Academic journal article Entrepreneurship: Theory and Practice

Challenges and Approaches to Purchasing from Minority-Owned Firms: A Longitudinal Examination

Academic journal article Entrepreneurship: Theory and Practice

Challenges and Approaches to Purchasing from Minority-Owned Firms: A Longitudinal Examination

Article excerpt

Historically, large corporations and minority-business enterprises (MBEs) have encountered many impediments as they have worked together. As a result, the government has adopted public policy to help promote greater interaction between large firms and MBEs. At the same time, the competitive environment has changed in ways that make it important for large corporations and MBEs to work more closely. This paper presents the results of a study that examined the impediments and approaches to buyer/supplier relationships between Fortune 500 firms that have corporate minority purchasing programs and MBEs.

In many instances, the objectives of both large corporations and minority-owned business enterprises (MBEs) would be better achieved if the two worked together. Unfortunately, despite efforts by large corporations, MBEs, and government to promote the development of buyer/supplier relationships between large companies and MBEs, the approaches and challenges involved in these relationships continue to be misunderstood. In fact, perceptions regarding these relationships vary greatly, especially between the two groups--large corporations and MBEs. They key to progressing toward more beneficial buyer/supplier relationships is to recognize the needs and abilities of each group so that the two can mutually strive to overcome barriers to cooperation.

Efforts to promote buyer/supplier relationships between large firms and MBEs have emerged from many sources. First, supplier development has long been viewed as a primary function of the purchasing department in larger firms. Many purchasing departments in large firms have instigated programs designed specifically to increase the amount of purchases from small or minority-owned firms (Leenders, Fearon, & England, 1989). This effort is one important aspect of corporate programs designed to help large firms fulfill their role as socially responsible corporations. Second, MBEs have joined together in many communities to form business development groups to increase their visibility and leverage. An example of such a group is the National Minority Supplier Development Council (NMSDC). Finally, the development of small minorityowned business has become an important objective of both national and state governments. The Minority Business Development Agency was established in 1969 to direct public policy toward assisting MBE development. Further, because many MBEs also qualify as small business enterprises, they are promoted through the Small Business Administration. In fact, the Small Business Administration provides support for over 650 Small Business Development Centers nationwide. Unfortunately, these efforts have lacked the necessary resources, scale, and scope to bring about an effective change in attitude and knowledge concerning buyer/supplier relationships involving MBEs. The efforts of the past 20 years have not even been able to get the two sides to consistently agree on the principal impediments to building mutually beneficial relationships.

However, circumstances and competitive pressures are changing, placing more emphasis on the development of successful relationships involving small and minorityowned businesses. Two changes in particular are working to change attitudes and to create opportunities for both large corporate buyers and MBEs: (1) the enactment of Public Law 99-661 with its contract goal for minority business; and (2) the increased use of just-in-time purchasing relationships. The inclusion of the contract goal for MBEs within Public Law 99-661 is the most obvious change and has had considerable impact on the thinking of both large corporate buyers and small "socially and economically disadvantaged" suppliers. This law requires firms that contract with the government to source at least five percent of each contract from MBEs. Requiring such set asides has greatly increased the pressure on government contractors to find or develop MBE suppliers. …

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