The development activities of Japanese automotive supplier in South Korea

The case study of transaction between Denso Korea and HMC

Abstract

In recent years, early involvement in advanced engineering has become increasingly important for automotive suppliers. A supplier engaged in advanced engineering affects development competition and has a higher probability of being selected as the mass production supplier. Therefore, global suppliers are encouraged to engage in the advanced engineering phase. However, suppliers have their own individual strategic methods of approaching automotive OEMs. 　The Korean market is a strategic target for global suppliers. The Korean OEM, Hyundai Motor Company （HMC） is widely regarded as a late starter. It has grown rapidly and it recently achieved the fifth position in the global vehicle sales world ranking for Global OEMs. The HMC headquarters are the centralized authority for R&D as well as for mass production. Thus, in obtaining business with HMC, approaching the headquarters is particularly crucial. On the other hand, HMC needs global suppliers’ development capability to improve quality and reduce cost. However, the supplier’s attitude determines whether the know-how can be transferred to HMC. This study uses the transaction between Denso and HMC as a case study, and observes how Denso engages in HMC’s advanced engineering phase and influences the mass production supplier selection processes later. Using transaction governance theory, this study discusses the effects of raising quality, reducing production cost, and controlling opportunism through early supplier involvement in advanced engineering. This research model would be a useful reference for observing the level of development and prospecting in developing countries’ OEMs.