Optimal financing modes of a capital-constrained manufacturer under different sales strategies

Abstract

PurposePrevious studies have rarely integrated the financing modes of a capital-constrained manufacturer with the choices of online sales strategies. To address this gap, the authors study how a manufacturer selects optimal financing modes under different sales strategies in three dual-channel supply chains.Design/methodology/approachThis paper considers three sales strategies, namely, combining a traditional retailer channel with one of the direct selling, reselling and agency selling channels, and two common financing modes, namely, bank financing and retailer financing. The authors obtain equilibrium outcomes of the manufacturer and traditional retailer and then provide the conditions for them to select optimal financing modes under three sales strategies.FindingsThe results indicate that the manufacturer’s financing decisions rely on the initial capital and interest rates, and the manufacturer selects retailer financing only if the initial capital is relatively larger. In terms of financing mode options, the retailer financing mode is more beneficial for the manufacturer under the three sales strategies. From the perspective of sales strategies, the direct selling model is more beneficial. In addition, the higher the consumer acceptance of the online channel, the more profits the manufacturer obtains.Practical implicationsThis paper provides suggestions on how the capital-constrained manufacturer chooses financing modes and sales strategies.Originality/valueThis paper integrates the financing mode and different sales strategies to investigate the manufacturer’s optimal operational decisions. These sales strategies allow us to investigate the manufacturer’s optimal financing modes in the presence of both different financing modes and sales strategies.