Threat or Opportunity?
Studies in International Investment series
Edited by Karl P. Sauvant
Chapter 4: The Transnationalization of Supply Chain Management: The Experience of Brazilian Industrial Companies
Paulo T.V. Resende and Alvaro Bruno Cyrino INTRODUCTION Corporate decisions to push business deeper into foreign markets have important implications for the modus operandi and the performance of any company. Traditionally, the motivation to internationalize is largely based on economic reasons (for example, business growth, lower costs), with eﬀects for other areas. The logic behind the ambition to become a global company, then, is to increase market share, while concurrently achieving cost reductions through scale economies. The expansion into uncharted territories involves a rethinking of most business functions, including activities related to supply chain management, such as purchasing, logistics, production, sales and distribution. But compared to the expansion in domestic markets, the risks and uncertainties of global markets are much higher, in spite of the potential growth of revenues and proﬁt margins. Given various risks and uncertainties, emerging transnational corporations (TNCs) from developing countries (companies expanding their international presence beyond exports) ﬁrst seek possibilities for gaining market share in their domestic markets before tapping foreign ones. Yet since the 1990s, several Brazilian companies have searched for new opportunities in international markets through outward foreign direct investment (OFDI), facing in the process new challenges to avoid potential failures. One of the most important issues in the context of reducing risks and uncertainties is supply chain management. First, because global markets are not homogenous, the product and business model needs adaptation to diﬀerent conditions. Second, companies have to add capacity, often at breakneck speed and at a global level,...
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