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