Risks and Benefits of Building Local Supplier Networks: A Case of Chevron

Table of Contents

CHAPTER 01: INTRODUCTION1

1.1 Research Questions1

CHAPTER 02: LITERATURE REVIEW2

2.1 Local content policy as a regulation tool for multinationals' operation6

2.1.1 Requirements of local content policy for foreign companies6

2.1.2 Implication of local content policy for country's economic development7

2.1.3 Benefits and drawback of local content legislation for multinational subsidiaries8

2.1.4 Linkages and spillovers between and multinationals and local economy9

2.2 Factors determining linkages between foreign companies and indigenous suppliers10

2.3 The impact of local content development strategy on domestic firms10

2.4 The influence of foreign affiliate e's presence on host country's development10

2.5 Factors Influencing the Sourcing Strategy of a Multinational Subsidiary11

2.6 The Case of Chevron13

REFERENCES15

CHAPTER 01: INTRODUCTION

1.1 Research Questions

What factors influence the sourcing strategy of a multinational subsidiary? (whether to source locally or keep sourcing from global suppliers)

What are the benefits and drawbacks of contracting local suppliers from the buyer's viewpoint?

What are the main gaps of local suppliers in developing countries?

What are the main impacts of the global company's presence on the economy of the region?

CHAPTER 02: LITERATURE REVIEW

The globalization of businesses is associated with an increased interdependence in markets. This phenomenon creates several new opportunities for businesses (Mathur, 2010). The global strategies of businesses stress on the development of a competitive edge. The global strategies provide businesses with several advantages including flexible networks, enhanced mutual learning, potential strengths, and others (Mendis, 2007, pp. 78).

One of the most common consequences of global competition is the shortened lifecycle of products. This phenomenon does not allow companies to adopt a polycentric approach to conduct business. It is important for businesses to acquire and enhance capabilities that would allow them to gain a substantial competitive edge in the market (Blanco and Razzaque, 2011, pp. 34). In addition, global sourcing has become an important strategic decision for businesses. The businesses gain a competitive advantage when they do implement a strategy that is not implemented by other competitors. The competitive strategy is one that cannot be easily intimated by competitors. The innovation of product, alone, cannot ensure the competitive advantage of businesses (Jovanovic, 2006, pp. 56). It is important for businesses to complement the product innovation process with other capabilities including marketing and manufacturing competencies. These skills are very important for businesses in order to survive in today's competitive market. In the current environment, the legal ways of protecting proprietary technology have become obsolete and ineffective. It is because the innovations in product are easily revere engineered by competitors. The innovations in product can also be improved and invented by competitors without the violation of any technology (Barclay, 2004, pp. 485).

The value of being the owner of a technology has decreased in the recent years. It is because the monopoly of the company over its technology has become transitory (Buckley, 2009). In the highly competitive marketplace, competitors adopt different strategies to differentiate themselves from others. They either try to product low-cost products or outsource the production (Chew and Yeung, 2001, pp. 341).

Without specific sourcing plans, it is not ...