Gaining Strategic Advantage Managing Social Capital in the Supply Chain

1、22gaining strategic advantage: managing social capital in the supply chainrobert r. wharton and linda e. parrywestern kentucky universitydepartment of management1 big red waybowling green, ky 42101track: strategic management/international management, original papercontact person: linda e. parry, wes

2、tern kentucky university, department of management, grise 211, 270-745-5810, l, 270-745-6376 (fax) gaining strategic advantage: managing social capital in the supply chainabstractthe resource-based approach to strategic management suggests that competitive advantage can be found in

3、the different resources and capabilities a firm controls. resources that are valuable, rare, difficult to imitate, and can be exploited by the organization can produce sustained competitive advantage and earn above average economic performance. researchers suggest that companies that learn to develo

4、p their organizational social capital will have a strategic advantage that is difficult to imitate. this study looks at the success that honda corporation has had in managing social capital in its supply chain. using self-report surveys from 120 participants at a honda-sponsored supplier competition

5、, researchers find that those people who participate in quality-teams report that they are more satisfied with their work, feel that they improved the effectiveness of their company, and continue to offer suggestions to improve their suppliers operations. gaining strategic advantage: managing social

6、 capital in the supply chain introductionin a world where products are copied almost as soon as they are introduced into the marketplace, building and sustaining competitive advantage is a major concern for todays ceos. the resource-based approach to strategic management suggests that competitive ad

7、vantage can be found in the different resources and capabilities a firm controls. resources that are valuable, rare, difficult to imitate, and can be exploited by the organization can produce sustained competitive advantage and earn above average economic performance (barney, 2001).much has been wri

8、tten about the value of people in organizations. huselid and becker (1997) found that a one standard deviation improvement in an organizations human resources system could increase shareholder wealth by as much as $41,000 per employee. barney (2001) contends that successfully managing relationships

9、can be a source of resource-based competitive advantage because it is a socially complex phenomenon that is difficult to imitate through direct duplication or substitution. consequently, there is a strong connection between how firms manage their people and the economic results achieved. results fro

10、m studies of five year survival rates of initial public offerings; studies of profitability and stock price in large samples of companies from multiple industries; and detailed research on automobile, apparel, and other industries shows that substantial gains of almost 40% can be obtained by impleme

11、nting high performance management practices (pffefer & veiga, 1999). one important management practice for many companies is the relationship that they have with their suppliers. supply chain partnerships are relationships between two or more independent entities in a supply chain to achieve specifi

12、c objectives. initiately these partnerships are generally created to increase the financial and operational performance of each channel. these objectives are accomplished through reductions in total costs, reductions in inventories, and increased levels of shared information. over a period of time t

13、hese partnerships can evolve and lead to improved service, technological innovation, and product design.the concept of managing the supply chain is not new. during the 1980s michael porter described a model for operational effectiveness in which all of the firms activities are looked at from the per

14、spective of a value chain. he theorized that mastery of the value chain would allow managers to understand how costs, quality, and value are delivered from each segment of the organization. when properly managed, organizations can forecast, produce, ship, and assemble a quality product or service ef

15、ficiently. companies that excel in supply chain management can tailor products to meet customer satisfaction. this skill offers the promise of a source of strategic advantage that others less proficient at supply chain management cannot readily duplicate. many companies have adopted supply chain man

16、agement principles for tracking their products or services through the chain. however, since most companies do tracking, this skill is not unique, and therefore, no longer offers a source of sustainable advantage. nevertheless, there are still methods to achieve resource-based advantage through the

17、supply chain. itami (1987) suggests that developing capabilities such as teamwork among top managers, organizational culture, relationships among other employees and relationships with customers and suppliers are often taken for granted but can become a resource. he contends that those companies tha

18、t learn to develop their organizational social capital will have a strategic advantage that is difficult to imitate.this research focuses on one company in the automobile industry. the automobile industry is important because it is the industry that has made the largest investments in u.s. productio

19、n (kenney & florida, 1995). the automotive industry has also been at the forefront of supply chain management.honda manufacturing company is among the industry leaders in attempting to increase its competitive advantage by establishing relationships with members of its supply chain. for example, in

20、the past five years honda has established networks of honda managers and their suppliers in order to encourage more effective partnerships. have they been successful? in this study, we survey the participants of these networks to determine their perceptions of their partnership with honda. specifica

21、lly, we inquire if the supplier team members have acquired new skills and training; if they feel that they are more effective in their jobs; if they are making suggestions to improve their workplace; if they feel more satisfied at their jobs; and if they feel like part of the honda team. literature

22、reviewthe resource-based view of the firm builds upon the strategy literature by noting that it is a firms resources that are ultimately the source of competitive advantage. the resource-based view posits that a firms internal processes create a resource bundle that can become the means of creating

23、and sustaining competitive advantage (penrose, 1959; barney, 1991). this theory rests on two main points. first, the resources are the determinants of firm performance, and second, that the resources are rare, valuable, difficult to imitate and non-substitutable by another rare resource. if these co

24、nditions are met, a competitive advantage is created (barney, 1991). if other firms with the same resources cease efforts to duplicate the firms unique configuration of resources, sustainable competitive advantage is achieved (mahoney & pandian, 1992). two forms of the resource-based view have been

25、developed: the strong form and the weak form (schultz, 1992). the strong form views resources as obtainable from the market. these resources can then be used to establish competitive position. the weak form emphasizes how generic factors, such as human resource practices, culture, and team-based ski

26、lls, can be applied to create temporary competitive advantages (schulze, 1992). these factors become the source of durable advantage if they are bundled together to make it difficult for competitors to duplicate (ghemawat, 1986; penrose, 1959). because many process innovations require organizational

27、 and human capital, they become “hard to manage” tasks and also become difficult to imitate, creating another source of firm-specific advantage (barney, 1986). organizational social capital focuses on collections of individuals. it includes a firms formal and informal planning, controlling, and coor

28、dinating systems. it also includes a firms culture and reputation as well as informal relations among groups within a firm and between a firm and those in its environment (barney, 2001). nahapiet and ghoshal (1998) maintain that the development of social capital within an organization is likely to b

29、e a source of competitive advantage. they maintain that networks of strong interpersonal relationships can ultimately leads to success. one important relationship that firms engage in is with their supply chain partners. supply chain management (scm) is a continuous improvement process, ensuring cus

30、tomer satisfaction from raw material provider to the ultimate finished product customer. using scm, companies can create a source for differentiation or cost reduction. however, coordinating the supply chain among customers, distributors, and raw material suppliers is not an easy task. two issues th

31、at keep emerging are ensuring quality throughout the chain at an efficient cost and managing relationships across organizational and international boundaries. the total quality movement (tqm) is an integrative management philosophy aimed at continuously improving the quality of products and processe

32、s to achieve customer satisfaction. tqm is based on the premise that both internal and external customers are the focus of all activities of an organization. tqm authorities recommend that organizations work directly with raw material suppliers to ensure that their materials are of the highest quali

33、ty possible (juran, 1974; ishikawa, 1985; deming, 1986). currently, at least 50 percent of tqm organizations collaborate with their suppliers in some way to increase the quality of component parts (lawler, mohrman & ledford, 1992). often these organizations send out “quality action teams” to consult

34、 with their major suppliers. the objective is to help suppliers use tqm to analyze and improve their own work processes (saskin, 1993).suppliers can contribute to quality in a number of other ways. flynn, schroeder, and sakakibara (1995) in their empirical study of 75 us and japanese automotive firm

35、s focused on a number of factors such as process flow management, product design, statistical feedback, customer relationships, work attitudes, and management attitudes to determine which factors were critical to achieving quality within the organization. they found that top management support and s

36、upplier relationships were critical to achieving quality in the product design process and to meeting the needs of the customer.the ability to execute this mass customization and tailoring of products to customers needs provide an efficient edge that others not using scm find hard to replicate (donl

37、on, 1998). in fact, a harvard business school study concluded that a key driver in the decline of u.s. competitiveness in the international marketplace has originated from investing less in intangible benefits such as supplier relations (macbeth & ferguson, 1994).supply chain management allows compa

38、nies to become leaner and more agile. companies can use scm to develop close partnerships in which each partner collaborates using shared information to forecast, produce, ship, and assemble in true just-in-time fashion. in the manufacturing process alone, scm can provide set-up time reduction, impr

39、oved process-oriented layout, better product design, and enhanced data capture (scott & westbrook, 1991). ring and van de ven (1994) provide an overview of the benefits of strategic partnering. however, in the supply chain, organizations are only as strong as their weakest link, so the challenge is

40、to integrate all the functions efficiently. damanpour (1991) “truly innovative organizations create a climate conducive to innovation in all their parts, not only in segregated units (p. 584).” all parties must understand and be able to implement similar quality standards. reaching this understandin

41、g takes time, resources, and the ability to manage the relationship between partners. hypothesesthe automotive industry has been at the forefront of supply chain management. its supplier networks are large and diverse in terms of size, technical sophistication, and global location. leading automotiv

42、e manufacturers have developed extensive networks of suppliers over the last decade. all of these factors make the automotive industry an ideal site for investigation into how effectively a company can manage relationships with suppliers to gain a sustained competitive advantage.this study focuses o

43、n one major player in the automotive industry. honda manufacturing corporation is a leading automobile manufacturer. the automobile industry has become increasingly competitive in recent years as evidenced by price-cutting, zero percent financing, consolidating within the industry, lay-offs, and inv

44、entory build-ups. in an effort to find a way to create sustainable competitive advantage, honda has turned toward managing its relationships with its suppliers. this management is not in the form of dictating to the suppliers what they need to do but rather it is an attempt to build a unique resourc

45、e by putting investment into the people who actually make the parts that ultimately find their way into honda vehicles. in pursuing this goal, honda has established networks of suppliers throughout the world. going under the acronym of can (circle assistance network), representatives meet monthly wi

46、th representatives of supplier companies. the purpose of the meetings is to coordinate the suppliers, address any questions that the suppliers may have concerning production, and most importantly, encourage the suppliers to set up teams of employees that desire to address some problems that they see

47、 in the firm. these “quality” teams are composed of 3-8 people who work for the suppliers. they are encouraged to address any issue that they feel causes an environmental, safety, or production problem within their plant. some of the problems that teams have worked on in recent years include oil spi

48、lls on the plant floor; lack of security in the building; machinery producing too many rejected parts; and inefficient work processes on the line. however, even the smallest problem can result in major savings for the supplier, and ultimately, for honda.these teams are voluntary. however, honda enco

49、urages supplier teams by providing training and materials. in addition, honda hosts a two-day competition twice a year during which supplier teams compete by presenting their ideas, solutions, and results to a panel of six judges. winners receive trips, plaques, and recognition for their achievement

50、s. these competitions and monthly meetings can be expensive. nevertheless, it is an effort to use social capital to gain a sustainable advantage. coleman (1990) and nahapiet and ghoshal (1998) noted social capital is a resource that is jointly owned, rather than controlled by any one individual or e

51、ntity. consequently, any investigation needs to include perspectives of both organization as a whole and its individual members. in this study we surveyed supplier participants of the honda-sponsored “quest for success” competition on topics relating to skill and training acquisition; involvement in

52、 teams; satisfaction with their company; and attitudes towards honda.the ability to learn and the ability to change are likely to be among the most important capabilities that a firm can possess (barney, wright & ketchen, 2001). without additional training, there would be little effect on the perfor

53、mance of the firm. napapiet & ghoshal (1998) described how various forms of social capital can facilitate the development of intellectual capital within the firm. a strong social capital model of employment supports high-performance work and includes investments in training, job security, and collab

54、orative work and learning (pfeffer & veiga, 1999; ichniowski, kochan, levine, oson, strauss, 1996). these practices are meant to build contracts between employer and employee and among co-workers in an organization (rousseau, 1995). moreover, people work smarter when they are encouraged to build ski

55、lls and competence. if honda had been successful in creating social capital, we hypothesize:h1: supplier team members will report an increase in their knowledge and skills as a result of their team participation. teams permit employees to pool their ideas to come up with better and more creative sol

56、utions to problems. shaiken, loopez, and mankita (1997) reported that teams at saturn and the chrysler corporations jefferson north plant “provide a framework in which workers more readily help one another and more freely share their production knowledge-the innumerable “tricks of the trade”- that a

57、re vital in any manufacturing process.” (p. 31). this is important, as fiol (2001) argues, the skills, resources of organizations and the way organizations use them must constantly change to produce continuously temporary advantages. if honda has been successful in building a culture among suppliers

58、 that encourages everyone to look for solutions continually, we would hypothesize that team members would not be just making one suggestion but:h2: supplier team members will report making additional individual suggestions to improve their workplace since becoming a part of their quality team.h3: supplier team members will report making additional team suggestions to improve their workplace since becoming a part of their quality team. honda invests time and resources into developing supplier teams over time. efforts to change supplier members from holding a traditional view of “