Table of Contents
List of Abbreviations i
List of Figures and Tables ii
1 Introduction 1
1.1 Problem Formulation and Objectives 1
1.2 Course of the Investigation 2
2 Characteristics of Sourcing 3
2.1 The Global Sourcing Theory 3
2.2 The Sourcing Process 4
3 Emerging Markets - Risks and Opportunities of Global Sourcing 7
4 Case Study in Global Sourcing – The Jungheinrich AG 11
Concluding Remarks and Outlook 13
Reference List 15
List of Appendixes 19
Appendix 20
Honourable Declaration 22
1 Introduction
1.1 Problem Formulation and Objectives
Global sourcing or sourcing in emerging markets per se is becoming more and more influential, and is a crucial factor of success in many companies. Globalisation is certainly one of the most outstanding phenomena in our today’s world.
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Especially German companies are facing a multitude of obstacles in their domestic market: High salaries and non-wage labour costs, market saturation and elevated production costs, associated with rising product prices, as well as increasing market dynamism and competi-tiveness forcing the companies to constantly adapt to those changes.
Many companies have thus seen an opportunity in global sourcing and moved to emerging market economies (EMEs) in the search for reducing their costs (Heakal, 2003).
The foremost reason why those companies move to aspiring markets like China, India, South-East Asia, Eastern Europe or Latin America are the lower wholesale prices in those countries (Kalkowsky, 2006). However, most firms have a different approach to the sourc-ing process and consequently varying success amongst them.
This study investigates the strategic challenges of German retail companies in conducting and balancing their sourcing activities in order to respond to the particularities and chal-lenges of specific emerging markets. At the same time an analysis on sourcing process op-erations and structures, together with risks and opportunities of different markets is carried out.
Table of Contents
1 Introduction
1.1 Problem Formulation and Objectives
1.2 Course of the Investigation
2 Characteristics of Sourcing
2.1 The Global Sourcing Theory
2.2 The Sourcing Process
3 Emerging Markets - Risks and Opportunities of Global Sourcing
4 Case Study in Global Sourcing – The Jungheinrich AG
Concluding Remarks and Outlook
Research Objectives and Core Themes
This seminar paper examines the strategic challenges faced by German companies when engaging in global sourcing within emerging market economies. The primary objective is to analyze the sourcing process, identify specific operational risks and opportunities in these markets, and explore how firms can balance these factors to maintain competitiveness.
- Strategic importance and theoretical framework of global sourcing.
- Step-by-step breakdown of the international sourcing process.
- Risk assessment and opportunities associated with emerging market economies (EMEs).
- Practical case study of Jungheinrich AG’s global sourcing approach.
- Key success factors for managing international supplier relationships.
Excerpt from the Book
2.1 The Global Sourcing Theory
Global sourcing in general cannot be clearly defined, but one can say that it is an alignment of procurement strategy aimed at exploiting global efficiencies in production or even a systematic, global market-oriented and border-crossing procurement activity (Kerkhoff, 2005, p. 52). According to Zeng (2003), the strategy that “companies develop their products in Europe and the USA, manufacture in Asia and Latin America, and sell worldwide . . . is known as global sourcing and is defined by Monczka and Trent (1991) as the integration and coordination of procurement requirements across worldwide business units, looking at common items, processes, technologies and suppliers.” (p. 367)
Hence, global sourcing is more than a simple relocation and exploitation process of cross-geographic arbitrages. The right knowledge of foreign markets and suppliers makes it possible for companies, which operate in various countries and engage in Foreign Direct Investment (FDI), so-called multi-national enterprises (MNEs) (Waters, 2001, p. 46) or multi-national companies (MNCs), to foresee trends and profit from a previously identified strategy and a potential choice of suppliers on a global scale. This option can guarantee the company the choice of the most desirable and cost-efficient suppliers in a country with a competitive advantage in specific technologies and manufacturing practices. In the long term, cost reductions can be achieved through the resulting economies of scale as global sourcing allows easier purchasing control and coordination (e.g. instead of several batch requirements from different suppliers, only one single purchase batch is sufficient) (Lysons & Farrington, 2006, p. 168), particularly via more effective long-term planning, technical standardisation and exploitation of suppliers and new components, respectively. (Howells & Wood, 1993, pp. 142-155) Altogether, the MNC has to develop a global sourcing strategy and align it with its utilisation of internal resources (McIvor, 2000, p. 27) in order to create a solid foundation and make it a profit driver.
Summary of Chapters
1 Introduction: This chapter introduces the growing influence of global sourcing due to globalization and outlines the objectives and methodology of the research.
2 Characteristics of Sourcing: This section defines the theoretical foundations of global sourcing and details the typical seven-step process used by companies for procurement.
3 Emerging Markets - Risks and Opportunities of Global Sourcing: This chapter evaluates the specific risks—such as legal, political, and cultural challenges—and the competitive opportunities inherent in sourcing from emerging economies.
4 Case Study in Global Sourcing – The Jungheinrich AG: This section applies the previously discussed theories to the real-world example of Jungheinrich AG, demonstrating how a global company optimizes its supply chain through targeted strategies.
Concluding Remarks and Outlook: This final chapter synthesizes the findings, emphasizing the need for consistent strategies and proper risk management to leverage emerging markets successfully.
Key Terms
Global Sourcing, Emerging Markets, Procurement Strategy, Supply Chain Management, Foreign Direct Investment, Cost Reduction, Supplier Selection, Risk Management, Jungheinrich AG, Logistics, Competitive Advantage, Emerging Market Economies, International Trade, IT Procurement, Value Chain.
Frequently Asked Questions
What is the core focus of this paper?
The paper focuses on the strategic implementation of global sourcing, specifically examining how German companies navigate the complexities and challenges of conducting procurement in emerging market economies.
What are the primary themes discussed?
The research centers on sourcing theory, the standardized seven-step sourcing process, risk-opportunity profiles of emerging markets, and practical supply chain management strategies.
What is the main objective of the study?
The objective is to understand how firms can improve their competitiveness through global sourcing while managing risks like logistics, legal barriers, and cultural differences.
Which research methodology is applied?
The paper utilizes a literature-based analysis of sourcing theories and supplements this with a practical case study analysis of Jungheinrich AG.
What is covered in the main body of the text?
The main body covers the definition and theory of global sourcing, the procedural steps of procurement, an analysis of risks in emerging countries, and an in-depth look at a specific corporate application.
Which keywords define this work?
Key terms include Global Sourcing, Emerging Markets, Supply Chain Management, Procurement Strategy, and Risk Management.
How does Jungheinrich AG manage its global sourcing?
Jungheinrich AG employs a centralized supply management strategy, utilizing IT systems for e-purchasing and maintaining close relationships with qualified international subcontractors.
Why is the choice of supplier critical in emerging markets?
Choosing the right supplier is essential for ensuring material quality, technical innovativeness, and the security of supply, all of which are vital for maintaining a competitive edge.
What role does the Fraunhofer IPT study play?
The study provides empirical evidence on why European companies relocate procurement activities, identifying labor cost reduction as a primary driver, and highlighting common pitfalls in international sourcing.
- Quote paper
- Robert Stolt (Author), 2007, Sourcing in emerging markets, Munich, GRIN Verlag, https://www.grin.com/document/83786
