Bridging inter and intra-firm boundaries - management of supplier involvement in automobile companies in India

Abstract

The automotive industry is one of the largest industries in India and world wide. Apart from being a vital sector of our economy, an interesting thing about auto industry is its ability to drive the demands of other sectors like steel, rubber, glass, aluminium, plastics, which in one form or another are used as components in the automobiles. Recently, the regulatory norms are liberalized which has made possible for the global OEMs to enter the Indian market. This move is now shifting the way the suppliers, assemblers and marketers way of doing business. The volumes of most Indian auto makers are below 100,000-150,000 units a year, the level that is considered viable in the developing economies. Because of this low volume, the manufacturers are not able to realize economies, thus the margins of few players remain under pressure. We sincerely believe that the critical success factors for passenger car manufacturers in the emerging scenario are indigenization levels, reach of dealer network, relationship of manufacturers with their suppliers and buyers, efficiency of after-sales service, volumes, and pricing.

In this backdrop, through this project we have made an attempt to understand one of the critical factors ‘manufacturer-supplier relationship’ in the Indian scenario and have tried to analyze whether the manufacture-supplier relationship can be tweaked in-order to gain competitive advantage in the Indian passenger car industry. Through this project we have compared and contrasted the same factor in Japanese, US and UK industrial scenario. We have also analyzed the feasibility of adopting Japanese model in India and what are the road blocks we need to overcome to achieve it.