Strains in the Strategic Alliance

BBA INDUSTRIAL MARKETING

ASSIGNMENT 1

STRAINS IN THE STRATEGIC ALLIANCE

Why do you think that the automakers are not fully vertically integrated when it comes to tires? That is, why aren't there Ford, GM, and Dodge tires as well as cars and trucks with those brand names?

Vertical integration is when a company acquires an ther that is in its supply chain in order to reduce costs. For example acquiring a retailer is a type of vertical integration.

Therefore we can say that the automakers are not fully vertically integrated. That is because it is not what they specialize in. They focus on the production of cars and leave the tire manufacturers, which normally know what they are doing, produce the proper tires.

Plus, the automakers do not have the distribution network to provide at a larger scale the tires. And if there were to have their own brand of tires, they would like to lock up the market, creating antitrust issues.

How does this affect alliances between Ford and other tire manufacturers, as well as relationships between any other automakers and tire manufacturers?

The scandal affects the whole of the car industry, as every player has a stake in it. Automakers will have to have better communication within the company to make sure every standards and specifications are followed. And they will need a clearer and better understanding of the tire requirements. That means closer relationship the tire manufacturers. Inflations norms will require a specific attention as to ne repeat the mistake and misunderstanding.

Moreover, the entire car industry will closely look at Ford and Bridgestone. They will want to be sure that another accident will not happen. Therefore a big pressure will arise from the car industry