Backward Integration at Ford/GM
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Why was it profitable for GM and Ford to integrate backward into component-parts manufacturing in the past, and why are both companies now trying to buy more of their parts from outside suppliers?
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Solution Summary
This solution discusses why it was profitable for GM and Ford to integrate backward into component parts manufacturing in the past but why both companies are now trying to buy more of their parts from outside suppliers. References are included.
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In the past both GM and Ford were able to integrate backward and control the manufacturing of their components. By doing this, both companies were better able to control the process and costs. However, substantial investment is required to make components in house, which would need to be allocated solely for this purpose. Ford used this concept throughout the company, making all parts needed, constructing the vehicles, and operating distributors to sell the vehicles. It was a very good example of vertical integration. By following this ...
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