Industrial repositioning from OEM to supplier

This report describes and analyses Saab Aerostructures´ repositioning during 1997-2008 from original equipment manufacture (OEM) of regional jets (Saab 340 and Saab 2000)to 1st -tier subsystem supplier under Airbus and Boeing. This type of repositioning is very rare, to "descend" from OEM to supplier, and at the same time abandon present market and product, migrating to a different market and product. It is an issue of interest to both companies and policy-makers. The reason is the current discussion about whether defence companies in Sweden could seek a future as suppliers instead of their current roles as OEMs. The purpose of the report is to identify and explain critical factors in the repositioning of an industrial company from original equipment manufactorer to subsystem supplier. There are two research questions: 1. Which major organizational factors influenced the repositioning process? 2. Which factors in the external environment generated opportunities and challenges for the repositioning process? The main focus is on the internal strategic process within Saab Aerostructures (research question 1). Saab Commercial Aircraft had in 1996 huge economic losses in its production of commercial jets. A decision was eventually made to terminate continued production and development. Instead of closing down the industrial plant Saab Aerostructures was formed on Januari 1, 1998. The vision was to establish a strong position as supplier of so called primary structures to Airbus and Boeing on tier 1, i.e.the highest system level. Starting from initial build-to-print orders to Boeing over larger commitments to mainly Airbus, Saab Aerostructures has in 2008 succeeded in reaching an established position as supplier of primary structures to Airbus and Boeing. Baswed on case study, we see the following internal factors as critical for succeeding with a repositioning from OEM to supplier in a different market: Access to competitive internal ressources: Niche technologies that can be exploited in the new market; existing complementary such as production facilities, production know-how, existing personnel pool with adequate competence and experience. Organizational change: Companies must change e.g. organizational routines and approaches to customers in order to transform from a role of OEM to that of a costumer-oriented supplier. such a change takes many years and is supported by intensive interaction with the customer. Synergies with established business: If resources are used for both the existing market and the new market, this generates cost and learning synergies. Clear strategic vision: A clear and robust strategic vision of the future position is an important change carrier. The vision must be balanced between stability and responsiveness to external change. The repositioning is influenced by external factors in the business environment: Development of supply chains: The repositioningis enhanced if OEM companies on the new market are focusing more on core competence and thereby invite suppliers to take a larger responsibility for development projects.The reason is that such change creates an advantage for suppliers having technological competences that are broader than the scope of the system they provide. That is, it is change that potentially favours a company with a past as OEM. Restructuring of supply chain structures: Repositioning is facilitated and supported by political deregulation of nationally organized supply chains, and by fundamental change in demand (e.g. technology, performance, type of supplier). Strategic supplier: The repositioning firm maust be perceived as a unique strategic supplier to OEMs in order to avoid strict competetion by price. This is particularly important in light of the cost structure, which is a legacy from the time as end-product producer.