«Ford» VS «General Motors», or the pioneers of outsourcing

«Ford» VS «General Motors», or the pioneers of outsourcing

In the first half of the 20th century «Ford Motor Company» was the absolute monopolist of the car market. Henry Ford created the first in history multi-level vertically integrated company with its own mining, assembly and service facilities in the USA, Canada, Australia, New Zealand, the UK and South Africa. Ford’s Empire is a vivid example of a self-sufficient company with its own factories for the production of raw materials, the railway network and even port.
In 1921, “Ford Motor Company” controlled 56% of the car market … 6 years later, the situation totally changed, having left «Ford» only 10% of passenger cars sales.
Why?
In 1923, Alfred Sloan Jr. became the CEO of «General Motors». Unlike Ford, he didn’t try to build a company based on a total control of all levels of government. Sloane reckoned that if the contractor was solving tasks better than their own employees, the cooperation with such companies was necessary to achieve the goal.
Sloan’s management model of the company was based on cooperation with the individual, specialized units, each had individual functions, and was responsible for various production segments. In other words, he developed the outsourcing system 70 years before the official origin of the term.
In 1927 «General Motors» had been already controlling 43% of the passenger car market.
Ford was skeptical concerning the outsourcing innovation in business. He believed that giving the opportunity to each individual unit to think independently, would certainly lead to a deterioration of production’s quality and destroy his vast empire.
But at the peak of development, «Ford Motor Company» has faced a number of obstacles that could have been solved only by experts “from outside”, which forced «Ford» to make a reorganization according to the example of «General Motors». The new scheme has justified itself, but the leadership had been already lost.
Alfred Sloan, Jr. is the founder of outsourcing methodology. He showed in practice using of specialized organizations can help to become a leader, surpassing perennial business giants.
«General Motors» still uses Sloan’s outsourcing model of management and budget of the company exceeded 100 billion dollars a year many decades ago.

Принять участие