Supply network development: A case of developing a supply base in China

Paper in proceeding, 2012

In the recent years, cost reduction has made going abroad and sourcing from low-cost countries so popular among the Western companies (Lewin & Peeters, 2006), that has turned it into a trend or a business recipe (Araujo & Gadde, 2009). At the same time as every year more and more firms are establishing and expanding their sourcing, marketing, R&D, manufacturing and distribution activities in low-cost countries, many face difficulties that result in failing their offshore activities (Kinkel & Maloca, 2009). In this study, the development of a supply network in China by a Swedish firm is studied in the form of a single in-depth case study. The development of this supply network is studied by investigating how different economies emerge when developing supply networks. The analysis shows that economies of scale, scope, integration and innovation not only coexist during the development of the supply network, but also pursuing one leads to opportunities for exploiting the others. Besides, it is concluded form this study that the view of “low-cost country sourcing” needs to be replaced by a “supply network development” view, in order to open up for a wider scope of economies than only cheaper product acquisition.