The Art Of Managing Automotive Business Part 1

Running an "Automotive Business" is a very complex art. An integral and most complex part of the art is to conceive and launch a new product. A look into the history of some spectacular stars and complete flops can throw some light on what works and what fails.

Ford Mustang is one such historic and spectacular success. This was a brain child of Lee Iacocca who later became a legend in his own right. Understanding Lee's background is important to understand how he could come up with such brilliant projects.

Lee was an engineer by qualification and worked briefly in the engineering department of Ford before he asked to be moved to sales and marketing. He worked his way up from a grass root level sales engineer interacting directly with the dealers and customers. he was a field manager for almost 10 years and initiated a number of sales campaigns before he was promoted and brought to the head office in recognition of his innovative sales campaigns. He worked for another 10 years in the Ford head office in sales and marketing.

In short, Lee had a very deep and first hand understanding of the customer's likes, dislikes aspirations and desires. Lee observed that there were no "American Sports Cars" while in Europe, sports cars were popular with the young generation. He further explored this idea by conducting a through market research, Based on the market research, a clear "Target Specification" was drafted to ensure that the customer would get what he desires in the product at the target price. Any excess would increase the cost and consequently either the price will go above the customer's expectations or the company would lose money. On the other had, diluting the specifications would disappoint the customer. ACHIVING THIS DELICATE BALANCE IS THE KEY TO SUCCESS.

It would therefore be interesting to understand how this was achieved. Although the car had a very different character and personality as compared to the products Ford was producing then, they did not introduce any new technologies. Instead, they decided to "Carry Over" the parts from Ford Falcon. Using these "Building Blocks" Mustang was given a sports car stance by reducing the height and increasing the width. The styling was "Truly American" with European accent, but the engine was a modest 2.4 L developing even more modest 105 BHP. The result was a quick and low cost development of an entirely new breed of a car aimed at a clearly defined customer.

Mustang became a hot seller from the day one, selling over 1 million units in less than two years against the prediction of 100,000 units per year.

Was the Mustang best sports car in the market? NO. The tires and suspension from Falcon lacked the sporty feel, the engine performance was also modest. There ware many shortcomings which ford corrected subsequently.

The recipe of success at the time of launch was - right ingredients in the right proportion to satisfy the desire of the young Americans to own a sports car of a very "American Character" and they loved it.

FORD "EDSEL" A MONUMENTAL FAILURE

In 1956, Ford motor company became a publicly traded company. A set of new board of directors were installed as needed by the regulation to run the management of Ford. The new board decided that a new brand was needed, positioned above "Ford" and under "Lincoln" brands to compete with GM's premier brands Buick, Oldsmobile and Pontiac as well as Chrysler's Dodge & DeSoto. The strategy was to launch "The Car Of The Future" loaded with several advanced features in it's price segment to compete with these giants. This was the first time any American auto manufacturer had introduced a new brand after 1938. The brand was named Edsel to honor the son of Henry Ford. Henry Ford II, who had lost the control had resisted the idea.

As was obvious that this market segment already had very formidable and well entrenched brands. Alfred Sloan, then Chief of GM was a master craftsman of brand management. (Read - My days with GM by Alfred Sloan). He had so skillfully positioned his brands that he had left no niche open in the segment while making sure that his own brand do not "Cannibalize" each other. All these brands also had their own "Cult" followings.

Edsel was developed as an "Entirely New Kind Of Car" to please all niches falling under the premier car segment. The Edsel lineup included seven models, from a two door to stretched limousine and a station wagon.

To create the image of "Car Of The Future" several "Innovative" features were installed. For example, the speedometer was no longer round or a strip but a rotating dome. Instead of the steering mounted gear shifter, a telephone like dial was mounted in the steering hub. The styling of the car also was very "Unusual".

The customers saw this car as a weirdly engineered and wackily styled junk. An attempt to thrust "Futuristic" features upon the customers, without understanding what they wanted boomeranged. And finally, a car designed to please all actually pleased none.

FRIENDS, at Pixy Electric, we study the market very minutely. Our products are like finely honed shoes for a specific customer. We may cater to a "Niche" but these customers are in need of what we offer. If you like to be a part of our mission and share our vision, please feel free to write to me. [email protected] is my email id.