Tutorial2 McCraw and Tedlow Article Study Questions

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29 Mar 2012
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Study Questions for McCraw’s “Henry Ford, Alfred Sloan, and the Three Phases of
Automobile necessity of life and management of Ford and Sloan.
Management is key.
Adaptation is central to success.
Be aware of competition.
1)Why did the American market for automobiles expand so much during the twentieth
Population growth
Increase of income, 5 times
Technology improvements economic of scale lower prices, Model T-850-
2)What were the three phases of marketing that developed in the United States during the
twentieth century?
Phase I: Market fragmentation
ohigh margin per unit, high prices, low volume, limited geographic market,
commodity products, 274 manufacturers
Phase II: Product Configuration
olow margin, low price, high volume, national mass market, branded
products, unification
Phase III: Segmentation
oDifferentiate products, value price, global market with segments, brand
Other e.g., soft drinks
3)Describe the life of Henry Ford and explain some of his groundbreaking innovations in
the automobile business. What failures did Ford experience in his life?
Henry Ford (1863-1947), mechanic
Grew up in family farm in Dearborn, Michigan
Treat workers well
Eccentric and stubborn, anti-semetic towards Jews
Autocratic, dictator
Made model T
Cheaper, better, simpler cars
Model T
Mass production on assembly line; 12 hr 28 min 1 hr 33 min
Five dollar day, 9 hrs work to 8, 6 days/wk to 5
Promoting consumer buying power through high wages
First company, 1899; second went nowhere
1919, purchased all outstanding shares and made Ford private
Ignorance, “peace ship”, discrimination of jews, “no meat”
4)Describe the managerial innovations inaugurated by Alfred Sloan at General Motors.
Sloan is a manager
Taking council > taking orders
oGetting all views out and focus on the positive
oReview the data and sell an idea (“here’s what could be done” instead of “I
want you to do this”)
Multidivisional structure, assembly of organizational parts into one smoothly
functioning whole
oComplex structure, clear lines of responsibility and reporting
oDivision according to product
oCross divisional committees which many managers are part of,
communicate regularly with each other
5)Why was General Motors able to eclipse Ford during the third phase of marketing?
Annual model changes and market segmentation to appeal to different groups vs.
same product (model T and model A)
Introduction of “fashion”, colour and styling,
Closer relationship with dealers vs. Ford’s rash attitude
GM’s flexibility vs. Ford’s stiffness
Innovative programs such as financing for dealers and individual retail purchase
Parts that could go into several makes/models
Positive, efficient managerial style vs. Ford’s alienation and exodus of talents
Multidivisional structure
Responsibility, problem identification
6)What were the primary business features of Ford and General Motors after the Second
World War?
Strict meritocracy
Styling and variety, market too segmented
oDifficult to design, manufacture (flaws recalls), and sell (massive
Horsepower war
oDangerously high speed, low fuel efficiency
Tail fin
oImpractical, potential to harm pedestrians and other vehicles
7)How did Japan compete with American car manufacturers?
First oil shock price of gas leads to American cars unaffordable
Improved product aimed at the heart of the American mass market
Outsourcing over vertical integration
Carefully crafted supplier relations (not produced in plant)
Toyota Production System, lean production, reduce inventory, minimal machine
supervision and employee empowerment
8)How do the personal comments by Ford and Sloan in Appendix A and Appendix B
reinforce the themes developed by McCraw in the main text of the article?
Ford as eccentric, paradoxical and “American”
oSupport point on hostility to bankers “determined absolutely that never
would I join a company in which finance came before the work or in which
bankers or financiers had a part
oHe could not do the same thing over and over, yet that was what his
employee have been doing
o“repetitive labour is not dangerous” “if he stays in production it is because
he likes it
o“Ford factory has no organization, no specific duties” no “red tape
oRight price is always lowest, “duty of a manufacturer constantly to lower
prices and increase wages”
oDespises history yet he left his marks in history through Henry Ford
Museum and others
Sloan patient, persuasive
oTone of his autobiography is rational
oArguments are structured and convincing
GM’s success
Installment selling, used-car trade-in, closed body, annual model