International purchasing offices in China

Abstract

Creating an international purchasing office (IPO) is one of the most frequently adopted solutions by companies to manage their international sourcing activities. Despite the increasing importance of this solution for international supply management, the literature still offers limited studies on it.

This research, which forms part of an EU project entitled ‘International sourcing Strategies for China’, tries to fill this gap. Starting from an analysis and systematisation of the existing literature, the study defines the main aspects characterising the creation and management of IPOs in China, which is actually one of the nations with the highest inflow of foreign direct investments and one of the most important sourcing basins in the world. In particular, taking into consideration the specificities of the Chinese normative/social/political context, the research tries to describe how to establish and manage an IPO in China and the main functions assigned to it.

Keywords:

• Purchasing offices
• China
• Multiple case study research

Notes

† An international purchasing office can be defined as an offshore buying office or buying house set up to procure components, parts, materials and other industrial inputs to be used by manufacturing plants globally (Goh and Lau 1998). According to this definition, an IPO can be a stand-alone purchasing office in a foreign country or an office inside a subsidiary (e.g. a joint venture) established abroad.

† Since 1978, when the Chinese government decided to reform the national economic system through a policy of openness to the outside world, China has established some Special Economic Zones. In these zones of the country foreign companies can gain advantages for their investments such as special tax incentives and a greater independence on international trade activities. These incentives have allowed the import of advanced technologies in the country and the development of the so-called Chinese ‘foreign-oriented’ economy (Birindelli 2005).