Today for large multinational corporations (MNC) to build or retain their competitive advantage requires effective methods in managing the global supply chain in order to assess their raw resources, inventory supplies and factory productivity. MNC look to global sourcing for several reasons including: scarcity or high cost of local raw materials, low cost of labor in developing countries, and to increase market share into new geographical areas. Effectively managing the global supply chain is quite literally the lifeblood of an MNC that produces goods to be sold around the world.
Building an effective global supply chain involves integrating and coordinating common materials, processes, designs, technologies and suppliers across worldwide buying, design and operating locations (Trent, 2005). Managing global supply chain poses many challenges which will be examined including cultural differences, language, regional and governmental laws and regulations, and design and integration of global information infrastructure (GII). Additionally, risk assessment of possible disruptions in the supply chain will also be reviewed.
Dealing with Differences in Culture and Language
Every large MNC has within itself a defined culture, which was developed by top-level leadership (Schein, 1985). It is the responsibility of top level leadership to manage and at times modify cultural values within the organization to better adapt to changing environment, for instance moving into a different geographical area with differing cultural values (Schein, 1985). Leadership must effectively manage both language and culture in order to maintain efficient flow of raw materials, assembly, and product shipments throughout the supply chain. Managing issues associated with cross-cultural differences are done first and foremost through awareness and understanding. When a MNC looks to expand into a new geographical area, to expand their global supply chain, special care must be taken to handle multicultural issues in sensitive and synergistic approaches (Phillips & Sackmann, 2002).
There are several theories on how to view and understand the differences in cultures. One theory postulated by Schein (1985) defines culture in three basic levels: Basic assumptions where core culture represents the beliefs of people; Values which are the expression of important elements within a cultural group; Artifacts and creations which are the most visible artifacts of culture which include art, technology, and other visible and audible patterns (Schein, 1985).
Another popular theory, postulated by Hofstede (1994), draws on national culture. Hofstede’s theory defines culture along four main dimensions of power distance, uncertainty avoidance, individualism-collectivism, and masculinity-femininity. Power distance is the level of inequality among people within a country that are considered normal. For example, in America where the culture is predominantly centered on equality...