Cooperation or cooperative management Lecturer Jakub Soviar Summer

Cooperation (or cooperative) management Lecturer: Jakub Soviar Summer School 2015 University of Žilina Slovakia 1

Lecture Content Theoretical background and definitions Examples (case studies) Toyota and GM Tesla motors CEIT Žilina Cooperation management - possibilities of utilisation Conclusions: cooperation management and sustainability 2

What is cooperation management (or cooperative management)? An example Kia and Siemens What are the main reasons for cooperation? Supplier-customer relations Partnership (strong relationships) Mutual benefits and trust 3

Theoretical background Social psychology and biology: Competition and cooperation Reciprocity Power of authority Socio-economic effects: Business clusters Game theory Competitiveness Globalisation (interdependency) 4

Author(s) Theoretical background Definition Ray (2002) Cooperative management is a framework for the integrated management of enterprise networks. Brown (1998) Cooperative management is a partnership between government and industry. Lafleur (2005) Zhang (2011) Soviar (2012) 5 Cooperative management is the way the management and development of a cooperative are conducted in a competitive setting. Cooperative management is the core of all management problems. Conditions of constructing a cooperation system are analysed which are the motivation of resource dependence, objective of effect enhancement, constraints of encouraging cooperation and possession of technology of cooperation. Cooperative management is effective and purposeful relationship management in the meaning of cooperation between individual, relatively independent organisations or individuals with the aim to increase their competitiveness.

Examples of cooperation management Joint Venture: NUMMI Strategic alliances: Tesla motors R&D and industry: CEIT 6

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Why do Toyota and GM have close cooperation? Situation on the market American automobile producers specialised in the production of large vehicles with high consumption of fuel in 1970 -1980. This period was affected by the oil crisis. Lack of fuels and simultaneous high prices caused increased demand for small cars with low fuel consumption. American car producers could not compete with small, cheap and high-quality Japanese cars in that time. The Japanese car producers started to dominate on the American market. Employment rate in the American car industry decreased by approx. 33%. Due to this situation, the US government decided to protect their market using export limits. Such limits especially affected the import of cars from Japanese imports were limited to 1. 68 million cars a year, which meant 17. 5 % of American market demand. The only way for Japanese automobile producers to increase market share on the American market was to bring production to the USA. 8

The aim of Toyota for establishing a Joint Venture To increase a market share in the USA despite the import limits. To surpass the main competitor General Motors. To gain experience with American suppliers. To gain experience with American labour force (American labour union - United Automobile Workers). 9

The aim of General Motors for establishing a Joint Venture To learn an efficient system of production TPS (Toyota production system) at first hand. To increase quality of vehicles of the division Chevrolet. To implement the TPS acquired first hand in their factories and thus to decrease production costs and increase quality of production. To make a model series of a small car following Toyota’s example. 10

NUMMI - New United Motor Manufacturing, Inc. Power distribution in the Joint Venture was 50: 50. Toyota invested USD 100 mil. in cash and GM invested USD 100 mil. in noncash form (former GM factory in Fremont). Toyota was responsible for production of the TPS systems and GM for marketing. 11

Main processes of the NUMMI Education and training Research activity Rebadging Development of supply network Bringing the Japanese system of production to American culture Employee education (trust-building) Car production using the TPS system Adoption of the TPS system by GM and implementation of that system in other production companies 12

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Tesla Motors 14

Tesla Motors and strategic alliances Supplier alliances R&D alliances OEM alliances with other automobile manufacturers 15

Tesla Motors and Panasonic Strategic Alliance Partner and Location Type of Alliance Panasonic, multiple suppliers (Japan) Supplier Equity alliance Battery cells for Tesla’s battery pack Panasonic (Japan) R&D Equity alliance Battery cell R&D; working on developing nickel-based lithium-ion battery cells 16 Equity, Nonequity or Joint Venture Alliance Products/Services Provided

Tesla Motors and Panasonic In 2009 a supply agreement In 2010 Panasonic invested $30 million in Tesla Motors In 2011 R&D collaboration for the development of next-generation automotive-grade battery cells - Tesla Model S 17

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Tesla Motors and Panasonic results Elon Musk, Tesla’s Co-Founder and CEO “It is a powerful endorsement of our technology that Panasonic, the world’s leading battery cell manufacturer, has chosen to partner with Tesla to advance electric vehicle performance and value. ” “Incorporating Panasonic’s next-generation cells into Model S batteries will ensure unrivaled range and performance. We are very grateful for our great partnership with Panasonic. ” Mr. Ito, a Panasonic executive “Panasonic will supply lithium ion cells for EVs that can achieve longer range with large energy density. It is our pleasure to start supplying the cells for Tesla’s Model S and promote sustainable mobility. ” 19

Tesla Motors and Toyota Strategic Alliance Partner and Location Type of Alliance Equity, Nonequity or Joint Venture Alliance Products/Services Provided Toyota OEM for other auto mfg. Equity alliance Develop electric version of Toyota’s Rav 4 SUV in Tesla’s new Los Angeles, CA. manufacturing plant (former GM -Toyota manufacturing plant); production and sales begins in 2012 Development of production systems, EVs as well as providing engineering support May 2010, Toyota acquired a 3% equity stake in Tesla Motors by investing $50 million 20

Tesla Motors and Toyota Main goals Toyota Creation of a plug-in EV with the help of Tesla Development of the electric powertrain for the Ra. V 4 Tesla Motors Engineering and production expertise for Model S (by Toyota) Securing of manufacturing facility (through the partnership with Toyota) Access to Toyota production facility 21

Tesla Motors and Toyota results Akio Toyoda, the president of Toyota "Through this partnership, Toyota would like to learn from the challenging spirit, quick decision-making, and flexibility that Tesla has. Decades ago, Toyota was also born as a venture business. By partnering with Tesla, my hope is that all Toyota employees will recall that ‘venture business spirit, ’ and take on the challenges of the future. ” Elon Musk, Tesla’s Co-Founder and CEO "Toyota is a company founded on innovation, quality, and commitment to sustainable mobility. It is an honor and a powerful endorsement of our technology that Toyota would choose to invest in and partner with Tesla. ” “We look forward to learning and benefiting from Toyota’s legendary engineering, manufacturing, and production expertise. " 22

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CEIT - Cooperation in R&D, partnership with customers CEIT is a Spin-off focused on business in R&D Concept based of close cooperation with: University of Žilina, Technical University of Košice, Technical university in Zvolen Private sector: Volkswagen Slovakia, a. s. Whirlpool Slovakia s. r. o. PSL, a. s. Krauss Maffei SCP Mondi . . . 24

AGV system Common development by CEIT and University of Žillina 25

AGV deployment VW facility in Bratislava (SK) Continental Matador Rubber in Púchov (SK) Škoda Auto facilities in Mladá Boleslav (CZ) Kvasiny (CZ) Vrchlabí (CZ) 26

CEIT - Two levels of cooperation 1 st CEIT and University of Žilina Common development Shared technologies and facilities Shared work force and knowledge 2 nd CEIT with customers: CEIT and VW in Bratislava Design, installing, staff training, assistance to operation: Settings Maintenance Reconfiguration Programming … etc. 27

Other examples? 28

Cooperation management situation on the market Actual situation: dynamic and turbulent market environment Actual need: dynamic cooperation based structures 29

Cooperation management main principles Mutual benefits and reciprocity Serious and respectable partnership Orientation on common goals Dynamic goal-oriented personal matrix Dynamic goal-oriented organisation structure High added value Competitiveness Variability 30

Cooperation management possibilities of utilization Common product (portfolio, joint venture) Common production Common marketing Common distribution and logistics Common R&D Cooperation with R&D and universities Cooperation with higher education Cooperation with self government and state bodies Increasing employees’ qualifications Common purchase Common orientation on subvention mechanism Raising of power position Common interdependency of products Cooperation with NGOs . . . 31

Conclusions: Cooperation management towards sustainability? Three main dimensions of sustainability - economic, social and environmental. “The economic dimension assesses short and long term value generation by a company and its relationship with shareholders. It is related with the long-term sustainability of an organization. ” “In the organisation point-of-view, the social dimension of sustainability concerns impacts on the social systems within which it operates or its stakeholders. ” Dyllick - Hockerts, 2002. Delai – Takahashi, 2011. Galpin - Whittington, 2012. . . 32

Conclusions: Cooperation management towards sustainability. . . Effective cooperation management: It is oriented on long-lasting solutions. It is mutual beneficial for all participants. Cooperation based organisation structures (e. g. clusters. . . ) have high probability for creation of positive externalities and have significant potential for innovations. Axelrod, 1984. Lorenz, 1982, 1983, 2000. Porter, 1998 1 -2. Hewstone et al. , 2007. Koukolík, 2006, 2010. Burke, 2006. Murphy, 2006. Weck - Ivanova, 2013. Soviar et al. , 2013. . . 33

List of references Axelrod, R. (1984). The Evolution of Cooperation. New York, Basic Books. ISBN 0 -465 -02121 -2 Burke, P. J. (2006). Contemporary Social Psychological Theories. Stanford Social Sciences, 1 st edition Delai, I. ; Takahashi, S. 2011. Sustainability measurement system: A reference model proposal. Social Responsibility Journal, Volume 7, Issue 3, 2011, 438 -471. Dyllick, T. ; Hockerts, K. 2002. Beyond the Business Case for Corporate Sustainability. Business strategy and the Environment, Vol. 11, Issue 2, 2002, 130 -141. Galpin, T. ; Whittington, J. L. 2012. Sustainability leadership: from strategy to results. Journal of Business Strategy. Vol. 33 No. 4, 2012, 40 -48. Hewstone, M. ; Schut, H. ; De Wit, J. ; Van Den Bos, K. ; Stroebe, M. (2007). The Scope of Social Psychology: Theory and Applications. Psychology Press, 1 st edition Holmberg, S. (2011). Emerging Green-Technology Entrepreneurs: Entrepreneurial Pathways to Growth in the Hybrid and Plug-In Hybrid/Electric Vehicle Space. ICSB World Conference Paper, (pp. 3 -8). Stockholm. Karamitsios, A. (2013). Open Innovation in EVs: A Case Study of Tesla Motor. Master of Science Thesis INDEK 2013: 67, KTH Industrial Engineering and Management, Industrial Management, SE-100 44 STOCKHOLM. Koukolík, F. (2006). In Czech: Sociální mozek. Karolinum, Praha. ISBN 80 -246 -1242 -9 Koukolík, F. (2010). In Czech: Lidství. Galén, Praha. ISBN 978 -80 -7262 -654 -0 Lorenz, K. (1982). The Foundations of Ethology: The Principal Ideas and Discoveries in Animal Behavior. Simon & Schuster Lorenz, K. (1983). Der Abbau des Menschlichen. R. Piper & Co. – München Lorenz, K. (2000). In Czech: Osm smrtelných hříchů. Academia, Praha, ISBN 80 -200 -0842 -X Murphy, F. R. (2006). In Czech: Úvod do kulturní a sociální antropologie. SLON, Praha. ISBN 978 -80 -86429 -25 -0 Porter, E. M. 1998. Clusters and the New Economics of Competition. Harward Business Review. Nov-Dec 1998. 25 -26. Porter, E. M. 1998. On Competition. Harvard Business School, Boston. Schmoltzi, C. ; Wallenburg, C. M. 2012. Operational Governance in Horizontal Cooperations of Logistics Service Providers: Performance Effects and the Moderating Role of Cooperation Complexity. Journal of Supply Chain Management 48(2): 53 -74. Soviar, J. et. al. (2013) Cooperation management. In Slovak: Kooperačný manažment – Efektívne prístupy pre získanie konkurenčnej výhody. Žilinská univerzita, EDIS, 2013. ISBN 978 -80 -554 -0813 -2 Valenzuela, J. L. D. ; Villacorta, FS. 1999. The relationship between the companies and their suppliers. Journal of Business Ethics 22(3): 273 -280. Vodák, J. ; Soviar, J. ; Lendel, V. (2013) Identification of the main problems in using cooperative management in Slovak enterprises and the proposal of convenient recommendations. In Communications – Scientific letters of the University of Žilina, No. 4, Volume 15, 2013. ISSN 1335 -4205. Vodák, J. ; Soviar, J. ; Lendel, V. (2013) The Evaluation System Proposal of the Businesses Preparedness for Cooperative Management Implementation. In Verslas: Teorija ir praktika Business: Theory and Practice, 2013 Vol 14, No 4, 315– 322. ISSN 1648 -0627 print / ISSN 1822 -4202 online. Vodák, J. ; Soviar, J. ; Lendel, V. (2014) Cooperation Management in Slovak Enterprises. In 2 nd World Conference On Business, Economics And Management -WCBEM 2013. Procedia - Social and Behavioral Sciences, Volume 109, 8 January 2014, Pages 1147– 1151, ISSN 1877 -0428. (ELSEVIER, Science. Direct) Vodák, J. ; Soviar, J. ; Lendel, V. (2014) Identification of the main aspects of cooperation management and the problems arising from their misunderstanding. In Communications – Scientific letters of the University of Žilina, Volume 16, Issue 3, 2014, Pages 93 -101. ISSN 1335 -4205. Weck, M. ; Ivanova, M. 2013. The importance of cultural adaptation for the trust development within business relationships. Journal of Business & Industrial Marketing 28(3): 210 -220. Wicks, A. C. ; Berman, S. L. ; Jones, T. M. 1999. The structure of optimal trust: Moral and strategic implications. Academy of Management Review 24(1): 99 -116. 34

Thanks for your attention 35