Two-Step Method Useful For Support of Technical Benchmarking Practice in the Automotive Market
Keywords:Data Envelopment Analysis, car, benchmarking, efficiency, product value, purchasing price, cost of usage
AbstractThe aim of this paper is to present a two-step method useful for support of product benchmarking practice in the automotive industry by measuring a technical value of car model. This method assumes that a car is a bundle of objectively and subjectively measurable attributes (i.e. functional features) provided to users. The car’s technical value is thus a measure of the overall benefit it delivers to users, while the car’s technical efficiency measures a relative benefit the users gain when they utilize a particular car model charged by certain ownership and usage costs. Technical efficiency is calculated by implementing Data Envelopment Analysis (DEA). As an example, the method is implemented to conduct a retrospective benchmarking study in the Italian domestic passenger car market in the years 1970s-1990s. Results show that cars differed remarkably due to their technical efficiency, but only 35 car models in the sample have been classified by DEA as 100 % efficient. Car models sold in the 1980s resulted not so competitive in terms of technical efficiency as models sold in the 1970s and 1990s. The results also revealed that the technical value increases with the purchasing cost, but it diminishes with the usage cost. As additional value to literature and practice, the method suggests insights about how: a) to compare cars in a multi-dimension features space; b) to analyze technological trends in the car industry; c) to study the car market structure and identify the emergence of market niches still unexploited by automotive manufacturers.
ECONOMICS OF ENGINEERING DECISIONS