Product variety in automotive industry : Understanging nicle markets in America

SPRINGER BRIEFS IN BUSINESS

Marco Guerzoni

Product Variety

in Automotive

Industry

Understanding

Niche Markets

in America

SpringerBriefs in Business

For further volumes:

http://www.springer.com/series/8860

Marco Guerzoni

Product Variety in

Automotive Industry

Understanding Niche Markets in America

123

Marco Guerzoni

Department of Economics and Statistics

University of Turin

Turin, Torino

Italy

ISSN 2191-5482 ISSN 2191-5490 (electronic)

ISBN 978-3-319-01906-2 ISBN 978-3-319-01907-9 (eBook)

DOI 10.1007/978-3-319-01907-9

Springer Cham Heidelberg New York Dordrecht London

Library of Congress Control Number: 2013947350

The Author(s) 2014

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Summary

The subject of this book is product variety in the United States automobile

industry. Specifically, it aims to understand the organization and the limits of the

generation of variety at the industry level.

This sector shows a dual structure: on the one hand, there are relatively few and

large companies producing cars that apparently achieve a degree of market power

through the differentiation of their production. On the other hand, a relatively

small niche market with distinct and smaller producers offers specialty equipment

to enhance the performance, appearance, and handling of vehicles. This peculiarity

allows an original type of empirical analysis of variety generation defined niche

market analysis. By comparing the variety produced by the large companies with

that provided by the niche market, it will be possible to understand more deeply

the nature and operation of niche markets and to provide fresh empirical evidence

on the limits of variety generation at the industry. Results have implications for

economic theory and management and call for further research on this topic.

v

Contents

1 Variety in the Automobile Industry ....................... 1

1.1 Variety in the History of the Horseless Carriage . . . . . . . . . . . . 1

1.1.1 Generation of Variety and Market’s Strategy . . . . . . . . . 4

1.1.2 Generation of Variety and Production: Lean Production

and Modularity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

1.2 The Persistent Dualism in Variety Generation: The Niche

Market for Special Equipment. . . . . . . . . . . . . . . . . . . . . . . . . 9

2 The Economics of Variety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

2.1 Variety Generation in the Product Life Cycle . . . . . . . . . . . . . . 13

2.2 The Equilibrium Approach to Variety Generation . . . . . . . . . . . 16

3 Empirical Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

3.1 Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

3.2 Variety Generation at Ford . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

3.2.1 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

3.2.2 Data Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

3.2.3 Market Segmentation and Model Customisation . . . . . . . 27

3.3 Variety Generation in the Niche Market. . . . . . . . . . . . . . . . . . 33

3.3.1 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

3.3.2 Data Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

3.3.3 The Variety Generation at Firm Level . . . . . . . . . . . . . . 37

3.4 Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

3.4.1 The Nature and Operation of Niche Market . . . . . . . . . . 40

3.4.2 The Limits of Variety Generation . . . . . . . . . . . . . . . . . 41

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

vii