Question

Why was it profitable for General Motors and Ford to integrate backward into component-parts manufacturing in the past, and why are both organizations now trying to buy more of their parts from outside suppliers?

Answer 1

Answer:

Why was it profitable?

(1) To control the quality of their spare parts.

(2) To reduce cost.

Why do they buy more parts outside?

(1) Inefficient in-house parts manufacturing.

The cost of managing Internal

(2) manufacturing of Automobile parts has increased.

Explanation: General motor and Ford are both world class Automobile manufacturers with several vehicles in every part of the world, General motors have its assembly plant in about 120 countries of the World.

During the early 20th Century they found that the local suppliers were unable to meet their Demand in terms of Quality and quantity and it was very expensive. So they started a backward integration to help regulate the quality,meet their Demand and save cost.

In recent times between the late 20th Century till recent times they buy more parts from external suppliers because the cost of managing Internal manufacturing became high because of labor costs and inefficiency caused by lack of competition and Japanese manufacturers have been able to meet their requirements.