IDENTIFIABLE DIMENSIONS TO EFFECTIVE GLOBAL SUPPLY

CHAINS: THE ROLE OF CULTURE

SUSAN A HORNIBROOK & PAMELA M YEOW

Kent Business School

University of Kent

Parkwood Road

Canterbury, Kent CT2 7PE

United Kingdom

Telephone: (44) (0)1227 827731, (44) (0)1227 823991

Fax: (44) (0)1227 761187

Email: s.a.hornibrook@kent.ac.uk

p.m.yeow@kent.ac.uk

WORK IN PROGRESS (3)

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Paper prepared for the 28th International Congress of

Psychology (ICP2004) in Beijing, China, 8-13 August 2004.

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ABSTRACT

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1. Introduction

The continuing globalisation of food manufacturing,

together with the more recent moves towards

internationalisation of major food retailers such as

Tesco, Metro, Carrefour and Wal-Mart, poses a number of

significant challenges to all firms along the supply

chain.

In Europe, and particularly the UK, own brand products

are a key component of competitive strategy, and in order

to guarantee food quality and safety, retailer-led

domestic vertically co-ordinated supply chains have

emerged (Hornibrook and Fearne 2001). As European

retailers seek growth through international expansion in

order to combat market saturation and low growth in

domestic markets, the strategic importance of own brand

products and economies of scale associated with global

sourcing will become increasingly significant. In

addition to food quality and safety, a number of other

critical supply chain issues including ethical and

environmental concerns are also driving closer

relationships between food retailers and their first and

second tier suppliers. Given the increasing

globalisation of both trade and markets for food, and the

need for closer relationships and management of the

supply chain, the impact of culture on relationships

between firms in geographically and culturally diverse

supply chains becomes particularly significant.

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Researchers from various academic disciplines have

adopted a number of different economic and management

theoretical perspectives in order to examine supply chain

management, in particular transaction cost economics,

systems theory, game theory and channel management. This

paper seeks to build on previous work that considers

vertically co-ordinated supply chains as strategic

responses to perceived risk (Hornibrook and Fearne, 2001,

2003) by examining the role of culture (Hofstede, 1980,

1994; Schein, 1985, 1990; Trompennars., 1993; Yeow, 2000,

2002; Erez and Gati, 2004). By adopting a cross-

disciplinary behavioural perspective and including a

psychological dimension, the authors seek to add to the

supply chain management and organisational behaviour

literature by developing a framework for the examination

of cross cultural supply chain relationships. Given the

emerging significance of China as a potential market and

source of supply for western food firms, and the

different perspectives on personal and business

relationships between Asia and the West (Liu and Wang,

1999), the paper develops a number of propositions within

the framework to identify and discuss the impact of

culture on perceptions of risk, using the example of

Tesco’s recent expansion into China as a case study.

Additionally, the paper will identify areas suitable for

further research regarding the consequences of culture

and perceived risk on global supply chains.

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This paper contributes to the supply chain literature in

two ways. It adopts an interdisciplinary approach to

supply chain management and presents a theoretical

framework for the examination of the role of culture on

effective supply chain management. The paper is presented

in four parts. The first section sets the scene by

discussing the globalisation of the food industry, supply

chain management and implications for firms. The second

section critically discusses the application of Perceived

Risk Theory to supply chains, in particular the failure

of the framework to account for the effect of culture on

behaviour. Other theoretical perspectives that do take

account of cultural differences are introduced in the

third section, and the proposed theoretical framework is

introduced in the fourth section. Next, the framework is

tested using the example of the UK food retailer, Tesco,

and their recent expansion into China. The final part

draws some conclusions and presents recommendations for

further research.

2. Supply Chain Management

2.1 Globalisation and the Food Industry

Paton and McCalman (2000:7-8) identified a number of

major external changes that all organisations are

currently addressing or will have to come to terms with

in the 21st Century. These include the development of

enhanced technologies and increased competition due to

world-wide historical, political and economic changes;

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worldwide recognition of the increasing importance of

finite resources and the environment as an influential

variable; health consciousness as a permanent trend

across all age groups and a growing awareness and concern

associated with food production and consumption

throughout the developed world; changes in lifestyle

trends affecting the way people view work, purchases,

leisure time and society; changes in the workplace

creating a need for non-traditional employees; and the

crucial role of knowledge and people to the competitive

well being of organisations.

In addition to the above general changes, the food

industry has been subject to a number of specific

environmental changes that have affected and driven

international and global activity. Drivers of the

increase of cross border trade in agricultural and food

products include the reduction of national tariffs and

non-tariff barriers (WTO, 2003), standardisation of food

safety and quality standards (WHO, 2003), consumer

demand, and firm strategic behaviour (Fearne et al, 2001).

As a result, the food industry has become interdependent

and global, instead of simply international (Varzakas and

Jukes, 1997). Globalisation is not just limited to the

range of a firm’s activities across geographical markets,

but also the extent of contractual co-operation with

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other firms (Mattsson, 2003). As a consequence, actions,

events and decisions taken in one part of the world will

have a significant impact on individuals and communities

in other, more distant, parts of the earth (McGrew,

1992). Globalisation therefore, has implications for

those firms such as multinational food manufacturers and

more recently European retailers, whose commercial

reputation and success depends upon branded products

sourced and produced by suppliers who may operate under

different environmental conditions.

The drive for more consistent eating quality has become a

competitive strategy amongst UK food retailers to gain

market share through improved margins and customer

loyalty (IGD 2003), and has led to various attempts at

marketing differentiated retail branded products sourced

through retailer-led co-ordinated supply chains. Own

brands, as defined by Davis (1992) are positioned as

niche, high quality products sold at a premium price,

supported by strong technical and quality control

involvement from the retailer. UK retailers do not

produce own brand products but delegate the task of

production to a small number of large suppliers, with

whom they develop close relationships. Such businesses

that participate in co-ordinated relationships remain

distinct in the legal sense, but in other respects,

extend their influence beyond their organisational

boundaries. The structure of the UK retailing sector is

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such that market power is a feature, with multiple

retailers able to impose their requirements very

effectively on the supply chain (Northern, 2000).

However, the economic benefits resulting from the success

of own brands are offset by an increase in the level of

risk for those retailers who invest in own brand

products. The more detailed their requirements and

instructions to their upstream suppliers, the more they

are held responsible for the safety and quality of the

end product by both regulators and consumers. By

delegating the task to upstream suppliers, the need for

control, communication and information is paramount in

order to protect the retailers’ reputation and market

share.

Supply chain management is therefore seen as crucial by

UK retailers, particularly in relation to maintaining

food quality and safety. In the UK, consumers have

become increasingly concerned about food safety and

quality issues, particularly those risks that have

potentially severe consequences, and are little

understood, such as nvCJD. However, other emerging and

high profile issues that may impact upon brand image and

reputation are beginning to attract interest by supply

chain researchers and practitioners. These areas include

environmental issues such as pollution, resource

depletion and waste management, as well as ethical issues

(New, 2004b) relating to labour and human rights,

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employment practices, bribery and corruption, and

corporate governance. In today’s challenging global

markets, the management of relationships are viewed as a

key element of successful supply chains (Christopher,

2004).

2.2 Theoretical Roots and Approaches

The concept of Supply Chain Management (SCM) has

developed over time from having an intra-organisational

focus on logistics to becoming focused on wider inter-

organisational issues. Although practitioners and

academics use the term widely, there is no universally

agreed definition (Dubois et al, 2004). The main tensions

arise between those who adopt a functional perspective

and view SCM as an overall term for logistics - managing

the flow of materials and products from source to user -

with the focus on operational issues. Others view SCM as

a management philosophy concerned with the management of

supply and demand across traditional boundaries –

functional, organisational and relational – and

recognises that by doing so, organisations will gain

commercial benefits (New, 1996). This research recognises

the latter approach, in which the scope of SCM is defined

as wider than that of logistics, is driven by the need to

develop competitive advantage for all firms in the supply

chain, and involves collaboration across functional,

organisational and individual boundaries. The emphasis

is on key supply chain-wide business processes across the

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whole supply chain, including customers and consumers

(customer relationship management, demand management,

order fulfilment, manufacturing flow management, supplier

relationship management, product development and

commercialisation) rather than individual business

functions (Figure 1).

Figure 1: Simplified Food Supply Chain

Key: Information flow

Product flow

Given the above, this research adopts the Global Supply

Chain Forum’s definition of SCM (1998), which is ‘Supply

chain management is the integration of key business

processes from end user through original suppliers that

provides products, services, and information that add

value for customers and other stakeholders”.

Supply Chain Management therefore views the supply chain

as an extended enterprise or organisation, utilising all

available skills and resources in order to enable each

individual firm as well as the system as a whole to

achieve competitive advantage (Bailey et al, 2004). The

most significant management challenge is to promote,

facilitate and encourage a willingness to collaborate,

both between functions within the firm, and across firms

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Consumers Retailers Processors

Farmers

in the supply chain, which may involve national and

geographic borders. The development of global supply

chains are viewed as a mechanism by which firms can

achieve a competitive advantage by utilising the unique

comparative advantages offered by the diverse nations

that make up the chain (Prasad and Sounderpandian, 2003).

Researchers from various academic disciplines have

adopted a number of different economic and management

theoretical perspectives in order to examine supply chain

management, including but not limited to operational

research, contingency theories, industrial dynamics,

social networks theories, transaction cost analysis,

agency theory, game theory, value chain, resource based

theory, lean supply, virtual organisations, and supply

chain integration (for a full discussion, see Giannakis et

al, 2004).

Critics of the operational perspective adopted by

economists, sociologists and organisational theorists

have noted the need to adopt a multidisciplinary approach

(Nassimbeni, 2004; Harland et al, 2004) and have called for

different ways to conceptualise the problems faced by

manufacturers, retailers and distributors (New, 2004).

In the UK, a series of high profile food safety and

quality incidents, changes in both public and private

regulation of the market, and the greater exposure to the

risks of product failure for retail brands have increased

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risk for all stakeholders. Supply chains operating across

geographic and national borders will encounter increased

cultural and ethnic diversity in comparison to

domestically based supply chains, which in turn will

affect the risks associated with food safety and quality,

and consequent consumer and organisational behaviour.

From a theoretical perspective, the risk perceptions of

both consumers and organisations (Zwart and Mollenkopf,

2000, Yeung and Morris 2001) and the impact of culture on

such perceptions cannot be ignored when examining global

supply chain behaviour.

3. Perceived Risk Theory

Different interpretations and approaches to risk can be

identified in the literature. Scientists and policy

makers in western societies view risk objectively,

assuming that the probabilities and consequences of

adverse events can be identified and quantified. This

notion is rejected by many social scientists, who argue

instead that such a view is incomplete at best and

misleading at worst, and that risk “does not exist “out

there”, independent of our minds and cultures, waiting to

be measured” (Slovic, 2002:4). The focus of the approach

in the sociology and psychology literature is therefore

on the effects of perceptions of risk on individual

behaviour.

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Initial research into consumer behaviour began in the

1960’s, informed by theory borrowed from social and

clinical psychology, anthropology and sociology (Cox,

1967). Perceived Risk Theory (Cox, 1967; Bauer, 1967;

Dowling and Staelin, 1994) asserts that consumers

perceive risk in a buying situation because the resultant

consequences cannot be known in advance, and that some

such consequences are likely to be unpleasant.

Researchers note that risk perception is shaped more by

the severity of the consequences than the probability of

occurrence (Slovic, Fischoff, Lichenstein, 1980; Diamond,

1988; Mitchell, 1998). The theory also notes that the

consequences from a purchase can be divided into various

types of loss: performance, psychosocial, physical,

financial and time (Mitchell, 1998). Performance risk

can be viewed in two ways: either as a surrogate measure

for overall risk in that the product results in a

combination of other losses (Mitchell, 1998) or does not

perform as expected (Sweeney, Soutar, Johnson, 1999;

Schiffman and Kanuk, 1994). Financial risk is defined as

a net financial loss, physical risk relates to the

possible danger or harm to the individual or to others,

time risk is associated with the loss of time and effort

associated with achieving satisfaction with a purchase.

Psychosocial risk relates to possible loss of self-image

or self-concept as a result of a purchase or use (Murray

and Schlacter, 1990) or social embarrassment (Schiffman

and Kanuk, 1994). The overall level of perceived risk is

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viewed as the sum of the attributes’ perceived risk

levels, with the degree of risk perceived varying by

individual consumer, depending on risk tolerance and

wealth level, both of which impact upon the ability to

absorb a loss. If perceived risk exceeds the tolerable

degree of the individual level, then this triggers the

motivation for risk-reducing behaviour. Such perceptions

of risk can be reduced through various risk reducing

strategies, including increasing information and reducing

the consequences.

Theoretical debate on the possible impact of

organisation’s perceptions of risk on complete supply

chains has only recently emerged (Christopher, 2004; New,

2004; Lamming, Caldwell and Phillips, 2004, Hornibrook,

2002). In addition to consumers, the impact of perceived

risk on a purchase decision could also be extended to

business-to-business sourcing situations (Mitchell,

1998). Peters and Venkatesan (1973) confirm that

organisational buyers are affected by many of the same

variables that affect consumers, including perceived

risk, an observation also supported by March and Shapira

(1987), Mitchell (1998) and Greatorex, Mitchell and

Cunliffe (1992). Generally, empirical research has

focused on the perceived risk and risk handling

strategies of industrial buyers associated with choosing

a supplier (Puto, Patton and King, 1985; Hawes and

Barnhouse, 1987; Greatorex, Mitchell and Cunliffe, 1992).

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Most recently, Perceived Risk Theory has been utilised,

using a supply chain methodology, to examine vertically

co-ordinated supply chains comprising consumers,

retailers, processors and farmers in the UK food

industry. Supply chain management is therefore viewed as

a strategy to manage perceived risk, for both consumers

and organisations at different stages in the supply chain

(Hornibrook and Fearne, 2001, 2003).

The above describes a number of theoretical approaches,

in particular Perceived Risk Theory, to describe and

explain supply chain behaviour. However, a number of

criticisms and limitations can be noted regarding current

theory in general, and Perceived Risk Theory in

particular.

Perceived Risk theory makes some attempt to acknowledge

the context and history of actions and behaviour.

However, although culture is identified as one

determinant of risk perception (Joffe, 2003, Slovic,

2002), the theory does not include the role of culture in

determining risk perception and the subsequent influence

on risk reducing behaviour. Additionally, the theory

adopts individual dimensions of loss (physical, time,

financial, psychosocial, performance) that may only be

appropriate in western societies and may be limited in

its scope for understanding global supply chains that

span different countries and cultures. Previous

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empirical research has been limited to small,

domestically orientated supply chains in the UK.

One of the main criticisms of both normative and

descriptive research into supply chains is that the

prevailing SCM literature tends to use theoretical

assumptions that simplify the complex reality of

interconnecting relationships between a host of different

actors (Dubois et al, 2004). Most research occurs at the

dyad, limited attempts have been made to examine

relationships along product supply chains (Hornibrook,

2002), and more recently, interest has extended to links

among supply chains (Dubois et al 2004). However, the

dominant paradigm has been the Newtonian style in which

an idealised world is constructed in the form of an

abstract model, in order to approximate the behaviour of

real objects (Tsoukas, 1998); to examine and then to

predict future behaviour without taking account of

context and history. The focus is on linear

relationships, the organisation as a machine, agents as

objects, generalisability, observation, and universal

laws.

Given that supply chains are extremely complex (Cox,

1999; Christopher, 2004; Dubois et al, 2004), the use of

oversimplified linear models and a Newtonian perspective

would seem to be inappropriate. Globalisation of firms

and markets involves reorganisation and confrontation

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between cultures, both at the organisational and the

national level (Mattsson, 2003). The need to understand

the role of culture on the effective management of

different supply chain issues is highlighted by a number

of observers (Mattsson, 2003; Robertson and Crittenden,

2003; Prasad and Sounderpandian, 2003; Weaver, 2001;

Schneider & Barsoux, 2003).

4. Culture and Globalisation

Globalisation can be defined as the process by which

cultures influence one another and become more alike

through trade, immigration and the exchange of

information and ideas. As such, the reach of

globalisation extends to every part of the world, but

cultures differ greatly in how much they have been

affected by it with considerable variations within

regions and within countries (Arnett, 2002). Culture

comprises divergent behaviours, norms and expectations

and is fluid across space and time (Ettlinger, 2003) and

can be viewed as the patterns of cognitions and behaviour

shared by a group which evolve and becomes manifest in

continuous processes of social interaction. As beliefs

and attitudes are important determinants of perceived

risk, interdisciplinary research is required to

investigate the role of culture in determining perceived

risk, and the consequent influence of culture on

organisational behaviour and global supply chains.

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Much work has been done in the importance in considering

notions of culture in terms of global organisations,

virtual or otherwise (e.g. Schein, 1989, 1990; Hofstede,

1980, 1994; Hampden-Turner & Trompennars, 1993;

Trompenaars, 1993), particularly addressing the

classification of cultural patterns. Alongside such

work, a continuing debate has been conducted regarding a)

the appropriate level of analysis, as culture level

analysis reflects central tendencies for a country but

does not predict individual behaviour, and b) that

differences in cultural patterns should be identified

through behaviour or values (Dahl, 2004).

Hofstede carried out large cross-cultural studies and

identified five dimensions of differences or traits

between national cultures. These were labelled power-

distance, uncertainty avoidance, individualism-

collectivism, masculinity-femininity and long-term/short-

term orientation. Power-distance indicates the extent to

which a society accepts that power is distributed

unequally, with high power distance cultures accepting

inequality and respect for social status and class; low

power distance societies are more likely to value

equality. Uncertainty avoidance indicates the extent to

which people in a society feel threatened by ambiguous or

unpredictable circumstances. Individualism/collectivism

represents the degree that cultures vary in their

emphasis on individualistic or collectivistic views of

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social life and personal identity, and the degree to

which they value group ties, which may be loose or

strong. Societies also range in characteristics that are

associated with masculinity and femininity, with members

of masculine cultures viewing the world in terms of

winners and losers and feminine cultures discouraging the

notion of competition. The final dimension is the extent

to which societies have different time horizons, either

long term or short term, and whether they value the past

or are more future orientated. Other researchers have

added to these cultural dimensions (Kluckhohn and

Strodtbeck, 1961….etc)

Although there been accolades to his work, there have

also been many criticisms. One major problem with

Hofstede’s approach is methodological. Cray and Mallory

(1998) write that the use of aggregated national data can

be misleading when applying societal characteristics to

individual behaviour because there can be considerable

variance in the degree to which individuals adhere to any

set of values. Others (cf. Dorfman & Howell, 1988;

Goodstein, 1981; Hunt, 1981; Robinson, 1983; Sondergaard,

1994) have also criticised his scales in terms of their

validity and usefulness of their four dimensions at the

individual level of analysis. It was argued that it is

not possible to discuss the impact of cultures on

organisational structures if all the data originates from

the same study (Tayeb, 1988), with Hunt (1981:62)

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questioning whether Hofstede was “studying the culture of

the Japanese or the French or the British or Malaysian

executive or the culture of a multinational firm”. A

further criticism is that underlying values are derived

from a measurement instrument in which the focus is on

the ultimate goal state, therefore the resultant

underlying values are frequently the result of very

little data (Dahl, 2004).

A different approach in developing a framework in which

to understand cultural differences has been adopted by

Schwartz (1992, 1994), who clearly distinguishes between

individual level analysis and culture level analysis in

comparison to the work of Hofstede and others (Dahl,

2004). This approach develops parallel sets of concepts

applicable to different levels of analysis, ie at the

individual level and at the culture level. Using data

from more than 60,000 located in 63 countries, Schwartz

derived ten motivationally distinct value types that are

likely to be recognised within and across cultures, at an

individual level of analysis (Table 1.).

Table 1: Definitions of Motivational types of Values

Power Social status and prestige, control ordominance over people and resources(authority, social power, wealth,preserving public image)

Achievement Personal success through demonstratingcompetence according to social standards(ambitious, successful, capable,influential)

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Hedonism Pleasure or sensuous gratification foroneself (pleasure, enjoying life, self-indulgent)

Stimulation Excitement, novelty and challenge in life(daring, a varied life, an exciting life)

Self

Direction

Independent thought and action – choosing,creating, exploring (creativity, freedom,independent, choosing own goals, curious)

Universalism Understanding, appreciation, tolerance, andprotection for the welfare of all peopleand for nature (equality, social justice,wisdom, broadminded, protecting theenvironment, unity with nature, a world ofbeauty)

Benevolence Preservation and enhancement of the welfareof people with whom one is in frequentpersonal contact (helpful, honest,forgiving, loyal, responsible)

Tradition Respect, commitment, and acceptance of thecustoms and ideas that traditional cultureor religion provide (devout, respect fortradition, humble, moderate)

Conformity Restraint of actions, inclinations, andimpulses likely to upset or harm others andviolate social expectations or norms (self-discipline, politeness, honouring parentsand elders, obedience)

Security Safety, harmony, and stability of society,of relationships, and of self (familysecurity, national security, social order,clean, reciprocation of favours)

Source: Schwartz (2004)

Taking a circular perspective, such types of values can

be ordered into four higher order value types: “openness

to change” which combines stimulation, self-direction and

a part of hedonism; “self enhancement” consisting of

achievement and power and the remainder of hedonism. On

the opposite side of the circle, “conservatism” combines

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security, tradition and conformity, and “self-

transcendence” consists of universalism and benevolence.

These higher order value types form a motivational

continuum, with values situated on one side of the circle

being strongly negatively correlated with values on the

opposing side of the circle yet positively correlated

with values located closely in either direction around

the circle. Later work by Schwartz (2004) has confirmed

the theoretical existence of basic values, that tradition

lies outside of conformity and that values form a

motivational continuum.

At the culture level, Schwartz also derives seven value

types. Conservatism or Embeddedness emphasises the

maintenance of the status quo, propriety and restraint in

actions or preferences that could disrupt the group or

the traditional order. Hierarchy emphasises the

legitimacy of an unequal distribution of power, resources

and roles. Harmony emphasises fitting harmoniously into

the environment, while Mastery emphasises achievement

through active self-assertion. Egalitarianism emphasises

foregoing of self interest in favour of voluntary

commitment to promoting the welfare of others.

Intellectual Autonomy emphasises the desirability of

individuals independently pursuing their own ideas and

intellectual directions, whereas Affective Autonomy

emphasises the desirability of individuals pursuing

affectively positive experiences (Smith, Peterson and

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Schwartz, 2002). These value types are also summarised

within three dimensions, namely Embeddedness versus

Autonomy, Hierarchy versus Egalitarianism, and Mastery

versus Harmony.

More recently, theoretical approaches (see Figure 2) have

proposed a multi-level model of culture incorporating

structural and dynamic dimensions, in which different

levels and consequently units of analysis (individual,

group culture, organisational culture, national culture

and global culture) are nested within each other and are

interconnected through reciprocal top-down and bottom-up

processes. Top down processes transmit the effects of

culture from higher to lower levels, whereas bottom-up

processes allow behaviours at the individual level, once

they are shared by all members of a social unit, to

emerge at the macro-level (Erez and Gati, 2004).

Globalisation is viewed at the macro level of culture

within the model, and is based upon individualism, free

market economics, democracy, including freedom of choice,

individual rights, openness to change and tolerance of

differences, reflecting the values of those Western

countries that provide the driving energy behind

globalisation (Arnett, 2002). Given that nations differ

as to the effect of globalisation, national cultures that

exhibit similar characteristics to western values are

more likely to embrace the global culture. It is likely,

therefore, that the effect of the global culture on the

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nested levels of culture can be facilitated or hindered

by the particular characteristics of the national

culture.

Research has mainly adopted a within-level orientation,

with most work focused on differences and similarities at

the national level. Little research has examined culture

at multiple levels. At the organisational culture level,

research has focused on the shared beliefs and values of

members of the same organisation; at the team level,

shared values by team members reflect a group culture,

whereas at the individual level, culture is viewed as the

values as they are represented in the self. Cross-level

research examines the congruence between two or more

levels (Erez and Gati, 2004).

Figure 2: The Dynamic of Top-down-bottom-up

Processes

across Levels of Culture

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Source: Erez and Gati (2004)

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Global Culture

National Culture

Organisational Culture

Group Culture

Individual

Top Down

Bottom up

Globalisation offers opportunities to organisations that

seek growth, and the dominant strategy to date has been

the emergence of the multinational (MNC). Employees who

work for MNC’s face potential tension between

local/national values and the values of the MNC, as they

seek to build horizontal relationships both at the local

(national) and at the global (MNC) level. The challenge

the challenge for MNC’s is to create a global culture,

and managerial role perceptions, without offending local

cultural values (Berson, Erez and Adler, 2004).

The strategic decision to manage upstream vertical

linkages through co-ordination rather than ownership

implies a greater challenge, as management of global

supply chains will encounter tensions both between and

within all levels of culture. If vertically co-ordinated

supply chains, rather than vertically integrated

organisations, are now viewed as the basis for

competition, then this raises a number of questions e.g.

do vertically co-ordinated but separate organisations try

to create and operate within a global culture? What are

the tensions, the dynamics and differences in the

cultural values along a global supply chain; is supply

chain management more likely to occur between nations

that have similar cultural values?

5. Proposed Theoretical Framework

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Perceived Risk theory has been applied to supply chains

but there are three notable criticisms of the approach;

namely that the theory is informed by western management

concepts of risk and fails to incorporate the effect of

culture on perceptions of risk; that supply chains are

operating in an increasingly turbulent, changing external

and internal environments, and that very limited

empirical work using the framework has only been

undertaken in the UK. The aim of this paper is to

provide a theoretical framework and recommendations for

future research that addresses such criticisms.

As discussed above, researchers have identified a number

of dimensions in which cultures and societies may differ.

Such dimensions will have an impact on how the different

types of loss associated with Perceived Risk Theory are

viewed, both at the individual and at the organisational

level, and the strategies employed to reduce such

perceptions of risk (Figure 2). Some applications are

discussed below.

Perceived Risk theory is derived from western values;

therefore it is likely that those national cultures with

similar values will also identify similar risks and adopt

similar strategies to reduce perceived risk at both the

individual and organisational level.

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Figure 2: Interaction between Perceived Risk and

Cultural Dimensions

In socially collectivist cultures, where group ties are

important, family and other group members are more likely

to offer help when required, and this is turn will affect

the perception of risk associated with different types of

loss. In terms of financial loss, collectivism acts as a

cushion against possible losses (Weber and Hsee, 1998),

and therefore perceived risk associated with financial

loss is likely to be lower than in individualistic

societies.

In high uncertainty avoidance cultures, risk reducing

strategies will favour formal procedures and systems such

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PERCEIVED RISK:

*Financial Loss*Physical Loss*Time Loss*Performance Loss*Psychosocial

NATIONAL CULTURE LEVEL DIMENSIONS:Hofstede Schwartz*Power Distance *Embeddedness*Uncertainty Avoidance * Hierarchy*Individualism/Collectivism * Harmony*Masculinity/Femininity * Mastery*Long term/short term *Egalitarianism Orientation * Intellectual

RISK REDUCING STRATEGIES*Increase information*Reduce consequences

as codes of conduct, quality and safety assurance

schemes, reporting systems, and standardisation of

practices, and will favour communication through the

spoken and written media. However, in low uncertainty

avoidance societies, where contextual clues and subtle

messages are crucial to the reception and understanding

of a message, formal structures and written documents

such as codes of conduct will be ineffective (Weaver,

2001).

The degree to which physical risk is perceived will also

depend upon variations in beliefs about the extent of

individual control over events. For example, symptoms of

food borne disease may be perceived as a natural

occurrence, for example in societies that seek harmony

with the environment, or as a side effect of disease that

can be transmitted through food and unhygienic practices,

according to different national cultures (Motarjemi and

Kaferstein, 1997).

In high power distance/hierarchy societies,

organisational superiors are treated as experts,

inaccessible, unreproachable and entitled to

organisational power (Weaver, 2001), and superior-

subordinate relationships are likely to be different to

those in low power distance or mastery societies, where

status and class roles are less important. However,

supply chain management is concerned with the management

30

of supply and demand across traditional boundaries,

including functional, organisational and relational. In

low power distance societies, such a concept is likely to

be more acceptable than in high power distance societies,

where status and power reside in the formal position

rather than in the individual. Supply chain management

requires innovation, sharing of information and team

working both within organisations and across

organisational boundaries, and this may be more

achievable in societies that accept the concept of

intellectual autonomy, in which an individual actively

generates and pursues ideas.

6. Illustrative Example: The case of Tesco and

expansion into China

Tesco has recently announced its expansion into China,

where it has just acquired a 50 per cent holding in

Hymall, a Chinese mainland subsidiary of the Taiwan-based

Ting Hsin International Group. Hymall has 25 hypermarket

outlets based in Shanghai and other major cities, and the

two companies will have equal representation on the

board. Such a move is viewed as an initial short term

strategy to enter the Chinese market but the long term

strategy is to establish and build the Tesco retail brand

(China Daily, 15 March 2004).

In the UK, Tesco, along with the other supermarkets,

employ strategies to increase information and to reduce

31

the adverse consequences associated with risks include

developing closer and more co-operative vertical

relationships with individuals and organisations along

the supply chain, in addition to gathering information

from a variety of sources. The UK food industry is

heavily regulated because of the risks and uncertainty

associated with food production and consumption, and

information from mandatory government inspections and

audits are made publicly available. On the other hand,

the industry as a whole, as well as individual firms,

also implement a number of code of practices and

assurance schemes with which suppliers have to comply.

Compliance is assessed through personal visits, or using

second or third party monitoring agents, depending on the

nature of the scheme.

Tesco has based its global growth strategy on complexity

reduction, relying on expatriate employees to replicate

and provide the systems and key processes, as well as

employing and training local managers. For Ting Hsin,

the strategic partnership with Tesco will bring benefits,

including new product development and supply chain

management (BBC News, 14 July 2004). The majority of

food is sourced locally, and therefore supply chain

management systems and processes developed in the UK are

likely to be transferred to the Chinese market.

32

Using the framework developed above to examine the

various supply chain practices invoked by Tesco to reduce

perceived risk, it can be seen that such procedures and

processes may be resisted by both Ting Hsin and their

suppliers due to differences in cultural dimensions and

perceptions of risk. Formal written codes of conduct and

assurance schemes, third party audits and inspections,

cross functional teams and exchange of information may

all be resisted due to the relatively high levels of

collectivism, power distance and importance of “expert

roles” in Chinese society. Managers seconded to China

from the UK will encounter tensions both within and

between different layers of culture driven by differences

between local Chinese values and those of Tesco. Tesco

will be seeking to develop a global culture embracing

western values, and this may lead to resistance within

Ting Hsin, and between the organisation and its Chinese

suppliers.

7. Discussion

Proposed framework allows for the impact of culture

on perceived risk theory

Also meets some of the criticism directed at

Hofstede’s research

Allows for increased complexity of global supply

chains

Further global/international research required to 1)

identify other types of loss associated with

33

perceived risk theory for individuals and

organisations that may be important for cultures

other than western ones, eg relational loss, 2)

research into effect of culture both within and

between different levels (individual, group,

organisational, national, global) on supply chain

management.

34

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