Researches On Some Issues Of Operations And Financial Decisions With Capital Constraints

With the rapid development of information technology and the acceleration of economic globalization,the operations management of enterprises have become more and more complicated,and their challenges and competitive pressures are also more severe.In such a highly competitive market environment,working capitals play a particularly important role in rapidly responding to the needs of the market for enterprises to capture a “foothold”.However,many enterprises,especially those small and medium-sized enterprises(SMEs),have widespread problems of shortage of capitals and meanwhile have very limited access to financing sources(e.g.,bank loan).Then,many innovation modes of supply chain financing emerged in practice,such as the complete or limited liability cooperative financing modes;but the theoretical research on these innovative financing modes is still rare in the field of Operations Management(OM).On the other hand,the majority of the current studies on operations and marketing(e.g.,advertisement)decisions ignore the firm's financial status and financing issues completely,which is more practical.Therefore,based on the innovative modes of supply chain financing,studying the operations/advertising promotion management theories and methods of financially-constrained firms will provide powerful guidance and theoretical support for the effective implementation,scientific popularization and applications of enterprise's or supply chain's management innovation modes.With the practices of the current supply chain financing modes,this paper focuses on studying some problems faced by the firms in practice,and has the specific research works as follows:(1)Based on two-period setting,we investigates the impacts of the carryover effect of advertising and the competition on the pricing/ordering and advertising investment strategy for a debt-financed firm.This paper shows that under the cases of the competition and stochastic advertising effectiveness for the deterministic demand,the firm always charges a monopoly price and order quantity,and adopts an “invest-all-or-none” advertising strategy,in the first period(the monopoly price and order quantity is the optimal retail price and order quantity when the firm is monopolistic,respectively).Moreover,we demonstrate that a lower price sensitivity prompts the firm to set a higher price and invest more in advertising.An interesting result is that,the inclination of the firm investing in advertising increases as the uncertainty of the advertising effectiveness becomes larger.In addition,compared to the monopoly situation,the firm may improve its investment to mitigate the impact of competition and secure the future earnings.Under the stochastic-demand case,the firm's optimal decisions will create an operational hedge,which forms a low-risk strategy and a high-risk strategy,that balances the tradeoff between the long-term profit and the short-term bankruptcy risk.(2)We study the optimal advertising and ordering strategy,and financing mode selection for firms with limited capital.Based on the classic newsvendor model,this paper analyzes the impact of advertising on market demand and propose the optimization models on advertising and ordering decisions under different financing modes(i.e.,self-financing mode,bank financing mode,and supplier/mixed financing mode),and mainly addresses to answer the following questions: 1)How can the capital-constrained firm determine the optimal ordering and advertising investment decisions to maximize(expected)profits in different financing modes? 2)How does the retailer choose a proper financing mode according to their own conditions and the external environment? Further,how large value can the financing mode create for the retailer? With the analysis,this paper identify the optimal strategy of ordering and advertising investment for the firm under different financing modes,and provides the method of the firm selecting its optimal financing mode according to their own initial capital levels and the interest rates.Interestingly,it is shown that the firm may still choose bank financing more even though the interest rate under bank financing mode is higher than that under supplier financing mode.We also show that financing services can increase the performance of the firm especially when it has relatively low initial capital level.(3)We study the inventory and financial decisions for a financially constrained firm under(completely joint-liability)cooperative financing mode.By incorporating the role of joint liability(i.e.,sharing risk each other)into the model of studying the operations and financial decisions,we find that in general,the firms' expected end-period cash levels are not concave/quasi-concave in their own order quantity and the noncooperative game is not supermodular.By using some technical approaches,we demonstrate that the best response function of each firm is increasing in its partner's inventory level,which can be used to prove the existence of equilibrium.The results then unveil that the risk-sharing role will always positively affect the firms' strategies and thus make them “riskier” in ordering as this additional bankruptcy risk becomes greater.In comparison to the case of noncooperative financing mode,the firms will over-invest in their inventory under cooperative financing mode.Furthermore,the equilibrium financing mode is completely determined by a two-threshold policy associated with both initial capitals and interest rates.We also identify the mild condition under which cooperative financing mode can make the firms and the bank reach a “win-win” situation.The results obtained in this paper provide plausibly guidelines for selecting the proper partners for the firms who want to use cooperative financing mode.(4)This paper also the capital-constrained firms' inventory and financial decisions under limited joint-liability(LJL)financing mode.So far none of theoretically papers study such financing mode in the broad area of interfaces of operations and financial decisions.Thus,in this paper,we address some related questions on this financing mode from the perspective of Operations Management: Compared with completely joint-liability cooperative financing mode,whether does LJL financing mode make these firms bear a lower liability risk(from other firms)? Under such financing mode,how does the role of the limited joint liability affect the firms' strategies? How large value can the LJL financing mode generate for the firms? With the analyses,we find that the non-cooperative game the two firms play is a supermodular game.Then,we further show that these two firms become more risky in ordering as the additional risk from their own collaborator increases.Interestingly,it is shown that a larger credit factor does not always improve these two firms' expected terminal capitals simultaneously.Moreover,we also characterize the certain conditions under which the two firms prefer to choose LJL financing mode.Finally,the numerically studies show that LJL financing mode does not always dominate completely joint-liability cooperative financing mode,in the view of the firms,and might generate a higher bankruptcy risk.