The ascents of both firms were strongly related to key individuals-- Henry
Ford, Alfred Sloan, and, to a lesser extent, William Durant--who were able to
formulate and implement visions for their companies that were the right ones for
their specific eras in the development of the auto industry. Ford's vision was the
right one for the nascent industry of 1913, but it was a disaster for the maturing one
of 1925. Sloan's vision was far more appropriate to the maturing state of the
industry and carried GM to dominance for over forty years.
Perhaps more interesting are the declines of both firms and the endings of their
periods of dominance. In both instances the declines were characterized by
managerial arrogance, hubris, and inflexibility, and by challenges by upstarts with
superior management systems and better approaches to the marketplace. In the 1920s the challenger was GM, and its product strategy and organizational strategy
were instrumental in toppling Ford; in the 1970s the challengers were the Japanese
auto manufacturers, with lower costs of production and superior attention to detail
It appears that market dominance may well bring with it, sooner or later,
managerial arrogance and inflexibility; if there are upstart rivals waiting in the
wings, the firm's dominant position will erode. In the latter half of the twentieth
century this has been true of IBM, Xerox, U.S. Steel, and American Can, as well
as GM. This recounting should provide some reassurance to students of industrial
organization (and to consumers), as well as a cautionary warning to the managements of some currently dominant firms (e.g., Coca-Cola, Microsoft, Intel, AT&T)
that market-dominant positions--unlike diamonds--may not be forever.
The definitive history of Ford--the company and the man--is provided by A. Nevins, Ford: The Times, the Man, the Company ( New York: Charles Scribner's Sons, 1954); A. Nevins
F. E. Hill, Ford: Expansion and Challenge, 1915-1932 ( New York: Charles
Scribner's Sons, 1957); A. Nevins and
F. E. Hill, Ford: Decline and Rebirth, 1933-1962
( New York: Charles Scribner's Sons, 1963); see also B. Herndon, Ford: An Unconventional
Biography of the Men and Their Times ( New York: Weybright and Talley, 1969); and C. Gelderman
, Henry Ford: The Wayward Capitalist ( New York: Dial, 1981).
See R. G. Cleveland and
S. T. Williamson, The Road Is Yours ( New York: Hawthorn, 1951), pp. 270-291.
Only in the 1960s, with the development of bilevel and trilevel rack (drive-on-driveoff) railroad cars, which allowed the economical shipment of whole (assembled) cars, was
the economic advantage of the regional assembly plants substantially reduced.
These improvements would today be described as "sliding down the learning curve."
Nevins, Times, Man, Company, p. 534.
Profit data can be found in Nevins, Times, Man, Company ( 1954), and
L. H. Seltzer, A Financial History of the American Automobile Industry ( Boston: Houghton Mifflin, 1928).
Many industrial organization analysts have questioned the use of accounting profit
data in determinations of whether a firm is earning excess profits, arguing that the
accounting data frequently do not reveal the crucial economic concepts that are necessary
for such determinations. See, for example, Franklin Fisher and
John McGowan, "On theMisuse of Accounting Rates of Return to Infer Monopoly Profits,"
Questia, a part of Gale, Cengage Learning. www.questia.com
Book title: Market Dominance:How Firms Gain, Hold, or Lose It and the Impact on Economic Performance.
Contributors: David I. Rosenbaum - Editor.
Place of publication: Westport, CT.
Publication year: 1998.
Page number: 126.
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