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... survive and to gain a competitive advantage in the industry. The second innovative technique was the progressive specialization of labor and the separation of skilled and unskilled tasks, which turned vehicle assembly into a deskilled and highly routine work. It also created a hierarchical industrial structure where managers specified the tasks of workers. In order to avoid disruptions of any kind, a system of open shop-floor (where workers were simply interchangeable parts of the production system) and high wages was maintained (Womack et al. 1990: 33, 42 - 3). The third innovative technique was a strong organizational capability for co-ordinating different stages of the production process that takes place within and outside the firm (Womack et al. 1990: 26 - 7).
The complexity involved in producing a car (produce and assemble between 10, 000 and 15, 000 parts, each requiring different production processes) requires the masterful engineering of plants, the streamlining of production networks, including a tight and sequential connection of specialized machines and different production processes, as well as the storing of heavy inventories (Dyer et al. 1987: 29). The introduction of specialized machines in itself did not guarantee a reduction in the overall time of vehicle assembly, since a failure in the supply of any component, at the right place, at the right time, and in the right quantities, could spell disaster (White 1971: 78). A successful auto maker had to be capable of effectively coordinating, setting, and storing thousands of interdependent parts that had to be supplied to the assembly line in an uninterrupted, synchronized, and precise manner. A related element was vertical integration or a functional organization and a hierarchical structure in the production of parts (Filgstein 1991: 318). Considering the numerous steps involved in producing a car, vertical integration was a key element in avoiding any potential disruptions in the supply of parts and key materials, and in achieving efficient economies of scale and a rapid Fords range of strategic options were influenced, first, by its ability to comply with the rules of competition, i. e.
those rules that were determined by mass production. The company's strategic choices were also influenced by its position or capabilities relative to the other competitors. The distribution of relative capabilities among the Big Three and other auto makers set the limits for Fords attempts to follow strategic actions that were independent of its competitors' moves. Being a price taker meant that Fords actual strategic choices, particularly regarding product and price, were set by GM, owing to the dominant position of the latter. Fords strategic choices for profit maximization were actually interdependent with the collective behavior of other industry competitors. Today, and even if its US operations still represent the bulk of Ford's total operations, its foreign operations continue to contribute to the company's strong performance and leadership in the industry.
Historically and compared with its rivals, Ford has tended to locate higher proportions of its production outside of the United States, although foreign production of its vehicles has not increased as a proportion of total worldwide production - except during the most severe years of the 1979 - 82 recession. Its international operations were a source of strength that allowed Ford to maintain its position as the second largest auto maker in the world and to respond to GM's competitive moves. In the worst years of the 1970 s' industry recession, those operations provided the cash that saved the company from bankruptcy. Considering the inefficiency and high cost of the company's operations in the United States, as well as the poor quality of its products, some of its subsidiaries abroad contributed to maintaining the parent company's competitiveness. Given their good performance, Ford's international operations gave the company time to focus on improving its operations at home and developing new products necessary to survive in a highly competitive and volatile marketplace. Contrary to popular views about multinational corporations behavior in an era of globalization, the information presented in this book showed that Ford was far from being the kind of organization that easily moved production operations from one country to another and that had the flexibility to introduce changes to its operations abroad rapidly.
As the failure of the world-car or global-car projects suggested, Fords complex organization required time and substantial resources to restructure the design and management of its operations. Ford did not shift the location of its vehicle production significantly, nor did it serve world markets from one location or substantially increase its manufacturing operations in low-cost production sites. During the 1980 s, the company did make progress in the integration of its production operations on a regional - mainly North America and Europe - rather than on a global basis. That progress represented a change of degree rather than of direction, because its regional integration strategies had been in place since the 1960 s. In this respect, the most evident and important change was the integration of its Mexican subsidiary into Fords North American system of production. Ford also achieved some inter-regional co-ordination, although this was limited to a few activities, such as R&D, design and engineering between the parent company and one subsidiary (Ford Europe) for the development of different vehicles, and then among different assembly plants for the production of global cars.
Some factors that prevented Ford from introducing major changes in its production operations can be explained by the high risk and costly nature of automotive production. Like other auto makers, Ford tended historically to open only a limited number of production operations in foreign countries, normally in those that had reached some level of industrialization and thus offered relatively large markets for vehicles. Sovereign risks there were not high. Their investments to produce in less-developed countries, particularly in the 1960 s, were defensive strategies aimed at either gaining first-mover advantages or protecting potential growth markets from increased competition in the industry worldwide. The failure of Fords world-car strategy demonstrated that economic considerations, such as transportation and co-ordination costs, would more than offset the perceived gains from higher economies of scale achieved through integration of production operations on a global basis. In addition, different national / regional consumer tastes and the existence of shortened product lifecycles required proximity of assemblers to the marketplace, thus frustrating efforts to standardize products and / or integrate production on a global basis.
All of this helps to explain why Fords global-car projects failed. Fords global-car strategy reflected the company's recognition that its ability to create cross-border integrated operations, whether at the regional or the global level, also depended upon its position in different countries and its ability to cope with the opportunities and constraints posed by the host government. Uncertainty and risks associated with political or economic disruptions in different locations are important deterrents to the pursuit of a globally integrated system of production. From the company perspective, and contrary to popular views, global integration is more, not less, vulnerable to such disruptions. It is also important to emphasize that the combination of heightened levels of competition and increased investments devoted to the creation of regional systems of production have prompted US vehicle assemblers to adopt an almost schizophrenic attitude toward trade policy. On the one hand, they have pressured governments of countries where they have manufacturing operations to introduce and implement clear rules of trade liberalization on a regional basis, so as to guarantee export markets and access to low-cost / high -quality sources of production.
On the other hand, and as a result of their increased investments and heightened levels of competition, they have also demanded protection for regional markets against non-regional producers. As the discussion of the Auto Pact showed in the Canadian case, this is not a new practice in the era of globalization. According to available information on changes in management and organization, Ford seemed to be well positioned to build a global and flexible structure that allowed for a better strategic response to changing conditions in markets around the world. Among other considerations, and compared with other auto makers, Fords management had more experience working with foreign subsidiaries. However, Fords efforts to move toward a global management structure, as expressed in Ford 2000, faced significant obstacles to the point that the company reversed centralization efforts.
More recent management changes point toward greater decentralization of management, a tighter co-ordination among subsidiaries within each region, and inter-regional or global co-ordination / collaboration , but only for a limited number of activities. Fords limited approach to global integration is a pragmatic one that recognizes both the benefits of integration and the numerous real and potential obstacles that national borders present to such a project. In sum, Fords rationalization strategies implied higher levels of cross-border interdependence and production of its operations at a regional, and not at a global, level. But this has not meant that Ford has become more mobile in terms of relocating high-value-added production to foreign locations. National borders, culture, institutions, economic and physical conditions continue to matter in the strategic planning and decisions of major multinational enterprises. Fords strategies represented a change, in various aspects, from previous practices and had different consequences for the subsidiaries and the countries where Ford operated.
The specific impact of Fords strategies depended upon the characteristics of the company's local operations, the relationship that the company had established with suppliers, labor and the governments of host countries, and the framework of relations between the host and the company's own home country. References: Dyer, D. , Malcom, S. , Webber, S. and Webber, A. (1987) Changing Alliances, Boston, MA: Harvard Business School Press. Filgstein, N. (1991) The structural transformation of American industry: an institutional account of the causes of diversification in the largest firms, 1919 - 1979, in P. J. DiMaggio and W.
W. Powell (eds) The New Institutionalism in Organizational Analysis, Chicago: University of Chicago Press. Finance Yahoo. com. Toyota Motor Corp. (TM). Profile.
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com Annual Income Statement. Retrieved November 28, 2006. web Toyota News Release (January 17, 2005). Guangqi Toyota Engine Co. , Ltd.
Starts Making Engine Parts. Retrieved November 28, 2006. web Toyota News Release. (February 2, 2005). TOYOTA CELEBRATES GRAND OPENING OF TIJUANA PLANT. Retrieved November 28, 2006. web Toyota News Release. (February 24, 2005).
Toyota Kirloskar Launches Production of Innova Minivan IMV Project Expands to Include India Retrieved November 28, 2006. web Toyota News Release (February 1, 2005). Toyota Releases Fully Redesigned View. Retrieved November 28, 2006. web Toyota Website, Company Profile. Manufacturing.
Location of Toyota Facilities. Retrieved November 28, 2006. web White, L. J. (1971) The Automobile Industry since 1945, Cambridge, MA: Harvard University Press. Womack, J. P. , Jones, D.
T. and Roos, D. (1990) The Machine that Changed the World, New York: Basic Books.
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Research essay sample on Vertical Integration Auto Makers
