San Francisco

In the wake of the last recession, there emerged into the lexicon of business a whole new language of change. Terms such as world's best practice, process re-engineering, customer centric organisations, globalisation, employee empowerment, paradigm shifts and race without a finish line have now assumed the status of cliché to many businesses and their employees. In many cases they were never widely understood to begin with, and now are so misused as to have become devoid of meaning.

But as jaundiced as many people have become to guru-speak, the fact is that the visionary companies who saw the world changing back then have embedded these concepts deep within the way they operate from day to day, and this can only mean that competitive pressures will continue to increase.

Witness the Ford Motor Company. As president of Ford Australia in the early 1990s, Jac Nasser took a company that had been satisfied to remain domestically focused, lulled into comfort by impressive profits and market leadership through the 1980s, and shook it to its foundations. He stripped out about a third of the company's workforce, remade its relationships with its suppliers and insisted that everyone in the business saw themselves as part of a global company, in line with the Ford 2000 global manufacturing vision of worldwide president and chairman, Sir Alex Trotman.

In the past three years, first as international number two to Trotman and now as president-elect, Nasser is driving equally profound changes in all divisions of the company. In 1997 and the first half of 1998, the cost of producing a Ford car has been cut by $US600, a $4.3 billion cut in total costs.

And recently, his attention has turned to the distribution end of the business, just as he addressed suppliers once he was satisfied Ford Australia was getting its house in order within its own factories.

Nasser and his senior executives have recognised that it is not just the manufacturing process that is under Damocles' sword in an era of instant communication and consumer empowerment. Customers today can log onto the Internet and discover just how much it costs to make a car. When they buy a Ford car, they don't distinguish between the components made by the company and those made by its suppliers. And when they walk into the door of a Ford car dealer, they don't consider themselves to be doing business with local businessman, Fred Bloggs, they consider themselves to be dealing with Ford.

Why are they so demanding of Ford? Ironically, because of the very success that the company has had in building its brand. Brands are where the real value resides today in most businesses, and the companies that own the brands are engaged in a continuing battle to make those brands more valuable, while delivering the product or service to which they are attached at the cheapest possible cost.

In many cases, such as Nike shoes, this has meant contracting out more and more of the manufacturing process. But Ford in the US is taking a different strategy to its dealership network. It has recognised that the existing structure of small businesses owning usually one retail site and delivering product service and support on Ford's behalf simply does not cut it anymore. Modern car retail sites need to give customers more choice, more convenience and do it on thinner margins.

Already in the US, big independent car retail chains have emerged, lured by the inefficient practices the manufacturers' own dealer networks have clung to. The Korean manufacturer, Hyundai, is experimenting with direct selling through colleges, reasoning that that is where the buyers for their cheaper cars are likely to be concentrated.

So Ford is "inviting" its US dealer to join it in city-wide joint ventures, with the manufacturer itself for the first time taking equity - albeit as a minority partner - in the retail businesses for the first time. But it means each dealer will no longer own his or her own site. Instead, there will be fewer superstores and more satellite service centres.

Ford estimates about 30% of the cost of getting its cars to customers comes from its distribution costs. After a decade of slicing costs out of every other part of its production chain, it is time for it to address that issue. The US has, according to Ford's global executive director of government relations and corporate economics, Martin Zimmerman, been insulated from the full force of the impact of Asian currency devaluation for political reasons. He sites Japanese export figures to illustrate the case. Go to the full Zimmerman/Cain interview: An Audience with the Ford Motor Company

Japanese exports to Canada were up 98.3% in 1997, and 33.5% in the first half of 1998. Exports to Europe rose 27.9% and 15.4% in the same periods.

But exports to the US rose only 15.8% in 1997 and less than 1% so far this year.

But Zimmerman is under no illusions about this continuing. Simply, Asian companies and Asian governments cannot afford not to make a concerted effort to tackle the world's richest market.

So, what does this mean for Australia? Firstly, it shows that no company is immune from continuing radical change in a world where the major companies understand what it means to be in a race without a finish line. If car dealers face these pressures, who can say they do not?

Secondly, it means Australian small businesses will have to embrace change as a means of survival, just as unions and employees had to do so when multinational companies introduced their enterprise change programs in the early 1990s. The small business has traditionally been slow to accept change, citing reasons such as lack of capital, lack of management skill and lack of time. Often, these explanations have masked a deeper source of resistance, suspicion of big business customers or suppliers.

Ford dealers in Australia today might well be in a unique position. They know change is coming. But instead of waiting for Ford to finish its experiment in the US, they should get on the phone to the Ford Australia president today and ask him to meet with them and discuss how they could implement the model, or develop a variation of it.

They could prove themselves model citizens to Ford and the Australian small business community. They could be one of those rare groups of small businesses who turn change to their advantage rather than waiting to be its victim.