Building strong ties with the suppliers is considered as a tradition in Japan but it also increases the dependency over the suppliers as well which is not a healthy sign for any business especially when the company is competing in a highly competitive industry. The Japanese way of business has to offer some highly attractive points which are remarkable in their own grounds and can help in creating a strong base for your business. However, there are some drawbacks as well or it can be said that there are some areas that are obligatory to follow and not following them is considered as a taboo in Japan.
One of such taboo is breaking ties with the suppliers or cutting the relationships and limiting them to some extent. Well this has been the reason why the supplier and manufacturer relationship in the old Keiretsu system was not affected and was providing to be burden on Nissan. It was restricting the company to flourish as the dependency over suppliers was high and the bargaining power of the suppliers was also very high which was resulting in increased cost. The company that was already facing bundle of issues must have to react towards these issues.
The RNA decided to operate in a different manner which was totally different and create new relationships with the suppliers under new rules but leveraging the Japanese method Keiretsu. This new method or this style of Japanese business has some very attractive features that can be discussed and described to understand the Japanese way of doing business more closely. Besides that it will also help in understanding the major attractive points of the Keiretsu approach. Therefore, understanding the new method and the definition that occurred is very important before enlisting its benefits.
According to the new system the company identified new suppliers and created a relationship with them, at an arm’s length and defined the new purchasing policy. This was a new approach to deal with the suppliers in order to create more strong ties and use suppliers in order to formulate an advantage. However, this approach also leveraged the script of the old keiretsu system. This system allowed the company to assess multiple benefits and encourages in investing more regularly in the suppliers relationship and focus on sustaining it. Under the new system the review system was established which was aimed at conducting reviews of the suppliers and their performance before and after their selection in order to completely monitor their performance and to examine and the interval of improvements. These reviews were also shared with the suppliers under the new system in order to keep them intact. The major benefit that this approach allowed was the suppliers identified the loopholes and became more focus towards the delivery of quality products.
Furthermore, the suppliers were under the confidence that sustaining relationships is also in favor of them so they focus on delivering the most quality products that will help the firm in creating competitive advantage. The suppliers were aware of the fact that these relationships are also in favor of them as well so they were not resilient towards investing in these relationships and improving or showing continues improvement on factors like quality, price and delivery. This system helped in building strong ties with the suppliers and utilizes them in creating advantage rather than becoming dependent over suppliers. The Japanese method allows building strong relationships with the suppliers and helping in creating cross functional coordination with them. Manufacturers can collaborate with the suppliers and help them in optimizing or enhancing their process of manufacturing and develop more strong and competitive products.
On the other hand the suppliers can also seek guidance from the manufacturers to develop new parts or materials or can even optimize on the existing parts. If a firm is committed towards innovation, the Japanese way of business allow the firm to collaborate with its suppliers to continuously stay connected and enhance on the production areas in order to provide more effective parts. Keiretsu system allows the manufacturers to work more closely with the suppliers and stay connected which allow the suppliers to understand the need of the manufacturers more appropriately and closely and deliver the output in more effective manner.
Creating such relationships is a challenging task but once established allows a company to reap exceptional benefits for a longer period of time. The suppliers can also receive multiple benefits that are of vital importance for suppliers as well. The suppliers can access the knowledge base of the manufacturer by working closely with them and understand more methods to improve and enhance on their manufacturing arenas. This allows the supplier to incorporate innovation in its grounds and develop more profound products or materials that can be helpful for the manufacturer and allow the supplier to receive recognition.
The suppliers also get the chance to target international markets and gain more global acclaim as far considering options to spillover are concerned. The suppliers get recognition and chances to explore more opportunities to excel as well. The Japanese method or approach like keiretsu is of unique importance for manufactures as it allows them to remain more focused towards research and development and digging innovation more rapidly. The manufacturers can establish strong relationships with the suppliers and should be worried about this as there will be no dependency over the suppliers. The companies can be more focus towards developing competitive advantage and improving on different areas like enriching their knowledge base.
These relationships with the suppliers can also the companies in targeting new markets and settling early in the new markets without accessing dependency over the suppliers in the local market. The suppliers can supply in the new markets as it will also allow them to explore new markets and will not be worry on factors like quality, price, and delivery. Thus, this system is of immense importance and can be very effective for companies aiming to operate in Japan. They should develop their method in the right manner in order to stay connected in the market.
The company was at the worst phases when the merger happened or the alliance was developed and the chances of survival were very low. Therefore, the company was unable to target some new opportunities that knocked on the door. Some of the major areas where the company realized the importance of additional synergies like entering in the Chinese market and incorporating with the local suppliers. However, this was not the case when the company targeted the Indian market and tried to enter in the hybrid category. One of the major reasons that the company failed to achieve laurels in these areas or opportunities was because the entry was late and the opportunity was already lost.
So the company had to focus more on realizing the importance of synergies but the company tried to utilize different mergers like entering in the Russian market where it acquired the oldest brand and the outcome was quite successful. However, in the economies like India and china where the economies were slowing down the company failed. It can be said that RNA assess the need of additional synergies and was quite aware of it as in some markets it utilized this aspect to cater the local market.
There are proofs that the company invested focus in developing electric cars and also competing with economical cars in India to compete with TATA Nano. However, the results that occurred were not attractive enough or in favor of the company. The company was very late in hybrid category as Toyota was already there first and had acquired most of the market share through its brand Prius. The company failed to understand the business practices of India and was unable to create strong synergy in that market to compete with the local giant. The Chinese market was established and highly competitive where the company was only able to serve a leap need. However, the company realized the importance of additional synergy but the measures or the methods it adopted in this regard were not affective.
The questioning regarding inviting new partners and creating more profound synergies is a good option but also has some concerning points. RNA is a strategic alliance and has been doing quite impressively since its inception. However, the two partners, Renault and Nissan both have their different identities and work accordingly. Adding a new player will not be an affective choice because a new methodology and culture has been created and diluting it further will not be the right decision to make.
On the other hand, adding or venturing with powerhouse can be an affective idea to compete globally but this also entails a risk of losing the brand image created through RNA. Thus RNA has been aware of the need of additional synergies and has put efforts as well to create more synergies but the need of additional synergy is not really there because the cost is very high as the alliance will not be able to serve the criteria they have established for themselves and may lose their advantage.