The successful operations of businesses requires them to maintain relationships with various stakeholders that are directly associated with their business. The most important ones are the suppliers and the business customers of the organisation. In performing the daily activities and to offer the core products and services to customers, businesses are required to acquire sufficient raw materials from suppliers and they are then processed for shipment to their customers. In performing this process of making the products available to customers, businesses are required to maintain good relationships with both their suppliers and customers. Further in respect to B2B business format, the importance of maintaining relationships with both the suppliers and buyers is crucial in achieving higher level of success. However, the task of maintaining harmonious relationships with both these important stakeholders has been extremely difficult for businesses, and it has been a major issue for them to achieve effectiveness in this regard. In ensuring effective development of relationships, it becomes essential for organisations to know the best possible timing and the ways of developing, nurturing or terminating business relationships (Bourne, 2009).
This report is aimed at performing a critical analysis of the strategic issue of maintaining good relationships with suppliers and customers. In perform the analysis; the business organisation that has been selected is Holden Australia which is an automaker that operates in Australia. The strategic analysis of Holden Australia will be performed through evaluating the core business of the company including its buyers and customers, the core products of the company and their classification according to buying situation. The analysis of organisation’s customers, suppliers and competitors and the flow of information between them will be performed through network diagram and finally, relationship management strategies would be suggested to improve the relationships with suppliers and customers.
Background of Holden Australia
Holden is an Australian automaker with its headquarter in Port Melbourne, Victoria. It is a subsidiary company of General Motors which is a renowned US based auto making company. Holden has initially started its saddlery business in 1856 and today, it is popularly known as one of the seven fully integrated global General Motors operations that perform the designing, building and selling of vehicles in Australia and across the world. The company has an engineering manufacturing plant on-site and a vehicle manufacturing operations in Adelaide. The organisation performs the distribution of its vehicles through its strong dealership networks of more then 250 dealers. The company produces more than 42 types of models of cars for its domestic as well as international customers. The company accounts for the centre of expertise in performing the designing and engineering processes for GM globally. Thus, the manufacturing and distribution of motor vehicles, components and parts and engines become the core business of the company and this is mainly done through the Holden Dealer Networks that comprises of more than 250 authorised dealers (About Holden, 2013).
Overview of Products/Services: A brief analysis of Holden Australia implies that the car manufacturer is primarily known for satisfying the car needs of both the domestic as well as international customers. Being a car manufacturer, the company makes purchases of various ingredients that are needed in the production of vehicles and the entire purchasing of raw materials for the car manufacturing process is the responsibility of Holden Global Purchasing & Supply Chain. Holden is responsible for purchasing the raw materials across all four regions of the world which provides an opportunity to its suppliers in doing business at unprecedented volumes and perform the expansion of their own business worldwide. The important raw materials as purchased by Holden Australia in manufacturing cars include chassis, body exterior, HVAC, electrical systems, interior/safety and PCRM. These raw materials are procured by Holden from its various suppliers worldwide. The procurement of these raw materials leads to the development of various kinds of vehicles such as Commodore range of sedans, Sportwagon, and Ute together with Caprice long wheel luxury vehicles. These vehicles are made available to final consumers through the strong authorised dealer network of the company. The company also performs significant level of exports of its vehicles to international markets in satisfying the needs of its international customers (About Holden, 2013). Thus, the downstream customers of Holden includes its authorised dealers that accounts for selling organisation’s vehicles across the globe.
Classification of Products as per Buy Grid Matrix: As per Buy Grid Matrix, there are three major buying situations as available to companies such as straight rebuy, modified rebuy and new task. In case of straight rebuy, there is no need for any new information and it basically involves a routine process in making purchases of requirements. In case of modified rebuy, the buyer feels the need for evaluating alternatives for purchase decision in order to make better purchase decisions, and finally, in respect to new task, an extensive search of new information is required to make buying decision. The buyer in this case lacks information about the products and need completely newer information to make sound buying decision (Morris, Pitt and Honeycutt, 2001). In respect to the raw materials as purchased by Holden Australian in manufacturing vehicles, almost all of them can be classified as straight rebuy because they are purchased in raw forms and designed as per the models of different vehicles at the manufacturing site of Holden. The raw materials such as chassis, body exterior, electrical systems and PCRM are needed in case of all kinds of vehicles and since they are acquired in raw form, they does not need new information in making the buying process. It is a form of routine purchase and as such, it can be classified as straight rebuy decision.
Business Network Model of Holden Australia
The core business of Holden Australia as identified is the development of vehicles to be sold to final customers through its strong authorised dealer’s network. In performing the development of vehicles, the role of suppliers is identified as crucial by the company because it is the quality components as provided by its suppliers that are integrated to make the final vehicle. Hence, the quality can be achieved, provided the suppliers provide high quality components. Further, it is essential to make delivery of vehicles to final consumers effectively and this is mainly achieved at Holden through its strong dealer networks of over 250 dealers. In achieving higher level of effectiveness with respect to both the suppliers and dealers in performing their responsibilities, the flow of information between them is crucial. In respect to Holden Australia, an evaluation of the flow of information and physical products and services between Holden Global Purchasing and Supply Chain and its suppliers is analysed in the business network model (included in Appendix). The model also states about the flow of information between Holden Australia and its customers and competitors.
From the evaluation of the business network model of Holden Australia as devised, it has been identified that the flow of information between the Holden Global Purchasing & Supply Chain and its suppliers is crucial from the point of view of achieving its prime goal of achieving innovative technology, superior quality, outstanding launch support and competitive total enterprise cost solutions in producing vehicles. An analysis of the suppliers of Holden Australia indicates that the company has more than 120 local suppliers of its key raw materials in manufacturing vehicles and among them; the key suppliers include Hett Pty Ltd, Futuris, Tenneco and Hirotec. The Global Purchasing & Supply Chain Team is responsible for the procurement of parts and services in manufacturing vehicles and this is generally performed on the basis of GM philosophy which focuses on quality, service, technology and price. In order to achieve all these aspects in the sourcing of products and services, the information flow between them is quite crucial and at Holden, the flow of information is achieved through a rigorous process. This includes conducting quarterly supply meeting with suppliers, annual supplier conference and organising supplier technology shows. The key flow of information is performed through these important ways between the purchasing department and the suppliers in order to achieve higher level of quality and cost efficiency with respect to all the key materials as sourced.
Apart from suppliers, the flow of information between customers is also crucial because it allows the company in identifying the level of customer’s satisfaction and necessary modifications that are needed in its existing products and services (Ukens, 2007). In respect to Holden Australia, the business network model as included in appendix shows that the company sells its vehicles through its wide range of authorised dealers that accounts for more then 250 dealers worldwide. Since, the company performs its operations in B2B mode, the analysis of the customer views is performed through employing different methods. The network model shows that the information flow between Holding Australia and final consumer of vehicles is achieved through Purchase & Delivery Survey (PDS) and Service Satisfaction Survey (SSS). These surveys allow the identification of the level of satisfaction of customers with the vehicles as delivered by the company, and also allows it in identifying the effectiveness of its dealers in assisting customers. The information flow along with the flow of vehicles to final customers is performed through the huge dealers’ network of the company. Finally, with respect to the competitors, the major competitors of Holden Australia as identified are Ford Motors and Toyota Motors.
Thus, the analysis of the information flows between Holden Australia and its suppliers and customers signifies that the organisation makes considerable attempt in order to ensure that the information flows in a most effective manner between these parties in order to achieve higher operational effectiveness.
Improving Relationships with Suppliers and Customers
Suppliers as well as customers are the important stakeholders of the organisation and as such, businesses are required to maintain good relationships with them. There are various relationship management strategies that can be applied by businesses in order to manage their relationships with their suppliers and customers. As for instance, in managing the relationships with suppliers, firms can consider for adopting the strategy of tier-1 supplier whereby the focus would be on managing relationships with few key suppliers that accounts for major proportion of supplying the raw materials and component parts to companies. As in case of Holden Australia, it has been identified that there are few key suppliers of the company including Hett Pty Ltd, Futuris, Tenneco and Hirotec. Thus, the strategy that the company should consider in managing its relationship with these few key suppliers is that of tier-1 supplier relationship which asserts for maintaining long term relationship with these few suppliers. This strategy allows for effective sharing of information with the key suppliers and this in turn allows for better meeting out the customer demands. As in case of Dell Computer, the organisation has considered for this strategy of sharing information with the suppliers which allows the company in timely and cost effectively meet the customer demands (Schneider, 2008).
Holden Australia can also consider for sharing the information about key raw materials or component parts with few of their key suppliers and ultimately, this would help in achieving effectiveness in sourcing raw materials required for production. Another major strategy as available for automobile manufacturers in enhancing the relationships with their suppliers are through developing Automotive eXchange Network (AXN) which is an important tool in linking automobile manufacturers with several thousand suppliers. In case of automobile companies such as Holden Australia, they usually have many suppliers for the necessary raw materials and component parts in manufacturing vehicles and maintaining relationships with all of them is important and also difficult. Hence, this tool would allow Holden Australia in enhancing its relationship with its suppliers through linking them directly with the production process of the company, and thereby in allowing them to deliver high quality and innovative vehicles to their final consumers (Kleinaltenkamp and Ehret, 2006).
Apart from establishing relationship with the suppliers, it is also highly essential that a long lasting relationship should also be developed with the customers of the organisation. There are various strategic tools available to companies in performing the development of long lasting relationship with customers. One such relationship management tool as available is customer relationship management (CRM) that allows the companies in delivering personalised services. As in case of Holden Australia, the analysis revealed that the company mainly sells its vehicles to final consumers through its strong authoritative dealer’s network and the customers’ satisfaction level is measured through purchase and delivery survey (PDS) and service satisfaction survey (SSS). However, the enhancement of relationship with the final customers can be performed through applying the strategy of customer relationship management. The company can utilise its technological tools in storing customer information and they can therefore be offered with personalised services. CRM enables the company in storing the information of its customers which in turn allows for the identification of the demand patterns of customers (Kincaid, 2003). Since, in case of automobile companies, the customers are required to undergo maintenance services for their vehicles with the company on regular basis, it provides a good opportunity in enhancing the relationships with their customers. Thus, Holden Australia can encourage its dealers to perform higher level of interaction with the customers in order to identify their viewpoints and suggestions which can be integrated to provide them highly satisfied services.
Thus, through the application of information technology, Holden Australia can ensure the effective flow of information across its suppliers and customers and this in turn allows for the effective accomplishment of organisational objectives.
In this report, a critical evaluation of the management of relationships with suppliers and customers is performed in respect to Holden Australia and it has been evaluated that the task of maintaining relationships with the customers and suppliers is crucial for the company in achieving its core goals of providing high quality and innovative vehicles. An analysis of Holden Australia revealed that it is a vehicle manufacturer company within Australia and the company mainly purchases raw materials and component parts in producing vehicles from a long list of suppliers. It performs the delivery of vehicles to final customers through its huge authorised dealerships across the world. However, the core business of the company is highly dependent on the suppliers because the component parts as provide by them are utilised in manufacturing vehicles. Hence, the attainment of quality and higher level of innovation in producing vehicles at Holden Australia depends upon its suppliers. In order to ensure that the company receives high quality and innovative component parts, it maintains close monitoring of its suppliers through quarterly supply meeting, annual supplier conferences and through supplier technology shows. In addition to this, the important competitors of the company as identified are Ford Motors and Toyota Motors. The company maintains relationships with its customers through purchase and delivery surveys, and service satisfaction survey. The enhancement of relationships with the suppliers and customers can further be achieved by the company through tier-1 supplier strategy of maintaining long term relationship with key suppliers, developing Automotive eXchange Network (AXN) and considering for the application of CRM tools in delivering personalised services to its customers.