Optimal Financial Decisions and Pricing Strategies in Competitive Manufacturing Supply Chains

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 maximise retail market gains, with options for financing including banks, bonds, and crowdfunding. Game-theoretic models are used to explore participants' behaviour 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 like 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. Managerial relevance statement: This study equips decision-makers with actionable strategies for optimising financing and pricing decisions, enhancing their competitive positions and profitability in the global market. It emphasizes the importance of monitoring market conditions to balance product price, product quality, production costs and financial strategies. For domestic manufacturers, it elucidates the importance of choosing suitable financing methods based on cost structures and competitive positions. For example, domestic manufacturers benefit from bonds or crowdfunding to secure market share and enhance financial stability when facing high globalization costs. Foreign manufacturers benefit from maintaining lower production costs. Tariff policies also significantly influence their costs and pricing strategies, and suitable tariff policies benefit all parties through improved profits. From the retailer's perspective, intensified competition among manufacturers leads to higher profits, allowing them to obtain products at lower prices. Decision-makers can use the developed models to formulate optimal pricing policies and select suitable financing methods.