5 – Automotive

Background

“AutoFix”, a leading European manufacturer of components for the automotive industry, is facing a difficult time. Over the last 10 to 15 years the automotive industry has been subject to major mergers such that the number of global players has reduced in number. With each merger, the new combine attempts to reach economies of scale by rationalising its supplier base. Also with each merger, the size of the companies being combined gets bigger such that the stakes of being in or out as a component supplier get higher. Up to now AutoFix has managed to weather each storm and to come out more-or-less on top.

AutoFix fears the day when, as a result of a merger of automotive companies and a subsequent rationalisation of suppliers, it will lose a significant part of its business at a stroke. Also, competition is not only getting more severe, it is also globalising such that there is now significant competition from countries with lower wage structures.

The problem

There is internal disagreement in the company between the “Doves” and the “Hawks”. The Doves advise that those who predict collapse of the company – those whom they call the “prophets of doom” - should be ignored. They argue that, in the past, the company has been able to maintain its position and to fight off competition when necessary. The company should have confidence in itself and believe that it will be able to master its destiny successfully in the future – as it has done in the past.

The Hawks disagree. They do not consider themselves “prophets of doom” – they are more concerned about doom of the profits – something which they believe is a realistic risk. They think that the company must initiate a program of product diversification – even to move out of the automotive industry altogether. They have tried to identify the areas of technological expertise where the company has strength. But what should they do with this analysis?

The challenge

  • How can AutoFix understand its present limitations and future opportunities?
  • Can AutoFix develop a different strategy with respect to the automotive companies?
  • What does it need to introduce a change – what intellectual property does it have, what does it need?
  • What problems could it face if it moves into another technology? For example, how should it approach freedom to operate issues?

The solution

If these are the kind of problems that you have, please contact BIRD GOËN by email (ipadmin@birdgoen.com) and refer to “case study 5” to arrange for consultation.