Case: Toyota, Ford, Gm and Volkswagen - Some Differing Opinions About Working with Suppliers

CASE: TOYOTA, FORD, GM AND VOLKSWAGEN- SOME DIFFERING OPINIONS ABOUT WORKING WITH SUPPLIERS. CASE SUMMARY: The main issues at stake in this case is the working relationship Toyota has with its suppliers, compared to other Auto manufacturers such as ford and General Motors. Another critical issue is which sets of parts should be standardized. Both Ford and GM have embraced the concept of an electronic market place for motor vehicle parts. The AutoX-change as it is called would bring automakers and their suppliers together. The rational for this e-market place is that it would drastically reduce costs by providing suppliers with more business opportunities. Toyota on the other hand tends to see its suppliers as partners. By engaging suppliers in long-term contracts, it is hoped that they would reduce prices. Toyota's fear is that engaging in the AutoX-change would create and adversarial relationship with themselves and suppliers. The sub-plot to this case is the standardization of auto parts sold in Europe. Toyota has been experiencing lagging sales in Europe. Once again, Toyota is at difference with VW and Ford. The main point of contention as it related to standardization resulted from the definition of "competitive components". Toyota had a much wider range of parts in this category than GM and VW. SWOT ANALYSIS. STRENGTH This market place will provide manufactures with more components to choose from. The online marketplace could help reducing costs to the manufacturer. It also has the potential to provide suppliers with more business, considering that they would be able to view the needs of the manufacturers online. Another strength of the proposed e-procurement site is the financial strength and backing it would have considering that it is being spearheaded by the likes of GM and Ford. This would create a "click- and-mortar" type company. WEAKNESS The main weakness of such a system is that companies like Toyota would no longer be able to treat suppliers as partners. A more adversarial relationship would ensue. This could have potentially devastating effects for smaller suppliers who might not be as price competitive as the larger suppliers. OPPORTUNITIES Given the fact that this business would be conducted over the web there would be little barriers to entry. As such smaller suppliers would have the opportunity to engage in business. In addition, it would provide new markets for suppliers. Given the fact that the World Wide Web is accessible 24 hours per day, the ability to transact business irrespective of geographic location would not be limited. THREATS. The threat exists that this online procurement system might fail if it does not have the right underlying technical infrastructure. This involves the right software, servers, hosting facilities, connectivity devices and the right people to build and effectively maintain this system The AutoX-change can be threatened if Toyota, GM and VW cant come up with a list of "competitive components" that is consistent for all concerned. Another threat exists if the demand and quality of components is not delivered by suppliers. If there is a limited amount of suppliers participating then this will impact the efficiency of the e-procurement system. Any business that is transacted over the Internet is always exposed to the threat of hackers and subsequent security breaches. CASE ANALYSIS. Some suppliers, depending on their size might not have the technological infrastructure to participate in the AutoX-change. This will obviously limit their ability to work with theses automakers. Suppliers who have established relationships and contracts with automakers will question the long-term viability of these relationships. The larger suppliers that supply multiple components will view this as a positive. This might provide them with opportunities to expand their business. One critical question, which will be asked by every supplier, is how will the e-procurement system affect prices. The AutoX-change will obviously encourage and attract more suppliers. This might result in drastic reduction in the prices of parts, especially if the automakers adopt a "bully" stance where prices are concerned. One of the main criticism of large oligopolistic firms like Wal-Mart and Target is that because of their market power they have the ability to drive suppliers into providing very low prices. Toyota clearly has subscribed to the fourth leg of the "three legged stool" approach. This "three legged stool" espouses the benefits of strong relationships with Customers, Employees and Owners. The fourth leg is Suppliers.