Key Factors for Green Product Line Extensions

Motivated by varied green product line extension strategies in practice, we consider price and quality optimization while selling (at most) two product variants: base product, green variant with recycled/reused content. On the demand-side, two distinct consumer segments with opposing perceptions of recycled/reused content have heterogeneous valuations. On the supply-side, incorporating more recycled/reused content increases production costs and decreases input material costs. Consumers' and non-government organizations' typical association of low environmental impact with "uniformly green" (UG) product line adoption or higher recycled/reused content influences two research questions: Should consumers with distinct green preferences be "targeted" with distinct product variants, or is profitable UG adoption possible? Are UG product lines environmentally preferable?

Employing non-linear programming theory and endogenous demand models reflecting conventionals' dislike and naturalites' extra utility of recycled/reused content, we characterize five distinct equilibrium scenarios. Using Environmental Burden Ratio (EBR), a metric to assess environmental impact, we show that neither UG adoption nor higher recycled content necessarily yields product lines with lower EBR. We highlight conventional-dominated markets and both consumer types perceiving product variants of similar functional quality as necessary (demand-side) factors increasing UG strategy adoption. Yet, these factors also decrease recycled/reused content at equilibrium, thus increasing EBR. In contrast, supply-side (production, procurement) cost reductions concurrently increase UG adoption with maximum recycled/reused content, thus reducing EBR.

We prescribe key insights for firms aspiring to profitably adopt UG while reducing environmental impact. Instead of seeking markets dominated by aggressive naturalities, firms should educate conventionals on how comparable (to base products) green variants' functional quality is. For concurrent profit and environmental improvements, firms should take control of design/quality decisions and lower production and recycled/reused material collection/procurement costs. Finally, environment advocates should not blindly demand UG adoption or higher recycled/reused content, as doing so may yield worse environmental outcomes.

Short Bio

Tolga Aydınlıyım is an Associate Professor of Operations Management at the Zicklin School of Business, Baruch College, The City University of New York. He also serves as the Operations and Decision Analytics Area Coordinator of the Zicklin PhD program in Business. He earned a PhD in Operations Research from Case Western Reserve University, and a BS in Industrial Engineering from the Middle East Technical University, Turkey. Tolga's research interests are broadly in operations and supply chain management, with particular interest in operations-marketing-economics interface, retail operations, revenue management and pricing, closed-loop supply chain management, and scheduling and capacity allocation in supply chains and healthcare. His research papers have appeared in Management Science, Manufacturing & Service Operations Management, Production and Operations Management, Decision Sciences, and European Journal of Operational Research. He serves as an associate editor of Decision Sciences.

Venue

Friday, December 8th, 2023, 4:00 pm (on Zoom)

https://zoom.us/j/94120587314?pwd=bFNxQmo5Qi8wNytqbkhCNjdRajVYdz09

Meeting ID: 941 2058 7314 Passcode: 282060

Language English