Towards the Strategic Outsourcing of Core Competencies in the Automotive Industry : Threat or Opportunity?

Faced with shorter product lifecycles and increased cost of capital, companies can no longer afford the capital outlay for new facilities which may become underutilised as processes improve over the first few years of operation. Outsourcing production capacity can remove this uncertainty. However, in the fast-moving automotive environment companies, faced with an increasingly demanding customer, have to deploy the resources and expertise of the best-in-class provider. To achieve this they have further reduced their functions to a handful of core activities. Outsourcing core activities can bring about benefits under certain circumstances, but also posses the risk that companies may become ‘hollow', lacking a core deliverable. Within the next couple of years, companies in the automotive sector will further outsource activities in order to free up investment capital. The trends and areas of outsourcing have been explored and a guiding framework has been developed for practitioners