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Francisco Veloso Chris Henry Richard Roth Joel P. Clark. December 1999. Students: Carlos Neves Tiago Ratinho. Contents. Objectives and Scope Analytical Approach Major Conclusions Critical Recommendations. Objectives and Scope. Automotive industry:

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Francisco Veloso

Chris Henry

Richard Roth

Joel P. Clark

December 1999

Students: Carlos Neves

Tiago Ratinho



  • Objectives and Scope
  • Analytical Approach
  • Major Conclusions
  • Critical Recommendations

Objectives and Scope

  • Automotive industry:
    • Massive generator of economic wealth and employment
    • Predictable demand for each country
    • Other sectors dependent, like rubber or steel
    • Highly dependent of government trade, safety and environmental regulations
    • Its impact depends crucially on the specific role
    • Governments look at automotive industry as an important industrial development opportunity

Objectives and Scope

  • Portugal:
    • 1987-1997 the autoparts industry grew seven times
    • together with assembly industry leads the stock of FDI
    • 7% of GDP
  • How can parts and components produced in Portugal remain internationally competitive?
  • What strategies should national firms follow to move up the tier structure?
  • When it is necessary to internationalize production, and under which conditions should it be done?
  • What role should the government play?

Analytical Approach (1)

  • Macroscopic:
    • Provides an understanding of the industry as a whole
    • Discusses the technical trends in the global automotive industry
    • Globalization and changes in the supply chains
  • Intermediate:
    • Macroscopic level, addressing common aspects across the supplier base in Portugal

Analytical Approach (3)

  • Micro:
  • Technical cost modeling for:
    • -Stamping and molding processes
    • -Logistic
    • -Logistic strategies


  • Company size: product development capabilities; manufacturing should achieve minimum efficient scales;
  • Labour Market: labour considerations play a role in the manufacturing cost for higher value added products; engineering and development costs;
  • Geographical considerations: logistics cost penalty arising from its peripheral location; significant automotive manufacturing industry in place in Spain; investments in Brazil;
  • Manufacturing competencies: represents 7% of GDP; 20% of national exports and 20% of all foreign direct investment stock; presence of AutoEuropa and substantial commercial vehicle manufacturing sector; high levels of certification and quality practices;


  • Cooperation: cooperation programmes among companies with complementary business objectives; specialization according to specificity of equipment; considerer mergers and acquisitions;
  • Development: higher value added products; companies working together; the area of cars interiors should be looked with particular attention; attracting engineering and research centers from major auto components corporation; research in logistics from Portugal, with the support of government funds;
  • Human Resources: low wages requiresa better-qualified workforce; creation of a technical vocational school for the auto;


  • Internationalisation: depending on the types of components being produced and overall company strategy; investing abroad should be seen by the government as a positive evolution of the local industry (Brazil in particular);
  • Manufacturing Management: narrow product range; higher levels of worker education and responsibility; a balanced and adequate use of methods for manufacturing planning and control; careful equipment time management; choice of the appropriate equipment for the product being manufactured;
  • Supply Chain: disseminating the best practices of the supply chain capabilities
  • Overall Strategy: development of the auto parts companies; strong cooperative environment between local industry and public sector.

Narrow array of high value products

  • Larger plants
  • Focus on integration of technologies
  • Full product engineering
  • JIT shipping logistics


Single Company

Group of Firms



Higher Complexity

Product Focused



Process Focused

  • Moderate array of low value products
  • Larger plants
  • Focus on manufacturing performance
  • JIT or distribution center
  • Full process engineering team
  • Very broad array of low value products
  • Small facilities
  • Lean business structure
  • Direct logistics strategy
  • No engineering

Higher Growth