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15 Cards in this Set

  • Front
  • Back
What is Global Sourcing Strategy
*global competition suggests a drastically shortened life cycle for most products, and it no longer permits companies a polycentric, cmountry-by-country approach to international business
*an increasing number of countries are competing head-on for global leadership
*in today's competitive world, technology diffuses quicly
*established sourcing plans, distribution and service networks --> necessary to exploit both emerging technology and potential markets around the world simultaneously
*global sourcing strategy reures a close coordination among R&D, manufacturing and marketing activities across national borders
Extent and Complexity of Global Sourcing Strategy
*US MNCs-the most experienced in the industrialized world.
*Intra-firm trade
Intra-firm trade
*used for the extent and complexity of global sourcing strategy
*the primary factor leading to the total volume of international trade among the Triad region.
Trends in Global Sourcing Strategy
1. The decline of exchange rate determinism of sourcing-companies building relationshps with international suppliers. Price is not a key driver anymore.
2. New competitive enviroment caused by ecess worldwide capacity
3. innovations in and restructuring of international trade infrastructure
4. enchanced role of purchasing managers
5. trend toward global manufacturing
Value Chain and Functional Interfaces
*The desing of global sourcing strategy is based on the interplay between a company's competitive advantages and the comparative advantages of various countries.
*can be divided into 2 major activites: primary and support activities
Competitive Advantage
Part of the value chain and functional interfaces
*the most important part
*the what?
*influences the decision regarding what activities and technologies a company should concentrate its investment and managerial resources in, relative to its competitors in the industry.
Comparative Advantage
Part of the Value Chain and Functional Interfaces
*the Where?
*affects the company's decision on where to source and market, based on the lower cost of labor and other resources in one country relative to another.
Value Chain Concept
*offers a general framework for understanding what it take sot manage the interrelated value-adding activities of a company on a global basis.
Primary Activities
Part of the Value Chain and Functional Interfaces
*consists of inbound logistics, manufacturing operations, outbound logistics, sales and after-sales service.
Support Activities
Part of the Value Chain and Functional Interfaces
*consists of human resources management, technology development and other activites that help promote primary activities
*secondary, not as important, but necessary
The 5 continuous and interactive steps to develope a global sourcing strategy
1. Identify the separable links (R%D, manufacturing and marketing) in the company's value chain.
2. In the context of those links, determine the location of the company's competitive advantages (considering both economies of scale and scope)
3. Acertain the level of transaction costs between the links in the value chain and select the lowest cost mode.
4. determne the comparative advantage of countries (including the home country) relative to each link in the value chain and to the relevant transaction costs
5. develop adequate flexibility in corporate decision making and organizational design so as to permit the company to respond to changes in both its comparative advantages and the comparative advantages of other countries.
Procurement: Types of Sourcing Strategy
*includes a number of basic choices companies make in deciding how to serve foreign markets.
*One relates to the use of imports, assembly or production within the country to serve a foreign market
*One involves the use of internal or external supplies of components or finished goods.
*Intra-firm Sourcing
Intrafirm Sourcing
a type of sourcing strategy
*the parents or their foreign subsidiaries
*domestic-in-house sourcing-produce in house by producing them domestically
*offshore subsidiary sourcing-procures major components from its foreign subsidiary
a type of sourcing strategy
*contract manufacturing
*domesting sourcing/purchase arrangement-buys major components from independent suppliers at home
*offshore sourcing-buys major components from independent suppliers overseas.
*hoolow corporations-companies adopting a "designer role" in global competition)
Long-term consequences of global sourcing
*requires close coordination of R&D, manufacturing and marketing activities, among others, on a global basis.
-ability and willingness of companies to integrate and streamline operations worldwide
*Many MNCs with plants in various parts of the world are exploiting not only their own competitive advantages but also the locational advantages.