STRATEGIC FLEXIBILITY IN GLOBAL SUPPLY CHAINS – COMPETITIVE ADVANTAGE BY AUTONOMOUS COOPERATION

Global supply chains (GSCs) are confronted with the phenomenon of hypercompetition. For this reason there seems to be an increasing necessity for GSCs to build up competitive advantages for the maintenance of their existence. Strategic flexibility is assumed to have positive effects on generating required competitive advantages by replicating and reconfiguring competences to manage GSCs. Autonomous cooperation (AC) as a management approach might contribute to achieving flexibility in GSCs. Therefore, this paper intends to illuminate possible contributions of AC to creating flexibility and in turn to generating competitive advantages in GSCs. NEED OF COMPETITIVE ADVANTAGES IN GSCS One phenomenon in the current business world is hypercompetition (D’Aveni, 1995, p.45; Thomas, 1996, p.221). Hypercompetition describes a condition under which businesses move fast to compete in the fields of price-quality positioning, creation of knew knowledge, protection as well as invasion of established markets and formation of alliances (D’Aveni, 1995, p.46). Under hypercompetition, established rules are repeatedly challenged, industry boundaries become increasingly ambiguous and customer loyalty is difficult to sustain. In other words, fast changes (e.g. development in technology) in the environment force businesses to move rapidly and intensely in order to build new advantages while undermining the advantages of their competitors (D’Aveni, 1994, pp.127). Embodied in specific capabilities or resources, competitive advantages are necessary for businesses to achieve relatively higher performance than their competitors (Wiggins and Ruefli, 2002, p.84). Its necessity can be explained from a social system theoretical view. An organization has to constantly adapt to changing and diverse environmental conditions in order to get necessary resources (e.g. information) and opportunities (e.g. consumer demands) to exist in the long run (Hicks and Gullett, 1975, pp.387). But the supply of the environment is limited (Sanchez and Heene, 1997, p.23), which is reflected in aspects like constrained natural resources and consumer purchasing power. Better performance than its competitors through competitive advantages would help an organization to secure needed resources and opportunities by better satisfying the requirements of its environment. However, under hypercompetition featured by fast moves among competitors, sustainable competitive advantages are hardly achievable (Williams, 1992, p.29). Instead, businesses continually try developing a series of temporary advantages. Reference: Hülsmann, M.; Grapp, J.; Li, Y.: Strategic Flexibility in Global Supply Chains – Competitive Advantage by Autonomous Cooperation. In: Pawar, K.S. et al. (eds.): Conference Proceedings of 11th International Symposium on Logistics (11th ISL). Loughborough, United Kingdom, 2006, pp. 494-502 Under competitive pressure, individual businesses often seek cooperation with members of their respective supply chains (SCs), wishing to leverage the resources of each other (Geoffrion and Powers, 1995, p.109). As involved organizations have the common goal of providing value-added products or services, a SC can be regarded as one single organization which competes with other SCs (Lambert and Cooper, 2000, p.65). Consequently, every SC strives for competitive advantages over other SCs. The removal of trade barriers and technological progresses in transport as well as telecommunication allow many SCs to expand out of their national borders, to enter new markets and to locate business processes in different countries (Schary and Skjøtt-Larsen, 2001, p.346). Under such conditions, activities, processes and structures of a number of organizations are interwoven worldwide, where the management has to deal with multiple interrelations between actors situated in distinctive economic, political and social environments. Thus, SCs with global characteristics could be defined as GSCs. However, satisfactory performance of GSCs is often impeded by increasing complexity and dynamics resulting from hypercompetition. From a social system theoretical perspective, complexity is based on the number and variety of a system’s elements as well as of relations between elements (Patzak, 1982, p.23). Due to hypercompetition, a SC may be forced to include new relationships with international qualified partners and to explore international market segments. Compared with domestic SCs, additional factors like various demands of worldwide customers, different cultures, distinctive local institutions as well as interactions between them and the GSC add more elements and relations. Dynamics describe the variation of a system’s state over time (Coyle, 1977, p.1). For a GSC, due to the multiple systemic linkages as well as temporal changes, dynamics of the surrounding systems (e.g. rapid changes in competitors’ strategies, vibrating exchange rates, changing local policies) have an impact on dynamics in logistics processes (Hülsmann, 2003, p.193). The increasing complexity and dynamics imply an immense exchange of data in a short time period between members of the GSC and therefore the risk of an information overload for decision-making as well as the risk of untimely response to changing demands of the environment. This can lead to a weak performance of the GSC. In such situations, competitive advantages are needed for GSCs to deal with complexity and dynamics for adaptation to the global environment. However, which capabilities are needed to achieve competitive advantage in the context of GSCs? NEED OF FLEXIBILITY TO GAIN COMPETITIVE ADVANTAGE Possible means for gaining competitive advantages might be found in strategic flexibility. Strategic flexibility refers to the ability of an organization to adapt to uncertain environmental changes, which have substantial impacts on the organization’s performance (Aaker and Mascarenhas, 1984, p.74) such as competitors’ taking away major customers or qualified suppliers. The emphasis on flexibility results from the fact that strategic planning fails to work in face of “conflicts of interest or lack of time, information or analytical capability”, which reflects the unintended and emergent nature of strategy (Genus, 1995, p.12). From a social system theoretical perspective, flexibility is the ability of a system to open its boundaries for necessary resources and opportunities (Hülsmann and Wycisk, 2005). Integration enables a system to communicate with the environment Reference: Hülsmann, M.; Grapp, J.; Li, Y.: Strategic Flexibility in Global Supply Chains – Competitive Advantage by Autonomous Cooperation. In: Pawar, K.S. et al. (eds.): Conference Proceedings of 11th International Symposium on Logistics (11th ISL). Loughborough, United Kingdom, 2006, pp. 494-502 through mutual inter-relations and thus sustains the existential exchange process of resources (Staehle, 1999, p. 417; Böse and Schiepek, 1989, p. 121). This process of integration is implemented by system openings (Luhmann, 1973, p. 173), through which the system absorbs a part of the complexity of the environment (i.e. information). Flexibility contributes to creating competitive advantages through processes of retaining, developing and regenerating competences. The generation of competitive advantages is based upon unique, valuable, inimitable and nonsubstitutable competences (Well 2001, p.151; Hitt et al., p.2005, pp.84). Therefore, it is desirable for a system to consolidate, develop and regenerate competences (Al-Laham, 2003, p.160; Teece et al., 1997, p.524), which creates a wide competence spectrum and ensures a continuous internal readiness for change. Two commonly recognized dimensions of flexibility are range of alternatives and response to changes by adopting alternatives. The former counts the number of options while the latter measures the reaction time (Upton, 1994; Burmann, 2005). It can be stated that an increased number of options as well as decreased time lead to a higher level of flexibility. These two dimensions of flexibility result from the abilities of an organization to replicate and to reconfigure its processes and competences (Teece et al., 1997, pp.518). The ability of replication makes it possible for the organization to multiply existing processes. In the context of GSCs, an example could be that the effective communication process via a certain software between two members is adopted by all other members, which could ensure the stable and timely transfer of data throughout the whole chain. On the one hand, this ability of replication enables a fast and efficient growth of the GSC by avoiding the waste of money and time on exploring new means for development (Teece et al., 1997). On the other hand, it stimulates the members’ understanding of existing competences regarding structures and functions through expanding competences to a large number of elements (e.g. people, functional units) (Burmann, 2005, p.300). In this sense, replication retains existing profitable competences, which are in turn prerequisite for identifying, assimilating and applying useful external information to generate new competences (Cohen and Levinthal, 1990). The ability of reconfiguration enables an organization to transform the structure of its resources and thus its competences (Teece et al., 1997, p.520). This ability enables an organization to develop and generate new competences: one method is to recombine the know-how existing in the organization and (e.g. the combination of competences in fast distribution and lean production) the other is to absorb new knowledge from the environment (e.g. developing innovation competence by recruiting talents) (Burmann, 2005, pp.301). The new knowledge resulting from both methods could widen choices for coping with changes in the environment and competition. An example in the context of GSCs could be as this: a GSC delivering cell phones can either shorten the delivery t