The Invisible Hand

Inside the company itself, we can identify clients and suppliers, just as in a market. Let’s have a look at the market’s theories.

The famous theory of markets of Adam Smith can be applied here too. To be short: when there is a product shortage, its price rises which stimulates production and eventually cures the shortage. Due to increased competition among manufacturer, the price of the product lowers to a “natural price”. It is the theory of the “invisible hand”. According to Smith, though human motives are selfishness and greed, the free market tends to benefit to the whole society.

YES… BUT INCOMPLETE! John Nash, a brilliant mathematician, won the Economics’ Nobel prize in 1994 for completing Adam Smith “invisible hand’s theory”. And don’t forget that Adam Smith is such a personality in political economics and he’s also a moral philosopher!

John Nash worked in the game theory, currently called Nash equilibrium. Hm… A game in a formal definition is a situation where many actors decide of a strategy, knowing that the result of this strategy will depend of the other’s choices.

John Nash said that, if each actor looks for personal AND collective interest, we’ll tend to benefit society as a whole. He introduced the idea of COOPERATION, instead of competition.

In my point of view, a client-supplier relationship is a COOPERATION interaction. For example, I want to negotiate the lower price with my supplier. But if it’s too low, he’ll have problems in his business and maybe will not be able to supply me. And I need him! So, we need to find the interest equilibrium!

With a good communication between them, clients and suppliers become confident, they cooperate with each other and they will both improve benefits. They climb the progress pyramid together; they play win/win in long term!

But we are here to talk about intern client-supplier relationships. Alcan units are negotiating between them, when the research and development center in developing a new Aluminum alloy to the Aerospace center, for example.

Alcan employees have their client and suppliers as well. So let’s come back to Sogerem and discover these interactions together!

I invite you to visit the following post: Clients and suppliers!