The History of Supply Chain

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The current issue and full text archive of this journal is available at www.emeraldinsight.com/1751-1348.htm

A study of resource dependency: the coal supply strategy of the Japanese steel mills – 1960-2010 Bradley Bowden
Griffith Business School, Griffith University, Brisbane, Australia, and

A study of resource dependency 73

Andrea Insch
School of Business, University of Otago, Dunedin, New Zealand Abstract
Purpose – The development of the Pacific seaborne coal trade since 1960 has been central to East Asia’s economic expansion. In exploring the growth of this trade this paper seeks to understand why Japanese steel mills ( JSMs), the world’s largest coal importers, used few of the strategies that one would expect in the light of resource dependency theory, relying instead on market exchanges. Design/methodology/approach – This study relies primarily on archival sources, held by the Departments of Mines and Natural Resources in Victoria (British Columbia) and Brisbane (Australia) to reconstruct changing patterns of supply and price in the Pacific coal trade. Findings – It is found that by relying on a strategy that amounted to “vertical quasi-integration” JSMs were able to use their combined power to dictate the terms of market exchanges with buyers during the 1980 and 1990s. By 2000, however, this strategy had become counter-productive, as low prices fostered the emergence of a powerful Australian-based selling oligopoly. Research limitations/implications – The study contributes towards the growing study of transnational events, experiences and institutions in management history, filling a noticeable gap in resource dependency theory, which has not previously explored the long-term consequences of strategies aimed at reducing dependency. Practical implications – East Asia has become the major engine for world economic growth and manufacturing output since the 1970s, and this study explores for the first time the genesis and development of the Pacific coal trade that has underpinned this growth. Social implications – The study demonstrates the long-term adverse consequences of attempts to manipulate buyer-supplier relationships to minimise cost inputs. By creating a low-cost environment, coal buyers ensured the emergence of a sellers’ cartel that eventually forced up world coal prices to the detriment of consumers. Originality/value – No previous study has attempted a study of a major international commodity trade over such an extensive timeframe. It is likely that similar attempts to manipulate supply and price in other commodity trades will, over time, result in similar outcomes. Keywords Buyer-seller relationship, Canada, Management history, Mining, Steel industry, Supply chain management, Japan, Coal Paper type Research paper

Introduction The coal industry has long attracted the attention of management historians. It was in this industry, as J.U. Nuf (1966, p. 322) notes in his classic history of the British coal trade, that “capitalistic forms of industrial organization” were first established. While, as Pollard (1965, p. 62) observes, other industries were “still in the handicraft stage”, the coal sector led the way in introducing steam-power, cost-accounting and methods for managing large labor forces. A low-value commodity that could not be profitably

Journal of Management History Vol. 19 No. 1, 2013 pp. 73-86 q Emerald Group Publishing Limited 1751-1348 DOI 10.1108/17511341311286204

JMH 19,1

74

transported by road any great distance, coal played a decisive role in determining the Industrial Revolution’s spatial development. By the 1960s, however, employment and profits in many old underground fields were threatened by new forms of energy, notably oil and nuclear power. Yet, during the 1960s, the foundations were laid in the Pacific Basin for a seaborne coal trade of immense scale, which was to underpin the continued economic development of Japan, Taiwan, South Korea and, after 2007, China. Pioneered...
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