Productive Model Versus Business Model ?

The increasingly important role played by Finance in firms' strategic decision-making undoubtedly represents a new issue in the analysis of structural changes affecting the automobile industry today. This industry has long been considered as generating low rates of profit due to a lack of incentive within firms dominated by managers or based on a family capitalism, both types less concerned than the market with financial results. In the past few years, this situation has changed, notably since the famous "revolt" by General Motors' shareholders.

Today, the search for "shareholder value" has become an essential parameter guiding strategic decisions made by firms' managers. Within this context, outsourcing leading to the spin-off of previously integrated activities (component subsidiaries) has become an immediate means of creating value through financial operations accompanying it. However, this also partakes in a more long-term perspective: outsourcing gives to the firm a greater flexibility within an uncertain economic environment.

Growing market uncertainties are associated with increasing variability in volume and structure of demand. Volume fluctuations are significant in so-called emerging markets, and they tend to be accentuated in industrialized countries. In these countries, the main source of uncertainty results from the growing segmentation of the market, produced by carmakers themselves through the competitive game. Firms are enlarging continuously their range of products declining more and more types of vehicle. To manage such a product variety adapting the mix of production to the market demand, firms seek out efficient and reactive flexible production systems. A modular system seems to be the most ideal technical response (that of engineers) since it allows the firm to limit costs associated with variety thanks to the commonality of elements shared among different products. This modular recombination theoretically allows for unlimited variety.

From the financial standpoint, response to uncertainty is also, theoretically, well known: it involves liquidity, money serving as the liquid asset par excellence in Finance. This can be translated into degree of "liquidity of activities" when one enters the productive sphere. Indeed, this means that a firm should be able to rapidly withdraw from positions within certain activities when profit anticipations are not satisfied so as to reposition itself in other more profitable areas. This capacity to react - the excess of which is well known in Finance with market volatility - requires that irrecoverable engagements be avoided, in other words, those that generate large cost of exit in the event of a necessary retreat (sunk cost). The trend towards outsourcing can thus be interpreted as the search for a new form of liquid assets (liquidity preference).

However, the productive sphere is by far the area wherein economic performance is constructed through a series of irrecoverable engagements. They do not necessarily consist only in material investments towards manufacturing activity (construction of buildings and plants, machine and equipment purchases): modalities such as renting or leasing can reduce the irrecoverable nature of such an engagement. What remain unavoidable, however, are intangible investments for developing competencies in the design, manufacturing, organization, and distribution realms through individual and collective learning. These competencies are necessary to implement a pertinent profit strategy by constructing an "corporate government compromise" between different stakeholders within the firm, including the extended parts of the firm (notably, suppliers and the distribution network).

The predominance of one of the firm's components in strategic decisions - the shareholder - can rapidly lead to the breakdown of already precarious and continuously renegotiated balances among the different stakeholders. The dynamics of large organizations, such as automobile firms, possess their rules that always re-emerge when certain decisions neglect to anticipate forces of reaction (which are more or less long in their expression). Different examples in current events - bad surprises after the launching of a new car model, or financial loss - constantly remind us of these rules. The conclusions of GERPISA's first and second research programs proposed by Robert Boyer and Michel Freyssenet have offered new conceptualization and action tools for this analysis.

The seductive discourse on the "New Economy" and other "business model" should not lead us to forget that these rules still legitimate approaches in terms of industrial models. Following the CoCKEAS workshop held in Bordeaux at the beginning of March, the next GERPISA colloquium will allow us all to further debate these issues.