Developing Supplier Relationships in Emerging Markets

Abstract

When a transnational corporation is setting up a supply chain in the manufacturing industry in an emerging market, it is often necessary to have well-established local sourcing connections. This is required in order to gain cost advantages, and to shorten the development phase of components being purchased. This thesis will examine the supply chain of Volvo Truck Corporation in India, focusing on the relationship towards its suppliers with international connections present in the Indian market. Volvo Truck Corporation established its operations outside Bangalore in south India in 1998. Presently, the company has a limited market share, although the company is benefiting from its global brand reputation. In order to understand and examine various relationships in Volvo Truck Corporation’s supply chain, the authors have studied the activities, by using the concept of technology transfers as a tool of measurement. This tool describes how information, knowledge, skills and technology have been transferred between different parties. In order to map these transfers occurring in Volvo Truck Corporations supply chain, the authors have used a model designed by UNCTAD. The findings of this study can conclude that there is a two-way transfer of technology between Volvo Truck Corporations and its international suppliers. The majority of the transfers have included embodied technology from Volvo Truck Corporations to its suppliers during the development of products ordered by Volvo Truck Corporation. The transfers have mainly incorporated assistance in providing machinery and equipment, and assistance regarding the implementation of quality and environmental assurance systems. In addition to this, the authors have defined a number of indicators, which categorize different areas that are connected to the extent of technology transfers necessary within a relationship. The categorizations are created in order to simplify the efforts needed in order to strengthen the relationships. The analysis has led the authors to formulate a number of recommendations with the intention of developing Volvo Truck Corporation’s relationship towards its suppliers. The overall recommendations encourage Volvo Truck Corporation toevaluate the technical standards of each supplier individually, and therefore avoid misperceptions regarding a perceived higher technological standard of its international suppliers. Furthermore, the authors believe that further collaboration within the supply chain should be established. These collaborations should focus on joint research and development and establishing of co-operation clubs within the network of Volvo Truck Corporation.