The coming market structure correction in the automotive supply base will leave no company untouched. Auto sales are diminished, competition has increased, and financial constraints are greater; suppliers can no longer afford to subsidize weak businesses, especially those with little or no strategic value. It is now vitally important to free up resources and deploy them to those business units that have the potential to create sustainable, advantaged market positions. The most pressing challenge, of course, is deciding which businesses fit into this category.
An important, advantaged position is one that can be defended, and hence is sustainable. It’s critical not to confuse this with the ability to earn a profit today in a particular niche. Especially in the radical restructuring that suppliers are now facing, companies must continually challenge themselves to define what a competitor might be able to do differently to attack their position and put their profit stream at risk.
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Monday, January 4, 2010
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