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...
... middle of paper ...
...ume that you are the successor to Jose Lopez at GM. What issues would you have to contend with? What actions would you take in your new position and why?
If I were the successor to Jose Lopez at GM I would contend with inefficiency of internal suppliers, revise gradually contracts with external vendors in order to establish long-term valuable for both sides relationships. I would try to move the company as a buyer in dominance box from the Power Matrix closer to interdependence. Since Lopez already has got some power by making this new policy, I would try to mitigate it, so suppliers could feel some relief and be more satisfied. Definitely what I would start to do is to develop a strategy for long-term cooperation and continue employ keiretsu practices but introduce them in better way stating with studying how my suppliers work and how we can gain mutual advantage.
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