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
•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
•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
•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
•Made model T
•Cheaper, better, simpler cars
•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
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
•Responsibility, problem identification
6)What were the primary business features of Ford and General Motors after the Second
•Styling and variety, market too segmented
oDifficult to design, manufacture (flaws recalls), and sell (massive
oDangerously high speed, low fuel efficiency
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
Installment selling, used-car trade-in, closed body, annual model