Harvard Case - General Motors: Supplier Selection for Innovation
"General Motors: Supplier Selection for Innovation" Harvard business case study is written by Tingting Yan, Hubert Pun, Timothy Butler, Melissa Srock, James Preslar, Kate Plegue, Jilianna Meldrum. It deals with the challenges in the field of International Business. The case study is 6 page(s) long and it was first published on : May 31, 2017
At Fern Fort University, we recommend that General Motors (GM) adopt a multi-pronged approach to supplier selection for innovation, prioritizing strategic partnerships with both established and emerging suppliers, particularly those in emerging markets. This strategy should be guided by a comprehensive framework that balances innovation, cost-effectiveness, and long-term sustainability.
2. Background
This case study focuses on General Motors' (GM) quest to revitalize its innovation efforts and regain its position as a leader in the automotive industry. The company faces stiff competition from established players like Toyota and emerging electric vehicle (EV) manufacturers like Tesla. GM recognizes the need to embrace innovation in areas like electric vehicles, autonomous driving, and connected car technologies. The case highlights the challenges of selecting suppliers who can deliver cutting-edge technology while also meeting GM's cost and quality requirements.
The main protagonists in the case are:
- Bob Lutz: Vice Chairman of Global Product Development, responsible for driving innovation and product strategy.
- Mark Reuss: President of GM North America, responsible for overseeing the company's operations in the region.
- Various supplier representatives: Representing companies with diverse technological capabilities and business models.
3. Analysis of the Case Study
Framework: A combination of Porter's Five Forces and the Resource-Based View (RBV) framework can be used to analyze the case:
Porter's Five Forces:
- Threat of new entrants: High, due to the emergence of new EV manufacturers and the increasing accessibility of technology.
- Bargaining power of buyers: Moderate, as consumers have a wide range of choices but are sensitive to price and quality.
- Bargaining power of suppliers: Moderate, as GM relies on specialized suppliers for key technologies, but competition among suppliers exists.
- Threat of substitute products: High, due to the growing popularity of alternative transportation options like ride-sharing and public transport.
- Competitive rivalry: Intense, with established players like Toyota and emerging players like Tesla vying for market share.
Resource-Based View (RBV):
- Valuable resources: GM possesses valuable resources like its brand, global distribution network, and manufacturing expertise.
- Rare resources: GM needs to acquire rare resources like advanced battery technology and autonomous driving software.
- Inimitable resources: GM needs to develop inimitable resources like its own unique technology platform and a strong supplier network.
- Organized resources: GM needs to effectively organize its resources to leverage its strengths and address its weaknesses.
Key Findings:
- Innovation is critical: GM needs to innovate to remain competitive in the rapidly changing automotive landscape.
- Supplier selection is crucial: GM's success depends on its ability to identify and partner with suppliers who can provide cutting-edge technology, cost-effective solutions, and long-term sustainability.
- Emerging markets offer opportunities: Emerging markets like China and India are hubs for innovation and offer access to a growing customer base.
- Balancing cost and innovation: GM needs to find a balance between cost-effectiveness and the pursuit of cutting-edge technology.
- Sustainability is essential: GM needs to consider the environmental and social impact of its supplier choices.
4. Recommendations
Develop a Strategic Supplier Selection Framework: GM should establish a comprehensive framework that prioritizes innovation, cost-effectiveness, and long-term sustainability. This framework should consider:
- Technological capability: Suppliers should possess advanced capabilities in areas like EV technology, autonomous driving, and connected car systems.
- Cost-effectiveness: Suppliers should offer competitive pricing and efficient production processes.
- Sustainability: Suppliers should demonstrate commitment to environmental sustainability and ethical business practices.
- Long-term partnership: GM should prioritize suppliers who are committed to long-term collaboration and innovation.
Prioritize Strategic Partnerships: GM should focus on building strategic partnerships with key suppliers, going beyond transactional relationships. These partnerships should involve:
- Joint R&D: Collaboration on developing new technologies and solutions.
- Knowledge sharing: Open exchange of information and expertise.
- Shared risk and reward: Alignment of incentives to ensure mutual success.
Explore Emerging Markets: GM should actively seek out innovative suppliers in emerging markets like China, India, and South Korea. This strategy offers several benefits:
- Access to new technologies: Emerging markets are hubs for innovation and offer access to cutting-edge solutions.
- Cost-effective sourcing: Emerging markets often offer lower labor costs and manufacturing expenses.
- Growth potential: Emerging markets represent a significant growth opportunity for the automotive industry.
Foster a Culture of Innovation: GM should cultivate a culture that encourages innovation and collaboration within its own organization and with its suppliers. This includes:
- Empowering employees: Providing employees with the resources and freedom to experiment and pursue new ideas.
- Rewarding innovation: Recognizing and rewarding employees and suppliers for their contributions to innovation.
- Open communication: Creating a culture of open communication and knowledge sharing.
Implement a Robust Supplier Management System: GM should implement a comprehensive supplier management system that ensures:
- Due diligence: Thorough vetting of potential suppliers to assess their capabilities and compliance.
- Performance monitoring: Regular monitoring of supplier performance against agreed-upon metrics.
- Risk management: Identification and mitigation of potential risks associated with supplier relationships.
- Continuous improvement: Ongoing efforts to improve supplier performance and collaboration.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: GM's core competencies lie in manufacturing, engineering, and global distribution. The recommendations align with GM's mission to be a leader in the automotive industry by fostering innovation and leveraging its strengths.
- External customers and internal clients: The recommendations aim to meet the needs of external customers by providing them with innovative and sustainable products while also satisfying the needs of internal clients by ensuring a reliable and efficient supply chain.
- Competitors: The recommendations address the competitive landscape by focusing on innovation and cost-effectiveness, which are key differentiators in the automotive industry.
- Attractiveness ' quantitative measures: While specific quantitative measures are not provided in the case study, the recommendations are expected to enhance GM's profitability by reducing costs, improving efficiency, and driving innovation.
6. Conclusion
GM must embrace a proactive and strategic approach to supplier selection for innovation. By prioritizing partnerships with both established and emerging suppliers, particularly those in emerging markets, GM can gain access to cutting-edge technologies, cost-effective solutions, and long-term sustainability. This strategy will enable GM to regain its leadership position in the automotive industry and thrive in the rapidly evolving landscape.
7. Discussion
Other Alternatives:
- Internal development: GM could focus solely on internal development of new technologies. However, this approach is time-consuming and resource-intensive, and it may not provide access to the latest innovations.
- Acquisitions: GM could acquire innovative companies to gain access to their technology and expertise. However, acquisitions can be expensive and disruptive, and they may not always be successful.
Risks and Key Assumptions:
- Risk of supplier dependence: GM needs to manage the risk of becoming overly reliant on a small number of suppliers.
- Risk of intellectual property theft: GM needs to protect its intellectual property when working with external suppliers.
- Assumption of supplier commitment: The success of the recommendations depends on the commitment of suppliers to collaborate and innovate.
Options Grid:
| Option | Advantages | Disadvantages | Risk |
|---|---|---|---|
| Strategic Partnerships | Access to innovation, cost-effectiveness, long-term sustainability | Requires careful selection and management | Supplier dependence, intellectual property theft |
| Internal Development | Control over technology, potential for competitive advantage | Time-consuming, resource-intensive | May not be as innovative as external solutions |
| Acquisitions | Quick access to technology and expertise | Expensive, disruptive, may not be successful | Integration challenges, cultural clashes |
8. Next Steps
- Develop a detailed supplier selection framework: GM should work with its procurement team and internal stakeholders to develop a comprehensive framework that outlines the criteria for selecting suppliers.
- Identify potential suppliers: GM should conduct research to identify potential suppliers in both established and emerging markets, focusing on companies with strong technological capabilities and a commitment to sustainability.
- Establish pilot programs: GM should launch pilot programs with selected suppliers to test the effectiveness of the new approach and identify best practices.
- Monitor and evaluate: GM should continuously monitor and evaluate the performance of its suppliers and make adjustments to the strategy as needed.
By taking these steps, GM can create a robust and innovative supplier network that will support its long-term success.
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Case Description
In February 2017, a purchasing manager for General Motors Company (GM) needed to come up with a sourcing proposal to source e-boost modules, which were required to support the enhanced 2020 Chevrolet Bolt Electric Vehicle and the new 2020 Chevrolet Bolt Autonomous Vehicle. GM had four possible international suppliers to choose from. Each supplier had its pros and cons in terms of price, product development capability, and the architectural nature of the braking system. GM wanted to be a disrupter to the autonomous vehicle industry. Its top priorities were public safety and defect-free quality. In order to continue to maintain the market leadership position, GM wanted to retain the intellectual property of the e-boost modules. Which supplier would best meet the needs of the company?
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