Operationalization of the Global Sourcing Strategy

Luz Mariela Jaimes Florez is one of the two recipients of a $2,000 scholarship awarded by the Canadian Purchasing Research Fund, for a Masters thesis in procurement written in 2006-2007 at HEC Montréal. This abstract is intended for PMAC members. The full version of the Masters thesis is available at HEC Montréal.

Thesis supervisor:

Professor Jean Nollet, Chairholder, Chair in Supply Management

Abstract

Communication and technology have influenced the world even more so in the last decade, making it appear “smaller” than before. As a result, companies of all sizes attempt to take advantage of this new reality, expanding and coordinating their sales and operations around the globe. However, the promising opportunities of a vast and global marketplace bring with them major challenges for every corporate function. It is necessary to define not only an appropriate global strategy, but also a suitable implementation – a subject that has frequently been neglected in the literature. This research concentrates on the implementation of global sourcing with respect to procurement, which is frequently called upon to be part of the globalization efforts, given the scope of purchasing expenses for industrial firms. Integrated global sourcing is perceived by multinational companies as one of the best ways to make the most of worldwide opportunities.

To better understand the challenges of implementing a global sourcing strategy, we chose to focus, for the purposes of this research, on its human aspects as defined by Spekman (1983): human resources capabilities, coordination mechanisms and communication of the strategy. Given that global sourcing is, by definition, a worldwide initiative, we believe that an important variable in the study of the human aspect implementation is the impact of the cultural characteristics of each country where the strategy is being implemented. Therefore, we have compared how the human aspects of global sourcing are implemented (or operationalized) in culturally different subsidiaries of the same multinational company. To integrate the cultural facet into our research, we have adopted Hofstede’s (1984) four dimensions of cultural analysis. Our research is based on two case studies developed in four subsidiaries, one in Colombia and one in Canada for each of two multinationals. A total of 9 interviews with global sourcing procurement personnel were performed (5 for Company A and 4 for B), and internal and public company information was also studied (i.e. position descriptions, websites).

The information collected at the Colombian and Canadian subsidiaries enabled us to describe the process in which the global sourcing strategy was implemented and the cultural adaptations that were thought necessary by the companies in each case. However, implementation differences were found not merely to be the result of national culture but also – and even more so – of the role that each subsidiary plays in the global sourcing process. The more strategic the role of a particular subsidiary, the more intense the subsidiary’s effort for smooth implementation of the human aspect of the strategy. On the other hand, cultural adaptations cannot be neglected, given that significant differences were mainly found in the personnel selection process and the communication of the strategy.

Given the complexities associated with the smooth implementation of the human aspects of global sourcing strategy and the impact of national culture on this process, we recommend to managers to begin by identifying cultural traits of the country where the strategy will be implemented and to plan accordingly. However, special care must be taken not to consider a different business environment, like the one experienced in developing countries, with cultural differences. Whatever the country, the hiring of global sourcing personnel is of main importance, since even when companies are under the impression of having an abundant pool of qualified candidates, as is the case in countries with high unemployment rates, the demands associated with these positions are not necessarily easy to fill. Finally, once the right person is hired, special attention should be given to filling in any gaps in their skills that could have a negative impact on their performance.