The automobile and petroleum were to the 20th century what the railroads and coal were to the 19th century: catalysts for profound change in industry and society in general. The automotive industry not only transformed the way we live our lives by introducing mobility to the masses, but also introduced many new management practices, including Henry Ford's assembly line, Alfred Sloan's management philosophy, and Taiichi Ohno's development of lean manufacturing techniques. Today, the industry remains the world's largest manufacturing activity, consuming 15 percent of the world's steel, 40 percent of the world's rubber, and 25 percent of the world's glass. No wonder Peter Drucker dubbed it "the industry of industries."
As the industry enters the 21st century, however, it is clear that something has to change. Many original equipment manufacturers (OEMs) and their suppliers are in a seemingly never-ending struggle to survive, as the industry battles chronic overcapacity and price wars. We are also seeing a rapid shift in the global economy's equilibrium and the advent of a multipolar world in which the U.S and Europe will share economic power with the rising Asian economies.
How should OEMs and their suppliers gear up to compete effectively in the multipolar, networked world of the future, where the rules of competition are continually changing?
1. Embrace and build a truly global organization
The development of a global organization requires the deliberate creation of a culture that recognizes this new economic order. The industry leaders of the future will be those companies that are capable of figuring out how to align capital, strategies, talent, and operating cost structures globally.
2. Win the global war for human capital
As borders blur, connecting and leveraging globally dispersed talent will become an increasingly important focal point within automotive companies. Winning this war for talent requires a well-thought-out people strategy driven from the highest level in the organization.
3. Proper positioning for energy diversity
The current drive toward energy diversity and conservation has major implications for the automotive industry. First, huge investments have to be made to develop the powertrain technology for alternative energy sources. Second, and perhaps, more important, it is unclear at this stage which alternative will win out in which markets. Will it be biofuels? Diesels? Hybrids? Plug-ins? Hydrogen? Will any one win out? Since lean businesses cannot afford to design everything, leaders need to make sound judgments and alliances to effectively map out a plan that places operations in position to prosper when the future does become clear.
As one of the leading management consultants to the global automotive industry, PwC's Strategy& has helped senior executives at OEMs and suppliers in North America, Europe, and Asia address such critical strategic, operational, and systems issues. Strategy&has helped clients turn marginal market returns into exceptional returns. It is not just a single service offering, but the resulting integrated changes that truly differentiate players and help clients to not only take cost out but also to attain margin improvements.