Metamorphosis in the auto industry

Abstract

Globally the automotive industry is transforming itself. During this period of uncertainty and discontinuity, entirely new ways of doing business are emerging. Three trends stand out. Together, they represent a convergence of progressive thinking from the major players. Trend #1: The manufacturer’s changing relationship with its customers. Increasingly customers are being given the opportunity to customize their purchase, while the automakers are becoming more adroit at understanding which customers create the most value for them. The customer’s demand for speed of delivery plus the automaker’s desire to make only cars that customers want (so they won’t be stuck with inventories that must be sold at discount), have resulted in shrinking the “order to delivery” cycle. Another dimension is the fact that cars are evolving into electric appliances. Today, 22 percent of a car is electronic content. In ten years, that will be 40 percent. Connectivity will promote extended relationships with auto owners fostering a greater customer‐centric focus. Trend #2: New partnerships with suppliers. US automakers are becoming more like their Japanese and European competitors: they strive for cooperation and are purchasing entire subassemblies (such as doors or power trains) from suppliers. This is leading to radically new infrastructure to support design, procurement and logistical processes. By connecting with suppliers and sharing demand data, quality and responsiveness are improving and costs are being reduced.

Citation

Benko, C. and McFarlan, W. (2003), "Metamorphosis in the auto industry", Strategy & Leadership, Vol. 31 No. 4, pp. 4-8. https://doi.org/10.1108/10878570310483933