Foreign sourcing behavior of New Zealand retail SMEs

Abstract

Foreign sourcing is a tool used by many organisations to improve competitive advantage. This study builds upon foreign sourcing theory by examining the foreign sourcing behaviour of small to medium retail enterprises (SMEs). To provide a holistic understanding of foreign sourcing behaviour, six constructs were investigated; these include motivations, benefits, barriers, supply chain management, purchasing strategy and mode selection. This study also identifies significant relationships between constructs' previously not identified in the literature.

This research enquiry uses an inductive theory-building approach. This approach overcomes the confines of current theory which include; the limited context within which past studies have been conducted (predominately multinational manufacturers), the treatment of constructs in isolation, and, the dominant use of deductive theory-building research approaches. Seventeen retailers participated in this study across three retail sectors, jewellery, gift/homeware and delicatessens. Information was gathered Using a combination of semi-structured interviews and shop observations.

Findings indicate that the foreign sourcing motivations and benefits of retail SMEs are largely consistent with those of manufacturing multinational enterprises (MNEs). Foreign sourcing barriers, however, differ based on both organisational size and industry. Supply chain management, purchasing strategy and made selection are also dependent on organisational size and industry, as well as the individual retailer's desired level of commitment and risk. The most notable relationship between the six foreign sourcing constructs is the influence that the choice of sourcing mode has on both foreign sourcing benefits and barriers. Furthermore, testament to the inductive research design, five factors also emerged that had previously not been identified in the literature. These include the motivator of gap in the market, the two benefits of point of difference and supplier knowledge, and the barriers of lack of information and education of customers.

The findings of this study make a contribution to foreign sourcing theory. They also provide guidance for retail SMEs when selecting their foreign sourcing mode, and suggest innovation as a means for New Zealand manufacturers to improve their competitiveness against foreign imports.