Strategic Management by Ford Motor Company
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Transcript of Strategic Management by Ford Motor Company
STRATEGIC AUDIT FOR THE FORD CORPORATION
2007
Ford Motor Company Page 1
1. Introduction
Nowadays, it is easy for us to see brands like Sony, McDonald’s, Nike, or Calvin Klein in
the nearest malls, shopping centers, or across the sidewalk in our neighborhoods. Interestingly,
for most of us that have become those brands’ fans should not be worry if we have to travel
abroad since the brands have evolved from local to global brands and are available anywhere in
the world.
In contrast, there are some brands that we used to know very well but suddenly they
disappear or are eliminated in their respective markets. Brands like Puma in sport shoes industry,
Fiat in automobiles or USA.net in free email services are examples of slowing down and thus
worst brands in the world. These conditions, while they are natural and common within today’s
fierce competition, are the results of effectiveness of marketing plan including the incurred
marketing strategy.
Therefore, in business, it is common to find out companies that loose their market share
and no longer have their dominance in their industry. At one occasion, these companies were
predicted to last forever and help shape the future. Then, reality became very different from
general predictions.
British Motorcycle Industry, for instance, was historically known to be the creator of the
first’s motorcycles and pioneer in motorcycle industry. During the golden age, people think that
the industry would grow forever and generate unlimited innovations for the global markets.
However, in the beginning of the 20th century, the industry simply loses their existence.
Concerning the rise and fall of a company, this paper will elaborate a `Strategic Audit`
for the Ford Corporation. The audit composes of eight sections such as current company
SEPT. 18, 2007
Ford Motor Company Page 2
performance, external and internal environment analysis, strategic alternatives and
implementation.
2. Current Situation
2.1. Current performance
There are various factors contributors to the current downtrend of the Ford Motor
Company such as the high employees’ benefits and pension costs, the increasing costs of fuels,
and the decreasing business of manufacturing, and competitors’ better competitive advantages, to
name a few .
However, the most recognized performance is inefficiency. It is said that Ford’s factories
in North America are operating at only 86% capacity compared to 107% of their competition,
Toyota Motor Corp. Management of Ford Motor Company stated that the downsizing program
is crucial to address the excess capacity (Jani, 2002).
In addition, Ford Motor Company also experiences declining sales in its main market,
North America. In 2005, the company sold 3.4 millions of vehicles but a year later the sales
declined into 3 millions of sold vehicles. In terms of revenue, in 2005, the company generated
$153.5 billions and declined into $143.3 billions in 2006. The declining performance is due to
the lose market share in SUV and small truck lines, which have taken most of the company’s
investment and resulted in minimum returns (Ford Motor Company, 2007a).
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Ford Motor Company Page 3
2.2. Strategic Posture
2.2.1. Objectives
The company has one main objective, which is to focus on automotive business.
However, this objective is considerably general since managements can justify their actions to
expand into other business as long as it relates to automotive. One obvious action is to provide
financial services that contribute about 10.5 percent of the company’s revenue, previously
represent 13 percent of revenue in 2005 (Ford Motor Company, 2007a).
2.2.2. Strategies
Realizing the fierce competition in automotive industry, the company develops some
anticipation actions to deal with the possible declining sales in North America market. In order
to address market trends, the company decides to rely on four key principles/strategies as
following:
Conduct restructuring in order to help Ford Motor Company to earn profits even in
markets that sell lower volumes of vehicles
Improve product development and eliminating any complexity/difficulties in
manufacturing
Generating and maintaining enough liquidity to finance the two most priority
Encouraging teamwork and accountability throughout the company’s operation
(Ford Motor Company, 2007a).
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Ford Motor Company Page 4
3. Strategic Managers
3.1. Board of Directors
Ford Company is considerably a fat organization, composing of 12 persons in Board of
Directors and more than twenty executives. One similar characteristic that Ford’s board of
directors has is their background in which at top level, most of directors have vast experience in
financial and retail services. This fact highlights that Ford has problems and managing their fund
as justified in their strategies (see section 2.2.3) and it also explains why the company also serve
financial service in addition to their core business in automotive manufacturing.
John R. H. Bond (65 years old) previously served as non-executive chairman at HSBC;
Stephen G. Butler (59) used to be Chief Executive Officer at KPMG, LLP; Irvine O. Hockaday,
Jr. used to be Chief Executive Officer, Hallmark Cards, Inc., and many others (Ford Motor
Company, 2007a).
3.2. Top Managements
In addition to board of directors, the company also has vast top managements, composing
of Executive Officers Group and a number of Vice Presidents. According to 2006 Annual
Report, we see that the company’s top managements’ structure are distributed into regional
group in which each region (North America, Europe etc) has one Group Vice President to
address each market needs. Fransisco N Codina, for instance, becomes the Group Vice President
at North America. Meanwhile, John Flemming is the Group Vice President at Europe (Ford
Motor Company, 2007a).
In addition to regional model, the company also has some top managements each is
responsible for particular brand. John G. Parker, for example, is the Group Vice President for
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Ford Motor Company Page 5
Mazda; Lewis K Booth is Executive Vice President for Ford’ luxury lines: Volvo, Jaguar, and
Land Rover (Ford Motor Company, 2007a).
4. External Environment (EFAS table is in Excel format)
5. Internal Environment (IFAS table is in Excel format)
6. Analysis of Strategic Factors (SFAS table is in Excel format)
7. Strategic Alternatives & Recommended Strategy: Economics of Scale
According to several resources, Ford’s general strategy is to meet a single goal,
economics of scale. Within the strategy, the company strives for producing vehicles in the most
efficient cost structure and in the most timely manner and sell as many as they can.
Pros
Ford’s production and pricing strategy are mostly directed to achieve faster and cheaper
ways to build cars for market demands. It helps the company to build affordable vehicles
for customers
The strategy helps the company finds the production time cycle from 36 to 24 months
and reducing platforms from 24 to 16. Therefore, the strategy increases time-efficiency
(Smith, 1996).
Cons
Customers are segmented. Therefore, developing affordable price is not heavily true
since customers would think there is a sacrifice to build ‘cheap’ cars like security,
accessories etc.
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Ford Motor Company Page 6
7.1. Recommended Strategy
Despite being known as efficient producer of cheaper cars in the historical days, there are
considerable developments within Ford’s strategic directions today. For instance, the company is
now also aiming to be the market leader in the luxury car segment.
The Luxury division is established in 1999 to coordinate their luxury brands like Jaguar,
land Rover, Volvo and Lincoln. Managers of the company believed that by coordinating these
brands, the company is in the right position to become a major force in the luxury segment
(Banks, 2001).
Although, the company has successfully made brand extension for their luxury cars
segments, still there are several recommendations to the Ford Motor Company to help increase
the company’s conditions.
Change of Leadership
According to some automotive analysts, Ford requires a new style of leadership. Besides
providing means to escape the old image, a change of leadership will also send a good
message toward stakeholders, especially within these hard times (the declining market share
in some key markets)
Design a New Market Image
The company is known as producer of high quality and luxury cars with premium prices.
The current image is about stability and elegance. It is about a legacy that is maintained and
hoped to provide customers with the same amount of satisfaction. This image is losing to
futuristic and ‘younger’ designs of cars that offer both quality and distinction. Ford needs to
find it new and better programs to demonstrate the new product image.
Introduce Hybrid Cars: Maintaining Ford’s Brand Name
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Ford Motor Company Page 7
Currently, there are many kind hybrid cars from various brands such as Toyota, Honda
and many others. Some examples of famous hybrid cars include the Toyota Prius, Honda
Civic Hybrid (HCH), and the Honda Insight. Where are Ford’s cars? Although hybrid cars
would not saleable within the next one year, still Ford should develop its prototype to tell
customers they cope with the trend.
8. Implementation
Table 1 Implementation Plan
No Activities Budgets
(USD)
Time Schedule (2008)
1 Customer Gathering
(Product Presentation
and Retention
Program)
2,000,000 Detroit Motor Show
Tokyo Motor Show
Frankfurt Motor Show
3 Visiting Universities
(Looking for talents
and conducting
research agreement)
40,000 MIT; March 2007
Texas University; July 2007
Harvard University; Sept 2007
Stanford University; Dec 2007
4 Press Release 30,000 monthly
5 Website Updates 20,000 Any time
9. Evaluation & Control
Table 2Evaluation and Control Plan
No Communication
Activities
Measure for Evaluation/Control
1 Customer Gathering (Product
Presentation and Retention Program)
The number of Audiences at the
Customer Gathering (minimum 500
people per seminar-day)2 Visiting Universities (Looking for
SEPT. 18, 2007
Ford Motor Company Page 8
talents and conducting research
agreement)
Participants/Audience Feedbacks
on product improvement
Post-seminar Sales
Record/Achievement
3 Press Release News Distributed into Media
4 Website Updates Web sites updated once a changes/new
activities occur
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Ford Motor Company Page 9
Reference:
Banks, Cliff. (2001). Special Dealership are Part of Ford’s Luxury Strategy. Retrieved
September 17, 2007 from
http://wardsdealer.com/ar/auto_special_dealerships_part/index.html
Cadrain, Diane. (2002) State Programs offer Alternative to Layoffs. Retrieved September 18,
2007 from http://www.stateline.org/live/ViewPage.action?
siteNodeId=136&languageId=1&contentId=14794
Carty, Sharon Silke. (2005). GM, Ford Try to Alter Pricing Strategy. Retrieved September 17,
2007 from http://www.usatoday.com/money/autos/search
Ford Motor Company. (2006). Retrieved September 17, 2007 from
http://en.wikipedia.org/wiki/Ford_Motor_Company
Hoffman, Bryce G. (2005). Slumping Ford Picks Employee Brains. Retrieved September 18,
2007 from http://www.detnews.com/2005/autosinsider/0510/25/C01-359823.htm
Jani, Pranav. Sustar, Lee. (2002). Ford Makes Worker Pay. Retrieved September 17, 2007 from
http://www.socialistworker.org/2002-1/390/390_12_FordLayoffs.shtml
Kotler, Philip. (2002). Marketing Management. New Jersey: Prentice Hall Inc.
International Labor Organization. (2006). Labor Market Trends and Globalization Impact on
Them. Retrieved September 17, 2007 from
http://www.itcilo.it/english/actrav/telearn/global/ilo/seura/mains.htm
Ford Motor Company. (2007a). 2006 Annual Report.
SEPT. 18, 2007
Ford Motor Company Page 10
---. (2007b). GLOBAL MANUFACTURING STRATEGY GIVES FORD COMPETITIVE
ADVANTAGE. Retrieved September 18, 2007 from
http://media.ford.com/article_display.cfm?article_id=13633
---. (2006). Partners and Suppliers. Retrieved September 18, 2007 from
http://www.ford.com/en/company/about/partnersAndSuppliers.htm
Smith, David C. (1996). How Ford’s new Brand Strategy Works. Retrieved September 18, 2007
from http://wardsautoworld.com/ar/search
Tierney, Christine. (2005). Ford Pays Workers to Sell Cars. Retrieved September 18, 2007 from
www.detnews.com/2005/autosinsider/ 0506/17/C01-218739.htm
Work Sharing Unemployment Insurance Program. 2005, EDD Fact Sheet -State of California
SEPT. 18, 2007