HOW DID GM USE THE MODEL CHANGE IN 1923 TO DEFEAT THE MODEL T BRAND?

HOW DID GM USE THE MODEL CHANGE IN 1923 TO DEFEAT THE MODEL T BRAND?

            Social Media creates great scale and this allows companies to develop competitive advantages that they wouldn’t ordinarily have. A case in point is General Motors. Their strength is social media gave GM a competitive advantage in defeating the Model T brand of 1923.

            It seems ironic that a brand of 1923 would be a benchmark for contemporary social marketers, but that is what happened. Alfred Sloan, the CEO of General Motors in 1923 is a marketer that contemporary marketers should study. General Motors overtaking of the Model T is one of the most exciting stories in American marketing history.  It was done through social media. In 1923, nine out of ten cars on the road was a Model T. Alfred Sloan realized that the only chance he had of overtaking Ford was to use the social media of the day.

            He did what a contemporary social marketer would do to overcome his disadvantage. Sloan created a “friendship” with customers. This friendship allowed him to have conversations with them. He learned that customers did not want just one kind of car, as the Model T was. Customers wanted variety in their cars. They wanted a car that was stylish and fashionable. Customers wanted a car that was “cool”.  Customers showed Sloan the way to defeat Ford.

            Customers wanted a change in the model appearance on a continuing basis. To do this, a company had to have the manufacturing technology to change lines over to different styles. General Motors had this technology and Ford didn’t. The ability to change over gave General Motors a strong competitive advantage over Ford. The yearly model change could only be handled by larger companies. In 1923 there were many niche car companies. The complexity of yearly changeovers ended the existence of tens of thousands of companies. This allowed General Motors to focus their competitive forces on Ford, the industry leader.

            The model change gave General Motors a true competitive advantage. The market of 1923 had changed. “Cool” was now an important issue in marketing cars. People wanted variety and fashion cars. This meant constant change. This was a big difference between General Motors and Ford. General Motors was orientated toward change and Ford was orientated toward continuity.

            The annual model change and diversity of product were incompatible to the way that Ford did business---to their very core as a company.  At Ford’s plants every machine tool and fixture was fitted specially for the production of a single product. Even small changes in the design of the Model T bottlenecked its production. The switch over to Model A production was chaotic. Machine tools highly specialized for Model T production could not be converted to multi model production as was the case at GM. The first model change happened in 1923. General Motors started getting buzz and traction in the market place with their variety model. Ford couldn’t make a changeover until 1927. The result of this was that 32,000 machines used to produce the Model T had to be redesigned and rebuilt and half of the remaining ones had to be scrapped. This cost Ford $250 million to change over. Ford was flatfooted and unable to adjust to GM’s repositioning.  

            Ford had to rearrange all their manufacturing plants to compete with GM’s model change. This cost Ford four years. No market leader lost their position so quickly. Ford has never, to this day, come close to getting even with General Motors in market share.

Dean Hambleton

dnhambleton@gmail.com