2 The Benefits and Limits of the Business Unit

BUSINESS UNITS date back to the 1930s, when General Motors took the leadership position in the car market from Ford.1 Ford had become extremely good at process innovation during that decade—streamlining its operations to be the lowest-cost automobile producer—but General Motors was better at reading the consumer of the time. While Ford was busy working to keep costs down, GM was capturing new market segments for which price was not the main purchasing criterion. More than one car market existed, and GM restructured its organization to serve multiple markets. Contrary to the traditional functional organization, GM was divided into business units—each focused on a particular market segment, each with ...

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