Value Creation Architectures and Competitive Advantage: Lessons from the European Automobile Industry

Abstract

In recent years, European automobile manufacturers have heavily restructured their value creation activities and processes.During this process of restructuring, a variety of organizational models evolved from relatively homogeneous production and distribution systems characterized by strict vertical control and high levels of vertical integration.Understanding these fundamental changes and their strategic consequences requires a perspective that goes beyond firm boundaries and investigates different degrees of integration of the value-adding processes.Disintegration in the automobile industry has been initiated by the reorganization of production.Vehicle manufacturers had to react due to increasing competition from Japanese manufacturers, who initiated lean production methods at a much earlier stage.To improve production efficiency, manufacturing depth has been drastically reduced.Automobile manufacturers consolidated the number of direct suppliers and transferred extensive quality, quantity, time, and cost responsibilities-for assembly groups and modules and sometimes even for complete models-to their suppliers.Whereas reorganization in production has already reached advanced levels, changes in distribution are a more recent phenomenon.In the automobile sector, the term "distribution" is usually not limited to the sale of new cars, but includes complementary finance, leasing, and mobility services as well as the entire repair, service, and parts sector.In the past, car distribution was characterized by a number of smaller brand-exclusive dealers that were strongly coordinated and steered by the vehicle manufacturers.Today, franchised dealer groups have taken responsibility for coordinating distribution networks for certain brands (importer function) or steering sub-dealer networks in Europe.