Open or Not? Operation Strategies of Competitive eCommerce Platforms from an Ecosystem Perspective

Abstract

According to the traditional theory of industrial organizations, differentiated competition leads to higher returns. However, Chinese eCommerce platforms tend to homogenize in the choice of operational strategies, which deviates from the principle of differentiated competition. Some competitive eCommerce platforms were described based on the hotelling model, and a sequential game model for the competition of ecosystems was built to analyze the choice of operation strategies. From the perspective of a business ecosystem, this paper studied the impact of the strategy choice of the core platform on the ecological profit. The results showed that an open strategy would always improve the performance of business ecosystems and could even benefit the competitive ecosystem because of its spillover effect. The equilibrium of the competitive platforms was related to the game strategies, independent of the distribution contracts of the suppliers. We found that the platforms’ positions deviated from the maximum difference principle due to network externalities, and differentiation did not improve the profits of platforms.

Keywords

• eCommerce platform
• vertical integration
• open strategy
• business ecosystem
• differentiation