Collaboration within international supply chain management

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Wong (1998) examines the failure of the international joint venture (IJV) of Wing On Co Ltd, a Hong Kong retailer, and Seiyu Ltd, a Japan retailer.  The paper notes that although the collaboration initially was very profitable, when Wing On experienced losses resulting from the IJV, both parties became inactive in the collaboration.  The research concluded that collaborations require additional and ongoing negotiations so that the perception of balance within the collaboration is maintained. 

Shrader (2001) examined the performance of seventy United States based newer high-technology manufacturing firms that entered foreign markets.  Twenty of the seventy firms gained entrance to a foreign market through collaboration with a local firm.  The research found a strong negative relationship between performance and the interaction of collaboration and R&D intensity.  However, the research found a positive relationship between performance and R&D intensity without collaboration, suggesting that firms with high R&D intensity should not enter into collaborations when entering foreign markets.  Shrader (2001) found that collaboration with a local firm benefited those firms attempting to differentiate themselves using a high level of advertisement.  Li et al. (2009) examined the effect that the level of the foreign equity share has on the productivity of the collaboration for 5,192 IJV's over three years.  The research found a positive relationship between productivity and foreign equity share to a point and then the effect becomes negative.  Therefore, the relationship between foreign equity share and productivity has an inverted U-shape, with foreign equity share having a positive effect on productivity up to 57%. 

A successful collaboration requires a partnership committed to continuous improvement and shared benefits, Soosay (2008). Sheu et al. (2006) stated a successful collaboration requires participates committed to supplying nurturing and the financial support. Further research is needed to gain a better understanding of the impact the IJV organization structure and how it differs from the parent companies has on the IJV success. Researchers could extend the research of the limited success of IJV with higher R&D intensive firms.

It is generally accepted that collaborative exchange of demand and supply information will lead to lower inventory costs and improved supply chain responsiveness. Holweg et al. (2005) identified four type of supply chain collaboration; Type 0, each level of the supply chain schedules production and places orders without the involvement of other supply chain participants; Type 1, sharing of demand information; Type 2, the supplier is responsible for managing inventory levels and replenishment; and Type 3, with external demand linked through the supply chain to raw material achieving a synchronized supply chain. The article identified three key factors to consider when working towards supply chain synchronization: 1) geographical distribution of customers and suppliers, 2) the demand pattern, and 3) product characteristics. According to Holweg et al. (2005) the frustration multi-national firms have experienced with supply chain collaboration is the result of mismatches between supply chain structure, product characteristics, and the type of collaboration. Multi-national firms should apply Type 3 collaboration with products where the demand and supply are local, Type 2 collaboration has been implemented successfully with slower moving non-perishable products, Type 1 is useful to generate better forecasts. However the research states, in many cases given the large number of customers and suppliers, moving away from Type 0 supply chain collaboration is not economically viable.

Frohlich and Westbrook (2001) surveyed 322 firms from around the world classified as manufacturers of fabricated metal products, machinery and equipment to measure their extent of supply chain collaboration and its relationship to marketplace, productivity, and non-productivity indicators. The article classified the level and direction of supply chain collaboration as inward, periphery, supplier, customer, or outward. A strong association was found between increased supply chain collaboration and increased performance of the firm.

Additional areas of research include the level of supply chain collaboration in the service industry, factors contributing to increase supply chain collaboration, and case studies of international supply chain collaboration including at least three levels. The included research support collaboration as a strategic concept that bridges all fundamental theories of the firm. International collaborations are multi-organizational structures that must address barriers from institutional to cultural.

Differentiation

Differentiation is the development of product and service specifications that differ from the competitor's products and services in respond to markets tastes and values. De Fraja and Norman (2004) proposed a model showing the relationship between product differentiation and the location of international production. The model found that firms that make foreign direct investment in operations will take a more aggressive stance to product differentiation and be more profitable when compare to firms that choose to simply export their product to a foreign market.

Kemppainen, K. and Vepsalainen, A.P.J. (2007) examined the supply chain of six global firms, including twenty-five organizations, by examining how those organizations differentiated themselves within the supply chain network with respect to the following categories; production, service, organizational resources, and product technology.  The study evaluated each supply chain network at the three separate timeframes; 1990, 2000 and planned 2010.  The research proposed a matrix for each category to illustrate critical issues relevant to differentiation. The matrix allows firms to compare the organization's status with benchmarks and the competition. Furthermore, the paper shows how the specialization of resources and capabilities allow organizations to focus on core competencies and thereby increasing the efficiency of the supply chain network. 

Product differentiation in the global market can often lead to excessive inventories and costs. The cost impact of product differentiation can be minimized when implemented in conjunction with postponement. Feitzinger and Lee (1997) examined the successful implementation of mass customization of DeskJet printers by Hewlett-Packard. By postponing the features that differentiated the printers by market, Hewlett-Packard benefited from production economy of scale and became more responsive to the market needs. Feitzinger and Lee (1997) stressed that successful implementation of mass customization requires collaboration between the various functional areas within an organization.

Matraves and Rondi (2007) examined the relationship between vertical and horizontal differentiation and turbulence for the 67 largest manufacturers in Europe. Thirty of these firms were identified as competing in their respective global market on price alone or horizontally differentiated (Type 1). The remaining manufacturers produced products that competed in vertically differentiated global markets (Type 2). The Type 2 firms were further subdivided based on the markets intensity of advertising, R&D, or both. Market turbulence is determined by the stability of the rankings of the top five firms by market share within a given market category. The research concluded sustainable competitive advantage can be achieved in markets where vertical product differentiation dominates, and markets with generally heterogeneous products.  Matsubayashi (2007) developed an artificial model to evaluate the influence differentiation had on consumer welfare. The research concluded when the market is relatively sensitive to price valuation more differentiation within the market (horizontal differentiation) decreases consumer welfare.  However, more differentiation within a market sensitive to quality (vertical differentiation) results in increased consumer welfare. 

The strategic concept differentiation is rooted in the firms need to satisfy the consumer's taste. Areas to consider for future research include international application of differentiation in the service industry, factors leading to successful international differentiation in the service industry, and case studies to support the model developed by De Fraja and Norman (2004) and Matsubayashi (2007).

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