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EDSEL: A Failure to Exercise Fundamental Business Principles

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EDSEL

EDSEL

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  • 1. EDSELA Failure to Exercise Fundamental Business Principles MGT 8040 Timothy Matthew Coleman July 28, 2011
  • 2. In 1957, the Ford Motor Company introduced a revolutionary experimentalautomotive design called the Edsel. Some of the features included self-adjusting brakes,electronic hood release, push-button controlled transmission and a radical grill design. Thedecision by Ford to engage in such a far-reaching design was to gain a competitive advantagewith General Motors, by offering a mid-priced car to its line that it felt it was lacking. Ford set out to market the Edsel by keeping it surrounded by a shroud of mystery andsuspense. They went to great lengths to create a buzz with such campaigns as “The Edsel iscoming” and creating “E-Day” E stands for experimental) referring to the unveiling of theEdsel (Gauss & Skinner & Waterhouse & Ford & Snyder, 1997). Ford also used theelements of surprise and anticipation to generate a heightened interest, hopefully leading to afrenzied public demand. Ford even went as far as producing a television show called theEdsel Show, which included many top celebrities of the era. As the title proclaims, the rollout of the Edsel was an enormous failure. Ford’s initialexpectations for sales were in excess of 200,000. But instead, sales were a miserable 63,000(Long, 2008). On the big unveiling of the Edsel on “E-Day”, over two million peopleconverged upon the Edsel dealerships to get a glimpse of this mystery vehicle. To Ford’sdismay, the public was thoroughly disappointed and sales were bleak at best. As Edseldealers quickly discovered the lack of interest in the vehicle, many dealers began to abandontheir Edsel franchises. There were a multitude of reasons for Edsel’s huge disappointment, allof which resulted in a huge monetary loss, as well as a loss of consumer respect for Ford. Many experts believe that the leaders of Ford missed many important economicaland consumer-related indicators that ultimately led to the failure. Ford’s debacle with theEdsel became a well known failure that, for many decades later, the word Edsel becamesynonymous with failure. When the “press” discovered the widespread disappointment of thepublic associated with the Edsel, they viciously attacked the vehicle in the media,immediately destroying the mystique and perceived value of the vehicle that Ford hadcommitted so many resources to create. The principal reason that Edsels failure is so famous is that it failed despite Ford’sinvestment of over $400,000,000 in its development (Libby101a, 2010). Apparently, it hasbeen theorized that Ford became arrogant due to their recent enormous success with therollout of the Thunderbird, and felt “bulletproof” in the market. With the large infusion ofcapital from Thunderbird sales, Ford decided to fund the very expensive Edsel production,building many Edsel dealerships around the country. In the mid 1950’s, as Ford began todevise its plan for the Edsel, they decided to sell Edsel franchises that exclusively soldEdsels. Ford solicited dealers from their competitors with the ability to become the first Edseldealers in the country. Ford successfully secured over five hundred new dealers who had tocommit over one hundred thousand dollars to obtain their franchises. Many of these samedealers had either abandoned their new franchises of filed for bankruptcy within months ofthe Edsel’s unveiling. In an industry renowned for its incredible failures, the Edsel still holds the top prizein that category. Although as mechanically sound as other Ford products, the car was 2
  • 3. criticized from the first viewing for being too ugly, too expensive and vastly overhyped(wired.com). The design of the grill of the car, for example, was compared to a “toilet seat”or worse, compared to the look of the female “sex organ”. In fact, comedian Bob Hope at thetime said the grill looked like a “Chrysler sucking on a lemon” (Troscalia, 2007). The Edselwas viewed by the public as just another typical sedan with a Ford chassis. Although itpossessed a few modern gadgets, such as push button transmission on the steering wheel andstate of the art speedometer, it wasn’t enough to overcome all the bad publicity and inflatedhype. The largest flaw of Ford’s was not in the design of the Edsel, but in their marketresearch. The design and planning stages were highly flawed also, but not to the extent of themarketing debacle. For example, as mentioned previously, Ford designed the Edsel to fill aperceived gap in their mid priced-range vehicle selection. Ford’s research indicated that therewould be an increased demand for this price-range, as a large percentage of a particulardemographic of the population would desire this level of vehicle. Their research alsoindicated that they were losing their share of the market of people who were trading up to amid-priced range vehicle. Their research ended up being highly flawed and incorrect. Fordfailed to realize the realities of the market. In an effort to recover from the poor consumerresponse, Ford budgeted an additional twenty million dollars to its marketing efforts(Libby101a, 2010). Ford had hired a marketing expert who collaborated with Columbia University toperform consumer research to determine a “personality profile” for the Edsel. The surveyasked very general questions about what consumers thought of the various auto makescurrently on the road. The major flaw with this research endeavor was that it didn’t includespecific questions regarding pricing preferences and cost of annual maintenance etc. Ineffect, their research didn’t provide any substantial information regarding the specific wantsor needs of customers. The pricing structure of the Edsel was another failing of Ford’s. The Edsel wasintended to fill the gap, as previously mentioned, between the cheaper Fords, such as theFairlane, and the more expensive Ford lines, such as Lincoln and Mercury. The problem wasthat the basic Edsel model was priced about seventy dollars less than lower category Ford topend model, while the fully loaded Edsel cost slightly more than the Mercury in the luxurycategory. This structure violated the low and high end categories, creating competition withinFord’s own product lines. Although the largest flaw was in the marketing of the Edsel, a close second big flawwas in the appearance of the vehicle Ford’s first big mistake was to create a separate divisionfor the Edsel, but did not erect a separate manufacturing facility to assemble these vehicles,instead using existing Ford assembly lines. This created frequent disruptions in the flow ofthe assembly line, leaving the line workers to have to perform frequent resets. The workersresented this intrusion and, as a result, took less pride in their work on the Edsel. It was alsosuspected that some workers deliberately sabotaged the Edsels along the line as retaliation. There was also a serious disconnect between parts suppliers for the Edsel and Ford’sassemblers. Frequently, parts were sent to the plant from distributors that were not built toexact specifications As a result, many Edsels were sent to showrooms with notes attached tothe steering wheels, listing missing parts. In some cases, parts that assemblers could not 3
  • 4. attach due to time constraints were placed in the trunk by the plant workers, with instructionson how to attach. In most cases, dealerships had no idea how to assemble these extra partsdue to its radical design. So the vehicles would be sold as is. In addition, most mechanicswere not able to repair an Edsel when it experienced a mechanical failure with the newtechnology. Edsels were arriving at the dealerships with ropes wrapped around doors and bumpersto hold them together. It was also reported that the vehicle’s trunk would unexpectedly openwhen the transmission control buttons on the steering column were pressed or that the hoodornament might fly off at speeds above seventy miles an hour (Troscalia, 2007). Apparently,the Edsels were being rushed through the assembly line in an effort to meet their introductorydeadlines this resulted in a tarnished reputation of the vehicles from the start, leading toreduced sales. One big economical factor that Ford missed was the oncoming recession in the late1950’s. In fact, the Edsel rolled out during the beginning of the recession, significantlycurbing sales. Ford completely ignored or missed the fact that auto sales, in general, duringthis period had steadily been decreasing significantly. Ford also missed the growing trend of consumers who were moving away from theenormous winged vehicles, to smaller more conservative ones. The Edsel was the epitome ofthe traditional gas guzzling oversized vehicles that were becoming obsolete at the time. Inaddition, another blunder Ford made was that they rolled out the 1958 Edsel in the Fall of1957, while the 1957 model year for all vehicles were being liquidated at greatly reducedprices at the same time, to clear the way for the new model year. It also didn’t help mattersthat the Edsel offered eighteen different models to choose from, which led to consumerconfusion and frustration. Still, another flaw with the Edsel was in the name itself. Edsel was the name of HenryFord’s only son, Edsel Ford. In spite of the fact that Ford’s marketing department submittedthousands of possible names for the vehicle, Ford’s Chairman ignored all of them and optedfor Edsel. Comments at the time compared the name to “weasel” or “deadcell” (dead battery)(Cashberry, 2006). In other words, the general public saw this name as a negative attribute,contributing further to declining sales. It is unfortunate that Ford failed on such an historic magnitude with the Edsel brand.It is clear that they failed to properly analyze and determine the desires of the general public,and built a vehicle that met their (corporate) needs, and then tried to convince the public tobuy it, rather than building a car the public was looking for. It seriously violates one of thebasic tenants of Six Sigma whereby, you perform strategic analysis that is driven by themarket and the customer. In addition, Ford failed to coordinate with their supplier networkto ensure quality control at the suppliers’ plants and with the parts that were being acceptedwithout proper inspection at Ford. The bottom line in this case is that Ford allowed there ownarrogance to take precedent over the basic business fundamentals that were grosslyneglected. The end result: Edsel only survived three years in production. In terms of today’sdollars, Ford lost approximately two billion dollars on the Edsel experiment (Troscalia,2007). 4
  • 5. ReferencesCashberry (2006). Classic Brand Failures: The Ford Edsel [online]. Available:http://brandfailures.blogspot.com/2006/11/ford-edsel.html (July 23, 2011).Ervin, Kathleen A. (2001). Failure Magazine Examines the History of the Edsel [online].Available: http://www.edsel.com/reviews/failure.htm (July 23, 2011).Gauss, J., P. Skinner, R. Waterhouse, E. Ford, J. Snyder (1997). The Edsel Pages [online].Available: http://www.edsel.com/pages/edsel58.htm#TOP (July 23, 2011).Hamer, Tony, Michele Hamer (2011). The Edsel: A Legacy of Failure [online]. Available: http://classiccars.about.com/od/classiccarsaz/a/Edsel.htm (July 23, 2011).Libby101a (2010). Edsel: The Big Failure [online]. Available:http://hubpages.com/hub/Edsel-The-Big-Failure (July 23, 2011).Long, Tommy (2008). Sept. 4, 1957: Short, Unhappy Life of the Edsel [online]. Available:http://www.wired.com/science/discoveries/news/2008/09/dayintech_0904 (July 23, 2011).Troscalia, Carroll (2007). Ford’s Edsel car – The Big Fin Failure of the 50’s [online].Available: http://www.suite101.com/content/edsel-fords-fabulous-57-failure-a30989 (July23, 2011). 5
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