Solution
David answered on
Dec 23 2021
The first prototypes of automobiles came into being in late 19
th
century. North America,
Europe, Asia together have contributed significantly to production and organization of
automobile industry throughout the 20
th
century. These innovation have made the
automobile industry competitive. The automotive industry is dynamic and large. It provides
jobs to many people especially in industrialized economies, approximately 1 in 10 people
are employed in this industry in industrialized nations. Automotive industry has vast
linkages to other sectors therefore developing economies always look upon at this
industry as the engine of growth. Development in this sector improves the future
prospects of developing nations.
The automobile industry has moved through three stages over the century: (1) craft
production (1890-1908), in which dozens of small enterprises competed to establish a
standard process of manufacturing automobiles and also standard product; (2) mass
production (1908-1973), by Henry Ford‘ assembly lines, which became the standard
operational mechanism of the industry; and (3 ) lean production (1973–present), which was
initially developed at Toyota in 1950s , and which introduced with it a revolutionary
management process of product-development and production. Before 1920s a large number
of firms existed in the industry. The firms were competing to make a place for
themselves in the industry. Till 1920s most of the firms started making exits from the
industry. Setting the industry standard for production, Ford took over the market place. But
this left no scope for innovation. In the 1920s, General Motors improved and made changes
on Ford‘s assembly line process. It
ought flexibility in the production process. It enabled
changeover from one model to the other. The lean production method
ought by Toyota
made huge increases in productivity. It replaced “push‖ system with a ―pull‖ system. The
production in this method is based on immediate demand and not on mass production in
assembly lines. It minimized the inventories with suppliers and dealers. Just in time
production also improved the quality of automobiles, product design as compared to mass
production. Suppliers were no longer vertically integrated to assembly line operations.
This method of cost minimization and greater responsiveness to consumer demand and
product quality and design revolutionized the automobile industry on global scale. Product
innovation and product positioning play an important and critical role for every
automobile manufacturer. General motors ended the rule of Ford‘s mass production
method and the focus shifted to several dimensions of product quality, speed of the
automobiles, luxury, comfort, safety, interiors.
Organizational changes and innovations have also occu
ed over the past century. In an
effort to minimize transaction costs associated with late delivery of components,
assemblers internalized the production of critical components. During the great depression,
automobile manufacturers found that vertical organizational structure did not allow
flexibility and therefore no product innovation took place. In 1930s, vertical organizational
structure gave way to multidimensional structure. It was first implemented at general
motors corporation. It gave way to environment that fostered product development,
innovation and sales of a wide variety of automobiles. It was due to decentralized
structure. In the 1980s, competition among the manufacturers was within national
oundaries but now the competition is on global front. Automobile producers choose
market strategies based on their rivals‘ actions. This indicates that this industry is an
oligopolistic industry. Market leadership is dynamic. By 1937, The big three - General
Motors, Ford, and Chrysler formed a dominant firm oligopoly. In the late 1990s Japanese
auto manufacturers took over more than a quarter of the U.S. market, and Big Three
market share slipped below 70 percent. In recent years, Toyota‘s market share in U.S. has
increased. Entrants like Hyundai have ...