Advances in Enterprise Information Systems II Møller & Chaudhry (eds)
© 2012 Taylor & Francis Group, London, ISBN 978-0-415-63131-0
Surviving in the global producer-driven commodity chain
Dan R. Christensen, Kasper H. Hansen, J. Ulrik Paludan, Steen K. Paulsen,
Simon S. Peters & Morten M. Thomsen
Aalborg University, Global Business Engineering, Aalborg, Denmark
ABSTRACT:
Purpose – The purpose of this paper is to establish how suppliers can maintain their competitive
position in the global environment as well as the producer-driven commodity chain.
Findings Commodity suppliers/wholesalers face increased challenges due to the rising trend
of offshoring, as it decreases their customer base and their profit potential. These suppliers will
therefore be forced to expand their current market, or attempt to enter foreign markets.
Implications The research opens up for a new area of investigation, with a focus on the
implications of offshoring on local suppliers, and the identification of a possible shift in the market
of local wholesalers across the world. This may affect how commodity suppliers view their industry
and survival capabilities.
Originality/value The article provides three directions, which can form the foundation for
a supplier’s future survival in the commodity chain, when their customers engage in offshoring
activities.
Keywords: Commodity chain, Producer-driven, Globalization, Offshoring, and Strategy
1 INTRODUCTION
Wholesalers have played a vital role in the development of globalization. Through the nineteenth
century they have provided important distribution and export services, which have contributed to
the current open global market (Rosenblom & Andras, 2008). Wholesaling includes all activities
involved in selling goods and services to those buying for resale or business use. Wholesalers are
those firms engaged primarily in wholesaling activities (Kotler & Armstrong, 2008). However, as
communication channels and transportation have become more efficient, due to new technology,
wholesaling is a declining business and wholesalers have been forced to change their focus to
providing value-adding services, along with the ability to lower the amount of suppliers for their
customers (Quinn & Sparks, 2007). The term “the world is shrinking” (Ghemawat, 2001) has been
one of the outcomes of the increasing globalization, in other words the world is smaller than it
was a few decades ago (Friedman, 2005). Due to the fact that the distance is becoming less of
an obstacle, advantages gained from outsourcing and offshoring (sourcing) activities have become
more significant, and an increasing amount of companies is therefore exploiting these possibilities
(Couto et al., 2006, Nielsen & Plovsing, 2008). According to Statistics Denmark 19% of all Danish
companies with more than 50 employees have sourced, and 6% is planning to source before 2009
(Nielsen & Plovsing, 2008). It can therefore be anticipated that Danish Wholesalers and suppliers
[Suppliers] might experience a loss of sales due to their customers’ sourcing activities.
According to McKinsey Global Institute [MGI] the primary locations for sourcing is low cost
countries [LCC], which are low-wage developing countries like India and China (Agrawal & Farrell,
2003a). Low wages are one of the primary motivational factors for moving previously internal
activitiesto LCC, whileother factorsare strategic decisions towardsmarket position and competitive
advantage, along with the possibility of technological advancement (McIvor, 2005). According to
McIvor (2005), in order to achieve competitive advantagethrough sourcing activities, it is necessary
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