Remanufacturing as a Marketing Strategy

TLDR

The profitability of remanufacturing systems depends on cost, technology, logistics, and their interactions, and has been extensively studied in the literature. The study proposes an alternative approach that incorporates demand-related factors such as green segments, OEM competition, and product life-cycle effects. The authors analyze remanufacturing profitability by modeling thresholds on cost savings, green segment size, market growth, and consumer valuations. For a monopolist, thresholds on remanufacturing cost savings, green segment size, market growth, and consumer valuations determine profitability, while under competition remanufacturing can serve as an effective marketing strategy enabling price discrimination to defend market share.

Abstract

The profitability of remanufacturing systems for different cost, technology, and logistics structures has been extensively investigated in the literature. We provide an alternative and somewhat complementary approach that considers demand-related issues, such as the existence of green segments, original equipment manufacturer competition, and product life-cycle effects. The profitability of a remanufacturing system strongly depends on these issues as well as on their interactions. For a monopolist, we show that there exist thresholds on the remanufacturing cost savings, the green segment size, market growth rate, and consumer valuations for the remanufactured products, above which remanufacturing is profitable. More important, we show that under competition remanufacturing can become an effective marketing strategy, which allows the manufacturer to defend its market share via price discrimination.