Channel Power Structures and Environmental Efforts: Insights from Store and National Brand Interactions

Sustainability concerns and rising consumer environmental awareness (CEA) have fundamentally reshaped competitive dynamics in modern supply chains. This study examines the influence of CEA on pricing and environmental effort competition between store brand (SB) and national brand (NB) products in a two-stage supply chain with one manufacturer and one retailer. We develop a mathematical model to evaluate strategic interactions under three power structures: Manufacturer Stackelberg (MS), Retailer Stackelberg (RS), and Vertical Nash (VN), considering two environmental investment scenarios: NB-only investment and bilateral SB-NB investment. Our findings indicate that (i) when only NB products invest environmentally, CEA increases environmental effort levels, wholesale prices, and retail prices for both brands, expanding total channel value rather than merely redistributing profits; (ii) CEA and channel competition on jointly determine optimal channel power structure, with MS dominating in differentiated markets with low CEA while RS yields superior outcomes under high competition and high CEA; (iii) retailers consistently achieve maximum profits under VN structure through balanced negotiation positions; and (iv) bilateral environmental investment causes price convergence across structures, shifting competitive focus from governance to operational excellence. By integrating environmental investment, channel power structure, and channel competition into a unified framework, this study offers managers practical decision tools for selecting optimal channel structures based on observable market conditions. Furthermore, it demonstrates how grocery retail chains and consumer goods manufacturers can transform environmental initiatives from compliance costs into value creation mechanisms that enhance both profitability and sustainability.