Re: [Amc-list] Auto industry meltdown

[Doug Dornbos <dornbos@xxxxxxxxxxx>]

Hi gang

It's been obvious/inevitable for a few decades that not all the auto 
manufacturers were going to survive since the marketplace doesn't 
tolerate more than three main competitors. Right about the time that the 
U.S. market was getting down to only three left, the marketplace became 
global. Now we're on the path to getting down to three again. It's not 
all that alarming or a conspiracy or "a sign of the times" or any other 
such nonsense. It's just the way the marketplace works. For entertaining 
reading about marketing and the shear number of competitors, read 
"Marketing Warfare" by Al Ries and Jack Trout. It was published in 1986 
and is one of the very few older marketing books that remains in print. 
(You can find it used for less than a few bucks at bookfinder.com) The 
beauty of it for AMC folks is that it uses AMC in numerous of it's 
examples. For a more detailed look at the issue of the number of 
competitors, you can start at 
http://en.wikipedia.org/wiki/Growth-share_matrix and start following and 
reading the links.

One of the things that makes people blind to the fact that the market 
doesn't tolerate more than three main competitors is that people can 
point to markets that have dozens of competitors who all seem to be 
doing well. For the sake of randomly picking one of these, let's take 
the barbecue sauce market. Twenty years ago, my local supermarket 
carried only two brands: Open Pit and KC Masterpiece. Now, my local 
supermarket has eight feet of aisle space with four shelves high of BBQ 
sauce (on one side of the aisle only.) It would appear at first glance 
that the Boston Consulting Group's theory of only three main competitors 
is wrong. Upon closer examination however (and talking to the store 
manager) you can discover that Open Pit with their multiple varieties 
and KC Masterpiece with their multiple varieties make up the vast 
majority of the business with Sweet Baby Rays making up most of the rest 
and the other 27 brands splitting up a small fraction of what's left 
over. What is different about AMC and the car business is that the 
machine needed to manufacture an automobile is HUGE and needs A LOT of 
people. The machine to manufacture a BBQ sauce is so small that it's 
usually one guy who wins a BBQ competition who has a "secret" a.k.a. 
hyped recipe and finds a food bottler to contract with to make his 
recipe and bottle it and then he convinces independent sales reps all 
across the country to add his sauce to their sales bag and the sauce 
shows up on your local retailer's shelf and sits right next to the big 
brands. If he doesn't get tired of the headache first, he's got a nice 
little job for himself as a niche player. His sauce might appeal to a 
certain segment of the market that is actually too small to fool with on 
the part of the majors. This is exactly the position AMC found itself in 
before Jeeps were the mass market rage. It was a nice niche product that 
was being produced in numbers too small for the Big 3 to split the 
market over. In other words, the cost of getting in the Jeep business 
was to high and the volume too low to warrant going to battle with the 
entrenched leader of that niche market. AMC was only valuable to 
Chrysler for the Jeep market which was cheaper for Chrysler to buy that 
it would have been for them to recreate from scratch.

We'll get down to the worldwide Big Three in the mainstream auto business.

Doug
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