Supplier Management in Chinese State-owned enterprises : A case study of bounded relationships from the perspective of buyer

Abstract:

Motivation: Chinese stated-owned enterprises (SOEs) play an increasingly role in Chinese economy although, its management for its suppliers are yet not in an effective manner in the situation mentioned in this case. Even though the Kraljic (1983) matrix is commonly used as a guideline for how to manage suppliers, there is a lack of studies based on Kraljic that have analysed the situation where the buyer are bound to and unable to switch its suppliers.

Purposes: the purpose of this paper is to first to analyse the situation in the case by applying the Kraljic matrix, and second to explore the major challenges in terms of cost, communication and supplier selection in dealing with the supplier relationships. Specifically the analysis concern how factors like political risk, “Guanxi” and CSR restrict the way the case company manage its suppliers. In addition, appropriate supplier management strategies are formulated based on the findings.

Research methods: in order to achieve the purposes of this paper, first an extensive literature review related to this paper was conducted. Afterwards, a case study of a subsidiary of Sinopec was carried out. The discussion concerns different types of the suppliers who are categorized according to the Kraljic matrix. Interviews with these two managers are major source of data collection.

Findings: as indicated from the purposethe findings from the case confirm that Kraljic matrix is inadequate to capture the case of Chinese SOEs in this paper. The subsidiary does not either select or evaluate suppliers based on cost efficiency. Further, it is shown that political risk “Guanxi” and CSR influence the way the way the firms manage its suppliers.

Implications: training design including all levels of managers and exploiting the use of “Guanxi” is two of appropriate strategies recommended for improvements in current situation