Introduction
An article “Detroit’s engineers need to rethink entire business model” by Pierre LavalleE, published in the Globe and Mail, outlines the main issues with auto industry sector in the US. The author outlines the difficulties auto sector currently faces in the United States bringing examples of such companies as General Motors and Chrysler. Bringing examples of successful companies in the same sector, such as Japanese and Korean companies, the author points out to the necessity of implementing changes in the business model, which after the end of Second World War mostly driven by the old system of coping with increased customers demand.
The basis of these changes is the transition from pushing products into the market into customer-driven approach, a modular design and an effective supply chain. An example of such implementation can be seen through the integration of internet and the auto industry through the possibility of configuring, ordering and paying the desired product online. Another implementation state by the author is the collaborative commerce through modular design.
The author ends the article stating that such changes require fundamental changes in management and financial processes, where the latest crisis in the industry can be seen as an opportunity to start implementing these changes.
Discussion
The first concept that can be linked to the aforementioned article is the importance of the managerial role, which was covered in chapter one. As it was stated in the article, “big changes are needed, both to the management model and to the financial processes…” The main function that is concerned in the article is “leading”, “Who will be courageous enough to lead it?” In that sense, although the function outlined in the article is concerned with leadership, other functions such as “Planning, Organizing, Leading and Controlling” are implied. The presented case of the US auto industry outlines the need of a manager of the upper level of managerial hierarchy as there is a need for conceptual skill in leading the new business model. Additionally, as the needed changes in the business models are long-term changes, it can be seen that need of an upper level management is obvious through the main duties of top managers, i.e.” scan the environment, create and communicate long-term vision, and ensure that strategies and performance objectives are consistent with the organization’s purpose and mission.” In that sense, the changing nature of the business can be seen as the main reason for implementing business model changes and accordingly managerial changes.
The second link can be seen through the importance of a competitive advantage and the factors influencing it, mentioned in chapter four. The competitive advantage, as a factor of” high value that competitors cannot replicate”, for the US auto industry can be summarized as the availability of the products that satisfy the demands resulted from the massive increases in consumption that followed the end of the Second World War. The aforementioned advantage can be seen as applicable to both economic and socio-cultural conditions that were influencing the post war era. In that regard, the change in the conditions require revising the competitive advantage of the US auto industry, due to the inability to compete effectively with the most successful companies in that sector, i.e. Japanese, South Korean car companies, and the companies that follow their lead, i.e. the Chinese and Indian car makers. In general, environment uncertainty can be seen as the driving force behind seeking a new competitive advantage niche for the US industry. In such way, US auto industry can be said to be inflexible in responding to the changes in the environment, a factor that needs changes, one of which was stated in the previous chapter.
Another aspect related to the article is the emphasis on the customers in customer driven organizations and the change in the supply chain, covered in chapter four. “Customer service and product quality are viewed as the two most important goals for business success.” The proposed change in the business model for the US auto industry implies the focus on the customer where, “[T]he desired car could be configured online in less than 60 seconds”, and such change accordingly imply a change in the supply chain which will ensure the “flow and on-time availability of quality resources for customer-driven operations.” Such change in the supply change can be seen as a new direction toward the customer-driven organization, where it can be seen that consumer-driven demand-pull production model is a way of fulfilling exactly the customers’ demands, eliminating the location factor through the internet, eliminating deadlines as factor of inconvenience, and the provision of a competitive prices. In that sense, Customer relationship management addresses the factors of adaptability to customers’ demands through the online form, while the supply chain change eliminate the waiting factor as well as the prices cuts resulted from saving on the dealers and the warehouses.
The last concept related to the article is the importance of IT in the work place and which was covered in chapter seven. The changes to customer-driven organization through facilitating customers’ service online can be seen as utilization of “information technology to collect, organize, and distribute data for use in decision making.” The changing nature of business where the products can be ordered, modified, and paid for online is an obvious demonstration of how information can be converted to knowledge. The creation of e-commerce departments in sectors which were traditionally related to conventional business practices, such as the auto industry, is driven by the necessity occurred in information-driven society, where “more information about more things is being made available to more people in organizations more quickly than ever before.” Additionally, the implementation of information technology changes can be helpful in decision making, where information collected online of the customer’ demands can be used to provide a basis for taking decisions such as unprofitable models, the decision to invest or not in a particular sector through surveys and etc.
Observations
The article as a whole addresses the issue of the necessity of changes. It can be said that approach of online order is a successful step forward in the auto industry. Conventional practices in trying the cars before buying can be compensated in the ability to manually configure and buy actually what is needed. Additionally the article is a perfect demonstration of what should be done when the environment uncertainty increase, where the proposed approaches represent flexible solutions for ineffective practices brought to attention by the latest crisis. In that sense, continuing to produce cars which exceed the demands of the customers is an example of such ineffective practice. Nevertheless, even with the needed directions outlined, the importance of the leader that will direct the companies’ new approach cannot be overestimated.
References
LAVALLéE, P. (2009). Detroit’s engineers need to rethink entire business model. Globe and Mail. Web.