Value creation architectures and competitive advantage: Lessons from the european automobile industry

California Management Review

Volumn 51, Issue 3, 2009, Pages

  Dietl, Helmut ^a   Royer, Susanne ^a   Stratmann, Uwe ^a  

^a NONE

Author keywords

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EID: 67651012130     PISSN: 00081256     EISSN: None     Source Type: Journal    
DOI: 10.2307/41166492     Document Type: Article

References (60)

1. Recently, however, Dell shifted towards a stock-based supply system and lost some control in distribution and some of its differentiation potentials as a consequence. See S. Holzner, HowDell Does It (New York, NY: McGraw-Hill, 2006).
2. See for example S. Royer, Strategic Management and Online-Selling: Creating Competitive Advantage with Intangible Web Goods (London/New York, NY: Routledge, 2005).
3. For example, M.E. Porter, Competitive Strategy (Boston, MA: The Free Press, 1980).
4. For example, J.B. Barney, "Firm Resources and Sustained Competitive Advantage," Journal of Management, 17/1 (March 1991): 99-120.
5. For example, see K.M. Eisenhardt and J.A. Martin, "Dynamic Capabilities: What Are They?" Strategic Management Journal, 21/10-11 (October/November 2000): 1105-1121.
6. J.H. Dyer and H. Singh, "The Relational View: Cooperative Strategies and Sources of Interorganizational Competitive Advantage," Academy of Management Review, 23/4 (October 1998): 660-679.
7. Ibid.
8. See, for example, E. Baraldi, "Strategy in Industrial Networks: Experiences from IKEA," California Management Review, 50/4 (Summer 2008): 99-126;
9. D. Lavie, "The Competitive Advantage of Interconnected Firms: An Extension of the Resource-Based View," Academy of Management Review, 31/3 (July 2006): 638-658.
10. See, for example, H.W. Chesbrough and M.M. Appleyard, "Open Innovation and Strategy," California Management Review, 50/1 (Fall 2007): 57-76, at 62.
11. S. Duschek, "Inter-Firm Resources and Sustained Competitive Advantage," Management Revue, 15/1 (2004): 53-73, at 69.
12. For example, T.J. Sturgeon, "From Commodity Chains to Value Chains," in J. Bair, ed., Frontiers of Commodity Chain Research (Stanford, CA: Stanford University Press, 2009), pp. 110-135. Sturgeon sees it as a research deficit that industry neutral explanations are lacking with regard to understanding value-adding activities on a global basis.
13. See M.G. Jacobides, T. Knudsen, and M. Augier, "Benefiting from Innovation: Value Creation, Value Appropriation and the Role of Industry Structures," Research Policy, 35/8 (October 2006): 1200-1221, at 1201.
14. For a description of the term "industry architecture" and its relation to competitive advantage, see also G.P. Pisano and D.J. Teece, "How to Capture Value from Innovation: Shaping Intellectual Property and Industry Architecture," California Management Review, 50/1 (Fall 2007): 278-296.
15. See M.A. Schilling and K. Steensma, "The Use of Modular Organizational Forms: An Industry-Level Analysis," The Academy of Management Journal, 44/6 (December 2001): 1149-1168.
16. See , accessed November 3, 2008.
17. This does not imply that all value-adding activities are owned by one player. However, it does mean that one player, to a high extent, controls and coordinates all the value-adding activities around a certain product or service.
18. See, for example, H.M. Dietl and S. Royer, "Intra-System Competition and Innovation in the International Videogame Industry," Innovation: Management, Policy & Practice, 5/2-3 (2003): 158-169.
19. For the following, see Dyer and Singh, op. cit., and the literature cited there.
20. See H.M. Dietl, S. Royer, and U. Stratmann, " Wertschopfungsorganisation und Differenzier-ungsdilemma in der Automobilindustrie," Schmalenbachs Zeitschrift fur betriebswirtschaftliche Forschung (forthcoming).
21. See, for example, M. Boos, A Typology of Case Studies, Research on Cases and Theories, Vol. 1 (Miinchen/Mering: Hampp, 1992).
22. Opel is a European brand of the General Motors (GM) group. Opel cars are sold under the "Vauxhall" brand in the United Kingdom. The brands Opel and Vauxhall are used as synonyms here as the products are the same and Vauxhall is integrated into the Opel organization.
23. This triangulating procedure is the basis for a holistic picture of chosen architectures in the automobile industry and the impact on competitive advantage by minimizing the personal perspective bias and enhancing the data validity (see R.K. Yin, "The Case Study Crisis: Some Answers," Administrative Science Quarterly, 26/1 (March 1981): 58-65). Internal validity was further ensured by the fact that the three researchers analyzed the data independently from each other and compared and discussed their results among each other as well as with other academics and practitioners.
24. Entities that refer economically and legally to the brand are seen as integrated. Supplier relationships between the brand and the mother company (such as Opel with GM entities) or between brands of the same company group (such as Opel and Saab under the roof of GM) as well as between brands from another company group (such as Opel and Fiat) have to be interpreted as external relationships. However, relationships with actors from the same company group are naturally tighter compared with relationships with actors completely outside. This has to be taken into account regarding the measurement and interpretation of the variables that describe the integration of external actors later on.
25. The measurement of distribution depth is difficult because there are no quantitative data about total distribution value. The availability of quantitative data is highly limited with respect to car service, parts distribution and financial services as a wide spectrum of different actors is involved in these activities. Valid data about the value output of all the different actors are not available in this area. Reliable quantitative data are only available for new car distribution.
26. Profitable after-sales services and parts sale are gaining strategic importance for the entire car industry. Competition is, however, increasing due to new manufacturer-independent players and a liberalized after-sales market (e.g., sale of original equipment by OES firms). Manufacturer-independent repair and service chains such as A.T.U. or Pit-Stop and independent franchise organizations such as Temot International or AutoDistribution are global players with extensive distribution networks and tight links to original parts suppliers. Some vehicle manufacturers try to integrate independent repairers by cooperative partnerships or separate multi-brand franchise organizations. Other vehicle manufacturers deny any integration of independent actors and concentrate on competition with them.
27. The International Car Distribution Programme (ICDP) in 2006 analyzed the service contracts of the main makes in terms of the specificity requirements on the franchisee. The research was conducted in the European core markets of France, Germany, Italy, and the United Kingdom. Around 100 items were analyzed to explore the complexity and the related costs to fulfill the brand-specific franchise requirements. The "franchise complexity index" is an indicator of the control of the vehicle manufacturer over the dealer network. ICDP used a three-point scale that was recalculated for our use. See J. Kiff, Authorised Repairer Standards, ICDP Research Report 06/06 (Solihull (UK): ICDP, 2006).
28. Car retailing was traditionally characterized by brand-exclusive dealerships. Vehicle manufacturers were the system leaders in this framework. Today, multi-franchising is gaining a lot of importance in the course of the liberalization of car retailing in Europe (see Block Exemption Regulation 1400/2002). A general consolidation process towards big dealer groups is pushing this trend too. Multi-franchising is furthermore a consequence of shrinking profitability and the loss of market share of established brands (e.g., Opel and Ford in Europe). Car dealers try to compensate for lower new car profits and rising costs by additional sales units with other brands.
29. See Dyer and Singh, op. cit.
30. See also W.G. Ouchi, "A Conceptual Framework for the Design of Organizational Control Mechanisms," Management Science, 25/9 (September 1979): 833-848.
31. Sako distinguishes between three types of inter-organizational trust building, such as building contractual trust, competence trust and goodwill trust. See M. Sako, Prices, Quality and Trust: Inter-Firm Relationships in Britain and Japan (Cambridge: Cambridge University Press, 1992).
32. Trust is not a control instrument but one outcome of the control techniques, see D.M. Rousseau, S.B. Sitkin, R.S. Burt, and C. Camerer, "Not So Different After All: A Cross-Discipline View of Trust," Academy of Management Review, 23/3 (July 1998): 393-404.
33. See Dyer and Singh, op. cit.
34. See also Ouchi, op. cit.
35. See T.K. Das and B.S. Teng, "Trust, Control, and Risk in Strategic Alliances: An Integrated Framework," Organization Studies, 22/2 (2001): 251-283.
36. See also R.F. Speklé, "Explaining Management Control Structure Variety: A Transaction Cost Economics Perspective," Accounting, Organizations & Society 26/4-5 (May/July 2001): 419-441.
37. See, for example, H. Mallad, "Erfolgsfaktor Kommunikation im Supply Chain Management unter besonderer Berücksichtigung elektronischer Medien," in B. Ebel, M. Hofer, and J. Als-Sibai, eds., Strategic und Marketing in der Automobilwirtschaft (Berlin/Heidelberg: Springer, 2003), pp. 660-672. Diez gives evidence for the relationship between supplier satisfaction and supplier's commitment towards the vehicle manufacturer.
38. See W. Diez, Marken Monitor 2005, 2006, und 2007: Hä ndlerzufriedenheits-Monitor 2005, 2006, und 2007 (Geislingen an der Steige: Research Reports Institut fur Automobilwirtschaft (IFA), 2005, 2006 and 2007).
39. See Automotive News Europe and SupplierBusiness, OEM-Supplier Relations Study 2006, 2007, and 2008 (Oberpfaffenhofen: Annual Suppler Relations Study, 2006, 2007, and 2008);
40. L. Buzzavo, G. Maramieri, C. Pizzi, and G. Volpato, DealerStat - Dealer Satisfaction Performance. Survey on Dealer Satisfaction in the Relationship with the Carmaker 2004, 2005, 2006, and 2007 (Venezia: Research Report of Quintegia and Università Ca' Foscari, 2004, 2005, 2006, and 2007);
41. Conseil National des Professions de 1'Automobile, CAP Réseaux - La Cote d' Amour, Les Resultats de l'Enquête CAP Réseaux 2003 to 2007 (Paris: CNPA, 2003, 2004, 2005, 2006, and 2007);
42. W. Diez, op. cit.;
43. B. Ebel, H. Utikal, and M. Hofer, From Cost-Pius Pricing to Value Management: How Automotive Suppliers Can Improve their Profitability (Bonn: Reihe Automotive Management, Simon-Kucher und Partners, 2007);
44. B. Ebel, H. Utikal, and M. Hofer, Quo Vadis Automobilzulieferer? (Bonn: Reihe Automotive Management, Simon-Kucher und Partners, 2005);
45. L. Ratledge, Dealer Attitude Survey 2001, 2002, 2005, and 2006 (Rugby: Survey Results, 2001, 2002, 2005, and 2006);
46. W. Meinig, Supplier Satisfaction Index 2001, 2003 (Bamberg: Forschungsbericht der Forschungsstelle Automobilwirtschaft, FAW, 2001 and 2003). Dealer satisfaction and manufacturer-dealer relationships are analyzed in these annual studies. Dealer satisfaction is measured on a six-point scale, which is recalculated for our use.
47. See A. Fein, Die Preissenkungs-Forderungen der Automobilhersteller 2006, Marktanalysen und strategische Ansätze für Zulieferer, Research Report (Stuttgart, 2006).
48. See also W. Meinig, SSI - Supplier Satisfaction Index, Der Zufriedenheitsindex der Automobil Zuliefererindustrie (Forschungsstelle Automobilwirtschaft (FAW), Universität Bamberg, 1995, 1998, 2001, and 2003).
49. See W. Diez, Automobilmarketing: erfolgreiche Strategien, praxisorientierte Konzepte, effektive Instrumente (Landsberg/Lech: Verlag Moderne Industrie, 2001), pp. 577-578.
50. See Motor Presse Stuttgart, Die besten Autos 2005 [Best Cars 2005] (Motor Presse: Stuttgart, 2006).
51. This balance seems to be reflected in the fact that none of Toyota's suppliers went bankrupt between 1999 and 2008, a period of many bankruptcies among the world's leading automotive suppliers.
52. For more details see T.J. Sturgeon, J. Van Biesenbroeck, and G. Gereffi, "Value Chains, Networks and Clusters: Reframing the Global Automotive Industry," Journal of Economic Geography, 8/3 (2008): 297-321, at 309-310.
53. These investments will result in high costs of serving multiple producers. See Sturgeon et al., op. cit., p. 308.
54. The work of Whitley who analyzes the effect of institutional contexts on international coordination and competition may be an important basis for this line of research. See R. Whitley, "How and Why are International Firms Different? The Consequences of Cross-Border Managerial Coordination for Firm Characteristics and Behaviour," in G. Morgan, P.H. Kristensen, and N. Divides, eds., The Multinational Firm (Oxford: Oxford University Press, 2001), pp. 27-68;
55. R. Whitley, Business Systems and Organizational Capabilities: The Institutional Structuring of Competitive Competencies (Oxford: Oxford University Press, 2007).
56. See M.E. Porter, "What is Strategy?" Harvard Business Review, 74/6 (November/December 1996): 61-78;
57. D. Hambrick and J. Fredrickson, "Are You Sure You Have a Strategy?" The Academy of Management Executive, 15/4 (November 2001): 48-59.
58. Regarding the risks of outsourcing, see, for example, Y. Shi, "Today's Solution and Tomorrow's Problem: The Business Process Outsourcing Risk Management Puzzle," California Management Review, 49/3 (Spring 2007): 27-44;
59. M.R. Weeks and D. Feeny, "Outsourcing: From Cost Management to Innovation and Business Value," California Management Review, 50/4 (2008): 127-146;
60. S. Tadelis, "The Innovative Organization: Creating Value Through Outsourcing," California Management Review, 50/1 (Fall 2007): 261-277.