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Charles H. Fine Daniel M. G. Raff

Charles H. Fine Daniel M. G. Raff. B. Steil, D.G. Victor and R. Nelson, “Technological Innovation and Economic Performance” Princeton Univ. Press, pp.416-432 Chapter 17: “Automobiles”. Students: João Castro Rui Carvalho. INDEX INTRODUCTION PRODUCT AND DESIGN INNOVATION

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Charles H. Fine Daniel M. G. Raff

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  1. Charles H. Fine Daniel M. G. Raff B. Steil, D.G. Victor and R. Nelson, “Technological Innovation and Economic Performance” Princeton Univ. Press, pp.416-432 Chapter 17: “Automobiles” Students: João Castro Rui Carvalho

  2. INDEX • INTRODUCTION • PRODUCT AND DESIGN INNOVATION • INNOVATION IN PRODUCTION SYSTEMS • ORGANIZATION INNOVATION: INTERNAL OPERATIONS AND THE EXTENDED ENTERPRISE • CONCLUSIONS

  3. 1. Introduction • Mature sector in industrialized economies (US, Japan, Europe) • Accounts for a fraction of GDP (Portugal 7%, 23% of exports)[1] • Scale Intensive Sector (Pavvits Taxonomy) • Complex product, incremental innovations, VP • Productivity influenced by technology and managerial innovation law and policy • The authors consider 3 types of innovation: product, process and organizational • Focus on US (Competitive market)

  4. The Value of Product Innovations

  5. Prices drop as quantity explodes Ford T (15.007.033 units) 1908-1927 Ford A (5.000.000 units) 1927-1932 WW I (US) WW II Oil Crises Great Depression (US)

  6. 2. Product and Design Innovation • Automobile is a complex good • At least 10,000 parts that must work well together • Long history of inventory problems (superficial changes as marketing strategy) • Design and production evolved as technology did • Regulation on safety and emissions affect product innovation

  7. Geographic Differences • Natural oil reserves • Spatial limitations (large cars vs. small cars) • Bias of innovation value • Efficiency in product development

  8. 3. INNOVATION IN PRODUCTION SYSTEMS before fordism . spirit of enterprise/ companies formed in profusion . products made in small number . skilled mechanics/artisans . unit costs high . good environment for local firms aquisition

  9. fordism think the PRODUCT . undifferrentiated . cheap . sturdy . easy to repair . car for the multitudes but also the PROCESS . mechanism of parts and components . economies of scale very important . new internal organization . large number of unskilled workers

  10. Toyota Production System - TPS (lean production) a. precedents . oil price shock (1970) . blue – collar employees were alienated . oligopolists competed among themselves (...) b. main characteristics . flexibility . efficiency . quality in the production process . learn from mistakes and continuously improve operations www.t-san.co.uk QUALITY IMPROVEMENT EFFICIENCY

  11. 4. Organization innovation: internal operations and the extended enterprise early years . entrepreneurs (engineers and businessmen) . tremounds rates of entry and exit . close to metal suppliers (upper Midwest) Alfred Sloan . minimized the degree of competition between divisions producing final goods . import and redifine financial concepts for managerial control . collective scale of the divisions without depressing divisional profits . brand culture diffussion

  12. Crysler – Extended Entrepise System (90’s) . based on the model of Honda . based on pitting the suppliers against one another . long-term relationships . more responsility to its suppliers . sharing the rents and incremental cost savings . advantage in mini vans and jeeps . more cooperative relationship with a stronger more technologically capable supply IT’S POSSIBLE TO REPLICATE THE CRYSLER MODEL? (DAIMLER BENZ)

  13. other important aspects . marketing toll – annual model changes . consumer finance units . Dealer´s Day In Court Act... Can Internet change the balance of power? . coordination challenges of a rapid make-to-order system

  14. 5. Conclusions . great influence in other manufacturing industries . great number of factors that influnce the development of the produt, system process, and organizational (urban structure, regulatory context, innovations infrastructures . organizational innovation more difficult to import than produt innovation . tendences to concentration – some few giants (Ford, GM, Daimler Chrysler, Renaut, Wolkswagen)

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