General Motors’ other franchise system: Creating an effective distribution model for Frigidaire

Abstract

Using a case-study of General Motors’ Frigidaire division, this study shows that differences in market conditions for refrigerators and cars, together with the weaker asset specificity of dealers’ physical and other capital, made the opportunistic model used for its auto division impracticable for refrigerators. Frigidaire instead focused on developing symbiotic relationships, based on licensing not only the product and brand name, but also a sophisticated package of business services and training - to encourage dealer conformity and ‘buy-in’ to their formal and informal control systems. Informal controls are shown to have been crucial to incentive alignment and knowledge transfer, underpinned by a vigorous socialization strategy, to build trust and social control and cohesion. This strategy succeeded in getting franchisees and their employees to view themselves as part of the Frigidaire organisation and created the necessary flexibility for Frigidaire’s network to rapidly respond to changing market and competitive conditions during the 1930s.