Global strategic sourcing involves companies acquiring goods and services from foreign countries to reduce costs. This can be done through partnerships with foreign suppliers or by building branches in foreign countries. However, cultural differences and communication barriers must be considered.
Global strategic sourcing is the practice of companies leaving their own country to acquire goods and services necessary for their business. This can be done by partnering with a foreign supplier or hiring employees and building a branch of a company in a foreign country. In both cases, the main objective of strategic global sourcing is to find costs lower than what local suppliers can afford. Precautions must be taken in this practice to ensure that the cultural specificities of the foreign country do not hinder business.
Due to the ease of communication in the modern world, companies tend to think in terms of a global economy. As a result, many of the most profitable companies have some sort of connection to foreign countries. In many cases, outside help comes in the area of sourcing, which is a term that essentially means that products and services come from a particular location of the company’s choosing. Companies that practice global strategic sourcing can reduce their costs significantly and build important business relationships.
Generally, there are two ways in which a company can practice global strategic sourcing. One way is to develop a relationship with a foreign supplier, who can produce goods and then ship them to the company. The other way is for the company itself to expand its operations into the foreign country, sharing production costs in the process.
In both cases, global strategic sourcing tries to take advantage of lower costs for these goods and services. A company from an established and powerful country often seeks partnerships with suppliers in developing countries. Companies can even build their own production center in these countries, taking advantage of an extensive workforce that can be secured with lower wages. The natural resources that are easily found in a foreign country can make it an excellent target for a company looking for goods that are not as easily or cheaply produced in their own country.
While these cost benefits can be substantial, companies also need to be aware of the potential pitfalls of strategic global sourcing. Sometimes the cultural mores involved with the foreign supplier can have an impact on the way business is done. In some cases, language barriers between the two parties can make communication difficult. Finally, the customs and duty costs involved in shipping goods from one country to another can hurt profit margins.
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