Vertical alliances and Global Supply Chains
20 important questions on Vertical alliances and Global Supply Chains
How do non-capital resources determine bargaining power and stimulate the learning race in IJV?
- › Each partner contributes critical knowledge resources that form the basis for its bargaining power:
- Local partner: Understanding of the local market, cultural and environmental conditions (e.g., investment regulations, supplier practices, labor law).
- MNE: Technological knowledge, management systems, manufacturing skills
- Local partner: Understanding of the local market, cultural and environmental conditions (e.g., investment regulations, supplier practices, labor law).
- › Outcome of the learning race will determine each partner’s bargaining power and the instability of the IJV
Why are firms expected to benefit more from relational learning than suppliers?
- › Buyers and supplier face different levels of uncertainty with respect to market demands and buyers are more exposed to demand volatility.
- › The critical production and inventory-related knowledge stock of the
supplier has relatively greater benefits for buyers than demand side information has for suppliers.
What do enhanced buyer-supplier relationships lead to?
*Suppliers are often co-locating their production facilities to deliver JIT and sometimes JIS.
JIT and JIS reduce inventory costs but, however, create high interdependencies between buyer and supplier
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What are some sourcing practices that can lead to vertical alliances?
Ø Repeated contracting often without supplier competition
Ø Small number of direct suppliers
Ø Single and dual sourcing
Ø Early integration of suppliers in product development process Ø Price is not dominant selection criteria
Ø High degree of supplier assistance
Ø Vertical and horizontal knowledge exchange
What is the “dark side” of buyer- supplier relationships?
- › Relational inertia
- › Cost inefficiencies
- › Lack of innovation
- › Dependencies and increased risks of supply chain disruptions
- › ....
Thus managing the tension between cooperation and competition becomes key!
Why is there ‘vertical coopetition’?
- › Suppliers engage in upgrading and move downstream
(e.g. Magna Steyr builds Mercedes G-Class, the redesigned BMW 5 Series, BMW Z5, Toyota Supra and Jaguar Land Rover) - › Carmakers compete with suppliers over profit margins
- › Competition between suppliers affects collaboration in the buyer-supplier dyad
Read the slides (week 4) about Toyota's supplier network!
What is the authors’ critique on the way the issue of inter-organizational learning
is treated on the strategic alliances literature? Grant & Baden-Fuller (2004)
·The paper counters the widespread presumption that the primary motive is knowledge acquisition through organizational learning.
What does the analogy of Pavarotti’s collaboration with the Spice Girls teach us
about learning in alliances? Grant & Baden-Fuller (2004)
Please explain how knowledge is subject to economies of scale and scope. Grant & Baden-Fuller (2004)
·As knowledge is not specific to the production of a single product, economies of scale imply economies of scope (Differentiation). à More products possible (the higher the scope, the less the knowledge fits to a specific product.)
Why is the concentration of strategic alliances in the pharmaceutical industry
higher than the wood industry? Grant & Baden-Fuller (2004)
of scope.
Wood: In these sectors knowledge requirements are narrower and the knowledge
deployed tends to be comparatively product specific, only one raw material
What is an (international) equity-based JVs and why is it considered hierarchical?
Features: Control (equity-based = high control because of involved resources), administration,decision-making within each firm
Why is it more difficult for the local partner to acquire its partner’s knowledge
than the other way around? Inkpen and Beamish (1997)
·Local knowledge classified as cognitive knowledge: Easier to transfer as skills, because it is not as sensitive to team embeddedness. The experience of the managers in an IJV is the key to acquiring this type of knowledge.
In which cases might the foreign partner decide not to acquire local knowledge? Inkpen and Beamish (1997)
acquisition.
If the foreign partner views the task as complex, it may be dissuaded from acquiring additional knowledge.
Why are buyer-supplier relations often adversarial in a lot of industries? Cheung et al. (2011)
·Because the compete for the margin, level of competition. What the supplier earns more in margins, is what the buyer looses in margins.
How is performance in buyer-supplier relationship traditionally measured? Why is there a need to change this? Cheung et al. (2011)
·Performance of a specific partner relative to other partners; They measure in on a relationship basis, not from a supplier, buyer perspective.
How do they collect the data, how do they prevent the subjective data from social desirability? Cheung et al. (2011)
What are the three dimensions of relational learning and how do they relate to Bartlett and Ghoshal’s model of multinational corporation strategy? Cheung et al. (2011)
·Closely follows the B&G model of MNC strategy, which argues that MNCs must seek local responsiveness for adaptability to diverse locations (via information sharing), worldwide learning to exploit innovations developed around the globe (through joint sense making with partner firms), and global integration for efficiency (via knowledge integration across partners)
How is buyer-supplier relationship performance measured in this study? Cheung et al. (2011)
Does cultural difference influence the relationship between relational learning and dyad performance? Cheung et al. (2011)
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