Networking is both a blessing and a curse for suppliers – Automotive study

June 19, 2018 | News Germany

The automotive sector is facing a number of challenges, ranging from self-driving cars to e-mobility. Nevertheless, business is still booming among German automotive manufacturers (OEMs) and their major suppliers (Tier 1). According to a recent survey which the corporate consultants at Staufen conducted among global market leaders in Germany, 58% of these companies generate profits at a rate above the market average. The situation is not the same for mid-sized and smaller automotive suppliers, however.  only one in three of these companies come in above the market average in terms of their profits. 

“As our study shows, Tier 2 and Tier 3 suppliers are working their hardest to respond to this development,” says Dr. Thilo Greshake, senior partner and automotive expert at Staufen. “Of the companies in this category, 56% of those surveyed stated that they have undergone major changes in the past three years, whereas only a good 40% of the OEMs and system suppliers could make a comparable claim.”

Why is this? Manufacturers and major suppliers have to win over customers with technological innovations in increasingly rapid cycles, and usually they re-route this pressure directly towards the suppliers they work with most closely. As a result, Tier 2 and Tier 3 companies (most of which have only a limited product portfolio) have to transfer their entire business model from the analog world to the digital realm within a very short time. This means they must completely restructure if they do not want to disappear from the market completely.

But it is not only a matter of pressure that mid-sized and smaller suppliers have to cope with in particular to remain in demand as an entity in the world of new technologies. In the future, these companies will have to take an entirely different approach to work as they turn their analog product into something high tech. “What businesses need is a much stronger partnership with many more partners. And the fact that these partners may be all the way over in Silicon Valley as opposed to being just around the corner doesn’t exactly make things easier,” as automotive expert Greshake comments. “Networking with other companies – including ones in different industries – is thus a blessing and a curse at the same time. It’s true that classic mid-sized companies can benefit from the expertise of others, but at the same time, it means they have to manage many more points of contact.”

To manage these challenges, 88% of the suppliers in question are counting on improving processes and organizational structures. Beyond that, 84% state that having properly qualified employees and managers is a key issue. “In this era of break-neck changes, managers have to handle much more than ever before.  On the one hand, they have to provide stability and efficiency, but on the other hand they also have to deal with insecurity and innovations. They will have to relinquish power and find a new role as a mentor,” Greshake says. One consolation here is that according to Staufen’s new study, this change in leadership conduct is not something that only typical German mid-sized enterprises struggle with: large global corporations face the exact same issue.

Best Strategy 2018: What global market leaders in Germany do better

For its study “Best Strategy 2018: What global market leaders in Germany do better,” the corporate consultant Staufen conducted a survey of a total of 210 German companies in early 2018 that were global market leaders either in their industry or in their segment. 40% of these companies are global players with annual sales of over €500 million. Of those who responded to the survey, 42% were owners, members of the executive board or CEOs, and another 38% were division heads. The companies predominantly represented the automotive industry, mechanical and plant engineering, and the electrical industry. A copy of the study is available by contacting Kathrin Kurz,

Media graphics about the Best Strategy 2018 research can be found at the following link:

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