CURRENT STATE OF PURCHASING AND SUPPLY MANAGEMENT IN FINLAND AND IN RUSSIA - A CROSS COUNTRY SURVEY Jari Jumpponen, Sergei Kouchtch, Katrina Lintukangas, Maria Smirnova, Veli-Matti Virolainen

Background The purchasing and supply management (PSM) literature has strongly emphasized the strategic role of PSM and empirically showed that strategic PSM has influence to the business performance The focus of PSM activities has moved towards to the strategic development of value chain and value networks in order to improve the competitiveness of the firms. Different views from Finnish and Russian business

Objectives of the study The overall objective of this study is to clarify the current state and future directions of purchasing and supply management in Finland and in Russia Different views from Finnish and Russian business: - Finland is ranked high in rather many conventional international competitiveness rankings, whereas Russia’s ranking has been rather modest. This combination of two neighboring countries provides interesting context to analyze and compare the enterprises purchasing and supply management practices between Finland and Russia.

Strategic Alignment Model (Cousins, Spekman, 2000) Skills and Competences Performance Measures Supply Strategy Corporate Strategy Actual Level of Strategic Attainment Desired Level of Strategic Attainment

Finland and Russia as Business Environments IndicatorFinlandRussia GDP (PPP) USD per capita (2005) GDP growth index ( )119,5143,7 FDI stock, USD per capita (2005) Share of SMEs in employment (2005)62%13%

General features of Russian and Finnish business management FinlandRussiaSource Leadership Interaction and encouraging to participate to decison-making Authoritarian style Role clarifying Visions Suutari and Bolotow (1996) Fey et al. (2001) Cultural differences Low power distance Individualistic Low masculinity Low uncertainty avoidance High power distance Collectivism Low masculinity Low long-term orientation General Equality between men and women Hofstede (1984, 1991, 1993) Bollinger (1994) Supplier relationships Intention towards collaborative relationships Value net Weak link between suppliers and buyers Importance of personal networks Transactional and adversial relationships Johanson and Johanson (1999) McCarthy and Puffer (2002) Tretyak and Sheresheva (2005)

Description of national samples Finland self-administered questionnaires N = industry groups (metallurgy, chemical industry, construction, wholesale and retailing, ICT, forest industry, power engineering) Russia fully-structured interviews N = regions 6 industry groups (metallurgy, machinery, wholesale and retailing, ICT, forest and woodworking industries, light industry)

The research propositions 1)In Finnish companies PSM is considered to be more often strategic than in Russian companies 2)In Finnish companies collaborative supplier relationships are more common than in Russian companies 3)Finnish companies use more PSM and supplier performance analyzing tools and measurements 4)Finnish companies pay more attention to the purchasing capabilities than Russian companies

The strategic meaning of supply

Planning of the future

The financial importance of supply

Supply capabilities Russia: organizational capabilities are documented –Reluctance to share information between companies –Aligned system Finland: benchmarking

Supplier performance monitoring

Supply Chain Development

Conclusion We drew together the theories of PSM and cultural differences in business management between Finland and Russia and conducted a country comparison of four elements of PSM. Significant differences were found in measured items. In Russia PSM is not yet seen as a strategic function. The findings support also earlier studies about cultural differences in Russia such as collectivism and low long- term orientation Intensifying competition forces companies to improve their performance also in Russia,

Conclusion One of surprising results: Russian firms are more ready to exchange information electronically PSM may become a driver of improvement of managerial technologies in Russian firms, aligning overall strategy and contributing to business development

Thank you for your attention! Contact information: Jari Jumpponen Veli-Matti Virolainen