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Tedlow, Richard S. New and Improved : The Story of Mass Marketing in America. New York: Basic Books, 1990.
If the business of America is business, Richard S. Tedlow would add that it is mass production, the pursuit of profit through volume, that defines American business. Tedlow organizes the book around six propositions, and proposes that American manufacturing developed this unique approach to profit over the course of three phases of business strategy development.
The six propositions include the first, above, that the unique contribution to business made by American manufacturers was the pursuit of profit through volume. Second, that successful mass marketing was always possible only through the guiding vision of an entrepreneur who could bend the firm to his vision. Third, that implementing a strategy of mass marketing required a company to achieve complete vertical integration, from control of basic raw materials through manufacturing, to marketing and distribution, and retail sales to the consumer. Fourth, that the ‘first mover,” the first company in an industry to achieve mass marketing success, was able to gain high profits, and while those high profits encouraged new entrants to the business, they also provided the first mover with the ability to block competitors’ access to the business. Fifth, that competitors’ key strategic choice was then how to attack those barriers to entrance, thus encouraging competitors to change the rules of the game. Sixth, and last, that sustained success or failure in a market was most dependent upon how a firm managed change over the course of the three phases of business development that Tedlow uses to organize the book.
The first phase was a kind of economic “state of nature” which was characterized by what Tedlow calls a multi-local, fragmented market, made so by the absence of trans-continental transportation and communication. This phase was characterized by the existence of few nationally recognized or distributed brands, and lack of vertical or horizontal integration of manufacturing concerns. During this phase, barriers to entry by firms were low. The second phase was what Tedlow calls the unification phase. As railroads and telegraph lines crossed the nation, national distribution and marketing became possible. This phase was characterized by mass production, and sales appeals based on price. The key drive of American companies such as Ford and Coca-cola, was to minimize the cost of production, and maximize product output so as to drive the price of the product as low as possible, and to use price to sell as much as possible of it, making profit on the volume. This phase included a kind of mass-produced sameness in product lines most closely associated with the Ford automobile. During this phase, Tedlow’s second through fifth propositions came into play, as entrepreneurs directed their “first mover” firms toward massive profits and control of their respective markets, and built integrated vertical structures to make and distribute their products. Smaller, less vertically integrated competitors attempting to gain access to these markets then had to find strategies for entry that made them competitive, which led to new business models that changed the rules of the mass marketing game. The Third phase was the segmentation phase, when the primary focus of marketing changed to division of the market, and products tended to attack the mass marketing approach of the second phase. Consumer choice became the key component of mass marketing as firms began to use methods of demographic and psychographic analysis to define and target specific market segments with specialized products and experiences.
Tedlow supports his thesis with four case studies of business success in mass marketing: Coca-cola was very much the product of Asa G. Candler’s personality and faith in his product, and the success of Pepsi as a competitor beginning in the 1930’s was largely due to the ability of Pepsi to create a similar organization and compete on price; Henry Ford’s systematic domination of the mass-produced car and the challenge presented to it by Alfred P. Sloan and General Motor’s Phase III style segmentation of the auto market in order to successfully compete; the story of A&P mass retailing and the competition presented to it by the advent of supermarkets and a legal challenge to its Phase II competitive power; and finally the story of Sears’s general merchandise retailing and the challenge to that company by Montgomery Ward and others who forced Sears to understand and effectively manage change at every part of its vertically integrated network.
Tedlow’s thesis, that marketing in the United States has gone through three major phases of development, and that mass production, entrepreneurship, vertical integration, the challenge presented by competitors changing the game to overcome the barriers presented by first movers’ profit and market strength, and the ability of a firm to manage change have governed the movement of companies, product lines, and even the entire economy of the United States through these phases is compelling, complex, and builds on the organizational ideas of Alfred D. Chandler, the technological histories of Thomas P. Hughes, and the histories of business development provided by others. This work is a powerful achievement. It does rely more than many are comfortable with on a sense of the power of an individual to influence history, but Tedlow argues that the individual has been the missing link in economists’ and business historians explanations of change in American consumption and production patterns over the past century. The addition that the book makes to the field is well worth the time it takes to read.