s also initiate research and development collaborations with suppliers and now ask them to manage sub-suppliers. We argue that the German automotive supplier industry is representative on a global scale and the findings in the paper show that only a small percentage of the players focuses on cost leadership. Instead, most companies follow a strategy of having high quality and innovative products. But, very big companies can apply a hybrid approach and use both, cost leadership and differentiation strategies (Lay & Wallmeier, 1999). Roland Berger and Lazard point out that automotive companies exercise a lot of price pressure on suppliers which forces them to engage in aggressive pricing ...view middle of the document...
3%. Both, powertrain parts and exterior supply components continue to account for the largest share in sales (Bernhart, Hoffmann, Kalmbach, & Kleimann, 2011, p. 36f). Hence, it could be argued that Bosch should invest more in its research activities related to these two areas.
After a sharp decline in revenue during the crisis which results in around 350 bankruptcies, sales in the automotive supplier industry now reach the pre-crisis level. In general, the market is highly fragmented and the earnings before interest and tax (EBIT) margin is around 6% (Roland Berger/Lazard, 2010). The competitive situation for process-focused segments is nicely illustrated by the following figure.
Figure : Market share distribution per segment (top 5 players and the rest)
Source: Roland Berger/Lazard, 2010, p. 22
In addition, since 2009 companies generate free cash flow again. Nevertheless, we can observe diminishing EBIT margins in each product group after the year 2007. For example, profitability for powertrain supplies shows a decline of 4.8% and electronic components even 4.9% (Roland Berger/Lazard, 2010). Starting from 2010 the profitability situation improves again in all sub-segments (Roland Berger/Lazard, 2011). This financial flexibility can be used to invest in new technologies or to build up further research facilities. Also, BAT may follow an acquisition strategy by purchasing small financial distressed companies. By that Bosch can not only increase its size and bargaining power with automotive manufacturers but it is also able to gain access to new technologies and intangible assets like the personal know-how of employe