Chapter 4 presents some ideas for thinking about the resilience of firms in the auto industry.
Our framework brings together three perspectives which, although not unique in themselves, have not to the best of our knowledge been previously combined. These are:
a) an operations perspective, which looks at the ability of auto companies to design, build and distribute vehicles to competitive standards, as well as to manage the considerable complexity of a global auto firm.
b) a stakeholder perspective which recognises that auto firms are heavily “embedded” enterprises. By this we mean that they exist in a web of settlements with multiple stakeholders, such as labour, investors, suppliers, customers and the state.
c) the context of the industry. The auto industry is characterized by long-term over capacity, which squeezes margins. Consequently, car companies need to seek markets in which they can enjoy reasonable returns (eg niche segments, or rapidly growing markets) if they are to generate the returns necessary to fund renewal.
These ideas are represented in this diagram:
“Like a spider’s web that traps an insect via contact with multiple threads, an organisation’s settlements with its stakeholders ‘tether’ it to a particular competitive position via a collection of settlements that are difficult to break, and that may constrain action on some occasions but provide support on others”. (p.115)
“For firms in deep crisis, one of the few options for survival is to seek an extension of support from some stakeholders, probably in conjunction with breaking and renegotiating the settlements with others, in order to create slack and buy time for recovery”. (p.115)