Dynamics of the manufacturer-supplier relationships in emerging markets: A case of Thailand

Abstract

The purpose of this paper is to analyze the nature and the evolution of manufacturer—supplier relationships in Thailand's automobile industry and to identify the factors that influence the evolution of these relationships. The study is based on case research method involving in-depth interviews with 120 local and expatriates of 7 companies and their 14 suppliers. In Thailand, the manufacturer—supplier relationship starts out as a market-exchange-type relationship, and then gradually moves to a partnering type. The stages in evolution involve constant efforts on the part of foreign manufacturers to develop the suppliers by offering resources, training, feedback and solutions. The supplier capability building programs, bridging of cultural differences and formation of trust provides the basis for enduring partnerships. These partnerships are symbiotic relationships in which manufacturers benefit from suppliers' knowledge of local production and market factors and suppliers benefit from manufacturer's technical and managerial support. Additionally, closer collaboration with suppliers helps to prevent the leakage of business intelligence and theft of intellectual property and to prevent suppliers from working with competitors, thus allowing manufacturers to devote undivided attention to smooth supply of parts without any shortage. In emerging markets, the local suppliers play key role in the success of foreign automobile companies. However, the local suppliers need technical and managerial support from manufacturers. The process of building a network of competent local suppliers consumes time and resources, therefore manufacturers should take a long-term view of the market. The undeniable importance of overcoming cultural differences and building trust is the hallmark of successful partnerships. The paper highlights the importance and process of developing local suppliers in emerging markets using Thai automobile industry as an example. © 2008, Emerald Group Publishing Limited