EY - Changing lanes: the C-suite's 2015-16 agenda

Changing lanes: the C-suite's 2015-16 agenda

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For our third annual automotive survey, 125 global executives were interviewed to find out what’s on the C-suite’s agenda for 2015-16.

Based on our survey findings and analysis, my message to executives for the year ahead is to:

EY - Randall J. Miller

  • Be prepared to respond to continued volatility, with some emerging markets facing potential recessions that could cascade to other regions and change overall sector growth
  • Move faster to leverage the convergence of connectivity, mobility and IT security
  • Refresh the dealer and sales experience to drive brand loyalty
  • Accelerate the adoption and use of analytics and data management tools to drive operational efficiencies – from manufacturing footprint optimization to supply chain visibility
  • Develop a talent agenda to secure and deliver a competitive advantage.

Randall J. Miller
Global Automotive and Transportation Sector Leader, EY

EY - Executive Summary

C-suite priorities for the next 18 months

Overall impact, strategies and preparedness to execute

1. Navigating volatility

The automotive C-suite expects unfavorable volatility to continue, with emerging markets demand and political instability topping the list of concerns. Most feel their organizations are unprepared to respond effectively.

Demand volatility – misfiring engines of growth
Slowdown in BRICS (assuming this includes South Africa), emerging markets, and concerns around Eurozone outweigh the positive outlook of the C-suite for North America.

  • 50% expect unfavorable demand volatility
  • 19% feel well-prepared for demand volatility

Cost volatility – business as usual
Currency and raw material price fluctuations are expected to have negative impact, but considered more of an operational issue.

  • 58% expect unfavorable cost volatility
  • 18% feel well-prepared for cost volatility

Political, economic and regulatory volatility
Political uncertainties and product regulations around the globe are the biggest concerns, but the C-suites feel significantly under-prepared for the former.

  • 72% expect unfavorable political, economic and regulatory 72% volatility
  • 25% feel well-prepared for political, economic and regulatory volatility

2. Enhancing value proposition

There is consensus across the industry on the value of features and functionality to drive loyalty, and a greater recognition of the critical role of digital in improving the customer experience.

In-vehicle features and functions
The C-suite believes demand for connectivity, fuel efficiency and mandated features (including driver assistance) offer the most significant opportunity to be relevant to customers.

  • 77% expect demand for in-vehicle features/functions to support their value proposition
  • 39% feel well-prepared to offer relevant in-vehicle features/functions

Digital experience and transactions
The C-suite considers delivering seamless digital/in-store experiences, and leveraging online resources to influence choice, to be critical to win and retain customers.

  • 71% expect demand for digital experience to support their value proposition
  • 13% feel well-prepared to meet the digital experience and transaction needs of customers

Demand evolution - mobility and vehicle types
The C-suite is divided on the benefits of incentives and competitive pricing, but strongly agree on the need to have used vehicle, corporate car sharing and fleet management solutions.

  • 73% expect demand for mobility services and vehicle types to support their value proposition
  • 13% feel well-prepared to meet the digital experience and transaction needs of customers

Demand evolution - automakers’ preferences impacting suppliers
Those in the supplier C-suite believe changes in automakers’ sourcing strategy is likely to be disruptive to their value proposition. However, they are more optimistic and prepared for platform consolidation, growing collaboration (among automakers) and light-weighting targets.

  • 59% of suppliers expect automakers’ demands to support their value proposition
  • 30% feel well-prepared to meet automakers’ needs effectively

3. Gaining competitive advantage

Market penetration/expansion, owning innovation and having an effective corporate strategy development process top the list of strategic initiatives for the C-suite to drive competitive advantage.

Market penetration/expansion strategies
Presence/success in new emerging markets and in regional niche segments/ bodystyles continue to be a top priority on the C-suite growth agenda. For suppliers, in particular, supporting automakers’ localization efforts by expanding into key markets enhances their value proposition.

  • 67% believe market penetration/ expansion strategies enhance value proposition
  • 28% feel well-prepared to implement market penetration/expansion initiatives

Product/service innovations and collaborations
Owning innovation and collaborations (within and outside the auto industry) are perceived to offer significant competitive advantage. However, business model/commercial collaboration opportunities with non-auto companies are yet to be fully exploited.

  • 77% believe product/service innovations and collaborations enhance value proposition
  • 26% feel well-prepared to implement product/service strategies and collaborative initiatives

Marketing and sales initiatives
Digital marketing and sales strategy are seen as critical, followed by the need to invest in customer analytics. Interestingly, innovative financing and retail strategy for alternate powertrain vehicles were at the bottom of the list.

  • 66% believe marketing and sales initiatives enhance value proposition
  • 26% feel well-prepared to implement key marketing and sales initiatives

4. Improving operational efficiency

There is a strong focus on data management and analytics initiatives to drive operational efficiency; however, few are confident in their organizations ability to execute.

Data management and analytics initiatives
Deploying analytics tools, and using real-time intelligence around customers and the supply chain to expedite decision-making and devise new strategies, but few appear to have the ability to execute. Standardizing/optimizing IT process and technology is also a priority.

  • 84% believe improving profitability is the primary driver for implementing data management and analytics initiatives
  • 12% feel well-prepared to implement data management and analytics initiatives

Manufacturing-efficiency-related initiatives
The C-suite is focused on enhancing operating efficiency of global manufacturing and enabling flexible production to adjust to changing market realities.

  • 86% believe improving profitability is the primary driver for implementing initiatives related to manufacturing operations
  • 16% feel well-prepared to implement manufacturing efficiency initiatives

Supply chain initiatives
The C-suite is prioritizing optimizing low-cost country sourcing, local-sourcing in developed and emerging markets, and gaining greater visibility to ensure supply chain security.

  • 86% believe improving profitability is the primary driver for implementing supply chain initiatives
  • 12% feel well-prepared to implement optimization initiatives in their supply chain

5. Securing access to resources

While the C-suite believes critical resources offer a competitive advantage, they also see them as necessary for business continuity. Talent topped the list of critical resources, followed by infrastructure and technology. Securing these resources, however, continues to be a challenge for most of the industry.

The C-suite believes innovative HR practices offer competitive advantage, and consistent talent management across geographies is necessary for business continuity. In particular, they believe efforts are needed to attract, retain and nurture human capital more effectively.

  • 62% believe securing talent offers competitive advantage
  • 12% feel well-prepared to secure talent

The C-suite believes the need for greater connectivity and meeting fuel efficiency norms make it imperative for the industry to secure access to the requisite technologies.

  • 84% believe securing technology/intellectual property offers competitive advantage
  • 10% feel well-prepared to secure technology resources

The C-suite expects expansion across new markets/segments necessitates securing access to financing, distribution and supply chain. This is essential to reduce time to market and maintain quality, while increasing localization.

  • 64% believe securing capital offers competitive advantage
  • 26% feel well-prepared to secure capital

Legal compliance
Establishing processes for proactive regulatory impact analysis to ensure timely interventions for minimizing financial impact, and to influence regulatory decision making is also on the C-suite agenda.

  • 44% interestingly, believe compliance and reporting offers competitive advantage
  • 32% feel well-prepared for effective compliance and reporting