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  • Print publication year: 2015
  • Online publication date: December 2015

3 - Competing in a global industry

Summary

In the previous chapter we reviewed the evolution of the auto industry and noted how key innovations in approaches to management and organization have seen the industry grow from a craft operation – making single cars for wealthy customers – to the mass production of a wide variety of cars, affordable to an increasingly large proportion of the global population. Each of these innovations, or paradigms, has been the subject of intense analyses elsewhere and we will not reproduce these in detail. We point more specialist readers to some of the classic studies in the area.

Our aim in this chapter is to provide an overview of four broad approaches to management and organization in the auto industry, each represented by a particular car company which represents the pinnacle of what was possible in the auto industry at a particular point in time, within a set of parameters bounded by standards of cost, quality, product variety and so forth. The four companies are Ford, General Motors, Toyota and Volkswagen.

FORD: THE BIRTH OF MASS PRODUCTION

‘Any colour you like so long as it's black’

The first major innovation in management and organization in the auto industry was Henry Ford's mass production approach, which represented a step change in production efficiency. By reducing the cost of producing motor vehicles, Ford created an entire new market of car buyers. In his autobiography, Ford wrote:

I will build a car for the great multitude. It will be large enough for the family, but small enough for the individual to run and care for. It will be constructed of the best materials, by the best men to be hired, after the simplest designs that modern engineering can devise. But it will be so low in price that no man making a good salary will be unable to own one – and enjoy with his family the blessing of hours of pleasure in God's great open spaces.

Over time, Ford made many improvements to his production processes, which allowed him to reduce the price further over time. Ford's famous Model T originally cost $850 in 1908, but by 1920 the cost of a T had fallen to just $260. Falling prices meant a growing market and Ford produced over 15 million Model Ts between 1908 and 1927.