Should a retailer support a quality improvements strategy?

In a one-manufacturer-one-retailer supply chain, players establish both operations and marketing strategies and coordinate the chain through the implementation of a support program. A retailer, who sets both the pricing and the advertising strategies, acts as chain leader and decides whether to support a manufacturer’s operational strategy, such as quality improvements. The players share the overall chain revenues based on an exogenous, fixed sharing agreement. We compared coordinated and non-coordinated solutions in which coordination is carried out via a support program for quality improvements. While according to the literature a retailer–leader always has an economic preference for operation-based coordination, our findings reveal that: (a) low operational efficiency and effectiveness discourage the retailer’s interest in coordination and (b) good sharing parameter values overcome concerns regarding operational inefficiency but not those of operational ineffectiveness.