A-class car industry: System Dynamics Approach

摘要

Nowadays, the A-class of car industry -cars shorter than 10 feet - covers about 40% of European car market. Due to import restrictions policies by EU, the main players of the industry are European firms. In this high concentrated sector, innovation and research on new technological solutions are a key factor to maintain a competitive advantage. In the early 90's, Mr. Hayek from Swatch, the most successful CEO in the watch industry, started a joint plan with Mercedes Benz to produce a new concept of car. They named it Smart - Swatch & Mercedes ART - to show the joint of both parts and emerging role of this new concept. The business project aimed to change the rules of classical perception of car industry, transferring the lessons from the watch industry. Several problems emerged from the implementation of the idea and affected several aspects in the steps of the supply chain. In this paper, we are going to analyze the factors that play a major role in the industry, and the relationship between them. In a second step we are going to present an empirical example: the MCC SMART case. Then we are going to show how the model of system dynamics using Vensim software can be applied to help managers in real decisions. In order to study the issue, using an effectual model is necessary. This model will be most profitable if it utilizes the system dynamics concepts efficiently. System Dynamics concepts states that "In order to study a subject, we should consider every single element that might influence it; and are likely to be influenced by the subject at the same time." For developing our model, we are using Vensim software, that is a visual modeling tool that allows to conceptualize, document, simulate, analyze and optimize models of dynamic systems. As we have forecasted, the company not only was going to have no profits but also having losses for the first decade of production of SMART but the future is bright for them because in from the ear 2007, they started gradually to reduce losses and from the year 2010 they are going to have profits for the first time after 12 years. Also, although they had big portion of overcapacity but they are going to reduce the percentage of overcapacity from around 50 percent to less than 5 percent in one decade. This case shows that although innovation and developing new portfolio of products to differentiate the business is very complex in industries characterized by high fix costs structure, if there is enough financial support and little pressure from the stakeholders, it is possible to turn out the business profitability.