Optimal Financial Decisions and Pricing Strategies in Competitive Manufacturing Supply Chains

Abstract

This study investigates the impact of financing methods and pricing competition on supply chain operations. It focuses on a domestic manufacturer competing with a foreign competitor to maximize retail market gains, with options for financing including banks, bonds, and crowdfunding. Game-theoretic models are used to explore participants’ behavior in the supply chain, considering three power structures: a Nash game and two Stackelberg games with alternating leadership. Results reveal that domestic manufacturers prefer financing options with flexible interest rates, such as crowdfunding, or low-interest alternatives such as bonds, when facing rising production costs or reduced competitiveness (when the foreign manufacturer holds a leader position). This preference impacts retailers, potentially leading to reduced product prices, benefiting retailers. Also, increasing initial capital prompts the domestic manufacturer to prefer bank methods. Interestingly, a higher budget and quality do not always guarantee higher profitability and can result in additional costs (for instance, in Nash game structure), depending on power structure type and market size. Furthermore, with increased price sensitivity, crowdfunding becomes less viable, leading to a preference for bank and bond financing. This can conflict with retailers’ optimal financial choices, highlighting the complexity of financial decisions in supply chains and their crucial role in global competition.