Abstract: The coordinated operation strategy of supply chain members under the influence of product price, quality and service competition on the products purchased by one retailer through two manufacturers is explored in this paper. By formulating a two-level supply chain system which consists of manufacturer, retailer and customer, applying the backward method and the optimization theory, the competitive equilibrium of supply chain members under centralized decision, manufacturer no cooperation, manufacturer cooperation and semi cooperation (retailer cooperation only with one of the manufacturers) is solved. The equilibrium solution of quality and service between the two competing products when in the case of those four different cooperative relations and their consumer surplus are analyzed. Moreover, numerical simulation is used to discuss the influence of various parameters. It is indicated that the manufacturer's no cooperative situation can't improve the service level of the product, but can improve the quality effort of the manufacturers; Centralized coordination of retailers helps to improve the product quality and service level. Avoiding to avoid the cooperation between manufacturers provides high quality products and service level to benefit customers, and increases the total number of customers in the market,at the same time can improve the whole profits of the supply chain.

Key words: supply chain, service competition, quality competition, consumer surplus, coordination strategy