Case 3 General Motors in 2005
1) What strategy was developed by Henry Ford to compete in car industry?
While GM was producing wide variety of expensive cars for a small market, in 1908, Henry Ford announced the development of Model T car which was to be produced by revolutionary method, a mass production. This strategy was based on moving conveyor belts, the belt brought the car to be assembled by unskilled workers. Ford started using standardized auto parts that could be easily fitted together to make assembly easier and less costly. Creating a mass market for Model T, cost of manufacturing cars plummeted, and Ford becomes an industry leader. And GM struggled to survive.
2) What was the strategy that Alfred Sloan developed to give GM a competitive advantage over Ford, and way was it successful? 3) What structure did Sloan adopt for GM and how did this structure support its strategy?
In 1920’s Sloan become GM’s CEO and searched for a new way to organize and manage Gm’s different car companies to increase their competitive advantage. GM was operating 25 different car companies that produced hundreds of different models and it was very inefficient comparing to Ford’s one mass production model. GM’s models were competing against one another. Sloan saw that Ford strategy to produce one model was ignoring the needs of other market segments such are luxury cars. He group 25 different GM’s companies into 5 major self-contained operating divisions: Chevrolet, Pontiac, Oldsmobile, Buick and Cadillac. Each of different division was given its own support service, and it should increase operating efficiency and design. Sloan’s strategy was that GM’s divisions would market five lines of cars to customers in five different socioeconomic segments. He hoped that the costumers would move up to the next most expensive cars as they prospered. He insisted that each division had a unique image so that cars of different divisions would...
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