Case studyLeveraging global markets: Lessons from Alcoa Alumina
Introduction
Globalization has contributed to the dismantling of national boundaries, which have enabled firms to compete and conduct business on a wider scale (Held et al., 1999). Firms can move freely between different markets using Internet-based technology. While access to such markets can provide firms with greater choice of suppliers and cost efficiencies, they need to be aware of challenges that can influence their business performance. With this in mind, we examine how these factors influenced Alcoa Alumina's drive to a global procurement platform through a global marketplace. The staged adoption process experienced at Alcoa Alumina offers a learning opportunity for other firms considering the transition to the global marketplace.
Section snippets
Procurement in global markets
Alcoa Alumina is a large Australian mining company, with its headquarters and several remote industrial sites located in Western Australia. Its parent organization is based in the United States and employs over 100,000 people worldwide and had revenues in excess of US$16 billion in 2003. Western Australia is geographically remote, culturally diverse and technologically advanced and globalization of business for many firms has become a critical consideration for sustained growth.
Alcoa Alumina
A staged process to global market participation
Alcoa's participation in a global marketplace went through a series of stages from pre-planning through to maturity (Fig. 1). The first identifiable stage (stage 1) was a pre-planning awareness of changes in the global business environment and a perceived need for Alcoa to counteract an economic downturn in the mining industry. The planning stage (stage 2) determined a strategy to take advantage of development in global marketplaces and identified principal benefits of economic savings. The
Key lessons
The key lessons from Alcoa's experiences of operating in a global market are summarized in Table 2. It would appear that the quest for cost efficiencies is a motivator for the adoption of a global procurement policy. Firms should clarify their policies on how to manage existing relationships in the transition to a global procurement platform. The provision of information to existing suppliers concerning the new strategy and the implications for suppliers should be addressed. If this is not done
Conclusion
The initial proliferation and subsequent consolidation of global marketplaces has led to many firms being wary about the long-term viability of this procurement option. Alcoa's ability to progress through the stages of global online market adoption was supported by their culture of technological innovation and their flexibility to adapt to the changing demands of the new environment. Firms, that have until now taken a more cautious approach, may benefit from the lessons drawn from Alcoa's
Craig Standing is a Professor of Strategic Information Management in the School of Management at Edith Cowan University, Australia. His current research interests are in the areas of electronic markets and mobile commerce. He has published in the European Journal of Information Systems, IEEE Transaction on Engineering Management, Information & Management and Information and Organization.
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Craig Standing is a Professor of Strategic Information Management in the School of Management at Edith Cowan University, Australia. His current research interests are in the areas of electronic markets and mobile commerce. He has published in the European Journal of Information Systems, IEEE Transaction on Engineering Management, Information & Management and Information and Organization.
Rosemary Stockdale is a senior lecturer at Massey University, Auckland, in the Institute of Information and Mathematical Sciences. Her research interests include–Evaluation of IS, benefit realization from e-commerce, inter-organizational relationships, online communities and the use of IT in tourism. Dr. Stockdale is a consultant to industry and government in e-marketplace participation and e-commerce adoption in small business.
Peter E.D. Love is a Professor of Innovation in the Department of Construction Management at Curtin University of Technology, Australia. Professor Love has a multi-disciplinary background and has varied research interests, which include project management, engineering forensics, operations and production management, information systems evaluation, and IT applications to construction and engineering. He has co-authored/edited five books and has authored/co-authored over 300 internationally refereed research papers, which have appeared in leading international journals such as European Journal of Operational Research, Information and Management, Information and Organisation, European Journal of Information Systems, IEEE Transaction on Engineering Management, International Journal of Production Economics, International Journal of Production Research, International Journal of Operations and Production Management.