INTRODUCTION In traditional corporation strategies theory [ 1], a market winner has to pursue one of the three strategies to keep the leadership position in a market. These strategies are cost leader, differentiation and focus strategy. Focus strategy is especially suitable to niche markets, where Original Equipment Manufacturers (OEMs) can provide fast responses to the market trend and clients' special requirements. OEMs can provide customized solutions in niche markets to retain the clients. When an OEM takes differentiation strategy, it typically will be a price leader as well, since there is always premium coded in the market price to compensate for the cost associated with high quality or market image. During the globalization process, price competition becomes more intense for automotive markets around the world. More and more OEMs adopt lean manufacturing methodologies, and cost reduction becomes a wide topic for all market players. Not only do OEMs that take cost leader strategy actively push down cost, but also every global OEM likes to utilize economic scale to cut cost.The Big Data Application Strategy for Cost Reduction in Automotive Industry Xinyu Ge and Jonathan Jackson Caterpillar Inc. ABSTRACT Cost reduction in the automotive industry becomes a widely-adopted operational strategy not only for Original Equipment Manufacturers (OEMs) that take cost leader generic corporation strategy, but also for many OEMs that take differentiation generic corporation strategy. Since differentiation generic strategy requires an organization to provide a product or service above the industry average level, a premium is typically included in the tag price for those products or services. Cost reduction measures could increase risks for the organizations that pursue differentiation strategy. Although manufacturers in the automotive industry dramatically improved production efficiency in past ten years, they are still facing the pressure of cost control. The big challenge in cost control for automakers and suppliers is increasing prices of raw materials, energy and labor costs. These costs create constraints for the traditional economic expansion model. Lean manufacturing and other traditional 6 Sigma processes have been widely utilized to reduce waste and improve efficiency in the automotive industry. However, these processes and measures are still a reactive strategy and will not provide break-through impacts on automotive OEMs. It is very challenging for an organization that pursues differentiation generic strategy to drive down cost without affecting its premium pricing strategy. Big Data technologies, which have evolved rapidly in past ten years in the Information Technology (IT) industry, show promise in linking aggregated real-time customers' application pattern to the product design and manufacturing phase. The Big Data technologies enable automotive OEMs to pursue innovative measures to drive down costs. When Big Data technologies are used according to typical reactive strategies in cost reduction, they do not bring revolutionary improvement for cost control as well. The ultimate power of Big Data technologies relies on the implementation of new strategies. Real-time data analytics for the adaptive calibration and circular-economy development are given in this paper as Big Data application strategy in the automotive industry. CITATION: Ge, X. and Jackson, J., "The Big Data Application Strategy for Cost Reduction in Automotive Industry," SAE Int. J. Commer. Veh. 7(2):2014, doi:10.4271/2014-01-2410.2014-01-2410 Published 09/30/2014 Copyright © 2014 SAE International doi:10.4271/2014-01-2410 saecomveh.saejournals.org 588Downloaded from SAE International by University of British Columbia, Saturday, August 18, 2018On the other side, price of raw materials, energy and labor costs are under increasing pressure. The impact on automotive OEMs and suppliers is dramatic, and the increase of cost can easily eat manufacturers' p