The correlation between relationship value and business expansion in the South African automotive supply chains

Abstract

Background: The South African automotive industry includes complete supply chains. The South African automotive supply chain stakeholders operating within the global arena are faced with opportunities as well as challenges. The South African government supports the automotive industry and encourages the vision to drastically expand the industry by the year 2020. However, having to adhere to strict prescriptions from customers regarding product quality and logistics, automotive component suppliers have only the actual relationship with customers through which value can be added. Literature acknowledges the importance of relationship value and agrees that it results in business retention. However, literature fails to prove whether relationship value can result in business expansion where more business is generated.Objectives: The objective of this article was to provide a better understanding of how to optimise relationship value within the South African automotive supply chains between Tier 1 and Tier 2 suppliers. Furthermore, the correlation between relationship value and business expansion was tested through a linear regression model. It was also important to determine whether supply chain stakeholders from different countries of origin and cultural backgrounds attach the same importance to relationship value.Method: This article reports on research which followed a positivistic paradigm, through a quantitative study undertaken in the South African automotive supply chains. Members of the National Association for Automobile Component and Allied Manufacturers of South Africa (NAACAM), defined as Tier 1 suppliers, were approached to describe their best Tier 2 suppliers. Questions relating to relationship value and business expansion were asked via a closed-ended questionnaire. The aim was to obtain the perceptions of Tier 1 suppliers of their best Tier 2 suppliers in terms of relationship value and business expansion. The data were analysed through a linear regression model.Results: It was found that relationship value directly correlates with business expansion and is therefore highly regarded as important by Tier 1 suppliers in terms of their Tier 2 suppliers in the South African automotive supply chains. Notwithstanding the different countries of origin, respondents are in agreement regarding the importance of relationship value.Conclusion: As the South African automotive industry plays an important role in the South African economy, all efforts should be made to retain and expand the industry. The industry is characterised by a difficult economy, and supply chain role players should constantly investigate new strategies to gain a competitive advantage. It was found that there was a high regard for relationship value which could result in business expansion. Automotive component suppliers are encouraged to invest in a relationship value governance strategy to actively pursue added benefits for all stakeholders.