European Journal of Purchasing & Supply Management, Vol. 3, No. 1, pp.

33-42, 1997
Pergamon © 1997 Elsevier Science Ltd
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Developing buyer-supplier
relationships in the automobile
industry
A study of Jaguar and Nippondenso

Farooq Ali
MIRA Business Unit, Loughborough University Business School, Ashby Road, Loughborough,
Leicestershire LEll 3TU, UK

Gareth Smith and Jim Saker

Loughborough University Business School, Ashby Road, Loughborough, LeicestershireLEl l 3TU, UK

The adoption of Japanese-style practices is considered to be the most effective weapon for
automobile manufacturers to sustain and enhance future revenue in the face of increasingly
fierce competition. This paper illustrates how these practices influence the development of a
relationship, through studying the current partnership between Jaguar and Nippondenso.
(~) 1997 Elsevier Science Ltd

Keywords: relationships, automobile industry, buyer-supplier partnership

Between the mid-1880s and 1910, the automobile in-
dustry was characterized by very small production
volumes, largely revolving around customized auto-
mobiles catering for the very rich. Because of the
presence of a very small number of buyers, it was
possible for sellers to know customers personally and,
wherever possible, accommodate their individual re-
quirements in product design and after-sales services.
These close relationships that existed between buyers
and sellers in the early years of the industry were
gradually eroded with the constant scaling up of firms'
activities and size. To adjust to increased demand for
automobiles, Henry Ford introduced mass production
techniques and the standardized Model T just before
the First World War. Though Ford was hugely success-
ful, it took another pioneer, General Motors' Alfred
Sloan, to recognize the opportunities available from
tailoring the product to suit the needs of different
customer segments. Sloan developed a series of cars for
different income groups, while regularly updating mod-
els with new styling changes. However, the mass pro-
duction system within which both Sloan and Ford
operated was not conducive to developing ongoing
relationships with customers. This, however, was not
considered an issue, as the industry was still in its
youth, with demand constantly growing.
As the industry grew and the number of firms
supplying vehicle assemblers increased, assembler
firms developed an antagonistic, adversarial approach
towards handling supplier relationships. The advent of
increased competitive pressures, coupled with new
rflethods of organizing and managing supply originating
from Japan in the early 1980s, forced Western vehicle
assemblers to re-evaluate the nature of their dealings
with their suppliers and return to a closer, relational
approach.
Aims and structure
This paper presents an account of how some of the
organizational structures and procedures pioneered by
the Japanese have been adopted by Jaguar in its
dealings with one of its first-tier suppliers, Nipponden-
so, and highlights how these practices are conducive for
the development of long-term relationships, drawing
on the findings of past research into relationships. We
commence with an overview of the theories surround-
ing relationships, followed by a summary of how West-

33
F Ali et al
ern assemblers have shifted from an 'adversarial
approach' to a 'relational approach' influenced by the
adoption of Japanese methods of organization. This
shift is illustrated through a case study of Jaguar and
Nippondenso, and subsequently interpreted using re-
lational theories from the literature.
The relationship concept
There is a growing body of literature on relationships in
both consumer markets (Gummesson, 1987; Gr6nroos,
1990; Christopher et al, 1991; Storbacka et al, 1994) and
industrial markets (Spekman and Johnston, 1986;
Landeros and Monczka, 1989; Matthyssens and Van
den Bulte, 1994). The current emphasis on relational
exchanges represents a departure from the former
transactional focus (Jackson, 1985), which viewed ex-
changes in the context of short-term gains through
limited communications and without provision for the
retention of one's customers (Gr6nroos, 1994). In
contrast, relationships are concerned with long-term
partnerships where each encounter between buyer and
seller is part of an ongoing sequence of encounters. A
number of models have been constructed in an attempt
to provide a framework for buyer-seller relationships.
Models by Guillet de Monthoux (1975), Wilson (1975)
and Ford (1980) all emphasize the incremental nature
of buyer-supplier relationship development over time.
These models were augmented by the IMP group's
influential interaction model (Hfikannson, 1982), which
added the dimension of an atmosphere. The atmos-
phere refers to the degree of closeness between the
buyer and seller, regulated by the relative power/
dependence of the parties, and reflected in the degree
of cooperation and conflict in the relationship. Within
the atmosphere, mutual trust may develop through a
series of episodes, with transaction costs being reduced
the closer the two parties become.
Research to date suggests that the concepts of trust
and commitment are pivotal to the relationship's suc-
cess. Trust is defined as 'the willingness to rely on an
exchange partner in whom one has confidence', (Moor-
man et al, 1992), and is thought to be the 'binding force
in most productive buyer-seller relationships' (Hawes
et al, 1989). The interpersonal function of salespersons
is seen as instrumental in gaining the trust of customers
(Swan et al, 1985). Indeed, Doyle and Roth (1992)
frame their definition of relationships from the sales-
person's perspective: 'The goal of relationship selling is
to earn the position of preferred supplier by developing
trust in key accounts over a period of time.' Commit-
ment, described as 'the highest stage of bonding'
(Dwyer et al, 1987), is closely related to trust, and has
been defined as 'an enduring desire to maintain a
valued relationship' (Moorman et al, 1992). It is also
considered essential for a successful relationship
(Gundlach et al, 1995). The relationship between trust
and commitment has been studied by Morgan and Hunt
(1994), whose findings reveal trust to be positively
34
related to commitment, both of which lead to coopera-
tion: that is, the desire to work together to achieve
mutual goals (Anderson and Narus, 1990).
In many respects the relationship concept has shifted
the focus away from the concept of power that once
dominated research into channel behaviour (cf El-
Ansary and Stern, 1972; Etgar, 1976, 1978; Hunt and
Nevin, 1974; Lusch, 1976, 1977). A brief comparison of
the two may explain its intuitive appeal. Relationship
development relies upon trust to bring about desired
consequences, without coercion: it 'assumes goodwill
from all parties' (Gummesson, 1994). Power, on the
other hand, seeks coercion of another party to achieve
one's goals: it refers to 'the ability of one channel
member to induce another channel member to change
its behaviour in favour of the objectives of the channel
member exerting influence' (Wilemon, 1972). A de-
sired outcome of relationships is cooperation, facilitat-
ing constructive dialogue and problem solving (Pruitt,
1981), and the opportunity to deal with conflict in a
positive manner as a means of resolving problems
(Morgan and Hunt, 1994). In contrast, coercive power
may lead to dysfunctional conflict (Raven and Krug-
lanski, 1970; Lusch, 1976). In short, within rela-
tionships power is used judiciously as a consequence of
mutual dependence (Macneil, 1978, 1980): a 'win-win'
situation.
The influence of Japanese-style practices in the
automobile industry
Until the early 1980s, Western automobile assemblers
were characterized by their arms-length, adversarial
approach towards their suppliers (Bertodo, 1991), com-
parable to transactional exchanges (Jackson, 1985).
This approach saw suppliers as auxiliary entities, whose
purpose was to supplement the main activities of the
buyer. It relied upon a large supplier base with price-
driven competitive tendering and the assignment of
short-term contracts (Spekman, 1988) coupled with
limited inter-firm communication. The high vertical
integration of the industry meant that assemblers car-
ried out most of their own design and development
work in house, and retained a high proportion of the
value chain (Carr and Truesdale, 1992). For those
components that had to be sourced externally, assemb-
lers played off bidding suppliers in an effort to secure
the lowest price. Assemblers were also readily pre-
pared to make suppliers dependent on them by offering
work at acceptable levels of pay, which were hard to
refuse. Once dependent, the assemblers insisted on
price reductions, to which the suppliers were forced to
acquiesce, otherwise risking bankruptcy. Many sup-
pliers did go bankrupt without unduly troubling the
assemblers, owing to a safety net of multiple supply
(Friedman, 1977). This adversarial approach bred an
atmosphere of suspicion and mistrust on the part of the
suppliers. Assemblers may have achieved price conces-
sions but at the cost of putting many suppliers out of
 Buyer-supplier relationships in the automobile industry

ADVERSARIAAPPROACH
L RELATIONAL
APPROACH

Industry ..~ ~-~-~

Iiiiiiilriiiii'~~~',~l ,~ ^~.~

--SupplieBase"~"
r

1
TerminatedSupplierRelationships )
Figure 1 Industry restructuring towards the relational approach

business. Moreover, the emphasis on price-based pur-
chasing did not mean that total costs were reduced. As
Burt (1989) argues: 'Once the cost of poor quality is
factored in - downtime on the line, rework, scrap,
warranty work, legal fees etc, the cheapest may well be
the more costly.'
The advent of global recession, coupled with rapid
technological change and increased competition during
the 1980s (Bloomfield, 1991) - spearheaded by the
Japanese automobile industry adopting new lean pro-
duction methods (Womack et al, 1990) - forced West-
ern assemblers to fundamentally re-examine their
strategic positions. One key shift has been in the
structure and nature of buyer-supplier relations.
Assemblers now recognize that their own competitive-
ness is determined as much by their suppliers as by their
own actions (Hyun, 1994). The upshot has been a
repudiation of the short-termism of the adversarial
approach in favour of a relational approach with
selected suppliers I (Figure 1), heavily influenced by
successful Japanese strategies (Dyer and Ouchi, 1993).
This shift has seen the vertical disintegration of the
industry with greater subcontracting of peripheral acti-
vities for a greater focus on core business strengths
(Bertodo, 1991; Law, 1991). The supplier base of
assemblers has been reduced, with the number of
international suppliers linked to high-volume assemb-
lers being trimmed from typically between 2000 to 2500
at the start of the 1980s to between 1000 to 1500 nearer
the end (Lamming, 1989). This reduction has continued
into the 1990s, with corporations such as Ford Europe
anticipating that its supplier base will be reduced from
around 900 in 1992 to 650 by the mid-1990s (Carr,
1993). By 1997, the Motor Industry Research Associa-
tion (MIRA) forecasts that the average number of
direct suppliers in the European components industry
will have fallen to around 400. Though this figure
represents a significant reduction, it is still in excess of
the 160-300 direct suppliers that are currently found in
the Japanese automobile industry (McGrath et al,
1994).
The Japanese influence on Western assemblers is
also reflected in their present-day use of long-term
contracts to single selected or 'preferred' suppliers
(Turnbull et al, 1992), 'system buying' of components 2
(Way, 1989; Nishiguchi, 1994), greater subcontracting
to suppliers (Nishiguchi, 1994), and the strategic in-
tegration and early involvement of suppliers in new
product development (Bonaccorsi and Lipparini, 1994)
using the principles of simultaneous engineering to
reduce product development time (Engel, 1991).
Further changes include the current emphasis on
quality-driven purchasing (Turnbull et al, 1992) as part
of TQM programmes, with 'zero defects' targets now
expected (Froggatt, 1991). Closely related to these
changes are JIT production systems (H~kansson and
Eriksson, 1993). Perfect quality control is vital in
operating a JIT system (O'Neal, 1989), as are close
relationships to selected suppliers: 'a JIT program
requires close integration of the suppliers' and buyers'
production systems . . . Multiple sources of supply
would create severe scheduling and integration prob-
lems' (Burt, 1989). More informally, it is believed that
long-term relationships lead to improved component
quality and lower costs, as has been witnessed in
Japanese industry (Richardson, 1993).

~Thisis discussedlater under the heading 'Vestigesof the adversarial 2A 'system"is defined as an integrated unit of interactive components
approach? - further research'. designed to form a function as a whole within a vehicle.

35
F Ali et al
Issues
The foregoing discussion reveals a number of issues
that provide opportunities for further study. These
include:
• How does an assembler select a supplier for a
present-day collaborative relationship?
• What are the dynamics of a relationship between an
assembler and one of its suppliers?
• Why does the application of Japanese-style working
practices assist in the development of a relationship
and how are they reflected in the theory surrounding
the relationship concept?
These issues are explored through the use of a case
study on a current partnership between Jaguar and one
of its first-tier suppliers, Nippondenso, established for
the purposes of developing a new product innovation.
Though the findings of the case study cannot be
generalized for the industry at large, it does allow for a
richer understanding of the processes at work. Tenta-
tive conceptualizations of the nature of the relationship
based on past relationship theory are used in interpret-
ing the findings. Before outlining the research method
we provide a background to the companies under
study.
Background to the companies
Jaguar
Jaguar is a low-volume automobile manufacturer of
luxury automobiles, based in the Midlands. It was
founded in 1922, and enjoyed considerable success
until merging in 1968 with the British Leyland Motor
Corporation. This was followed by falling sales accom-
panied by declining quality and reliability of its pro-
ducts. Jaguar continued to suffer into the start of the
1980s as a loss-making entity with total vehicle produc-
tion numbering around 14 000. This figure steadily rose
through the 1980s, and in 1984 Jaguar was successfully
floated on the Stock Exchange. In December 1989 it
was taken over by the Ford Motor Company. Jaguar's
new parent brought with it access to its own product
and process technologies, and extensive resources to
secure Jaguar's long-term future growth. Total annual
vehicle production has since increased to over 40 000 in
1995.
Nippondenso
Nippondenso is a leading Japanese manufacturer of
automotive components, and has partnerships with
nearly all the world's automobile assemblers. It is a
global corporation, which operates in 19 nations
through 37 subsidiaries and employs over 55 000 people
worldwide, achieving net sales of £9bn in 1994 (Nip-
pondenso, personal communication, 1994). Its pro-
ducts within the automotive sector include air con-
ditioners and heaters, electrical components, fuel man-
agement systems, radiators and filters. It is a fully
36
integrated firm, designing, manufacturing and testing
all its own parts and components.
Nippondenso extended its operations into the UK in
1984. It now has two sites in the UK, based in Hatfield
and Coventry. Hatfield houses Nippondenso's head
office, responsible for the procurement, sale and dis-
tribution of components, engineering liaison for the full
range of Nippondenso's products, quality assurance
and service support. Testing of engine management
systems and engineering liaison for engine management
and air conditioning systems are conducted at Nippon-
denso's site in Coventry.
The context of the partnership
The partnership between Jaguar and Nippondenso was
initiated to develop a new system (referred to within
the text as 'the innovation'), which was fitted to a new
vehicle in 1995. The fundamental design and develop-
ment work for the innovation was undertaken by
Nippondenso in Japan. Further tuning and refinement
to match Jaguar's requirements was identified in the
UK and relayed back to Japan to produce an updated
design. Production of the innovation is being carried
out in the UK.
Research method
The method used in this exploratory study was a series
of semi-structured personal interviews conducted with
managers in the engineering, purchasing and sales
departments at Jaguar and Nippondenso. Issues that
were covered in the interviews included:
• background to the nature and reasons for restructur-
ing of Jaguar's organization with respect to its sup-
pliers;
• Jaguar's supplier selection procedure for a col-
laborative relationship;
• the key factors that influenced the final decision to
select Nippondenso;
• the nature of the relationship in terms of trust,
commitment and cooperation;
• the nature of power/dependence and conflict man-
agement in the relationship;
• the development and maintenance of the rela-
tionship over time;
• the future of the relationship.
The interviews revealed the following findings.
Reorganization of Jaguar's supply structure
Two major structural changes have taken place with
respect to Jaguar and its suppliers: a reduction in the
number of suppliers it deals with, and increased sub-
contracting to suppliers.
Reduction in supplier base
Jaguar has been reducing its supplier base since 1988,
when it was dealing directly with 870 international

firms. By 1994 this figure was trimmed to 490 'prefer-
red' suppliers, of whom 150 were located abroad.
Jaguar benefited from fewer suppliers through lower
transaction costs, higher chances of component com-
patibility across suppliers, and easier monitoring of
individual firms' quality.
Increased subcontracting
Rapidly changing technology and the high costs associ-
ated with new product development forced Jaguar in
the early 1980s to concentrate on its core business
activity of assembling luxury automobiles and increase
the number of tasks subcontracted to suppliers in the
design, development and manufacture of component
parts. This move allowed Jaguar to reduce its fixed
costs and transfer costs in quality control, stock and
product development to its suppliers, while taking
advantage of the scale economies that its suppliers
afforded. Operations at Jaguar that have recently
ceased include the development of seat design technol-
ogy, a vacuum-forming shop, and a major press shop
producing thousands of parts a year.
Jaguar's move to sourcing from fewer, preferred
suppliers and the subcontracting of tasks to those
suppliers is closely related to relationship development.
Choosing to retain preferred suppliers suggests that
only preferred suppliers are sufficiently trusted to fulfil
delegated tasks in the manner required. Dealing with
fewer suppliers also avoids diluting the amount and
quality of interaction and communication that can be
devoted to each, thus strengthening the overall rela-
tionship. The following section presents the key fea-
tures of the relationship between Jaguar and the prefer-
red supplier Nippondenso; these are subsequently in-
terpreted within the context of the relational dimen-
sions of trust, commitment and cooperation.
The Jaguar/Nippondenso relationship
Supplier selection procedure
In 1992 Jaguar decided that it needed an outside firm to
design and manufacture the innovation for one of its
new vehicle models. An internal appraisal of the most
promising suppliers considered as specialists in the field
of the innovation was conducted. A shortlist of five
firms was made using criteria of industry reputation,
delivery, technological and R&D capabilities, manu-
facturing capacity and financial status. In order to pare
the five firms down to three, Jaguar provided each of
the firms with a broad specification of its product
requirements and invited them to submit a proposal
and quotation for design, development and production.
On the basis of their responses, three firms were
shortlisted to give detailed presentations on their prop-
osals. These presentations revealed that all three firms
were capable of manufacturing the innovation. Follow-
ing further internal discussions within Jaguar it was
decided that Nippondenso should receive the contract.
Buyer-supplier relationships in the automobile industry
Key factors influencing the choice of Nippondenso.
Four factors were dominant in reaching the decision to
enter into a collaborative relationship with Nipponden-
so as opposed to the other two firms in contention.
These revolved around Nippondenso's quality, system
responsibility, previous experience with the firm, and
the technology they used for fast communications with
Nippondenso headquarters in Japan.
Quality. Jaguar's concern with quality stems from the
mid-1980s, when it implemented a quality drive attri-
buting 60% of its components' problems to poor quality
control. Jaguar's suppliers are now having to meet
stringent quality assurance standards supported by
statistical verification, or risk de-selection. Jaguar
claims that it will now enter into a collaborative part-
nership with a supplier only if it could trust the supplier
to produce components with the requisite high quality
standards. The Ford takeover of Jaguar has served to
augment the quality of Jaguar's components. Ford (as
with all the world's automobile assemblers) has moved
towards the principle of TQM, with quality now having
supplanted price as the chief criterion upon which
purchasing judgements are made. This is not to suggest
that price is no longer important. The priorities have
merely changed to a situation where high quality is now
the baseline from which a reasonable price is negoti-
ated, whereas in the past a reasonable price was the
baseline from which the highest quality was aspired.
Jaguar is moving towards a common supply base with
Ford, and currently shares 62% of Ford's suppliers. For
Jaguar this not only ensures that the companies it
sources from are accredited with Q1/Q101 status
(Ford's supplier approval awards), but the parts are
also cheaper as a result of the economies derived from
Ford's purchasing power.
During the supplier selection procedure, Jaguar's
supplier quality assurance (SQA) team visited each of
the three firms' production plants. At the plants,
planning, production processes, work practices, the
general appearance of the shop and the statistical
process control (SPC) systems were examined and
appraised. Nippondenso scored highly on all counts.
On Nippondenso's part, maintaining high quality stan-
dards is a priority. Quality circles and a company-wide
suggestion system are in place, and component quality
is controlled at every stage of its operations. Attention
to quality extends to regularly communicating with car
dealerships to obtain feedback on the performance of
its components. In view of the quality standards Nip-
pondenso was attaining, Jaguar was prepared to pay a
premium for its collaboration rather than vigorously
bargaining for price reductions.
System responsibility. Since 1988, Jaguar has been
moving away from small suppliers to larger suppliers
producing components as complete systems. From
Jaguar's perspective the benefits of a system supplier
37
F Ali et al
are twofold. First, systems offer improved perform-
ance, as each sub-component is finely tuned to match
the others, and, second, a supplier taking on system
responsibility provides a central point of contact in the
event of any design problems or malfunctions with the
component. This negated the prospect of a supplier
refusing to accept that its part is at fault.
In taking on a system supplier, Jaguar needed to feel
confident that the chosen firm would be totally re-
sponsible for its products. Unlike the other two firms in
the supplier shortlist, Nippondenso was prepared to
take on full 'system responsibility': that is, responsibil-
ity for all the activities in design, development, the
procurement or manufacture of the sub-components,
their final assembly, and post-purchase quality assur-
ance supported with a four-year warranty.
Previous experience. Previous experience with Jaguar
worked in favour of Nippondenso in securing the
contract. Nippondenso started supplying small compo-
nents to Jaguar in the mid-1980s, and continued to
work successfully with various departments at Jaguar.
As part of the strategy for entering into a partnership
with the department responsible for the current innova-
tion, members of Nippondenso's sales team responsible
for surveying business opportunities had been visiting
Jaguar one to three times a week for over a year before
the contract was put out to tender. The aim of these
visits was to build interpersonal relationships, to be-
come familiar with key figures in the organization, and
to keep Jaguar updated by giving presentations on new
products. Jaguar felt that this familiarity with Nippon-
denso helped to reduce the perceived risk and uncer-
tainty of entering into a new business partnership.
Communications technology. Despite the familiarity,
there still existed some concerns by Jaguar over possi-
ble cultural barriers in dealing with a Japanese firm.
This was directed specifically at potential language
difficulties if communications were to be conducted
directly with Japan. This concern was dispelled when it
became clear that all communications to Japan would
be conducted through Nippondenso's UK offices, who
would then liaise with Nippondenso in Japan. For
instance, during the design phase, an engineer at
Nippondenso's UK head office acted as the intermedi-
ary between Jaguar and specialists in Japan, each of
whom were responsible for a single component in the
system. Jaguar was particularly impressed with a satel-
lite link that Nippondenso had in place to accelerate
communications with Japan. From Japan, designs were
sent via satellite to a computer-aided design (CAD)
link in the UK. The advantage of the CAD-satellite
system was that it enabled some of the design work to
be done in the UK, nearer Jaguar, while allowing any
developments to be communicated with Japan almost
instantly.
38
Procedures for managing the relationship
This section details some of the procedures adopted by
Jaguar in managing its relationship with Nippondenso.
Long-term contract. Relationships are characterized by
their long-term ntaure. Based on the results of the
selection procedure, Jaguar was prepared to offer an
initial five-year contract to Nippondenso. This is in
contrast to the one-year contracts that Jaguar typically
administered to suppliers in the years leading up the the
1980s.
Single sourcing. Jaguar operates a single-sourcing poli-
cy, which was described by one manager as 'our
greatest risk'. By not having more than one source of
supply, Jaguar risked becoming over-dependent on one
source and falling victim to interruptions in supply.
More strategically, it eliminated the potential of diffus-
ing technical knowledge amongst suppliers, which
would have made for more competitive bidding con-
tests in the future. Multiple sourcing systems would
also have provided Jaguar with a standard for compar-
ing supplier firms on criteria such as cost, quality and so
on.
The move to a single source of supply is, in part, a
consequence of the greater involvement that suppliers
now have in design, development, quality control, and
their greater strategic integration with their customers.
From Jaguar's perspective, committing itself only to
Nippondenso would assist the more effective manage-
ment of these new inputs and help forge closer rela-
tionships by sending strong signals about its commit-
ment. It also allowed for easier monitoring of quality
and ensured that the inconsistencies in component
quality that arise from multiple supply systems did not
occur. A further attraction of committing itself to
Nippondenso alone was the cost savings that would be
made by avoiding duplication of administration, over-
heads, communications and so on. Jaguar estimates
that, in general, using dual supply alone costs Jaguar an
extra $300m to put a car on the road.
Early involvement. Jaguar committed itself to Nippon-
denso early on in the new product development pro-
cess, and before the precise specifications of the com-
ponent had been decided. Involving Nippondenso at
the product concept stage was designed to capitalize on
its technical know-how. As one engineer at Nipponden-
so explained:
I've found most of the time that engineer's at assemb-
lers don't know what they want. They think they know
what they want, but because they don't know the
market, they can't know what they really want. We
know the market and can guide them on industry trends
and to technology concepts that would suit their vehi-
cles. On the whole Jaguar were open enough to listen
and trust us.
The early involvement of Nippondenso in design and

development meant that both firms were closely inte-
grated at the outset, sharing equally the hopes of a
successful outcome. Simultaneous engineering methods
were implemented to reduce product development
lead-time and costs. Though Jaguar had not experi-
enced any difficulties with Nippondenso, it was ex-
plained that early commitment to a supplier ahead of
any significant design work could prove problematic.
Recognizing that Jaguar had committed itself, some
suppliers had in the past behaved opportunistically by
pushing up the price of a new product at various stages
in its development.
Strategic integration. As part of the process of cultivat-
ing long-term relationships, Jaguar had adopted a
policy of open communication channels with Nippon-
denso on its present and future plans. In the past, all
future projects had been kept tightly hidden, but
Jaguar was now divulging sensitive strategic informa-
tion to selected suppliers. Providing knowledge of
future projects to Nippondenso allowed it to prepare its
own input in advance and so reduce product develop-
ment time. The same practice applied to many of
Jaguar's suppliers. Recently Jaguar brought together
representatives from 100 of its suppliers to view a new
automobile three years prior to its launch. These
included suppliers who were both directly involved with
the project and those who were not. The suppliers'
representatives were briefed on the details and speci-
fications of the automobile and entrusted to maintain
confidentiality. From Jaguar's perspective, being more
open was a way of demonstrating the trust and long-
term commitment it placed in its suppliers.
Though Nippondenso and Jaguar integrated their
operations at all of the new product development
stages, it was Nippondenso who had the ultimate
responsibility for designing, developing, and producing
all the prototypes, in addition to being the end
(volume) producer. It was readily apparent to Jaguar
that Nippondenso housed the greater technological
expertise and experience. This fact notwithstanding,
Jaguar did retain a nucleus of engineering expertise 3 to
enable it to make informed judgements on technical
decisions and to lessen the chance of opportunism on
Nippondenso's part. In most cases, however, Jaguar
was prepared to acquiesce to Nippondenso's recom-
mendations in view of its greater depth and breadth of
knowledge. Nippondenso explained that this attitude
was important to prevent the type of situation that
developed in the 1970s in some sections of the British
motor industry. During this period assemblers overly
dictated technical demands to suppliers, disregarding
their specialist advice. Nippondenso attributed the
poor quality and reliability of the cars that were
produced during this period to this attitude.
3Theseengineersact moreas projectmanagers.The amountof actual
hands-on designwork they do is limited.
Buyer-supplier relationships in the automobile industry
Conflict management and mutual dependence. Jaguar
endeavours to ensure that its relationship with Nippon-
denso is successful. If at any stage it felt it wasn't
working it would attempt to establish what the precise
problem was and resolve it before it became unmanage-
able. In recent years, the presence of an engineering
team at Jaguar has worked to the advantage of both
parties for cooperative joint problem solving. For
instance, in the event of Nippondenso experiencing any
design difficulties, Jaguar was prepared to give hands-
on assistance by sending over a team of its own
engineers to work with Nippondenso's specialists and
help overcome the problem. In the final analysis, both
Jaguar and Nippondenso saw themselves as mutually
dependent on one another for their own success.
Increased interdependence as opposed to the applica-
tion of coercive power meant that Jaguar 'would never
use our power destructively' (Jaguar Manager) and
Nippondenso would 'never put Jaguar in a position of
take it or leave it when it came to purchasing a
component' (Nippondenso Manager).
The following section provides an overview of how
the relationship developed over time, and the key
influences in its maintenance.
Development and maintenance of the relationship
The nature of the relationship between the partners
changed as time progressed. At the start, both firms
were mostly engaged in interactions bounded by
formalities. Each interaction, however, provided an
opportunity to acquire more information about the
other party, and so helped to reduce any residual
uncertainty that may have prevailed over the wisdom of
entering into the partnership. With time the rela-
tionship developed onto a more informal, personal
level as more became known about the other partner.
This phenomenon was self-reinforcing, because the
more that became known about the other partner, the
more the relationship developed. It was stressed that
building relationships with another firm was not a task
that could be achieved solely by two top managers
communicating with one another. It required the per-
sonal commitment of many people, with Jaguar esti-
mating that up to 140 different persons could be
involved in communications with Nippondenso. For
example, in Jaguar's purchasing department alone
there was a buyer, a chief buyer, a purchasing manager,
a material control scheduler, his or her supervisor,
administrative personnel, and so on. At Nippondenso
there were up to 50 buyers with whom communications
could be conducted. Jaguar might be talking to 15
different engineers, 20 different applications people
and five different accounts people.
The ability to forge personal relationships was consi-
dered highly important by both firms for the successful
maintenance of the partnership. Though the two firms
could communicate through electronic means, it was
stressed that this was not a sufficient substitute for
39
F Ali et al
tionship. While differences in management style and
personality could enrich the partnership, in past rela-
tionships it had led to dysfunctional systems, which
overrode business imperatives. The small scale of
Jaguar's operations meant that interpersonal rela-
tionship development was initially considerably easier
for Nippondenso's sales team, with access to individual
departments' decision makers possible without undue
difficulty. A network of relationships quickly evolved
through knowing only a handful of people.
Future of the relationship
The relationship between Jaguar and Nippondenso is
now established, and is to be consolidated, with plans
under way to incorporate Nippondenso into another
project for future Jaguar vehicles. Nippondenso sees
itself as a long-term partner of Jaguar, and expects to
become one of its largest suppliers.
Interpretation
Though a relationship focus may not guarantee that
partnerships will not fail, the attitudinal shift and
adoption of different methods of organization at
Jaguar, and the will to work together by both parties
for their mutual benefit, have, however, reduced the
chances of failures occurring. This section interprets
the findings in the light of the relationship's success,
with reference to extant theories on relationships.
Factors related to the presence of trust
The findings tend to support past research emphasizing
the importance of trust in a relationship. Trust was
described in the interviews with Jaguar as a 'confident
feeling' held towards the other party. Moorman et ars
(1992) definition of trust highlights the importance of
confidence in trust, with the findings showing confi-
dence in Nippondenso to be instrumental in awarding it
the contract: Jaguar felt it was
confident they (Nippondenso) could produce the right
number of components, at the right time, Xo the right
specifications and at the right quality.
Quality registered within the interviews as particularly
important to Jaguar, particularly as the consumer
associates component failures with an assembler and
not with the supplier who manufactured them. Though
functional specifications, delivery and quality were
necessary, they were not sufficient in selecting Nippon-
denso. The role of personal trust has also been shown
to be important. Nippondenso's salespersons had en-
hanced interpersonal trust with Jaguar through
periodical visits to build bonds with key staff, which
helped to reduce uncertainty. In effect, Nippondenso
were following the relationship definition proposed by
Doyle and Roth (1992), wherein
the goal of relationship selling is to earn the position of
preferred supplier by developing trust in key accounts
over a period of time.
40
Trust was further enhanced by Nippondenso's taking
on total system responsibility for the innovation, cou-
pled with offering robust post-purchase guarantees.
This is consistent with Schurr and Ozanne's (1985)
belief that warranties act positively in engendering
trust. Jaguar's concession to Nippondenso of paying a
premium for its partnership demonstrated its prepared-
ness to engage in a high-risk move in its desire to
coordinate with a trusted party, thus supporting Pruitt's
(1981) suggestion that trust and the desire to coordinate
are closely related. Given Jaguar's limited in-house
technological expertise, the presence of trust was also
necessary for Jaguar to rely on Nippondenso to guide it
to the most appropriate technological solution to its
problem: so-called 'competence trust' (Sako, 1992).
In summary, the process of building trust began with
the first contact made by Nippondenso to Jaguar in the
mid-1980s, and was enhanced with each subsequent
interaction, consistent with the episodes of the interac-
tion model (H~kannson, 1982). The engendering of
trust may be conceptualized as a function of past
experiences based on interpersonal encounters, and as
a function of confidence in perceived outcomes: in this
case a supplier capable of developing a quality product
in accordance with Jaguar's needs, supported by full
responsibility for its components.
Factors influencing commitment and cooperation
An intuitive reading of the findings shows that they
tend to support the theory that trust leads to commit-
ment and cooperation (Morgan and Hunt, 1994) The
presence of trust was necessary for Jaguar to commit
itself to Nippondenso which initially manifested itself in
the allocation of a long-term contract. As Ganesan
(1994) argues:
The reason trust is such a necessary ingredient for
long-term orientation is that it shifts the focus to future
conditions.
The long-term contract demonstrated the resource and
emotional inputs of Jaguar's commitment and of the
relationship's expected durability or longevity, thus
concurring with the input and durability criteria pro-
posed by Scanzoni (1979) as characteristics of commit-
ment.
Commitment to Nippondenso was also demonstrated
through involving the firm early in the new product
development process and not opting for dual or multi-
ple supply in the procurement of components for the
innovation. Kimmel et al (1980) suggest that trust
promotes integrative behaviour and self-disclosure.
This was confirmed where Jaguar felt it needed to trust
Nippondenso if it was to be more open and give a fuller
picture of its future vehicle programmes. As one mana-
ger at Jaguar explained, 'There is still a high level of
trust. You can't put out a contract that is completely
watertight.' Armed with this knowledge, Nippondenso
was able to plan in advance its input into future
projects.

In disclosing l o n g - t e r m strategic i n f o r m a t i o n for t h e
p u r p o s e s of w o r k i n g t o g e t h e r , b o t h firms w e r e d e m o n -
s t r a t i n g t h e i r will to c o o p e r a t e ( A n d e r s o n a n d N a r u s ,
1990). C o o p e r a t i o n was also e v i d e n t in the w a y b o t h
firms w e r e r e l u c t a n t to e x e r t p o w e r t h r o u g h c o e r c i o n to
a c h i e v e t h e i r goals, b u t r a t h e r to r e s o l v e conflict
t h r o u g h c o m m u n i c a t i o n a n d assist the o t h e r firm in the
e v e n t o f p r o b l e m s . U l t i m a t e l y b o t h firms saw t h e i r
success in t e r m s o f the o t h e r ' s success, i n d i c a t i v e of an
i n t e r d e p e n d e n t p a r t n e r s h i p t h a t c h a r a c t e r i z e s rela-
t i o n s h i p s ( M a c n e i l , 1978, 1980). A s t h e r e l a t i o n s h i p
m a t u r e d o v e r t i m e it was e v i d e n t that c o o p e r a t i o n
b e t w e e n i n d i v i d u a l s was u p p e r m o s t in b i n d i n g the
r e l a t i o n s h i p . T r u s t was m o r e a function of the w a y in
which i n d i v i d u a l s r e a c t e d to o n e a n o t h e r , a n d the
e x p e c t a t i o n t h a t t h e y w o u l d c o n t i n u e to b e h a v e c o o p e r -
atively on a d a y - t o - d a y basis.
Vestiges of the adversarial approach? - further
research
It t r a n s p i r e d d u r i n g the c o u r s e of the r e s e a r c h t h a t the
r e l a t i o n a l a p p r o a c h was not u n i f o r m l y p r a c t i s e d across
all s u p p l i e r firms. In t h e m a i n , the r e l a t i o n a l a p p r o a c h
was r e s e r v e d for J a g u a r ' s d e a l i n g s with large firms with
a world-class reputation supplying high-technology
c o m p o n e n t s . M a n y of the p r e c e p t s o f the a d v e r s a r i a l
a p p r o a c h w e r e s~ill active with s m a l l e r firms s u p p l y i n g
l o w - t e c h n o l o g y c o m p o n e n t s . T h e a u t h o r s are in the
p r o c e s s o f c o n d u c t i n g f u r t h e r r e s e a r c h to e x p l a i n this
b e h a v i o u r a l d i s c r e p a n c y , a n d to i n v e s t i g a t e the role
t h a t small firms n o w o c c u p y in the a u t o m o b i l e s u p p l y
chain.
Conclusion
J a g u a r has d e p a r t e d f r o m t h e a d v e r s a r i a l a p p r o a c h to
h a n d l i n g its s u p p l i e r s in f a v o u r o f a r e l a t i o n a l
a p p r o a c h , which is r e f l e c t e d in its p a r t n e r s h i p with
N i p p o n d e n s o . R e l a t i o n s h i p s a r e c h a r a c t e r i z e d by t h e i r
l o n g - t e r m o r i e n t a t i o n , with t h e e x p e c t a t i o n t h a t o v e r
t i m e t h e r e l a t i o n s h i p will be n u r t u r e d , m a i n t a i n e d a n d
d e v e l o p e d for the m u t u a l b e n e f i t o f b o t h p a r t i e s con-
c e r n e d . This s t u d y has s h o w n h o w the i m p l e m e n t a t i o n
o f J a p a n e s e - s t y l e p r a c t i c e s influences the d e v e l o p m e n t
of long-term, mutually dependent relationships based
on trust, c o m m i t m e n t a n d c o o p e r a t i o n .
Acknowledgements
T h e a u t h o r s wish to t h a n k Clive H i c k m a n , G e o f f
Callow and Alan Draper of the Motor Industry Re-
s e a r c h A s s o c i a t i o n ( M I R A ) for t h e i r s u p p o r t in p r o -
ducing this w o r k , a n d to a c k n o w l e d g e F r a n c i s M c D o n -
nell a n d t h e c o m m e n t s o f a n o n y m o u s r e f e r e e s in pre-
p a r i n g the final p a p e r .
Buyer-supplier relationships in the automobile industry
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