Government Policies

Companies from different national backgrounds have different considerations in selecting suppliers, depending on the country‟s national agenda, government policies as well as the political, economical, social and cultural context which the companies operate in (Lehmann, 1974).

Pressures exerted by the government relate to the government‟s role in controlling firms‟ social conduct through regulations and laws. In this research study, government pressures are defined as pressures by legal authorities of the firm‟s home country on the supplier regardless of the origin of the supplier (local or international).

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Beyond the particular perception of supplier management, a number of researchers off validated proof that the procurement policies of government regulations have a strong impact on organisations involvement in corporate activities. On a general level, Porter (1991), stated that organisational responses to regulations may result in a competitive advantage. Furthermore, prospective tightening of regulations may cause companies to set higher standards up front in order to be prepared for the future and to avoid high readjustment costs (Barnett and King, 2008). In this perspective, Darnall et al., (2008) wrote that companies can are able to make regulations that are less relevant to them when they predict costly post adaptations of their processes, by complying with higher social standards. Instead, in some supply chains, government regulations can erode the returns that might be achieved by the possession of a superior position and resources.

In the context of this study, government procurement policies which govern the telecommunications sector in Malaysia have to be taken into account during the supplier selection decision. Being a prominent sector in the country, the telecommunications sector is highly regulated to ensure fair competition and equal opportunity for all players in the industry. The main telecommunications companies also play a role in the vendor development program aspired by the government as part of its national agenda. For example, in accordance with the Malaysian government procurement policy, local companies with Bumiputera status must be given priority in the supplier selection process. Thus, the government procurement policy is a factor that must be considered during the decision making process in supplier selection.

In the supplier selection context, it was suggested that complying with appropriate government procurement policies reduce the risk of incurring high supplier switching costs in case of new regulatory requirements in the future. Therefore, it is hypothesized that companies from different national backgrounds have different considerations when undertaking the supplier selection process and strategies.

Based on this discussion, following hypothesis is put forward for testing

H6: Alignment with government procurement policies has a positive affects to supplier selection.

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In conjunction with the interrelationship among criteria the sub hypothesis (H6a) was developed where the government procurement policies and business ethics has an influence to supplier selection. This sub hypothesis was developed based upon the following information.

While looking at the linkages between government policy and business ethics issues, we can look at the scenario in Japanese corporation and organisation business environment. The study shows that the relationships among the policy and ethics were existent. It ranks five factors according to the influence they exert on managers to make ethical/unethical decisions. The five factors are; industry climate, government and company policy, behaviours of superiors, behaviours of colleagues, and personal codes of behaviours. Japanese managers believe that "policy" influences their ethical decisions most, with "one's personal code of behaviour (Chiaki Nakano 1997).

The governing rules and regulations as set out by the government also seek to address the ethical issues that are prevalent in any business environment. Therefore, during the supplier selection process, suppliers with records of unethical business practices will also taken into consideration during the supplier selection decision.

Based on this discussion, the following hypothesis is submitted for testing

H6a: There is a significant relationship between government policies and business ethics which affects supplier selection.

In conjunction with the interrelationship among criteria the sub hypothesis (H6b) was developed where the government procurement policies and decision making tools/techniques has an influence to supplier selection. This sub hypothesis was developed based upon the following information.

The making of decisions is a crucial activity in each realm, being used in our day-to- day lives and in social affairs or national conducts. So when decisions are made by people, they have to be reasonable and correct. Normally, the process of a decision is constituted

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by several crucial elements like deciding person, the decision object, method, tool, environment, policy, information and target.

Therefore in order to choose the better supplier it has to be done through certain ways both the subjective and objective circumstances taken into account, and based on information and experiences. Decision-making is an important activity in each thing we do, involving our daily lives and the project of social affairs or national policies (Lin and Wu 2008).

According to Groenewegen and Vergragt (1991), it is indicated that adherence to government policies and regulations often requires supplier organisations to handle complex business processes (e.g., coordination of works, design of employee benefit systems, implementation of safety guidelines) which can only be achieved through effective management systems and strong planning capabilities (Groenewegen and Vergragt, (1991); Hart, (1995); Waddock and Graves, 1997).

From these aspects, government policies play a critical role in the success of a firm‟s selection process. The supplier selection decision clearly needs to be based on the evaluation of supplier capabilities, market demand and market supply within the context of national rules and regulations as described previously.

In the context of this study, government procurement policies which govern the telecommunications sector in Malaysia have to be taken into account during the decision making process. Being a prominent sector in the country, the telecommunications sector is highly regulated to ensure fair competition and equal opportunity for all players in the industry. The main telecommunications companies also play a role in the supplier development program aspired by the government as part of its national agenda. For example, in accordance with the Malaysian government procurement policy, local companies with Bumiputra status must be given priority in the supplier selection decision. Thus, the government procurement policy and decision making tool/techniques is a factor that must be considered during the decision making process in supplier selection.

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Based on this discussion, the following hypothesis is submitted for testing:

H6b: There is a significant relationship between government policies and decision making tools and techniques which affects supplier selection.