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