Sunday, March 25, 2007

Redistributing Power Along a Value Chain

Last week, the Wall Street Journal used the automobile industry to show how power is being redistributed along the value chain. A combination of factors, including the entry into the parts supplier industry by private equity firms, the exiting of a large number of suppliers, new operational economics following bankruptcy by suppliers, and changes in ownership among downstream retail dealers, are all conspiring to significantly increase the bargaining pressure that the Detroit Big 3 auto producers are feeling. The message clearly is: you are your value-chain, unless your value-chain gets fed-up and deserts you!

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