cost negatively influences the manufacturer’s profit. The advertising effort cost is higher in manufacturer bundling compared to retailer bundling which means that the retailer puts more effort into advertisements for component products to sell into the market compared to bundled products. As a result, the demand of component products is increased compared to bundling products. Our result provides similar insights to those of Yan et al. ( 2014 ), that firms should invest less in advertising to promote bundled products during retailer bundling strategies.

This study shows that VN provides higher profit compared to the other two RS and MS strategies under both bundling models. This happens as a result of lower retailing price and higher advertising effort. Consequently, demand for the product in VN is comparably higher than the MS and RS strategies. Thus, it might create an opportunity for the manufacturer and retailer to negotiate and delegate bundling decisions and to share profit in a supply chain network. Further, it is observed that the total profit in model MS is higher compared to model RS. This happens because of lower retail price and higher advertising effort. The equilibrium outcomes under retailer bundling and manufacturer bundling are different for RS models, whereas total profits in the MS and VN models are observed to be nearly equal for retailer and manufacturer bundling. Under retailer bundling, the retailer utilises limited capacity and spends less on advertising effort to produce more bundled products. Conversely, under manufacturer bundling, the manufacturer utilises limited capacity to produce less bundled products because bundling cost influences profit significantly when compared with component products.

5.1 Sensitivity analysis and managerial insights

A sensitivity analysis was carried out to examine the impact of various parameters on the model.

5.1.1 Impact of market size

The impact of market size, \( \alpha_{n} \) on the total chain profit was studied, observing that the total chain profit increases exponentially, as the market size increases for all three cases of bundling (see Fig.  1 a, b). When market size increases, the total profit for manufacturer bundling increases compared to that of the retailer. This happens because the retailer sells component products to the market with a higher retail price and also makes higher advertisement effort in MB compared to RB. The demand for bundling products in VN under RB and MB increases as the market size increases; therefore, generating more revenue for VN compared to the other cases. The manufacturer profit and retailer profit in VN is higher compared to the other two RS and MS strategies because of equal bargaining power between retailer and manufacturer. Again, it is observed that the total chain profit in MS under both manufacturer bundling and retailer bundling cases are equal as market size increases. Furthermore, both retailer and manufacturer can explore the demand in RS compared to the other two models under manufacturer bundling because of the better service offered by them to the customers.

a Total profit for MB with different power cases. b Total profit for RB with different power cases different values of market size (α). different values of market size (α)

5.1.2 Impact of price elasticity

The paper studied the impact of price elasticity, \( \beta_{n} \) on the total chain profit for three cases under manufacturer and retailer bundling. The results presented in Fig.  2 a, b show that the total profit decreases exponentially as the value of price elasticity increases in retail and manufacturer bundling. When \( \beta_{n} \) increases, the VN efforts result in higher profit compared with that in the RS and MS cases under bundling; this is because the retail margin of the respective products is higher compared to the other two cases. It is also observed that the total profit in MS under retailer and manufacturer bundling decreases as β increases. It is marginally higher for VN compared to that of RS because of the low wholesale price. Furthermore, the cost of component products will be low, and the retailer will sell those products at a higher price after bundling. As a result, the demand for bundled products will decrease as β increases, thus leading to an increase in the total supply chain’s profit. Seldom, efficiency loss due to double marginalisation is limited in the MS and VN power case under retail bundling. Furthermore, RS bundling chooses not to serve the retailer with component products. From Fig.  2 a, b, it is observed that, in the VN and MS power case, the total supply chain profit under manufacturer bundling dominates that under retailer bundling; whenever the retailer offers the bundling product and advertising efforts.

a.Total profit for MB with different power cases Fig.  2 b.Total profit for RB with different power cases

5.1.3 Impact of advertising elasticity

Impact of advertising elasticity, k , on the total chain profit for three equilibrium cases under manufacturer and retailer bundling is studied. The results presented in Fig.  3 a, b show that the total profit is nearly the same, as the value of advertising elasticity increases in retail and manufacturer bundling. When k increases, the retailer bundling generates lower profit compared to manufacturer bundling due to low advertising effort and high bundling margin. Furthermore, the retailer motivates the consumer to purchase component products due to their proximity to the end-customer. The retailer thinks that consumers prefer bundled products more as they treat them as discount products. Therefore, among these three power systems, the best option is to use retailer bundling, whenever the retailer offers the bundled product and uses appropriate advertising effort.

a.Total profit for MB with different power cases Fig.  3 b.Total profit for RB with different power cases different values of k . different values of k

6 Conclusion and contribution

In this paper, the impact of bundling and advertisement strategy on total channel profit in a dual manufacturer and single retailer SC network were studied. The study developed mathematical models under manufacturer bundling and retailer bundling considering three power-balance structures. Considering bundling homogenous products, characterised equilibrium outcomes under each strategy showed that total profit is undifferentiated under the MS case and VN cases in the retailer bundling and manufacturer bundling strategies. It is also observed that the total chain profit under manufacturer bundling dominates retailer bundling in the VN and RS cases. An extension of the basic model for studying the simultaneous impact of advertising efforts on total channel profit under two bundling strategies was also considered.

The study offers understanding of different advertising strategies in practice. It is found that manufacturer bundling is affected more by advertising effort compared to retailer bundling. The retailer spends more on component products and wants to sell all the products to maximise the profit. When advertising effort level is constrained, the study by Yan et al. ( 2014 ) showed that offering bundling products could bring equilibrium under retailer bundling. Manufacturer bundling dominates retailer bundling (particularly in RS and VN case) in terms of the total supply chain profit being unique and remains valid under various scenarios of market size, price elasticity and advertising elasticity. These models can be limited for the service types of bundling as service bundling is defined as the quadratic function of service cost.

The paper makes an original contribution to the research interfacing supply chain and marketing by considering multiple parametric conditions and scenarios. To the best of authors’ knowledge, this is the first study to consider bundling and advertisement strategy simultaneously to capture insights into price competition under different power-balance scenarios. Some of the key implications of this research are as follows. First, the study showed that the optimal outcome under manufacturer bundling in the presence of double marginalisation can be different from retailer bundling. Second, the study compared manufacturer and retailer bundling strategies in terms of total supply chain profit under various power structures (such as MS, RS and VN) and showed that total supply chain profit is more in VN and MS power-balance competition under retailer bundling and manufacturer bundling compared to RS cases. Third, the total supply chain profit increases as advertising expenditure increases under the RS and VN cases in the retailer and, subsequently, manufacturer bundling is established. Fourth, it is observed that in the RB case, the retailer takes no interest in spending a significant amount on advertising for selling the bundling products. The retailer produces the bundling product on the basis of customer request. Numerical examples further illustrate and confirm the analytical findings which, in turn, offer practical insights to firm managers. In addition, the findings can help manufacturers to identify the bundling price and advertising expenditure.

Taking a lead from this study, there are several potential directions for future research. Consideration of nonlinear price and service sensitive demand function remains unexplored in the literature and models discussed in this paper can be re-examined considering these conditions. Market demand and collection rate depend on consumer attitude, whereas advertisement impacts positively on consumers’ attitudes for buying bundling products; this insight can be useful for studying the impact of consumers’ behavioural aspects on advertising in the future. In this paper it was assumed that the manufacturer and retailer sell only product bundling to the customer. Meanwhile, retailer and manufacture sell product bundling and component product simultaneously with a different price to the customer. It would be interesting to consider both product bundling and component products simultaneously under perfect price and service competition. The current formulation does not present the characteristics of product bundles. Future research can be extended by considering these perspectives.

The products can also be bundled with various services such as core services. Thus, this study can be extended by considering the product-service bundling strategy under a competitive environment. Furthermore, future research can highlight different cost constraints between the direct and retail channels, while investigating the return problem of bundling. It would also be interesting to understand the effect of the return policy of a bundling product on total supply chain profit while considering power-balance perspectives.

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Jena, S.K., Ghadge, A. Product bundling and advertising strategy for a duopoly supply chain: a power-balance perspective. Ann Oper Res 315 , 1729–1753 (2022). https://doi.org/10.1007/s10479-020-03861-9

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DITO Telecommunity Corporation: Challenging Telecom Duopoly in the Philippines

Research by: Shweta Pandey, Sandeep Puri , &  Babak Hayati  

Dito Telecommunity Corporation (Dito Telecom), the erstwhile Mislatel (Mindanao Islamic Telephone Company) Consortium, which won the government-sanctioned bid in the Philippines in mid-2019, is set to become the third major telco provider in the Philippines. In the run-up to its complete launch in early 2020, the telecom newbie started rolling out SIM cards to start pilot testing operations in November, struck deals with partners and competitors alike to access common towers, constructed new towers in key areas, built telco facilities in military camps, and even utilized unused fiber optic cables. However, the challenge ahead was to acquire and retain customers even as it tries to avoid a Php24 billion loss in the event it fails to fulfill its commitment of providing an Internet speed of 55 megabits per second (Mbps) covering 84 % of the population over 5 years against a capital expenditure commitment of around Php250 billion and at the same time anticipate and counter obstacles in its quest to challenge the Globe–PLDT duopoly.  

To cite this article:   Pandey, S.,  Puri, S. , &  Hayati, B. (2020). Dito Telecommunity Corporation: Challenging telecom duopoly in the Philippines. Journal of International Business Education , 15.  

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Dynamical Study of Competition Cournot-like Duopoly Games Incorporating Fractional Order Derivatives and Seasonal Influences

Cournot’s game is one of the most distinguished and influential economic models. However, the classical integer order derivatives utilized in Cournot’s game lack the efficiency to simulate the significant memory characteristics observed in many economic systems. This work aims at introducing a dynamical study of a more realistic proposed competition Cournot-like duopoly game having fractional order derivatives. Sufficient conditions for existence and uniqueness of the new model’s solution are obtained. The existence and local stability analysis of Nash equilibrium points along with other equilibrium points are examined. Some aspects of global stability analysis are treated. More significantly, the effects of seasonal periodic perturbations of parameters values are also explored. The multiscale fuzzy entropy measurements for complexity are employed for this case. Numerical simulations are presented in order to verify the analytical results. It is observed that the time-varying parameters induce very complicated dynamics in perturbed Cournot duopoly game compared with the unperturbed game.

Acknowledgments

The author would like to extend his sincere appreciation to the Deanship of Scientific Research at King Saud University for funding this Research group No. (RG − 1438-046). The author would like to thanks the anonymous Reviewers for their helpful and useful comments which further improved the paper.

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The seven sets of case studies showcased here feature examples of the most innovative work and legal services that lawyers have developed in the Asia-Pacific region for clients, whether operating in the region or globally.

All of the case studies were researched, compiled and ranked by RSGI. “Winner” indicates that the organisation won an FT Innovative Lawyers Asia-Pacific award for 2024.

Read the other FT Innovative Lawyers Asia-Pacific ‘Best practice case studies’, which showcase the standout innovations made for and by people working in the legal sector:

Business of law In-house

Unlocking capital

Winner: Linklaters Originality: 9; Leadership: 8; Impact: 8; Total: 25 The firm helped advise on the creation of Swap Connect, which allows international investors to tap into China’s onshore interest rate swap market via links with Hong Kong. The initiative, launched May 2023 with the backing of Chinese President Xi Jinping, aims to support Hong Kong as a financial trading hub while delivering a bigger and more efficient derivatives market for China’s own domestic market. It follows the creation of similar “Connect” programmes for stocks and bonds. Lawyers at the firm advised bourse operator Hong Kong Exchanges and Clearing on the design of the Swap Connect clearing link agreement, which allows foreign investors to remotely trade and clear renminbi interest rate swaps to hedge their debt exposure.

A&O Shearman O: 8; L: 8; I: 8; Total: 24 The firm helped China-backed telecoms company Dito Telecommunity secure a 15-year $3.9bn loan arrangement to fund the rollout of its telecoms network in the Philippines. The long-term financing deal, struck last September, was supported by a group of international banks. The funds raised are to pay for expansion of the network — the launch of which, in 2021, was backed by former Philippines president Rodrigo Duterte, in an attempt to challenge the historic duopoly of the country’s two dominant suppliers.

Sullivan & Cromwell O: 8; L: 8; I: 8; Total: 24 The firm advised Japan’s SoftBank on last September’s initial public offering of its UK chip designer, Arm, in the US. The lawyers helped SoftBank acquire an additional 25 per cent of Arm from its Saudi-backed investment partner Vision Fund to obtain full control of Arm ahead of the flotation, which then saw the Japanese company retain 90 per cent of the business while raising about $5bn.

Highly commended

Dechert O: 7; L: 8; I: 8; Total: 23 The firm advised ACEN, the energy arm of Philippines conglomerate Ayala, on securing project finance for its 24 per cent stake in the $1bn 600-megawatt Monsoon Wind development in Laos. Work has begun on installation of the wind farm, which will export generated electricity to Vietnam under a 25-year offtake agreement.

Hogan Lovells O: 7; L: 7; I: 7; Total: 21 The firm helped Indian car parts maker Samvardhana Motherson International acquire an 81 per cent stake in Japan’s Yachiyo Industry, a subsidiary of Honda Motor. The deal required Honda to buy out minority shareholders in the Tokyo-listed company to allow it to be taken private, with Honda maintaining a minority stake.

Allen & Gledhill O: 7; L: 6; I: 6; Total: 19 The firm acted as Singapore adviser to Bayfront Infrastructure Capital on the complex launch, last September, of infrastructure asset-backed securities valued at $410mn. It worked alongside international counsel Latham & Watkins. The transaction was the fourth such issuance by Bayfront.

Deacons O: 7; L: 6; I: 6; Total: 19 The firm advised asset manager BEA Union Investment on the reclassification of its Asian bond fund as an impact fund last July. The changes, authorised by Hong Kong regulators, will see the renamed Asia Impact Bond Fund primarily invest in bonds backing environmental and social improvement projects.

Responsible business

Winner: Trilegal Originality: 9; Leadership: 8; Impact: 8; Total: 25 The firm advised the education charity SGBS Unnati Foundation on becoming the first organisation to list on India’s Social Stock Exchange in December. The government-sponsored platform — created last year as a sub-category within India’s existing stock exchanges — is designed to help charities and other social enterprises subject to its oversight to raise funds, by strengthening confidence among potential donors and investors.

The lawyers advised Unnati on meeting regulatory conditions to launch the debut fundraising on the exchange, which secured Rs2 crore ($240,000) to finance training for 10,000 underprivileged young people.

Freshfields Bruckhaus Deringer O: 8; L: 8; I: 8; Total: 24 The pro bono team helped the Hong Kong branch of global children’s charity Plan International to create a safeguarding framework for kindergartens, in 2023. The lawyers advised on the compilation of guidelines, which have been circulated to more than 1,000 kindergartens via a manual and e-learning platform for free.

The initiative also offers tests and accreditation to caregivers. The lack of official guidance on safeguarding had recently been highlighted, publicly, by cases such the prosecution of 34 staff for mistreatment of children in a care home.

Gilbert + Tobin O: 7; L: 10; I: 7; Total: 24 The firm supported the Yes23 campaign, which sought improved constitutional recognition for Aboriginal and Torres Strait Islander people through Australia’s 2023 “Voice” referendum. Gilbert +Tobin’s co-founder and chair, Danny Gilbert, co-chaired one of the leading groups campaigning for the change, and the firm helped with fundraising, hosting meetings, and providing administrative and legal support. Early support faded as the proposal failed to secure the majorities required to pass despite government support, but 40 per cent of Australians supported the campaign.

DLA Piper O: 7; L: 8; I: 7; Total: 22 Lawyers at the firm have represented East Timor pro bono at the International Tribunal for the Law of the Sea (ITLOS) and, subsequently, the International Court of Justice to argue for mitigations over the impact of climate change.

The firm advocated for obligations on other states that would still protect the right of East Timor and other small island developing countries to further industrial development, as part of a fairer global transition to net zero greenhouse emissions.

Lander & Rogers O: 7; L: 8; I: 6; Total: 21 As one of the first Australian law firms to commit itself to achieving net zero emissions by 2030, Lander & Rogers supported several initiatives under its “climate and just transition” pro bono programme. Efforts included seconding law firm staff to a number of climate activist and litigation organisations to work pro bono.

Morrison Foerster O: 5; L: 6; I: 8; Total: 19 Marcia Ellis, global co-chair of the firm’s private equity office, worked with a team of associates to support Justice Centre Hong Kong, a charity that advises refugees and asylum seekers. They worked together to develop a public database of case law covering detention of immigrants in the territory. Since its launch in June 2023, the resource has been used by Justice Centre staff, researchers, other campaign groups and immigration lawyers.

Nagashima Ohno & Tsunematsu O: 6; L: 7; I: 6; Total: 19 Tokyo English Language Lifeline (Tell), a Japanese philanthropic organisation offering mental health support, was considering closing one of its clinics because rules governing its prescription of medicines looked too ambiguous. But the law firm secured a clarification from regulators that meant it could continue to operate.

Dispute resolution

Winner: MinterEllison Originality: 8; Leadership: 8; Impact: 10; Total: 26 The firm successfully defended Australian media company Nine Entertainment and investigative journalists Nick McKenzie and Chris Masters in a protracted, high-profile, and politically contentious case when they were sued for defamation by Australia’s most decorated living soldier, Ben Roberts-Smith.

In June, the Federal Court found that the lawyers had substantially proved the truth of the allegations contained in articles from 2018 that Roberts-Smith had committed war crimes, including the killing of unarmed civilians in Afghanistan. The lawyers also dealt with challenging secrecy requirements relating to documents and witness testimony.

Hogan Lovells O: 8; L: 8; I: 8; Total: 24 The firm helped Lego sue Chinese competitor Longteng for infringement of the Danish toymaker’s copyright. The lawyers persuaded a Chinese court to make a judgment based on inspection of a sample of 54 units out of 1.6mn boxes of seized goods. In December, the court in Shanghai ordered Longteng to pay Rmb600mn ($83mn) to Lego and sentenced five individuals to up to nine years in prison.

Numen Law Offices O: 7; L: 8; I: 8; Total: 23 Lawyers persuaded the High Court of Kerala to issue guidelines for tighter handling of sexually explicit evidence by law enforcement agencies and state courts. The move came after illegal access was gained to visual evidence during proceedings that followed the assault of the firm’s client, Indian actress Bhavana Menon, in 2017.

WongPartnership O: 7; L: 7; I: 8; Total: 22 The firm helped German telecoms group Deutsche Telekom enforce an award in Singapore of $93.3mn plus costs against India over the breach of a bilateral investment treaty, originally granted through arbitration in Geneva. Lawyers persuaded the Singapore Court of Appeal to apply the legal principle of “transnational estoppel”, which prevented India from relitigating claims already rejected by the Swiss court.

Anand and Anand O: 7; L: 7; I: 7; Total: 21 The firm won an interim order for Indian actor Anil Kapoor before the High Court of Delhi when he sued 16 defendants last year for misusing artificial intelligence. They were accused of exploiting his image and voice to create deepfakes for commercial gain, in ringtones and other merchandise. The case has led to increased scrutiny over the legality of deepfake practices in India.

Rajah & Tann Singapore O: 7; L: 7; I: 6; Total: 20 The firm’s lawyers defended Chinese tech company NetEase Games against an application for an interim injunction in Singapore in December 2022 to force withdrawal of a video game from sale.

Rival US video developer Riot Games had claimed NetEase’s game Hyper Front infringed the copyright of its similar Valorant combat game, as part of a campaign of action in several jurisdictions. However, NetEase did withdraw the game from the market last April, following legal challenges in various jurisdictions.

Restructuring

Winner: Sidley Austin Originality: 8; Leadership: 9; Impact: 8; Total: 25 The firm advised Chinese developer Sunac through a $10bn offshore debt restructuring last year, one of the first of its kind among China’s distressed property companies, following a widespread wave of defaults since 2021. It narrowed down the company’s complex creditor structure to a single class by use of a court-led scheme of arrangement and refinanced the existing debt into convertible bonds — in line with Hong Kong regulation.

Clifford Chance O: 8; L: 8; I: 8; Total: 24 The firm advised Italian construction group WeBuild on the rescue and restructuring of Clough, the troubled Australian building company, last year. The lawyers helped strike a deal with Clough’s administrator and creditors, preventing the collapse of the business. This required the renegotiation of hundreds of contracts in a 12-week period and saved more than 1,100 jobs. Among the projects saved were Snowy 2.0, a multibillion-dollar hydro power extension project.

Pinsent Masons O: 8; L: 8; I: 7; Total: 23 The firm advised the International Finance Corporation, the investment arm of the World Bank, on its $67mn financing of a transport terminal in Laos. This involved separating the contractual agreements of the project in the country’s capital from a wider logistics development. The deal, which closed in December, is designed to divide the project into two “bankable” concessions to encourage further additional funding.

Morgan Lewis O: 9; L: 7; I: 7; Total: 23 The firm advised PNG Air, Papua New Guinea’s second-largest domestic airline, in securing a vital writedown of debts under a court-approved creditor scheme to avoid bankruptcy. The lawyers teamed up with other advisers to secure backing for the restructuring, formally approved in December, through which major creditors swapped debt for equity in the business.

Rajah & Tann Singapore O: 8; L: 7; I: 7; Total: 22 The firm worked as lead counsel for DeFi Payments following the collapse of its crypto exchange, Vauld, in July 2022 when a surge of withdrawals by customers forced it to reveal a $70mn shortfall of funds. Lawyers worked alongside new management on a court-supervised scheme approved in August last year, to retrieve what remains of its assets and provide customers with the means to retrieve part of the value of funds originally invested.

Corrs Chambers Westgarth O: 8; L: 7; I: 6; Total: 21 The firm advised Mineral Resources on last year’s acquisition of the Bald Hill lithium mine in Western Australia, for A$260mn including assumed debt, after its previous owner went into administration four years earlier. The lawyers helped strike the deal by using independent experts to value the mine — despite hopes among some former shareholders of a higher premium.

Science and technology

Winner: Trilegal Originality: 8; Leadership: 8; Impact: 9; Total: 25 The firm drafted a policy for India’s Open Network for Digital Commerce, a government-backed scheme designed to encourage ecommerce expansion and competition. The network aims to connect different platforms through technology, enabling all buyers and sellers to transact with each other regardless of which app they are on.

The scheme was created by India’s commerce ministry to encourage small traders to move their businesses online and promote competition with established platform providers. The policy is designed to be fit for future regulatory changes.

MinterEllison O: 7; L: 8; I: 9; Total: 24 The firm helped Genomical, an Australian genomics data collaboration between hospitals and academic groups, become a commercial enterprise. The firm devised a structure to balance the interests of investors with stakeholder control over product development. It structured shareholder rights and negotiated intellectual property rights to take account of the platform’s potential use by hospitals around Australia for genetic tests and other medical applications.

Sidley Austin O: 8; L: 8; I: 7; Total: 23 The firm represented Chinese chip developer BaTeLab in the vetting process for listing on the Hong Kong stock exchange in December. The lawyers drew on their drafting of the legal prospectus and specialist knowledge of the semiconductor industry to inform the HKEX about the company and its products.

Tilleke & Gibbins O: 6; L: 7; I: 8; Total: 21 The Thai firm’s local expertise helped global tech companies Amazon and Google navigate foreign investment restrictions to take part, alongside Microsoft, in investing $8.5bn to build data centres in Thailand.

Shardul Amarchand Mangaldas & Co O: 6; L: 7; I: 7; Total: 20 The firm helped telecoms operator Reliance Jio secure financing to buy equipment worth over $2.bn from Sweden’s Ericsson through a loan facility with several banks. Syndicated loans of its scale are rare in India, requiring the lawyers to liaise closely with regulators.

Anand and Anand O: 7; L: 7; I: 6; Total: 20 The firm helped US tech groups Microsoft and Amazon pursue a case against an India-based scam that involved impersonating support staff and defrauding customers of both companies. The lawyers convinced India’s Central Bureau of Investigation to register this as a rare joint case.

Winner: Morgan Lewis Originality: 8; Leadership: 8; Impact: 9; Total: 25 The firm assisted Singapore-based global port operator PSA International in setting up a joint venture with Kazakhstan’s state-owned railway operator, Kazakhstan Temir Zholy.

To satisfy PSA’s preference, the business is subject to the AIFC Court, an independent jurisdiction following English common law based in the Kazakh capital Astana that is separate from the country’s domestic judicial system.

The combined entity, KPMC, was unveiled last May and aims to improve rail route connections and trade flows from China and the rest of Asia to Europe via Kazakhstan.

Gilbert + Tobin O: 9; L: 8; I: 7; Total: 24 The firm advised Sigma Healthcare in striking a proposed reverse takeover deal with its larger Australian pharmacy rival, Chemist Warehouse. Under the terms of the deal, announced in December, shareholders in privately owned Chemist Warehouse would hold an 85 per cent stake in the combined business, which would take on the Australian Securities Exchange listing of Sigma and have an indicative market capitalisation of A$8.8bn.

The company obtained “in principle” advice from the ASX that it would not need to repeat compliance with the exchange’s admission and quotation requirements following its effective takeover by the larger Chemist Warehouse. The deal remains subject to approval by the Australian Competition and Consumer Commission.

Dechert O: 7; L: 8; I: 8; Total: 23 The firm advised Capital Square Partners on its merger with Basil Technology Partners in 2023. The deal created a merged fund valued at $700mn that provides investors with access to a larger pool of technology assets, or the ability to cash out of original investments. The assets are spread across multiple jurisdictions in south-east Asia and it has become one of the largest technology funds in Asia.

Nishimura & Asahi O: 8; L: 8; I: 7; Total: 23 The firm advised Toshiba, the Japanese electronics conglomerate, on reverting to private ownership following 74 years as a public company and, latterly, eight years of accounting and governance turmoil.

The lawyers helped to secure a $15bn offer from a consortium led by private equity firm Japanese Industrial Partners, following a protracted sales process that paved the way for the country’s biggest ever take-private deal.

Ensuring transparency with the shareholders and encouraging competition among bidders was crucial in concluding the sale of the business, given the heightened scrutiny of Toshiba prompted by the recent controversies.

Freshfields Bruckhaus Deringer O: 7; L: 7; I: 7; Total: 21 The firm helped Zurich Insurance acquire an enlarged majority stake in Indian insurer Kotak Mahindra General Insurance for $488mn. The proposed stake rose from 51 per cent plus additional considerations to 70 per cent outright, requiring the lawyers to design a structure to comply with regulatory limits on foreign ownership of Indian insurers. If the deal goes ahead, it will represent the largest foreign investment into India’s non-life insurance market.

Resolüt Partners O: 6; L: 7; I: 7; Total: 20 The firm advised Singaporean sovereign wealth fund GIC on the creation of a joint venture with Genus Power Infrastructure, an Indian smart meter maker. GIC holds 74 per cent, with Genus holding the remainder of the business, which is committing $2bn in capital to supply smart metering across India.

Fintech and digital assets

Winner: DLA Piper Originality: 8; Leadership: 8; Impact: 9; Total: 25 A team of lawyers based in Hong Kong helped Dubai’s Virtual Assets Regulatory Authority (Vara) create a compliance framework for all cryptocurrency and other digital asset businesses. Lawyers worked with the emirate’s regulator to draft a rule book aimed at promoting Dubai as a hub for cryptocurrency investment while ensuring consumer protection. By April 2023, the regulator had granted 19 licences.

Allen & Gledhill O: 8; L: 8; I: 8; Total: 24 The firm advised Singapore-based global carbon exchange Climate Impact X ahead of its first trading day, in June 2023. The venture — which aims to establish Singapore as a regional hub that can challenge other global exchanges in voluntary carbon emission trading — is backed by Singapore Exchange, state investor Temasek, and the banks DBS, Standard Chartered and Mizuho. The exchange aims to attract international carbon traders keen to buy credits created by the accredited projects designed to curb greenhouse gas emissions.

Ashurst and Linklaters O: 8; L: 8; I: 8; Total: 24 When the Hong Kong government issued a $750mn green, multi-currency digital bond, Linklaters acted for global bank HSBC, and Ashurst represented its blockchain platform HSBC Orion, where the bond is hosted. Lawyers from both firms liaised with regulators and helped redesign the bond documentation to reflect its use of blockchain.

The lawyers ensured the hosting digital platform was directly connected to Hong Kong’s central clearing house so investors could subscribe to the bond without having to open new accounts.

Baker McKenzie O: 7; L: 8; I: 8; Total: 23 In November 2023, the firm helped Singapore’s DBS Bank, Switzerland’s UBS, and Japan’s SBI Digital Asset Holdings to structure the world’s first cross-border repo and natively-issued digital bond fully executed and settled on a public blockchain. The transaction, which was sponsored by the Monetary Authority of Singapore, aimed to test the feasibility of applications in asset tokenisation and decentralised finance deploying distributed ledger technology.

Clifford Chance O: 8; L: 8; I: 6; Total: 22 The fintech team advised on Singapore’s first live cross-border transaction using tokenised deposits between financial services company JPMorgan and Japanese digital asset service provider SBI Digital Asset Holdings, in November 2022. The lawyers contributed to the development of new regulation that clarifies that these tokenised deposits will not be classed as securities.

Howse Williams O: 7; L: 7; I: 7; Total: 21 The firm helped Tykhe Capital investment group win approval from the Hong Kong securities regulator to tokenise a real estate asset fund through a subsidiary, Pioneer Asset Management. The rarity of tokenised real estate asset funds in the region meant lawyers had to show how it complied with existing regulation. The transaction aims to set a blueprint for future tokenisation projects in Hong Kong.

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