International Strategy of Traditional Suppliers in the Automotive Industry -A Case Study of a Japanese Forged Part Supplier-

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Abstract:

In this study, the author attempts to clarify how existing auto component suppliers can grow despite a lack of managerial resources for leading transformation into new world of ICT.
As a basis for growth, Japanese manufacturing industries are shifting from domestic markets to overseas markets. In addition, new technologies and emerging business models are assumed to be challenges for traditional players.
Mainstream study of supply chain management has put emphasis on structural embedding in a specific network. In other words conventional supply chain management study has shed light on cooperative relationship between carmakers and suppliers. They neglected the study of growth strategy of each supplier.
　This study aims to investigate how traditional players can avoid the risk of being bound by traditional value networks or disruptive innovation. It also investigate how traditional players can successfully expand their businesses from the suppliers’ point of view.
This is a qualitative study based on fieldwork at Gaia japan and Gaia Korea ( both pseudonyms ) on May 30, 2013 and October 12, 2013, respectively. Several surveys were also conducted at the companies via email.
Gaia Japan was founded in Osaka in 1943 as a metal processing company. It has chosen a growth strategy focusing on the forged repair part business in the domestic market, in order for it to stay independent.
Gaia Japan has also established several foreign subsidiaries beginning in 1976.
It established Gaia Korea in 1979 as a foreign subsidiary. Rather than forged repair parts Gaia Korea’s main business is genuine forged parts including spools and universal joints for OEM car makers including Hyundai.
Gaia Korea has seen rapid growth. Currently annual sales of Gaia Korea are three times larger than that of Gaia Japan. Also Gaia Korea is contributing to the development of high quality electric water pumps used in HEV, EV and FCV for major car manufacturers, applying the industry’s latest technology.
Gaia Japan continues to face challenges in operating its foreign subsidiary smoothly, it has increased its presence in the global markets through Gaia Korea’s growth.
This case study implies that even traditional suppliers could adapt to the change of environments such as global markets and innovation by implementing suitable international strategies.