Competitive Advantages of Mnes and Global Supply Chain Management

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On the basis of predecessors’ theories, as well as taking all the advantages and disadvantages into account, Dunning (2002) came up with an eclectic framework named OLI paradigm to analyze the determinants of FDI and the competitive advantages among MNEs:

Ownership (O) specific advantages: “MNEs will own unique advantages which gives the firm a competitive advantage over the firms of other countries in which it invests ,and which may or may not be embodied in the form of an asset” (Grimwade, 2000,p.128).

Location (L) specific advantages: The more the fixed endowments such as natural or created resources in a foreign location instead of domestic location, the more firms are supposed to explore O specific advantages (Dunning, 2002).

Internalisation (I) advantages: Firms are supposed to deploy and manage their own competencies with enthusiasm, providing the location attractions to diverse regions(Dunning, 2002).

Dunning’s OLI paradigm incorporates a variety of factors that contributed to the determinants of FDI and the growth of MNEs. It is a framework that makes reasons of FDI flows clear by illustrating a full range of factors which make up FDI decisions.

To review these economic theories, they contribute to the explanation of FDI and improve themselves in a developing way. Grimwade (2000) thought that Hymer (1960) and Kindleberger (1969) gave us a comparatively immobile theory to explain the expansion of MNEs, however a dynamic explanation will be better to a certain degree. Besides, Caves (1996) explained FDI decision, but location element was not been considered into his theory (Grimwade, 2000). Although Buckley and Casson (2009) believed their internalisation theory can explain all the reasons of FDI, Grimwade (2000) still regarded this theory as an explanation of vertical FDI, and items which are affected in this process are most unfinished items instead of finished items. What’s more, Verbeke, Dunning and Lundan (2008) reviewed that general elements of MNEs were not included in OLI paradigm, and it is necessary to combine these factors. Dunning’s theory may be more convinced if he had added some key concepts with ownership, location and Internalisation in his theory (Grimwade, 2000).

Novartis International AG

Novartis is a Swiss multinational pharmaceutical enterprise located in over 150 countries, spreading its production and management around the world. In 2013, it ranked number one in sales that is 57.9 billion US$ among the global industries (MerketLine,2014). Novartis distributes its market shares in US, Japan, German, France and Switzerland, therefore those different parts provide different supports to its development and contribute to the sustaining profits. The diversity of Novartis business and product portfolio enable it to seize opportunities in the pharmaceutical industry, as well as spread its risks and expose to macroeconomic effects (MerketLine,2014).

General Electric Company (GE)

General Electric Company is a world-renowned MNE, raking number three in the global enterprises (MerketLine,2013). It operates in nearly 100 countries in the world and provides a variety of products and services such as power generation equipments, engines and financial services. GE is one of the largest and diversified infrastructures and financial services enterprises in the world, wide product portfolio with stable revenue captures cross selling opportunists and spreads the market risks, which in turn creates new market (MerketLine,2013).

Significance of global supply chain management and examples

Cooper, Ellram, Gardner, and Hanks (1997) viewed SCM as lying between fully-vertically-integrated systems and each channel member operates completely independently. The key concept is that the channel is viewed as an integrated whole, everyone in the channel directly or indirectly influences other channel members, as well as the ultimate, overall channel performance (Cooper and Ellram, 1997). Besides, SCM improves the competitiveness of a channel and benefits all the members such as buyers and sellers in that channel (Cooper, Ellram and Gardner et al., 1997).

Global supply chain management at Digital Equipment Corporation (DEC)

Digital Equipment Corporation, an old computer company in the United States, serving as the third-largest vertically integrated computer company in the world, DEC owned one quarter-million customer sites, with more than half of its $14 billion revenues coming from 81 countries outside the United States (Arntzen, Brown, Harrison and Trafton, 1995).DEC, like all the worldwide companies, requires supply chain management to promote its production distribution and construct the global network. SCM is used at a Digital by the sourcing and capacity planning (SCP) group within Manufacturing and Logistics, SCP performs supply chain analyses including diverse product business units (Arntzen, Brown and Harrison et al., 1995). DEC adopted global supply chain model to resolve sourcing problems and to determine which plants and suppliers to employ (Arntzen, Brown and Harrison et al., 1995).By taking advantage of supply chain management, Digital built its own unique operation model which minimize the production cost and cycle time, as well as choose the optimal suppliers to flexible circulation chain.

Supply chain management six sigma at the Samsung Group

As South Korea’s largest conglomerate, the Samsung Group establishes about 85 subordinate companies in nearly 70 countries and regions, involving electron, finance, machinery, chemistry and other fields (Yang, Choi, Park, Suh and Chae, 2007). It owns a vast complex supply chain around the world, as well as manipulates the flexible global supply chain management to improve its production and physical distribution. Most notably, Yang et al. (2007) introduced Samsung Electronics Company (SEC) was one of only two manufacturing companies worldwide to earn profits over $10bn in 2004. At SEC, advanced planning and scheduling (APS) systems possess significant influence on global resources controlling and management (Yang et al. 2007). Particularly, Samsung Group’s supply chain management combines the six sigma. There are two stages in carrying out SCM six sigma. According to Yang et al. (2007), first, educating members to let them understand the whole supply chain process and ways to do it; second, using DMAEV (define, measure, analyze, enable, verify) with considerable data and process analysis. Just like what Yang et al. (2007,p.9) commented in their article, “Samsung SCM six sigma is an advance technology