Determinants of inter-segment performance differences: The case of automotive suppliers in Turkey

The automotive industry is considered strategic by most developing country governments, due to its significant contribution to trade, employment, and technological capability development. The automotive supplier industry consists of distinct segments, such as casting, forging and plastic part producers. In a developing country, those segments are developed to varying degrees. This dissertation compares the performance of automotive supplier segments in a developing country context, and traces the reasons for performance differences to segment-specific business conditions. Turkey is chosen as the focus country, due to its shared experience and characteristics with other developing countries. Case studies of seven supplier segments are conducted, using qualitative data collected through interviews with leading suppliers, assemblers, and key organizations. This is complemented by a cross-case analysis, using quantitative data in the public domain to highlight the performance differences among supplier segments. The findings indicate that segment-specific business conditions are important determinants of performance differences among supplier segments. Specifically, the labor-intensive nature of the manufacturing process, the domestic availability of raw materials, and the lack of specialized know-how emerge as the three most important factors. Most automotive suppliers have low labor costs and large product variety as competitive advantages, and neither strategy is sustainable in the long run. For process oriented firms, specializing in a narrow range of products is suggested as an alternative strategy. For product-oriented firms, becoming a module supplier is the ideal path to becoming partners with assemblers in the long run. A potential role for the government in improving supplier competitiveness is in privatization of inefficient state-owned raw material producers. Having adequate testing capabilities emerges as a key determinant of success in all segments. Finally, the strategies of multinational assemblers and suppliers are found to be among the key factors shaping the rules of the game for domestic part suppliers.