General Motors Appears to Have Better Market Strategy Than Ford

In the 1920ies the automobile industry grew rapidly and became soon the biggest Industry in the US. The more traditional transportation industries as ships, locomotives and railroads grew much less at the same time. At the end of the 1920ies, the US produced a large percentage of the whole world’s output. In the Industry two important players were Ford and General Motors. Ford was a first mover that invented the assembly line. which gave him the opportunity to enjoy large economies of scale.

The other major player was General Motors which was Ford’s major competitor. The two different companies developed very differently. In this paper, 3 different strategic choices Will be demonstrated as well as their impact of the success of the two companies. Ford’s initial success was due to its achievement of essential economies of scale which was possible to exploit by employing the assembly line.

Ford could offer its products at much lower prices than its competitors, Even though Ford had an essential first mover advantage and achieved a market share of 55.

7% it was not successful in sustaining this position. There are several reasons for it. A very important failure was the missing recruitment of professional management. This was quite determining for the whole development of the business. Ford was personally run and missed the change to benefit from their positive initial development by taking the right action. General Motors, on the other hand, had a team of outside managers, which were making much better decisions than the inside directors of Ford.

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Furthermore, they had a careful administration. Ford was concentrating its business mainly on production. They were making hardly any adaptations to the car they produced.

In the mid ZOies when the shares of Ford dropped while those of General Motors have risen they replaced their traditional Model T with the Model A. This change. however. took a year to be implemented. General Motors on the other hand continuously improved their cars. They were the only auto manufacturer, which made extensive investments in research and development. Furthermore. they had many different models, All other car manufacturer expanded by moVing to distant geographical markets. However, General Motors was diversifying its product line and captured economies of scope. Ford on the other hand expanded its product line by producing nonautomotive products as airplanes and tractors.

This was not very successful as again Ford lacked the organizational capabilities. Ford tried to sell these products Vie the same distribution channels as their cars, which turned out to be unsuccessful as well. Another difference in the history of the two firms was the degree of integration. Ford was a highly integrated company. The need for high capacity utilization of the factories led to high investments in production of material needed for the production process. However. when the depression of the 19305 hit the markets and demand dropped the unit costs rose substantially. Other car manufacturers which obtained their material from outside suppliers where less affected by the recession than Ford.

General Motors was also affected by the dropping demand, but was better off as they could get their parts needed for the production from cheap outside suppliers, that themselves were affected by the recession. These arguments lead all to the development that General Motors was going through a remarkable period of success gaining market share and competitive power. At the same time Ford was loosing market share and had to realize that they had poor organizational capabilities as well as made some maior strategic mistakes by Just concentrating on producrng one type of car.