Supplying the Latino Way : A study of the Mexican automotive industry

Abstract: Problem- Sweden is for the moment one of the countries in the world that is most dependent on the automotive industry. Significant companies within this industry at a global level move parts of, or entire operations abroad which increase the competition for Swedish companies. This fact conveys problem for the Swedish SMEs suppliers, as if a supplier only focus on the national market will not match the requirements from the OEMs such as integrated product development and delivery of complete systems on a JIT- basis. Considering these fact, SME suppliers in Sweden need to look for new opportunities on new markets, and create an understanding for how to act accordingly to the new market’s particular business conditions. Purpose- The main purpose of this thesis is to examine business conditions and prerequisites that applies for the buyers and the suppliers in the supply chain in the Mexican auto-motive industry, and further to develop an understanding of the logic of the interaction and integration between them. Derived from the obtained knowledge, a sub-purpose of this thesis is to present recommendations for how Swedish suppliers should enter and act accordingly on the new market. Method- In this thesis we have applied a case study method. We have conducted semi-structured interviews with four of the largest OEMs and five suppliers, all of whom have production in Mexico. We have in addition to the interviews with OEMs and suppliers supported the collected information with one interview with a representative of a trade association within the Mexican automotive industry and one representative from a governmental institution. Results- Our analysis indicates that the conditions for Swedish automotive suppliers to enter the Mexican market are favorable. Factors such as Free Trade Agreements, the positive attitude towards Foreign Direct Investments and skilled but low labor costs all imply for opportunities for Swedish suppliers. Secondly, our analysis indicates that the OEMs are today doing supply base rationalizations. We consider that this is based on the fact that the OEMs are changing their ordering basis from purchasing single parts to complete systems in order to reduce costs and increase the efficiency. Thirdly, our analysis indicates that it is the buyer, no matter on what level in the supply chain it is acting, who forms the strategy of its suppliers. If the buyer has a lean approach, its suppliers are forced to use the same thinking and apply it to their suppliers in order to meet the pressures on costs reductions, product development and JIT delivery. This we entitle as a continues correlation, which permeate in the complete supply chain.