Ford automobile analysing the vertical integration Essay

Ford automobile analysing the vertical integration - Essay Example Generally, it is the level at which an organization controls the main suppliers and buyers, and aims at improving marketplace supremacy (Katie, 2013). In the early 20th century, Ford Corporation built a manufacturing empire unlike any other before or after based on vertical integration. Ford had chosen to produce the components and materials for its famous Model T passenger car instead of sourcing them from independent contractors or suppliers. The company also bought glass and steel mills to produce steels and window screens for its cars. In addition, Ford acquired huge tracts of land in Asia and Brazil to grow rubber trees to meet its requirements for tyre materials. These efforts culminated in the construction of the massive Rogue plant that ensured full control of all the resources that were necessary in the production of the automobiles. The first model T cars retailed at $850 but the price fell to $440 and eventually to $290 in 1925. The approach had been able to provide better quality cars at much lower prices and thus progressively increase the company’s market share. (Lu, 2011). On the other hand, General Motors, Ford’s main business rival, adopted the multi-divisional approach later on and integrated the various independent firms that were held under the umbrella firm. This ensured that the overall financial and directional decisions were made at the corporate headquarters and the operating decisisons were left to the various divisions. The large scale vertical integration was meant to achieve various objectives. Scholars believe that this was aimed at increasing control, capturing profitability from upstream suppliers, and exerting marketing dominance. This strategy was suitable with the prevailing market environment, which seemed to have enduring demand and low prices determined the market leader. However, despite the soaring sales figures, the approach also had some weaknesses. These included rigidity in asset deployment, modification of product lines and responses to demand changes (Harrigan, 2003). Analysis The Ford Motor Corporation held the dominant position in the automobile industry during the 1910s and 1920s. It held the largest market share and even briefly went over the 50 percent mark. It also reported the highest profits due to its better manufacturing innovation and a reputable brand name. in addition, its main competitors had less superior production technologies and felt the immense pressure from Ford’s market dominance and the low prices. Henry Ford was highly motivated by the vision of producing good and low-priced motor cars for the entire public and the development of technology used to mass-manufacture the cars. His ability to provide substantially lower prices than his closest competitors gave his company the flexibility to pursue these objectives. For instance, Ford’s Model T car was retailing at US$440 while the closest competitor was a Willys-Overland vehicle that was sold fo r US$ 895 (Rosenbaum, 1998). The company had started with the construction of its Highland Park plant in the 1910s, which consisted of a huge capital investment. The multi-storey building became the largest in Michigan state. Its large and open floors provided room for machinery arrangement, and the huge windows provided ventilation and natural lighting. This made the plant a good model for design of factories. In addition, it combined a foundry, a machine shop and a power plant, which brought various stages of automobile