Global sourcing strategy by foreign multinational firms in Malaysia

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Date
2007
Authors
Siti Halijjah, Shariff
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Abstract
Global sourcing strategy is the reexamination of one of the many purchasing strategies for a company’s purchased material as a result of global demand economics and global supply base. This strategy may have ripple effects to the economy as a whole since an estimate of 67% of the cost of goods of a company are tied up in purchase expenditure. The importance of understanding global sourcing strategy particularly in Malaysia is needed since the manufacturing sector is considered as the number one sector and the engine of growth for the economy with foreign multinational corporations playing a significant role in it. Global sourcing strategy may be viewed from both ownership (intra and inter) and locational (foreign and domestic) factors. Currently the studies on global sourcing strategy are being examined either on ownership or locational factors. Any attempt to study global sourcing strategy on both factors was only made conceptually and in an exploratory study. Since foreign multinational corporations may view location as an important factor in their sourcing strategy besides product factors, this study had empirically examined global sourcing strategy on both, ownership and locational factors as well as addressing the impact of location and product factors on it. Moderating variables were also incorporated to the framework to examine its impact on the relationship between location, product factors and global sourcing strategy. Using components as the unit of analysis, foreign multinational corporations that used three to four types of sourcing strategy were identified. These four types of sourcing strategies are intra-domestic, intra-foreign, inter domestic, and inter-foreign. Respondents had to answer four or three sets of questionnaires pertaining to their component sourcing strategy that was sent to them by mail. Industry that carried out at least three to four types of global sourcing strategy was found in the electrical and electronics (E&E). Furthermore, the utilization of these global sourcing strategies predominated in the E&E industry. Using multiple and hierarchical regression, the findings generated from testing the hypothesis indicate that an E&E foreign MNCs is more likely to source internally and from domestic suppliers when trade barrier stability is low. It is also found that these MNCs are willing to source components with high quality externally from domestic suppliers, and are also willing to source externally from domestic suppliers when the delivery is not urgent. In testing the moderating effect of supplier dominance, competition intensity, and asset specificity it is found that supplier dominance behaves as a moderator between trade barrier and intra-domestic global sourcing strategy, and between product delivery and intra-domestic global sourcing strategy. Competition intensity behaves as a moderator between product delivery and intra-domestic global sourcing strategy. For asset specificity it behaves as a moderator between product quality and inter-domestic global sourcing strategy, and between product delivery and inter-domestic global sourcing strategy. The empirical findings may prove to be beneficial for government officers in relevant ministries as well as Malaysian owned suppliers and also Malaysian owned companies that are venturing abroad to understand the patterns, and trends in order to implement the right strategies for future success.
Description
Ph.D
Keywords
Business administration , Global sourcing strategy
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