IN PRACTICE: GLOBAL SUCCESS STORIES

despite valiant efforts to introduce new product types in the hope of
extending markets.

Today, says Jacques Nasser, Ford's CEO, ``If you look at it in a

macro sense, there's too much capacity. . . If you're not fit and lean,
and are burdened with excess assets that are not utilized well, it's
not fair to the customers and employees and shareholders.'' This is
something of an understatement auto pundits argue that worldwide
there is an overcapacity of some 30%, severely destabilizing the market,
deflating prices, reducing profits that are already low, and encouraging
governments to adopt protectionist policies to preserve jobs.

In the long term, however, there are plenty of potential car buyers

in the developing world, particularly in China, South-East Asia, Eastern
Europe, and Latin America. With trade barriers falling, the established
car companies are increasing their presence in these regions. One
difficulty is that most of these potential consumers cannot afford to
purchase vehicles at present future sales will depend on overall
economic growth. Another problem is that developing countries may
not have an infrastructure that is adequate to support modern auto-
motive plants that need high quality machine and engineering support
groups associated with other industries. Thirdly, there is a need for a
workforce with the skills and training necessary to manufacture and
assemble components and subsystems, and to manage and maintain
the equipment. Finally, a country has to have a logistical system able to
move supplies and components in sufficient quantities and to deliver
the completed product efficiently.

Getting even bigger: economies of scale

Car manufacturing is a mature industry, with vast firms dominating the
markets, particularly through their ability to achieve economies of scale.
As with other firms, Ford is over-dependent on the North American
market and finds its numerous plants across the world difficult to
manage because of restrictive labor agreements. The advent of e-
commerce and pressure from the environmental lobby also represent
major challenges to profit growth laws regulating exhaust emissions
and fuel consumption are increasing in severity.

Analysts expect only the biggest firms to survive in the medium

term. Ford is one of only six ``first tier'' companies worldwide that are