Jose Ignacio Lopez de Arriortua Case
Jose Ignacio Lopez de Arriortua Case
General Motors is one of the world's most dominant automakers from 1931. After 1980s economic recession the main goal for automobile companies was cost reduction. Customers became more price-sensitive. Also Japanese competitors came into market with the new effective system of production. So market was highly competitive and directed toward price reduction. The case states that in 1991 GM suffered $ 4.5 billion losses and most part of the costs of manufacturing was due to purchased components. GM NA hired Lopez in order to find the way from "extraordinary" situation and reduce costs. Answers to the case questions: 1. Andrew Cox states in his article that the ideal situation for buyers is logically to force all of their suppliers into the buyer dominance box (of his "Power Matrix" page 13 of the article). Should a buyer ultimately be striving to maintain a dominant power leverage position over their supply base as Cox suggests? Is it possible to maintain a buyer dominant power position and simultaneously build a collaborative alliance with a supplier?
Dominant power is very tempting for the buyer since it provides some kind of control of quality and specifically drives price down. But, from my perspective, supply chain management is mostly all about cooperation in order to achieve success in every part of the channel and by this means get quality improvement and reduce costs throughout the supply chain so everybody is satisfied. The key here is definitely to establish long-term trusting and supportive relationships in which all members cooperate rather than dominate. For me it seems that interdependence box is better for such kind of relationships, where buyer and supplier are forced to work closely together and no one takes advantage of another. Such forces as high switching and search costs and attractiveness for both sides will motivate cooperation rather than pressuring one member by another. In many cases
General Motors is one of the world's most dominant automakers from 1931. After 1980s economic recession the main goal for automobile companies was cost reduction. Customers became more price-sensitive. Also Japanese competitors came into market with the new effective system of production. So market was highly competitive and directed toward price reduction. The case states that in 1991 GM suffered $ 4.5 billion losses and most part of the costs of manufacturing was due to purchased components. GM NA hired Lopez in order to find the way from "extraordinary" situation and reduce costs. Answers to the case questions: 1. Andrew Cox states in his article that the ideal situation for buyers is logically to force all of their suppliers into the buyer dominance box (of his "Power Matrix" page 13 of the article). Should a buyer ultimately be striving to maintain a dominant power leverage position over their supply base as Cox suggests? Is it possible to maintain a buyer dominant power position and simultaneously build a collaborative alliance with a supplier?
Dominant power is very tempting for the buyer since it provides some kind of control of quality and specifically drives price down. But, from my perspective, supply chain management is mostly all about cooperation in order to achieve success in every part of the channel and by this means get quality improvement and reduce costs throughout the supply chain so everybody is satisfied. The key here is definitely to establish long-term trusting and supportive relationships in which all members cooperate rather than dominate. For me it seems that interdependence box is better for such kind of relationships, where buyer and supplier are forced to work closely together and no one takes advantage of another. Such forces as high switching and search costs and attractiveness for both sides will motivate cooperation rather than pressuring one member by another. In many cases