Research On Pre-sale Strategy Considering Capital Constraints And Asymmetric Information

With the increasing volatility and complexity of the market environment,small,medium and micro-sized enterprises are facing many challenges: more difficult of the bank loans,more severe market competition,more uncertain of market demand,and more inaccurate of the demand information from the downstream.Such a severe situation has a serious negative impact on the operation and financing of most small,medium and micro-enterprises.Therefore,enterprises need to optimize their operations strategy,flexible use of pricing strategy,effectively reduce the inventory-related costs,and actively explore alternative financing schemes for bank loans.Under this background,advance selling(AS),as an effective sales strategy that can not only adjust the price but also obtain the prepayment,has gradually been familiar with and used by enterprises.AS is a marketing strategy that allows customers to place orders at a time preceding the official release of a product(or service)by a firm.Under AS strategy,enterprises accept orders before production.Once the enterprises produce the products,these products will be directly distributed to consumers,which can lead to a large reduction of inventory-related costs.Prepayment during the AS period can help enterprises relieve the pressure of insufficient funds;Based on the demand information acquired in AS period,enterprises can predict the demand in spot selling period,reduce the loss of mismatch between supply and demand.Besides,the advance demand information can also guide enterprises to make accurate production plans,avoid too much or too little financing,thereby reduce the financing cost.In this thesis,the market model with uncertain demand in the pre-selling period and spot selling period is established to study the AS strategy of enterprises in the context of capital constraints and asymmetric information.The main work includes the following aspects.(1)The relevant theories and literature of AS strategy are reviewed.Firstly,the role of the AS strategy in price discrimination,inventory control,financing,information acquisition and other aspects is sorted out,and the impact of the AS strategy on enterprise operation is expounded.Secondly,this thesis summarizes the literature on the marketing and operation of AS in a competitive environment,such as pricing,inventory,etc.,and shows the value of further research on the operation of AS in a competitive environment.Thirdly,the thesis summarizes the literature on financing strategy from the perspective of operation management and shows the research value of AS in financing.Finally,the thesis sorts out the operation management literature in the asymmetric information environment,finds the problems faced by the AS in the asymmetric information environment,and points out the significance of the information acquisition function in the AS to the enterprise’s operation strategy.(2)Advance selling for financing of a capital-constrained enterprise in a monopoly environment is considered.By establishing a two-stage stochastic demand model,this thesis studies the optimization of optimal prepayment price discount,optimal financing scheme and financing amount,and optimal inventory level for a capital-constrained enterprise under a monopolistic environment,and gives the necessary and sufficient conditions for enterprises to adopt AS strategy.The research results show that under the condition of sufficient funds,the demand information obtained in the AS period has a significant positive effect on enterprises.By comparing whether enterprises use AS information or not,it is found that the AS strategy using the advance demand information is the dominant strategy.However,in the case of insufficient funds,the effect of demand information acquired in AS period on enterprises may be either negative or positive.No matter whether the AS information is used or not,the AS mode does not necessarily dominate the regular-selling-only mode: the sufficient and necessary condition for the AS strategy to prevail is the strong correlation between the demand of the two stages.The results show that in the monopolistic environment,enterprises should use the strategy of AS and bank loans simultaneously.Advance demand information has an important influence on the operation strategy of enterprises(no matter whether the capital is sufficient or not).The capital-constrained enterprise should use advance demand information cautiously.(3)Advance selling strategy in the competitive environment is considered:there is an enterprise with sufficient capital and an enterprise with insufficient capital in the market,and they conduct sales activities in the uncertain preselling and spot-selling market.By establishing a two-stage stochastic demand model,the optimal prepayment price discount,financing scheme,and inventory level are investigated.The research results show that when both enterprises have sufficient funds,the only equilibrium results in the market competition is that both enterprises provide AS services.When there are two oligopoly enterprises,one has sufficient funds and the other has insufficient funds,the optimal inventory level of the capital-constrained enterprise depends on the pre-orders volume,and which increases with a piece-wise slope.The only equilibrium result in the market competition is that the enterprise with sufficient capital provides AS service,while the capital-constrained enterprise provides pre-order service according to its credit rating: when the credit rating of the enterprise is at the medium level,the enterprise should not use the AS strategy;conversely,when the credit rating of the enterprise is at both ends(high or low),the enterprise should use the AS strategy.The results show that in the competitive environment,the credit rating of an enterprise affects its operation and financing strategy.Enterprises with sufficient working capital should adopt AS strategy,while the capital-constrained enterprises should carefully choose sales mode according to their credit rating.(4)Advance selling mechanism design of enterprises under asymmetric information environment is studied: the sales agent employed by enterprises has private information,which will lead to adverse selection and moral hazard problems.By establishing a two-stage stochastic demand model,this thesis studies the compensation contract design,prepayment price discount,and inventory level optimization of the sales agent.The results show that the AS strategy always dominates the regular-selling-only strategy.Traditional linear menu contract(MLC)can align the conflict of interests between enterprises and sales agents,and such alignment is successful for one-period sales agent’s effort or/and two periods sales agent’s effort but will lose efficiency.The reason for the loss of efficiency is that the average regular selling effort of sales agents becomes larger and the pre-selling effort becomes smaller.Floor-and-ceiling linear contracts(CFC)can perfectly solve the problem of information asymmetry without any efficiency loss,but in practice,CFC contracts are less likely used by enterprises because of their complexity.The results show that in the asymmetric information environment,enterprises should use the AS strategy,but the specific use of two periods of sales agent’s effort or single period sales agent’s effort depends on the other market parameters.(5)The strategy of whether or not to adopt AS under the principal-agent mechanism is investigated.By establishing a two-stage stochastic demand model and under the principal-agent mechanism,this thesis studies the compensation contract design,prepayment price discount,and inventory level optimization of the sales agent.The results show that the traditional linear contract can align the conflict of interest between the enterprise and the sales agent,and the loss of efficiency can be ignored in some cases.The correlation between advance period demand and spot period demand has an important influence on the AS strategy of enterprises.In the symmetric information environment,the AS strategy dominates the regular-selling-only strategy.In the asymmetric information environment,enterprises should choose AS strategy when the demand correlation is weak.The research results show that the enterprise should pay attention to the correlation between the historical pre-sales and the spot sales demand.In the asymmetric information environment,whether the AS strategy is optimal depends on the strength of the correlation in the case of a given unit mismatching cost.The above-mentioned investigations are performed to make the following innovations:(1)This research studies the AS strategy from the perspective of operation management,and focuses on the optimal inventory and pricing strategy of a capital-constrained enterprise,and describes the financing function and information acquisition function of AS,which is the contribution of this work to the existing literature.As is known to all,advance demand information is very important for enterprises,it affects the inventory,distribution,and other related operations decisions of enterprises.At the same time,AS is also an important way of financing for capital-constrained enterprises.Existing literature,either focus on the research of advance demand information acquisition,explore the impact of this function;or focus on the financing function of AS and explore the effect of the financing function.This study explores the cross-influence of financing and information acquisition: in the case of studying the function of AS financing,it explores the influence of information acquisition,which is the contribution of this study to the literature.At the same time,this study also found that this effect is not always positive(sometimes it is negative).(2)This work studies the AS strategy for capital-constrained enterprises under the competitive environment,which is the contribution of this study to the existing literature.In particular,this study considers how to optimize the AS strategy of capital-constrained enterprises that compete in both sales periods(i.e.,pre-selling and spot selling periods).Recently,some scholars have studied how well-funded enterprises develop AS strategy,but they consider that competition either occurs in the pre-selling stage or the spot selling stage,rather than at the same time.They do not involve capital constraints.Some literature also studied the financing problem of enterprises in the competitive environment,but do not involve the AS problem.Through research,this thesis finds that the credit rating of an enterprise has an important impact on the choosing of AS strategy and even financing strategy(band control interval).(3)This thesis studies the AS mechanism design of enterprises in the context of information asymmetry,which is the contribution of this paper to the existing literature.Since the sales agent has private information,this information is critical to the operations decisions of the enterprise.There are adverse selection and moral hazard problems in the actual sales process of the sales agent,which will affect the authenticity of the demand information obtained by the enterprise.Enterprises need to design a reasonable mechanism to obtain reliable advance demand information.The adverse selection and moral hazard in AS have not been discussed in the existing literature.Through research,this work finds that the traditional linear menu contract(MLC)can align the interests of enterprises and sales agents,and solve the problem of information asymmetry in AS,but it will cause efficiency loss.Floor-and-ceiling contracts(CFC)can perfectly solve the problem of adverse selection and the moral hazard of agents without loss of efficiency.(4)Under the principal-agent mechanism,this thesis studies the choosing of AS strategy of enterprises and focuses on examining the influence of the correlation between advance demand and spot sales demand,which is the contribution of this paper to the existing literature.Whether an enterprise should adopt AS strategy is a practical problem under the scheme of the enterprise-sales agent.This study found that the correlation between pre-order and spot demand has an important impact on the AS strategy of enterprises.In particular,when the correlation is relatively weak,enterprises should adopt the AS strategy.