Question

1. Assume you own a small (US$15,000,000) manufacturing company that makes components for the automobile industry. At present, your company only makes metal components. Apply at least one of the strategic frames of analysis discussed in Chapter Five to answer the following questions in your role as the owner of this small manufacturing company. Considering your company’s strategy, its competition, and gaining sustainable competitive advantage . . .
   1. What are the strategic challenges you face?
   2. What kinds of technological trends could affect your company? What kinds of global trends could affect your company?
   3. Should you move into plastic components as the industry continues to move to composites? Should you outsource? Why or why not?
   4. What other aspects of the case give you concern or present opportunities and why?

Answer 1

The strategic challenges faced by the company are as follows:

• Metal components can catch rust quite easily. Hence the cost of rework and wastage can be quite high
• The inventory needs to be audited on regular basis. Hence the carrying cost of inventory is quite high
• The company focuses on developing components in automobile industry. The company indulges in quite less diversification which limits the overall scope of business

The technological trends which can affect the business of the company are as follows:

• The evolution of technology may make the parts obsolete and incapable of being integrated in automobiles
• The disruptive innovation of 3d printing can emerge as a strong substitute of the metal automobile components in the industry
• The evolution of hybrid cars may integrate fiber based components in the automobile segment

There is high requirement for the company to diversify and differentiate its products. This is so because the overall society and technology is evolving. For the manufacturing company, to maintain its competitive advantage, it is essential that the company must diversify and enter into different segments. In my views, the company must indulge in the plastic components and incorporate it in the business model of the company.

The automobile segment is going hybrid as well as compact. Hence 2 major opportunities for the automobile components manufacturing company are:

• Develop compact components which can be easily integrated in compact cars
• Come up with components which are compatible in electric and hybrid cars