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Management Essay

1821 words - 8 pages

Title: How to get along with the dominant supplier—KNORR-BREMSE

Stream: Yellow
Group: No.4
Members: Duan Xinxin,
Han Han,
Liang Haigang
Date:18th April 2016

1 Abstract 1
2 Introduction 1
2.1Background 1
2.2 Challenges 1
3 Analysis 2
3.1 Bargaining power of suppliers 3
3.2 Bargaining power of buyers 4
3.3 Internal problems of CRRC 4
4 Recommendation 4
4.1 Solution to decrease the power of Knorr 4
4.2 Solution to decrease the power of customers 6
4.3 Solution to improve myself 6
5 Conclusion 6
Reference 7

How to get along with the dominant supplier—KNORR-BREMSE
1 Abstract
In the report, the background of CRRC is introduced and 3 ...view middle of the document...

With the development of technology, Customers put forward higher requirements on the price, lead time and quality of the product, and the risk should be under CRRC’s control, so how to get along with Knorr becomes more crucial to the development of CRRC and puts forward 3 challenges for CRRC.
* Bargaining power of suppliers;
* Bargaining power of buyers;
* Internal problems of CRRC.
3 Analysis
Five Forces model of Michael Porter(see Figure 1) is a very elaborate concept for evaluating company's competitive position. Michael Porter provided a framework that models an industry and therefore implicitly also businesses as being influenced by five forces.2 
Porter's competitive five forces model is probably one of the most commonly used business strategy tools and has been proven its usefulness in numerous situations. Porter's Five Forces model provides suggested points under each main heading, by which you can develop a broad and sophisticated analysis of competitive position. This can be then used when creating strategy, plans, or making investment decisions about your business or organization. 2 
Porter's Five Forces model is made up by identification of 5 fundamental competitive forces: 2 
* Barriers to entry
* Threat of substitutes
* Bargaining power of buyers
* Bargaining power of suppliers
* Rivalry among the existing players

Threat of
new entrants
Bargaining power
of suppliers
Bargaining power
of buyers
Threat of substitute products or services

Figure 1 Five Forces model of Michael Porter3
Two fundamental competitive forces --“Bargaining power of suppliers” and “Bargaining power of buyers”—are used to analyze the problem, meanwhile, internal problems of CRRC are studied.
3.1 Bargaining power of suppliers
(1)Concentration degree of supplier industry
Knorr has the dominant position in braking system in CRRC’s trains as the figure 2 and figure 3 below shows.

Figure 2 the proportion of Knorr in locomotives

Figure 3 the proportion of Knorr in high speed trains and metro
Its leading position in braking system leads to some sequences as follow: less responsive to trouble-shoot, long delivery time of spare parts and necessary documents,
(2)Switching cost from KNORR to another suppliers
Knorr braking system is mature after many years of testing, batch run assessment, can meet different environmental requirements, therefore, the cost of switching suppliers is huge.
(3)The importance of supplier's products to CRRC
Just as we have described before, the braking system is one of the key technology of rail transit vehicles and related to the life and property safety, especially for the high speed trains. At present, Knorr braking systems have been widely used and recognized by the vast majority of customers. Therefore, switching risk and requirements of customers should be considered at the same time before switching Knorr.

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