Global Sourcing: Unlocking Growth Potential in Emerging Markets - Essay Sample

Introduction

Many organizations are facing maturing local markets while seeing unlimited growth potential in emerging markets. They are driven by technological advancements that are transforming the economics and of transportation and manufacturing scale. Moreover, the change in public policies is creating more open markets worldwide. As a result, globalization spreads from one industry to another. Consequently, many purchasing companies are being challenged to increase the global sourcing levels to tap into future opportunities and to stave off competitors. Unfortunately, many businesses are ill-suited for the challenge: although global sourcing employs a similar set of activities as local sourcing, there is also greater intricacy. In this regard, most companies need to improve their purchasing skills to pursue worldwide sourcing effectively.

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Question 1

The U.S is no longer the unbeaten leader in product technology in the world. Other countries such as China and Indonesia have developed cutting-edge technologies in several areas including electronic products (Laseter and Leary). Consequently, Asian suppliers are becoming technological leaders in this field. Moreover, gaining access to the most current technology leaves many companies with little or no choice except to pursue global sourcing. Businesses in the United States that are stuck with local suppliers producing low-quality products are forced to source offshore components with the hope of improving the quality of end-products. As such, the combination of high quality and lower overall costs has been a significant contributor to the United States companies purchasing internationally.

Question 2

China and India are undeniably showing signs of significant growth and are becoming global outsourcing hotspots. On the other hand, regions like Eastern Europe are also demonstrating the capability of becoming an outsourcing hub (Pierce). These countries have invested considerably and leveraged increased demand for low-cost services. As such, the global financial crisis has forced numerous companies to place greater emphasis on cost optimization. Nonetheless, several studies have demonstrated that there can be disadvantages and possible risks associated with sourcing form these low-cost countries. For instance, in India, labor costs might be considerably low, but telecommunications cost can be much higher than in the United States (CBX). Poor infrastructure Is also highly ranked as a problem. This demonstrates that there is a significant trade-off between the costs and benefits that come with outsourcing from low-cost countries. Nearshore outsourcing is, therefore, more economical. Be that it may, sourcing experts still heavily favor the inexpensive plan and continue to do so for the predictable future.

Question 3

Reshoring involves moving a company's operations from overseas to the United States. Nearshoring, on the other hand, occurs when a company brings products closer to the United States. As the global market continues to grow, more manufacturers are looking for ways to save money. For some, operating in foreign countries is beneficial to international clients, nonetheless, having operations in the U.S is also advantageous to the local customers (Cerasis). The net has given the average consumer more access to product information. As a result, more firms are offering considerably lower shipping rates, and products are competitively priced. In this regard, the primary benefits of reshoring and nearshoring is consumer perception, cost reduction, better customer service, low shipping rates, local expertise on the product and low fulfillment among other factors. Also, reshoring helps to drive millennials to manufacture as businesses look to bridge the skills gap.

Question 4

Global sourcing is part of purchasing materials and products from other countries for availing exclusive benefits. This is because different countries have different prices for similar products and services. The following are therefore some of the most significant reasons for pursuing global sourcing:

Accessibility of raw materials- If raw materials are available in other countries, it is advisable to depend on global sourcing for the supply (Westford University College).

Competitive wages- certain materials that are affordable in other countries can be outsourced for economic gain. However, quality is paramount while choosing global supplies of labor. The latest technology should also be used for the manufacturing of goods in other countries.

Service reciprocation-global outsourcing is done on mutually agreeable terms. If the products manufactured in one country are being sold in another which has the required raw materials, then importation and exportation can be done in that country.

Question 5

Today's business climate marked by the ever-increasing global competition has significantly influenced the growth in international outsourcing. As such, global outsourcing emerged as an approach to neutralize the threat of foreign competition. However, it today's business environment, it is viewed as a strategy to create competitive advantage (Laura and Stanley). While local outsourcing typically allows for quicker logistics and shorter market time, international sourcing is generally considered economical. Cost-saving is the main advantage of worldwide sourcing. Many foreign suppliers offer their services at competitive prices, particularly in low-cost areas. The cost of manufacturing is generally, lower and companies can often buy products at low unit prices. For a company with a tight budget, this is a great way to maximize their bottom line. Besides cheaper unit price, other advantages of establishing an international purchasing office include: availability of world-class technology, access to specialized knowledge and information on products, proximity of raw materials may be unavailable locally, high manufacturing capabilities, high-quality goods compared to local products and there is a wide variety of suppliers you can choose from.

Question 6

Today, outsourcing has become a significant aspect of manufacturing. It helps businesses to contract third party agents and manage work more effectively. As such, a sourcing agent can be beneficial to a firm in the following ways:

Local Representation-Sourcing agents are the local representatives of your company in areas where you want to source products. They help the business in getting the best deals thus maintaining a working relationship based on trust (Lal). The agent also keeps the agenda of the company forefront and strives to achieve the interests of the business as well.

Better security-if the business is not located in a secure area; there are high chances of deceiving clients who masquerade as genuine customers. In such a scenario, a third party agent proves valuable as they are aware of trustworthy suppliers.

Effective communication-one of the most significant challenges of doing business in a foreign land is language. Sourcing agents, therefore, help to eliminate any disruption that may occur during business transactions.

Reduced workload-A sourcing agent takes charge of business tasks such as providing quotations and price negotiations on behalf of the company. As a result, this helps to minimize the load of responsibilities faced thereby saving time and effort.

Reduced expenses on logistics-By taking up tasks on behalf of the company, the sourcing agent help the business avoid unnecessary costs that may arise during traveling and accommodation. In case of a sourcing trip, the thirty-part external agents help to pick the best time to visit when traveling and accommodation costs are affordable.

Question 7

Purchasing is quite a complex organizational process with objectives stretching far beyond the common belief that its primary role is to obtain products in response to internal needs. No one should jump into something without proper extensive research. Developing a strategic sourcing plan is therefore driven by the ability to recognized qualified and competent suppliers. As such, the internet provides an avenue for verified sources of information. Nonetheless, purchasers should not disregard other sources of information that are available to ensure that the supplier pool consists of a wide range of options whether offshore or nearshore. In this capacity, a list of resources a buyer can use to identify a robust list of potential suppliers includes supplier websites, information files, supplier registers and directories, trade articles, phone directories, advertisements, and verified professional organizations. This list helps the company to evaluate each supplier individually. Evaluation is a vital process since there is a direct relationship between supplier performance and the brand image.

Conclusion

Global sourcing aims to take advantage of global efficiencies for product delivery. In reality, it is a centralized procurement strategy coordinating the world's most cost-effective manufacturing and production inputs. However, there are many challenges to overcome in worldwide sourcing. These challenges either add cost or increase risks. As such, many businesses venturing into global sourcing find the benefits are less than expected. Moreover, ineffective worldwide sourcing can have undesirable effects on global expansion. The inability to create a local supply base can lead to business failure in the new market. Nonetheless, companies that are willing to invest and build skills in support of global sourcing can be successful in the long run. Indeed, it is not easy, but it can be done.

Works Cited

CBX. Retail Challenges of Low-Cost Sourcing Countries. 10 July 2018. https://www.cbxsoftware.com/retail-challenges-of-low-cost-sourcing-countries/.

Cerasis. Nearshoring & Reshoring Will Continue to Increase Thanks to these Main Benefits. 6 April 2019. https://cerasis.com/nearshoring-and-reshoring/.

Lal, Shrinivas. Why is it a Smart Idea to Hire a Sourcing Agent? 18 February 2017. https://medium.com/@classikinternational2017/why-it-is-a-smart-idea-to-hire-a-sourcing-agent-cabaeb3bb2c4.

Laseter, Tim, and Tonya Leary. Critical Purchasing Skill. n.d. https://www.strategy-business.com/article/17876?gko=bf4ab.

Laura, Birou and Fawcett Stanley. "International Purchasing: Benefits, Requirements, and Challenges." International Journal of Purchasing and Materials Management (n.d.). Document.

Pierce, Freddie. Outsourcing hubs: China, India, Eastern Europe. 30 April 2010. https://www.supplychaindigital.com/scm/outsourcing-hubs-china-india-eastern-europe.

Westford University College. Major Reasons for doing Global Sourcing for International Business. 20 January 2016. https://mywestford.com/blog/major-reasons-for-doing-global-sourcing-for-international-business/.