Ford Motor Company was founded in 1903 by Henry Ford and has continuously remained under family ownership since this time. The company developed and implemented assembly line production by the release of the Model T in 1909, and produced planes and vehicles for the Allies in World War II. Ford has operated internationally since 1904, when it opened a branch in Canada to gain access to Commonwealth markets. Ford was particularly inhibited by substantial legacy costs—primarily from employee pensions and healthcare benefits—and falling demand for it’s most profitable lines of vehicles. Ford Motor Company faces many strategic challenges during these volatile economic times. Ford is the most financially sound American car manufacturer and possesses enough cash on hand to continue operations through fiscal year 2009, provided there are no further dramatic deteriorations in the market. Analysts believe that the company will not need to seek government funding unless car sales for 2010 are below 12 million. While Ford, like all major car companies at this time, faces serious challenges, we assert that opportunities exist during any time of crisis. We believe that Ford can, with our help, break even in fiscal year 2010 barring further macroeconomic deterioration.
USA is one of the most mature automobile markets in the world with the level of car ownership exceeding 60% of the total population. Imported cars constitute 70% of the domestic market, while local sales are more than double local production. Due to the high inflation rate in the America economy, the selling price of cars is increased. This poses a great challenge to marketers, who must attempt to maintain sales level by convincing the customers to select their firm’s product over the competitors. Furthermore, the strong currency and high interest rate discourage the domestic market spending level. Due to this, the level of savings has increased and it is too costly to take out a mortgage to buy a new car. Also, there is a growing consumer interest in smaller cars due to consistently escalating fuel prices. The relatively high production cost in America, especially in comparison to China and Thailand means that there is little scope for increase in production; while the saturated levels of car ownership will constrain sales expansion.
The main focus of Ford is their trucks. They have the Ranger, F-150, F-250, F-350 and in 2008 they are coming out with a F-450. Ford trucks are among the top selling trucks in North America. They utilize the motto “Built Ford Tough” to create an image for their truck line. They range in price from around $20,000 up to around $80,000. Their cars have a less satisfactory image. They are thought to have lower quality and less reliability than the import cars. This is something Ford is trying to change but it is hard to do. They are relatively low cost. The Focus starts at around $15,000 and the Crown Victoria starts at around $25,000 and can go up to the $40,000 range. All of their cars and minivans fall into this price range. Ford has approximately 10,500 dealerships worldwide with around 60% of their sales in North America
It’s important to understand current and potential sociocultural, such as lifestyles, values, attitudes, beliefs, and patterns of behavior, in the market. Different countries have different cultural. Ford has special irreverent, fun and goofy cultural on customers. Its customers are mostly native. Now Ford is pursuing code-sharing deals with foreign carriers in Europe and Asia in order to expand its market beyond North America. So there will be diversified cultural customers.
Political stability is a given in most countries, and some still face volatile and unstable situations. Political unstable can take bad impact on the airline industry development. Since the Button Car Plan, import tariffs have been cut from 57.5% to 10% and free trade agreements mean many vehicles are now imported duty-free. This makes imported vehicles more cost-efficient than domestically built vehicles. Major political-legal concerns include taxation, minimum wage, which can have a significant impact on Southwest’s financial performance. Therefore, automobile industry is heavily regulated and taxed.
Today’s car is becoming more and more complex due to the rapid changes in technology. Automakers use the latest technological developments to improve such areas as brake assistance, adaptive speed control, global navigation and satellite tracking systems. These options advance the quality of dealer’s products and help to meet the needs and wants of American consumers. American motorists are concerned about the effect of their cars on the environment. This has signaled automakers to improve their manufacturing efficiency, cut the emissions of vehicles, and increase the recyclability of the vehicles parts, so as to expand their future sales. Automakers Ford, also offer other options, such as flexible-fuel vehicles that run on a mixture of gasoline and ethanol, and new Hybrid technology.
The value chain of the Ford Motor Company is not all that different from other manufacturers in the automobile industry. Many years of increased arbitrary demands on suppliers has led to poor supplier relations and so the 100 year-old company is taking a new approach to reinvent its’ value chain. Ford’s rivals showed a greater disposition to use resources from outside of the United States. It was not until 1994 that Ford focused on developing a global strategy as means to enhance on building a strategy that would allow the company to recover its competitive position in its own home market, which was essential for survival. An analysis of the structural and institutional factors that shapes Ford’s strategic reponse both to the new industry rules and the short-term challenges posed by other industry competitors explains this paradox.
Procurement makes up more than a quarter of the value chain and so Ford has focused its efforts there. In the past, Ford lowered its’ supply chain costs by demanding lower prices from its suppliers, in effect obtaining savings at the supplier’s expense. It is now taking a different approach. Ford is working closely with its suppliers to eliminate waste and thereby lower costs for both organizations. This should be a “win-win” situation for both companies and should help lift Ford from its near-last ranking in supplier relations.
Another high value impact of the Ford value chain is the design phase. Ford has begun to understand the value of consumer input in successful modern design technologies. They have initiated tailoring design models after public demand. This method has proven highly successful in recent financial periods. Marketing is also a very important aspect of the Ford automotive value chain and is considered a high value-added part in the value chain. Ford has been working together with dealers to create marketing strategies that help boost sales. This is proven to be the primary basis for the consumers' perceived values.
Three Levels of Strategy
The three levels of strategy for a company are corporate, business and functional. Corporate strategy focuses on determining which businesses the company should be in. Business strategy develops competitive advantages within a business’s segment. Functional strategy operates at the level of marketing, operations and finance to ensure that each part of the company has strategies to support the business. For Ford companies, corporate strategy consists of continuously evaluating the benefits of remaining in a single business versus becoming active in complementary industries.
Corporate level strategy fundamentally is concerned with selection of businesses in which the company should compete and with the development and coordination of that portfolio of business.
Ford has several core competencies which they could utilize to father gain advantage over their competitors, and if possible, overtake General Motors in its market leadership in the automotive industry. One core competency of the company is their brand management. The strength of their automotive marketing has been such that their brand is known even in the parts of the world where cars are not the common medium of transportation. Ford companies have the advantage of focus and rapid response but are vulnerable to problems in their industry. Their corporate strategy must demonstrate the advantages of remaining active in only one industry while evaluating business opportunities in areas with complementary activities. With a goal of optimizing company operations, profitability and growth, the corporate strategy must compare the return of a continuing investment in the Ford business with the acquisition or starting up of complementary businesses. Ford Motor Company went public on Feb. 24, 1956. Henry Ford II's ability to identify political and economic trends in the 1950's led to Ford expanding globally in the 1960's. The establishment of Ford of Europe in 1967 stemmed from this global expansion. The company established its North American Automotive Operations in 1971, consolidating U.S., Canadian, and Mexican operations more than two decades ahead of the North American Free Trade Agreement. Presently, Ford Motor Company consists of many car brands including: Ford, Lincoln, Mercury, Mazda, Jaguar, Land Rover, Aston Martin, and Volvo and is continually trying to expand globally.
The business strategy of Ford Company is similar to that of a business unit of a diversified company except that the business strategy must support corporate strategic initiatives aimed at the single business. The business strategy sets goals for performance, evaluates the actions of competitors and specifies actions the company must take to maintain and improve its competitive advantages. Typical strategies are to become a low-price leader, to achieve differentiation in quality or other desirable features or to focus on promotion.
Ford’s main promotional strategy that was used in the past was the employee discount. This meant that the general public could purchase a car for the same price as an employee of ford would be able to purchase one for. This was quite a generous offer that stimulated the sale of Ford automobiles.
Ford’s release of their “Bold Moves” internet documentaries can be viewed as a marketing tool to reposition Ford as the “underdog”. The documentaries offer a rare glimpse into the inner workings of Ford. There is commentary on Ford’s complacency in developing fuel efficient vehicles, interviews with depressed factory workers, complaints from executives over Ford’s dull vehicle designs and other critical comments on why Ford has been struggling in the automotive industry. However, these web documentaries also show the steps Ford is taking to correct their mistakes. They showcase their plans to introduce hybrid cars and more customizable vehicles to meet consumer demand.
Marketing Functional Strategy
In companies that are marketing oriented, the marketing strategy on a functional level influences the other functions and their strategies. A typical marketing strategy is to determine customer needs in an area where the company has a natural competitive advantage. Such advantages might be in location, facilities, reputation or staffing. Once the marketing strategy has identified the kind of product customers want, it passes the information to operations to design and produce such a product at the required cost. The advertising department must develop a promotional strategy, sales must sell the product and customer service must support it. The marketing strategy forms the basis for the strategies of these other departments. Market Penetration will be used to defend as well as increase sales in Ford’s core competency – their F-Series of trucks. Currently, import companies are beginning to encroach on Ford’s core competency with such offerings as Honda’s Ridgeline and Toyota Tacoma and Tundra. With Toyota and Honda’s reputation and growing market dominance in other vehicle markets, it is only a matter of time before Ford loses ground to their competitors. This can be prevented by offering high quality, reliable trucks using Ford’s experience and reputation for creating trucks. They should also offer similar pricing against their competitors as well as adapting to any new innovations in the market.
Ford’s corporate structure and it’s values have contributed to some recent financial trouble. The most recent change to Ford’s corporate structure was the appointment of Allan Mulally to the position of Ford CEO and President. With his appointment, Ford would release their current re-structuring plan - "The Way Forward", which would replace the ineffective restructuring plan prior to Mulally’s arrival. Ford hopes this restructuring plan will resize the company to match current market realities, dropping some unprofitable and inefficient models, consolidating production lines, and shutting down seven vehicle assembly plants and seven parts factories. Among these are the following plants; St. Louis Assembly, Atlanta Assembly, Batavia Transmission, Windsor Casting, and Wixom Assembly. Up to 30,000 hourly and salaried jobs or 28% of the total workforce in North America over the next six years are expected to be eliminated, which is comparable to similar cutbacks previously announced at General Motors. These cutbacks are consistent with Ford's roughly 25% decline in U.S. automotive market share since the mid-late 1990s.
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Mission Statement of Ford is “We are a global family with a proud heritage, passionately committed to providing personal mobility for people around the world. We anticipate consumer needs and deliver outstanding products and services that improve people’s lives.” Ford Motor Company’s vision, values, and strategy can be great motivation or inspiration to anyone who is considering opening their own business or managing a company, especially within the automotive industry. A manager should always be willing to switch gears of the company to keep with the industry and avoid horrific financial situations like that of General Motors and Chrysler. Ford had to create a new strategy to avoid bankruptcy and in turn had to create a vision and values that followed suit with what they were trying to achieve with their strategy. Change is important to any company, automotive or not, in order to stay competitive while still providing quality products or services to consumers. All companies and managers should take a page out of Ford’s book because not all companies could have seen both sides of the financial spectrum and still be one of the largest manufacturers in the world.