DEC
4

Competitiveness and Business Organisation

 

Industrial revolution and mass production

Mass production was the most efficient business organisation model after the industrial revolution.  Large scale production was the way to reduce costs.

Henry Ford is reputed to have said: ”we are ready to provide cars in any colour, as long as its black!”. Modern Times of Charlie Chaplin is an ever memorable presentation of this model.

This model was accompanied by horizontal integration, where companies preferred to  host a large variety of production inside their organisation.  This reduced hold-up, and enabled economies of scale.

In the second half of the 20th century technical progress and codification of production by segments along the value chain offered undeniable opportunities to companies. Progress in information and telecommunication industries made significant contribution to this process and this evolution led to vertical specialisation, and eventually to global organisation of production.

Competitiveness is now embedded in the performance of companies along the value chain.   Profitability and growth  of companies  now correlates with their competitiveness at a segment level, and more importantly with their ability to engineer and manage supply chain management.