Denso Case Study

DENSO

1. How has DENSO’s relationship with Toyota affected its international strategy? DENSO was/is part of Toyota’s keiretsu. Toyota has a vertically integrated supply chain, which DENSO is part of. Toyota accounts for over half of DENSO’s business. When Toyota expanded internationally, DENSO had to follow to supply Toyota’s overseas plants. So Toyota initially set DENSO’s international strategy However, DENSO started supplying other automakers with parts. Economies of scale are equally important for parts suppliers and assemblers. Toyota has also benefited from Denso’s scale economy, which translates into lower costs, yet

better quality products. The contradiction is that Denso has attained market power and pricing autonomy by becoming an oligopoly, which has freed it from Toyota’s grasp somewhat. It attains this bargaining power through customer diversification, with Toyota’s consent. But, Toyota paved the way for DENSO by being the first in many new markets, such as North America, and by supplying needed capital to DENSO.

2. What types of quality programs has DENSO adopted, and how do you think they will affect DENSO’s future as a global supplier? It has adopted TQM, and is striving for zero defects to satisfy Toyota. DENSO also has ISO 9001 and QS9000 certification so it can supply parts to auto makers in Europe and North America. I think by adapting to various quality programs, besides just TQM for Toyota, has enabled DENSO to become a supplier for many other auto companies. Being able to meet many automakers quality standards can only help DENSO grow its foreign sales and make it less dependent on Toyota.

3. Why does it make a difference whether DENSO uses kanban or MRP? It

matters because DENSO, if it can use MRP, can accommodate not only Toyota, but many other companies who require many different parts. If they only use kanban, they limit their potential and lose improvements they can make in efficiency and cost saving measures. Using only kanban also sort of says they “belong” to Toyota, and are not truly the independent company they actually are.

4. What challenges will DENSO face as it diversifies its customers and its

product lines? DENSO may find it has to adjust its’ production strategy

and its global sourcing strategy. For instance, it may have to move some of it’s’ production closer to their new customers to reduce costs and