Question

Examine the various types of contracts available to Toyota when dealing with international suppliers and advise them on which contracts would be most beneficial to achieve a competitive advantage.

Answer 1

The different types of contract that are available to Toyota when they are dealing with international suppliers are:
a) Reimbursable Cost Contract: In this type of contract, the cost is reimbursable which means that when the project is finished, the leftover cost would be reimbursed. The risk here rests with the buyer.

b) Material and Time type Contract: In this type of contract, the services are provided for a certain period of time. The risk in this contract is distributed between both the buyer and the seller.

c) Fixed-Price Contract: In this type of contract, the prices are fixed for the objects to be purchased. The risk here lies with the seller as it is needed to perform the task within a decided period of time as mentioned in the contract.

From the above-given contracts, the fixed price contract seems to be more profitable to gain a competitive advantage for the company when dealing with the international suppliers as the suppliers need to complete the task within the decided or agreed period of time and the risk lies with the suppliers of the item. Toyota will not aim to own any type of risk and the entire risk will be owned by the suppliers when the project is not completed on time.