Beyond product architecture: Division of labour and competence accumulation in complex product development

This paper considers the trade-off between leveraging external sources of innovation by outsourcing design and engineering activities and the ability to develop internal product development competences. The trade-off arises because the division of labor within and across firms' boundaries has a crucial role in shaping competence development processes, especially because the division of labor also influences opportunities for learning by doing. In new product development projects, learning by doing appears to be both a key determinant of competence development and a difficult-to-substitute form of learning. While the division of development tasks is often considered as guided by product architecture, we show that by decoupling the decisions concerning the product architecture and the allocation of development tasks, firms can realize the benefits of outsourcing such tasks while developing new internal competences. Drawing on a longitudinal case study in the automotive industry, we also identify a new organizational lever for shaping competence development paths and for designing firm boundaries. This lever consists in alternating different task allocation schemes over time for different types of development projects. We show why this is a novel solution, what its underlying logic is, and how it enables alleviating the trade-off between the benefits of leveraging external sources of innovation and the opportunities for competence development provided by in-house design and engineering. We discuss implications for theories of organizational boundary design and innovation management.innovation management; organizational boundaries; outsourcing; product architecture; modularity; new product development; template process; automotive industry; Fiat

'Smart' design: greening the Total Product System

About the book: Since the Rio summit in 1992, the paradigm of corporate environmental responsibility has gradually and consistently extended beyond complying with increasingly stringent environmental regulation and taking up the proactive initiatives of a few world-class companies. Research indicates that the business and financial performance of companies may depend directly on socially and environmentally responsible business practices. Many world-class companies now realize that customers and other stakeholders do not distinguish between a company and its suppliers. As a result, greening the supply chain is an innovative idea which is fast gaining attention in the industry. Greening the Supply Chain is a compilation of important chapters written by a diverse set of international authors which incorporates a broad variety of perspectives. Note: Smart car refers to Smart City coupe and Fortwo, and all terms are registered trademarks of MCC (micro compact car)

Rover and out? Globalisation, the West Midlands auto cluster, and the end of MG Rover

This paper sets the scene for this Policy Studies special issue on plant closures by outlining the form of the auto cluster in the West Midlands, the nature of structural changes unfolding in the industry, and the decline and eventual collapse of MG Rover (MGR). Structural changes highlighted include: greater pressure on firms to recover costs when technological change has been intensifying, driving up the costs of new model development; increased international sourcing of modular components; and a shift of final assembly operations towards lower cost locations. All of these make maintaining mature clusters such as the West Midlands more challenging for firms and policy makers. The paper then looks at ‘what went wrong’ at MGR. Given long-run problems at the firm and its inability to recover costs, BMW's sale of the firm in 2000 left MGR virtually dead on its feet, and by 2002/2003 it was clear to many that the firm was running out of time. Whilst recognising that the firm's demise was ultimately a long-term failure of management, the paper also looks at other contributing factors, including government policy mistakes over the years, such as the misguided ‘national champions’ approach in the 1950s and 1960s, a failure to integrate activities under nationalisation in the 1970s, a mistaken privatisation to British Aerospace in the 1980s, and a downside of competition policy in ‘allowing’ the sale to a largely inappropriate owner in BMW in the 1990s. The considerable volatility of sterling in recent years hastened the firm's eventual demise

The Rise of China’s Auto Industry and Its Impact on the U.S. Motor Vehicle Industry

[Excerpt] The automobile industry, a key sector in China’s industrialization and modernization efforts, has been developing rapidly since the 1990s. In recent years, China has become the world’s fastest growing automotive producer. Annual vehicle output has increased from less than 2 million vehicles in the late 1990s to 9.5 million in 2008. In terms of production volume in 2008, China has surpassed Korea, France, Germany, and the United States, trailing only Japan. A disproportionate share of China’s output was heavy vehicles in the 1990s. However, since 2000 China’s growth has been led by an increase in passenger cars, which now account for more than 65% of its vehicle production. China’s automobile industry has continued to expand despite the global economic downturn. From January to October 2009, more than 10 million vehicles were sold in China. If such growth continues, China is on its way to becoming world’s largest auto market. Unlike Korea or Japan, China’s automotive industry has developed extensively through foreign direct investment. This investment has come in the form of alliances and joint ventures between international automobile manufacturers and Chinese partners. The international automobile manufacturers are unlikely to promote Chinese exports that compete with their own products in other markets. As a consequence, the Chinese companies that have expressed a strong interest in exporting cars have not had strong ties to foreign car producers and that, consequently, may struggle to meet safety and emission standards in industrialized countries. However, if independent producers, such as Geely, can achieve much higher standards, they could prove to be a strong international competitor. Ford’s proposed sale of Volvo to Geely may help the Chinese company improve its products. China exports and imports few motor vehicles. Exports are growing much more rapidly than imports and are mostly light trucks and passenger cars shipped to developing country markets. By contrast, Chinese auto parts exports are already making inroads into the United States and other developed markets. While U.S. motor vehicle trade with China was insignificant in 2008, the United States imported more than $5.5 billion in parts from China, while it exported about one- eighth of that amount. Many of these imports are aimed at the aftermarket, as most of what China now exports to the U.S. market are standard products such as brake parts, electrical and electronic parts, and seating and interior trim. But with high rates of investment and strong growth in China by the leading U.S. manufacturers of both cars and parts, major motor vehicle companies are likely to increase sourcing from China. There have been a significant number of trade disputes with China ranging from implementation of obligations that were made when China joined the WTO, China’s exchange rate policy, lax trade law enforcement, and alleged subsidies to industrial producers. With a bilateral U.S. trade deficit that rose to more than$268 billion in 2008, representatives of the Obama administration, as well as many Members of Congress, would like to achieve more balance in U.S.-China trade relations

Assessing the risks to tesla´s market value: towards the share price

The report evaluates the risks associated with owning Tesla’s stock to provide the investors with an informed investment recommendation. Firstly, Tesla may suffer from the competition undercutting its prices by marketing cheaper models. Secondly, the supply of essential battery components puts the penetration of electric vehicles in Europe and America under considerable pressure. Thirdly, the escalating inflation is scaring investors more than how it is impacting Tesla’s financials. Finally, before drawing a comparison between the long-term RONIC and the cost of capital, the report provides evidence on how Tesla can navigate the supply chain disruption better than its legacy competition

Taking stock of Tesla´s leadership: a market and company perspective

An important systemic part of investors’ fundamental analysis concerns the knowledge of the market structure in which the company operates and a clear understanding of the business strategy behind the firm. This paper digs into one of the most valuable companies in the automotive sector, i.e., Tesla Inc. A deep analysis of the company’s insights is carried out, examining the production capacity and main products. Moreover, the work includes a broad evaluation of the Electric Vehicles’ market current situation, highlighting major trends and issues based on different continents

The logistics implications of the emerging business model

In what may eventually be called the fastest recovery from a recession in modern business we should be considering the lessons emerging from the 2008/9 financial crisis which witnessed the demise of corporate giants and unprecedented government responses. We have seen all three ‘business directions’ (strategy, structure, and implementation) undergo change. Historically dominant companies have migrated from industries in which they were acknowledged leaders and have been replaced by organisations that were hitherto unknown in circumstances that take us beyond Friedmen’s (2006) ‘Flat World’ towards one that is perhaps becoming ‘concave’ – in which connectivity and interaction become even easier

Greenhouse Gas Emissions of Electric Cars - A Comprehensive Evaluation

As an important trend in the automotive industry, electrification of propulsion systems has potential to significantly reduce greenhouse gas emissions of the transportation sector. Whereas electric vehicles do not produce exhaust emissions during driving, the impact of electricity provision for charging the batteries as well as the impact of vehicle production play an essential role in a holistic consideration of the carbon footprint. The paper introduces a comprehensive evaluation of greenhouse gas emission-related factors of battery-electric cars, considering the entire product life cycle. This comprises vehicle production, including battery system, electric powertrain and other relevant components, the car’s use phase under consideration of different electricity mixes, user patterns and the end-of-life phase. The results of the study can serve as a basis for comparison with the characteristics of cars driven by conventional propulsion systems and allow a detailed discussion of the different technologies, especially under consideration of future development trends

Dealing with the non-accomplishments of functional specifications in the context of buyer-supplier relationships : a case study in the automotive industry

The access to technological resources and capabilities by a company may involve the establishment and development of business relationships with specific suppliers. These relationships may reflect both general, prescribed or formal purchasing orientations (i.e. adversarial vs cooperative approaches) and more specific evaluation criteria of suppliers. This paper aims to analyse the relevance of inconsistencies between the two levels for the emergence and search for solutions to failures in the accomplishment of functional specifications in the stage of series production, i.e. when both parties are interdependent. The starting point for the empirical study was non-accomplishments of functional specifications involving an auto manufacturer and some of its suppliers, followed by an exposition of the searching processes for solutions, often by trial and error, involving several departments and firms. The results of the study suggests that these processes may reflect the tensions between transactional and cooperative orientations regarding business relationships with suppliers, a fragmented view of NPD and series production activities and targets, and the lack of integration of the criteria used for the evaluation of suppliers within the customer company. In face of inconsistencies between the formal purchasing orientation and the specific frameworks used to evaluate suppliers during series production, local solutions may emerge at operational level, which may be contrasted with existing formal orientations

Room For Growth In A Time Of Uncertainty: The UK Luxury Automotive Industry And Brexit

The UK has been a dominant hub for the production of luxury consumer vehicles for the past couple of decades. Yet this dominance is likely to wither with the new challenges facing the industry due to Brexit. This article examines how automotive supply chain globalization and foreign direct investment aided the development of the luxury automotive industry in the UK. The article considers the consequences that will result from industry isolation from the EU caused by Brexit