Drivers and barriers of logistics capabilities outsourcing to South African SMMEs by multinational retailers during their internationalisation stages

Abstract

Globalisation of the marketplace has led to internationalisation becoming increasingly vital for companies’ survival. This rapid increase in the level of internationalisation has seen many retailers look for expansion opportunities outside their borders. South Africa is a very significant market in Africa for multinational retailers and has seen many of them expand and explore opportunities there. This growth in multinational retailers entering and operating in the South African market has created challenges for SMMEs who have difficulties competing with larger logistics third party providers in the local market due to many multinational retailers outsourcing their logistics capabilities to global and larger third party logistics providers instead of local SMMEs. This research study seeks to understand the drivers and barriers of logistics capabilities outsourcing to South African SMMEs by multinational retailers during their internationalisation. SMMEs are the backbone of many economies, particularly emerging market economies such as South Africa. Throughout the globe, SMMEs are the largest business group and create more jobs than any other business group thus indicating their importance and relevance which justifies the need for further research. This research study followed a qualitative method which was underlined by an interpretive and inductive research approach to gather in depth insights from the participants. This provided an analytical lens to explore what influences the decisions to outsource logistics capabilities by multinational retailers with the aim to reveal how SMMEs can participate more in the supply chains of internationalising multinational retailers. Data analysis was done from the transcripts which allowed the researcher to develop codes which were grouped into categories/themes that related to the research questions. Available academic literature was compared and constructed with the findings revealing that: (i) the internationalisation process of multinational retailers in South Africa has two stages, which are the early and late stages, (ii) , (iii) selection processes and the ability to create partnerships with local providers have a significant influence on multinational retailers’ decision to outsource to local SMMEs, (iv) in the early stages of the internationalisation process, due diligence has significant influence on multinational retailers’ decision to outsource to local third party logistics providers, (v) standardisation of processes plays a significant role in influencing multinational retailers’ decisions on outsourcing in the late stages of the internationalisation process.