Marketing and the new car companies

The June 8th issue of Forbes has as its cover story the new breed of American car companies. Unlike to old days, in which car companies were vertically integrated manufacturing enterprises, the new breed is more akin to a fabless semiconductor firm. The fabless semiconductor company doesn’t own any manufacturing capacity; rather it designs semiconductors to fill a market need and outsources the manufacturing to a manufacturing specialist. The capital advantages to this approach are obvious and so are the market speed advantages. What seemed so unusual about the fabless semiconductor companies when they appeared years ago was that semiconductor manufacturing had always seemed like the perfect example of an industry that had to remain vertically integrated, since the manufacturing of semiconductors was so critical a competence.

Well, fabless semiconductor companies are now abundant, and now plant-less car companies are proving that the auto industry too can pare its essence down to design and Marketing (with a big “M”) as so many other industries have. As we’ve said so many times, Marketing is the one essential, core, non-outsourceable function of any company—its sine qua non. In the case of the new car companies, for good reason, they have elected to also keep design in-house, although the design function is really more of an integrating engineering function that pure design-from scratch. Take a proven engine from GM, drive train from another supplier, integrate them with some lesser unique elements and outsource the manufacturing to spare auto manufacturing capacity somewhere in the world, and you have a late 20th century company, in a turn of the century industry, finally appearing in the early 21st century. The essence of the new American car company will be the forward-looking identification of profitable market needs, the financially and technically competent specification of a product to fill that need, the management to drive it all to happen, and the delivery of those products to the market with appropriately designed channels.

In other words, the new American car company will be a Marketing company..and not a whole lot else.


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