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Remanufacturing as a marketing strategy (RV of 2005/63/TOM/MKT)

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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, OEM 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 importantly, we show that under competition remanufacturing becomes an effective marketing strategy, which allows the manufacturer to defend its market share via price discrimination.

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