Opportunism or strategic opportunity seeking? Three approaches to emerging country sourcing
Journal article, 2013
The current interest in low-cost or emerging country sourcing (ECS) has inspired a multitude of empirical studies. These studies are based on varying methodological approaches and have come to somewhat different conclusions regarding the motivations for and outcomes of ECS. This paper argues that the overall approach to the new markets, especially the strategic network context surrounding each buyer-supplier relationship in the ECS setting, impacts on the prerequisites for success. The aim of the paper is to identify and discuss approaches to ECS. It begins with a review of recent empirical studies, scrutinising research interests and the approaches applied by the companies studied. It suggests and illustrates three broad categories of approaches: (1) the transactional approach focusing on individual sourcing in the emerging country, (2) the supply base approach focusing on establishing a set of supplier relationships in the emerging country, and (3) the network positioning approach in which both supplier and customer relationships are developed in the emerging country. The paper also discusses the three approaches as stages in an internationalisation process. The paper concludes that of the three strategic approaches the viability of two - the transactional approach and the supply base approach - can be questioned on several grounds, but that when seen as a process directed towards developing a network position in a new (emerging) market all three approaches make sense as different stages in a process moving towards achieving that goal. An explanation for the process of increasing commitment in emerging markets, relying on learning in interaction and on relational investments beginning with suppliers and continuing with customers, is also discussed.
Low-cost country sourcing