Alternative Component Sourcing Strategies within the Manufacturer-Supplier Network: Benefits of Quasi-Market Strategy in the Japanese Automobile Industry

Abstract

This study examines the component sourcing strategy of the Japanese automobile manufacturers, focusing on the sourcing concentration and the sharing common suppliers with competitors. We have analyzed sourcing strategy of six Japanese car assemblers (Toyota, Nissan, Honda, Mitsubishi, Mazda, and Suzuki) regarding 95 components. We have found that firms using a broad manufacturer-supplier network tend to be more profitable. In other words, firms with a low sourcing concentration and a high supplier sharing, which are the characteristics of quasi-market strategy, tend to perform better than the other firms. Among the six manufacturers, Toyota, Mitsubishi, and Suzuki were categolized as firms that followed quasi-market strategy. We believe that this finding is interesting because this relationship has been found in the context of the Japanese supplier-assembler relationship. The Japanese cooperative inter-firm relationship is supposed to be beneficial to suppliers, as well as to assemblers. It is commonly considered that a relatively exclusive keiretsu system facilitates these close inter-firm ties. However, the results in this study imply that a few leading Japanese automobile manufacturers may have management capabilities in benefiting from both a relatively broad supplier base and cooperative relationship with individual suppliers.