Business Case Analysis: #1
Toyota, Ford, GM and Volkswagen-Some Differing Opinions about working with Suppliers.
Toyota Motor Corporation is one of the world’s leading auto manufacturers. Toyota has been approached by two large US automakers, GM and Ford, to join their Internet-based marketplaces where the automakers and their suppliers hope to do business more efficiently and drastically reduce costs by giving the suppliers access to more business and by trading billions of dollars worth of goods and services in the marketplace. Both Ford and GM have embraced the concept of an electronic marketplace for motor vehicle parts and are in fierce competition to enroll large non-US automakers to their camps. Toyota’s issues with the US automakers proposals to join the Internet marketplace are twofold. One is that Toyota considers Internet marketplace to be only an efficiency road, and not a destination to do the business at. Second issue Toyota has with such proposal is that by joining the Internet marketplace, where virtual “bidding” would occur, Toyota would violate it’s own philosophy on treating suppliers as partners and developing long term relationships, thereby reducing costs and maintaining high quality of parts. The unwritten issue in this case is that Toyota has with the Internet Marketplace is that by acquiring goods and services through this marketplace, quality of the purchased products may be questionable, and although costs per product may be lover, overall, the waste of parts, and overall higher costs, unfit to be used in production, or, used in production and failed during customer operation may be greater than the saving form joining such marketplace. A separate Issue Toyota has been struggling with is partnership with VW in Europe in attempt to standardize auto parts for cars sold in Europe to reduce production costs, mainly due to almost limited sales volumes. The main point of difference between Toyota and VW is what parts each company considers for standardization and what each company considers "competitive components". QUESTION 1.
GM and Ford have quickly pushed the development of large Internet sites to create an environment where suppliers must compete for business. Ford and GM argue that these Internet sites should reduce cost because the negotiations are streamlined. How do you think the suppliers view these sites?
The reaction of most suppliers will depend on weather the suppliers have an existing relationship with the automakers participating on the Internet marketplace or not, as well as their size and ability to compete for new contracts. Most suppliers not having and existing relationship with the automakers would view these sites as an opportunity to expand their business and acquire a large customer for their goods. However, as with any large vendor, the automakers will have supplier qualification requirements posted on those Internet marketplaces, as most large US companies require quite extensive qualification process to become their vendor, which then will prevent many smaller suppliers form competing for business. This will certainly limit their ability to work with theses automakers. On another hand, suppliers who have been doing business and have existing contracts with the US automakers will surely question the solidity of these long standing relationships and will view this step as a pressure on them to reduce their prices, even if this means to incur losses. The existing suppliers that supply multiple components to the automakers may also view this as a positive trend as it will give them an opportunity to expand their business by introducing their other products to the industry or by acquiring smaller suppliers who have competitive products...
Rather than having vendors compete against one another, Toyota is Interest in treating suppliers as partners. Is Toyota just being old-fashioned in its views?
One would think that as the...
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