Case Ford

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 1.
Why
was
it
profitable
for
General
Motors
and
Ford
to
integrate
backward
into
 component‐parts
manufacturing
in
the
past,
and
why
are
both
companies
now
 trying
to
buy
more
parts
from
the
outside?
 
 Earlier
in
the
1900’s
Ford
and
General
Motors
found
it
profitable
to
use
backward
 
 integration
to
control
the
inputs
manufactured
to
be
put
into
their
automobiles.
These
 
 companies
tried
to
control
these
manufacturing
processes
to
reduce
costs
and
achieve
 
 higher
quality.
Vertical
integration
was
used
when
Ford
began
to
realize
it
would
be
 
 cheaper
for
his
company
to
make
their
own
materials
that
were
needed
to
make
his
 
 automobiles
instead
of
buying
them
from
an
independent
company.
He
took
this
idea
and
 
 spread
it
all
through
his
company.
So
in
the
end,
everything
needed
to
construct,
 
 distribute,
and
sell
was
made
within
the
company
(Vertical
Integration).
This
system,
also
 
 known
as
the
Single
Management
System
came
from
vertical
integration,
as
was
the
case
 
 with
General
Motors.
By
1920,
GM
owned
the
manufacturers
of
70%
of
everything
that
 
 went
into
their
automobiles.
For
the
next
several
decades,
GM
enjoyed
a
30%
cost
 
 advantage
over
Ford
and
Chrysler
(Crossing
Company
Boundaries).
By
controlling
every
 
 aspect
of
the
manufacturing
process,
the
company
is
able
to
see
the
value
chain
of
what
it
 
 produces
very
easily.
GM
and
Ford
were
able
to
build
barriers
to
entry,
facilitate
 
 investments
in
specialized
assets,
and
protect
product
quality
to
gain
a
competitive
 
 advantage
in
the
automotive
industry
(Hill,
Jones
311).
However,
with
rapid
changes
in
 
 technology
that
happened
later,
and
unpredictable
demand,
vertical
integration
turned
out
 
 to
not
be
the
best
route
for
them
to
take.
 
 Nowadays,
both
GM
and
Ford
are
turning
to
Strategic
Outsourcing
to
gain
a
 
 
... [continues]

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