India as the Global Outsourcing Destination

Abstract

The Practice of outsourcing has been prevalent in the automobile industry for a very long time. Vehicle brand owners (VBO), also known as assemblers, have developed preferred relationships like Keiretsu with their suppliers to capture the complexities of outsourcing as also to reflect their regional idiosyncrasies. Against the backdrop of the Indian automobile industry becoming increasingly global, a field study conducted on suppliers of automobile components to vehicle manufacturers, captured patterns of outsourcing prevalent and provided interesting insights. Indian auto component suppliers, although aware of global opportunities, are left with little choice in transacting with their clients partly because of their own risk averse, status quo preferences and remaining for want of an efficient mechanism for horizontal cooperation among firms with complementary capabilities to form clusters/groups of globally competitive suppliers. On the other hand, such clusters often lack necessary institutional support leaving individual suppliers dependent on clients for business and growth. While this article investigates the existing relationship between auto assemblers and their suppliers to suggest a not so encouraging picture of global opportunity for the suppliers with pressures of global competition and sourcing, it also highlights areas in which to expect changes before the global opportunity can be leveraged.