HOW AND WHY MNEs COMBINE GLOBAL AND LOCAL SOURCING STRATEGIES

Details

Supervisors

Blome, Constantin

Faculty

Louvain School of Management

Degree label

Master [120] en Ingénieur de gestion

Abstract

Human and natural resources were spread randomly across the world. Each region in the world had its characteristics and advantages. For this reason, humans have been trading for centuries. According to Xie et al. (2007) global trade and thus global sourcing are ancient phenomena that have existed at least since the second century BC when the Silk Road was established. In that time, the purpose of global trade was to exchange goods with other different goods. Nowadays, the objectives are multiple and different than before. Sourcing globally, in fact, refers to seeking out cheap labor and materials in order to reduce production costs. Local suppliers, on the other hand, are responsive. Thus, both strategies have their characteristics and advantages. However, with the new technologies and invention some countries stand out. Natural and human resources are focused in some regions of the world. While some countries are independent, others depend on these independent countries. In other words, some countries import more than they export, others export more than they import. The same concept applies to companies. In fact, some companies prefer to produce most of their products or services within the company and outsource a small part of their business to a third party. Others prefer to outsource a large part of their business to a third party and focus on a small part of their business. This is called in-sourcing and out-sourcing strategies. Multinational Enterprises (henceforth NEs) can out-source or in-source their production inside or outside the country borders. However, scholars accord less importance to glocal in-sourcing. In fact, several research works paid considerable attention to the benefits and applicability of low-cost country sourcing, while less focus has been placed on the decision-making process as whole (Stanczyk, Foerstl, Busse, Blome, 2015). According to Murray (2000), many managers have a non-comprehensive understanding of the strategic importance of global sourcing. They consider global sourcing as a quick means to achieve short term objectives, which are mainly to reduce production costs. During the last century, a new concept appeared and has been implemented by multinational organizations. This concept is the glocal sourcing strategy. MNEs aim to improve their sourcing strategy by combining global and local sourcing. However, Peter Drucker, a famous management guru and business historian, once said that sourcing and logistics would remain the darkest continent of business - the least exploited area of business for competitive advantage.