Question 1: Please prepare a comprehensive SWOT analysis for Ford Motor Company
Ford Motor Company
Ford Motor Company is considered as the market leader in the automotive industry. It is also one of the first American automotive companies that even today are successfully manufacturing and selling automobiles, trucks, busses and automotive parts all over the world. The company sells commercial vehicles under the brand name, Ford while luxury cars come under the Lincoln brand. The company has become the second largest U.S. car manufacturing company and fifth largest vehicle manufacturing company in Europe and the world (Jurevicius, 2013). In the year 2008, the company had employed around 213,000 employees in its all 90 plants across the world producing 5.532 million automobiles. This made the company emerge eighth position in the United States according to the 2010 Fortune 500 list. The Ford Motor Company was founded by Henry Ford and incorporated in 1903. Today, Ford has been aggressively globalizing its operation rapidly by entering into new markets by pursuing its marketing strategies of studying the local requirements and demand of the customers. The company is localizing its cars with customized features that are suitable and affordable for the local customers (Blitterswijk &Karadzhov, 2009).
SWOT analysis is a simple but a very useful tool to analyze the position of the company in its external and internal business environment. As used in a business context, a SWOT analysis is used to help companies developing their strategies and setting their goals for the future (SWOT analysis, 2013). In the following section, SWOT analysis of the Ford Company will be discussed. The four sections are strengths, weaknesses, opportunities and threats that the company faces in its operations.
1. Strong position in U.S. market
The company is the second largest automaker in the United States and the fifth largest vehicle manufacturing company in the world. The Ford Company has a great reputation in its local market and strong commercial vehicle sales. It has made a lot of profit from the sales of the commercial vehicles (Jurevicius, 2013). The company is one of the major producers of cars and trucks in the world and recently it has shown impressive sales figures. The company has shown strength in multiple areas. Some of the major factors that can be attributed to continued performance and higher profits include positive financial performance, positive market performance and growth in business. For the first quarter of 2013, the company showed an increase in sales by 18 percent as compared to its sales from last tear. Ford’s sales in the car section have increased by 21 percent while utilities sales are increased by 16 percent. Ford Fusion and Escape set sales record with a year-over-year increase in sales of 24 and 52 percent respectively. Ford has positioned itself as a market leader in America’s best selling pick-up brand, F-Series. Another well-known brand of Ford is Lincoln that has experienced as an increase in sales by 21 percent (Ford Sales Grow Strong in U.S., 2013).
These statistics have shown that Ford is gaining its financial strength, positioning and recognition in the United States are thus becoming a high auto - manufacturing and selling brand of the U.S. According to Ford vice president, U.S Marketing, Sales and Service, company is keeping pace with the record demand for its all-new, fuel-efficient Fusion and Escape. F-Series pickups are also continuing to build on their momentum as housing and construction industry rebound. Ford’s strength is not confined to only American and North American rather it is also witnessing immense growth in China. The company has diversified its operations in various countries around the world. A significant growth of the Ford Company in China has helped the company to increase its performance and thus profitability. The financial performance and position of the company has been consistent and encouraging to the investors. According to Ford Financial records, improved performance in the company’s sales has been cited. For the first quarter of 2013, the company has shown an increase in sales by 54% as compared last year’s quarter. As a result, positive sales directly affect the profitability of the company. This results into a positive market performance in the company (Ford Sales Grow Strong in U.S., 2013).
2. ECOnetic Initiative
Ford’s ECOnetic initiative is one of the techniques the company has adopted in producing highly fuel-efficient engines. The process involves improving the existing engines rather than new hybrid engines. The result of this initiative is referred to as the Ford Fiesta that is responsible emission of mass-produced cars in Europe and Ford Focus ECOnetic. According to the Ford Company, the car has better fuel consumption than the Toyota Prius (Jurevicius, 2013). Ford ECOnetic Technology is actually meant to suit the needs of the consumer and bringing together a wide range of vehicle features and technologies. This is usually done in order to, specifically, target better fuel economy while reducing emissions and overall lower cost-of-ownership without compromising to great designing or dynamics of driving. For instance, EcoBoost petrol engine technology and refined Duratorq diesel engine technology is manufactured to add more torque and power with lower fuel consumption and CO2 emission this meeting the latest Euro 5 emission standards (Ford Motor Company, 2013). Therefore, the ford motor company initiative is aimed at increasing the company’s’ profits and subsequent performance in the market.
Based on Ford ECOnetic technology, the company has also stipulated that the technology contributes greatly in the economy and savings. This technology provides software named as Eco Mode that is a useful device for achieving better fuel economy. This system helps in assessing the influence of your driving behavior on fuel consumption. For instance, this software identifies gear shifting, motorway driving and anticipation behavior guide drivers that how they can save fuel while driving. Ford Eco Mode then generates a driver profile and a score based on the areas where a driver can improve its fuel economy (Ford Motor Company, 2013).
3. Sound financial performance
Ford was the only big U.S. car manufacturing company that did not need the government bailout. As a result, it became the first company to get investment status back in a very short span of time. The firm’s profit margins are relatively high as compared to its competitors that are having high liquidity ratio (Jurevicius, 2013). After a long period of the financial crisis, the company renewed its financial strength. In spring 2012, Ford earned back its investment-grade rating from the second of three major rating agencies. This is a significant milestone that allowed the company to not only low its borrowing cost, but also to reclaim its brand Ford Blue Oval. Ford Blue Oval was placed by the company as collateral for the original $18.5 billion secured loan that Ford took out in 2006. In 2012, for the second year in a row, Ford brand surpassed the figure of 2 million in U.S. vehicle sales making it the best-selling brand in America. Regaining the Ford Blue Oval also presents strong and sound financial strength of the company. Ford Blue Oval is the most recognized brand in the world and was the greatest source of the company’s pride. By reclaiming the brand, the company is highly motivated to get further from achieving success (Ford Sustainability, 2013).
The sound financial performance exhibited is as the result of the company’s financial strategy of pulling out “junk” investments by overhauling its production. Ford is transforming itself into a fully globalized business while continuing to invest in its new vehicles and technologies. It is also coupled with flexible manufacturing operations that are helping the company to save money. Ford Company has managed to invest in faster product development technologies and finding ways to deliver efficient technologies in the market. Ford’s performance in North America is giving power to the company to invest in South America, planning investments in Europe and extending the operations in Asia Pacific and Africa. Figure 1 shows EcoBoost performance till 2012 contributing to overall financial performance of the company (Ford Sustainability, 2013).
Figure 1: EcoBoost Cumulative Sales
4. “One Ford approach
Ford has managed to pull different strategies in its manufacturing procedures in order to meet customers’ demands and thus company’s’ reputation. For instance, the company has decided to produce single, streamlined global lineup for its models. The car manufacturing company no longer produces customized products for different regions rather the company focuses on designing and engineering cars that fit the different regional tastes and regulations. It significantly decreases costs for Ford and drives record profitability (Jurevicius, 2013). Ford Motor Company founded One Ford program in 2009. The main aim of this program is the understanding of the company as a real Global Entity- unique family regardless functions, place or culture of their members. The three elements of One Ford approach are: One team, one plan and one goal (Guerro, 2010).
5. Ford’s expansion in china
The ford company has globalized its operations across the world in an effort to increase the marketing of the product. Extension of the ford company in china has been one of the most successful establishments. In the recent years, the company has experienced a significant growth in the automotive market. Automotive business has been one of the performing business opportunities in china. The business flourishes due to the strategic operating environment offered by china. According to statistics, the ford company sales grew with a margin of 6 percent in the year 2012. This shows an improvement in the sales of the company and subsequent profit.
1. Poor environmental record
In the past, Ford has been condemned for poor attempts to reduce environmental pollution. The University of Massachusetts Amherst has rated the company seventh, in regards to the worst air polluter due to its manufacturing plants. The U.S. Environmental Protection Agency also associated the company to 42 toxic waste sites (Jurevicius, 2013). This flaws act as an impetus to the success of the company and reputation. As a result, the company should come up with a policy to ensure pollution is minimized at a considerable rate.
2. High Cost structure
The company’s’ “One Ford” approach is aimed at substantial cost reduction in its operations. By contrast, Ford is still considered as a high cost structure company relative to other automobile companies. Ford’s cost structure is driven by huge and generous packages to employee compensation and pension plans (Jurevicius, 2013). As a result of this high cost structure, the company has not been able to tap opportunities in small and medium segments where the motor market is the largest (Blitterswijk &Karadzhov, 2009). The high cost structure of Ford Motor Company was also one of the main reasons for a drop in profits in 2011. The costs shot higher by over $1 billion while net income was dropped almost by 80 percent (Woodall, 2011). Therefore, being a multinational company, ford’s expenses turn out to be so much such that the cost of production increases by a large margin. Over the past, the company has experienced such instances though it has strived to maintain the production costs as low as possible.
3. Unprofitable European operations
The company, in 2012, lost $1.75 billion in its investment endeavors in Europe. According to the company’s financial reports, plans to recoup the losses in the region are underway and expected to go on until 2015. Even in 2013, Ford’s outstanding profits were dented by losses in Europe. In Europe, the company made a loss of nearly $462 million and is so far considered as the biggest fall in profits for Ford. Sales in Europe for all car manufacturing companies were falling nearly by 10%. According to Ford, the losses in Europe reflect “unfavorable” market factors and the company is seeking to restructure its plans for European business (BBC News, 2013). Due to these economic conditions, Ford Motor Company has announced its plan to close two U.K plants along with a third plant in Belgium in an effort to cover European losses. These problems are no unique for Ford because a worsening European recession has resulted in the worst industry-wide auto sales decline (CNN Money, 2013).
1. Positive attitude towards “Green” vehicles
A fuel efficient car is one of the customers need in the recent world. A vehicle that is fuel inefficient and emits large amounts of carbon-dioxide is a great threat to the environment. Companies that are responding for manufacturing fuel efficient cars are gaining significant attention around the world. Consumers have become more aware of this negative impact and likely to buy “green” vehicles that emit much less CO2 and are fuel efficient (Jurevicius, 2013). The federal government has set an ambitious goal of 54.5 miles per gallon among all new cars and light trucks sold in 2015. Consumers want the best vehicles with better mileage that is able to meet their needs and demands of fuel efficiency and green economy (USA Today, 2013).
2. New emission standards
A new wave of stricter regulations on vehicle emission standards will positively affect Ford’s position in the automobile market and industry. The company can invest large amounts of money to manufacture fuel efficient engines and also reap some success with its vehicles such as Fiesta and Ford ECOnectic models. Many countries like Germany are moving towards stricter standards of emission. These standards will be enforced in 2020. The German government is stressing on car manufacturing companies to make small and fuel efficient cars that can comply with emission standards. The companies that are already complying with these standards are making their way to increase their sales. Recently, the new European Union automotive emission standards are enforced that require the cars to give average fleet CO2 emissions to 95 grams per kilometer (Jaynes, 2013).
3. Strategic partnership
Ford has great experience in creating strategic alliances and partnerships with other automotive companies. As a result of the current competitive pressure, the company has a great opportunity to enter into a strategic partnership that will help in lowering down its R&D cost and will also give it an access to new markets while gaining skills and experience. In addition to this, the growing economies of Asia especially China, India and Pakistan can also be a great opportunity for the company to exploit regional strengths of these countries. The company can also make several partnerships with local marketing companies to increase brand awareness in the relative countries. Promoting their powerful Volvo vehicles in the Bus and Truck markets of Asia where the local brands like Tata Motors have a strong presence can also help Ford to increase its sales. Collaboration with Asia car manufacturing giants such as Tata Motors and localization of manufacturing and workforce in third world countries will give Ford an additional cost reduction advantage. For example, Mercedes Benz has shown phenomenal growth in India by forming a joint venture with Tata Motors. Therefore, formation of a strategic partnership with these companies will help Ford to achieve its strategic objectives (Blitterswijk &Karadzhov, 2009).
1. Economic conditions
Instability in economic conditions of most of the Western countries is a continuous threat for car manufacturing companies including Ford. The western car markets have been badly hit due to stagnation and the economic crisis. Car sales in the United States have declined by 3 6 percent. Car manufacturers in other developed countries like the United Kingdom and Canada has also witnessed a similar crisis with 38 percent of sales decline in UK and 29 percent decline in sales in Canada. Western economies are facing aftermaths of severe economic downturn due to sub-prime crisis (Blitterswijk &Karadzhov, 2009). For this reason, despite of showing phenomenal growth in profits, Ford experienced huge losses in Europe. This is perhaps a continuous threat for the Ford Motors.
2. Threat from competitors
Over the recent years, Ford is has experienced an intense competition from other car manufacturing companies more than ever especially in the small car segment with hybrid engines. General Motors Company is the undisputed auto manufacturing company and volume sales leader in the United States. This is simply because it is a bigger car maker as compared to other four brands- Chevrolet, Buick, GMC and Cadillac. GM’s position in the auto manufacturing market makes it a very strong competitor of Ford Company. In the last two decades, Ford has managed to beat GM in terms of sales by, only, four times. However, this year the company sold only 2,049 fewer cars and more light trucks than GM attaining the position of one of the stiff competitors of GM in North America. It shows the intensity of competition for Ford in Car manufacturing industry (Young, 2013).
3. Fuel prices
Ford, including other automotive companies can be adversely affected by fluctuations in the exchange rates. The company earns more than half of its profits outside the United States. The profits may be lower due to appreciating dollar against other currencies. Most of the cars in the United States and Europe rely heavily on gas. Any changes in prices of fuel count daunt buyers from opting for cars. This will greatly impact profits and revenues of car manufacturing companies (NDTV Profits, 2012). There have been fluctuations in fuel prices in the United States. As a result, fuel prices can raise or decline at any given time of the year. Rising gas and oil prices are likely to growth in 2013 because of the instability in the Middle East. Nearly 20% of the world’s oil flows through the border to Iran and Oman. Any instability in these regions will largely impact fuel prices in America (Amadeo, 2013).
Question 2: Please analyze the quality of Ford’s strategic direction (i.e., Mission, vision, broad goals).
“Ford Motor Company is a worldwide leader in automotive and financial products and services. Our mission is to, continually; improve our products and services to meet our customers’ needs, allowing us to prosper as a business and to provide a reasonable return for our stockholders, the owners of the business.” To accomplish this mission, Ford Motor presents a set of values and guiding principles that are followed by all employees of the company (Smith, 2005).
Accomplish of the company’s mission is as crucial as the mission itself. The company is usually focused on the success of its operations around the world through its three basic values:
Ford’s people are the source of the company’s strength. These people provide the company its corporate intelligence while determining reputation and vitality of the company. People’s involvement and teamwork are the core human values at Ford Motor Company (Smith, 2005).
Ford’s products are the end results of people’s efforts trying to serve the worldwide customers at their best. As Ford’s products are viewed, so is the company viewed.
Profits are the ultimate measure of Ford’s success and how efficiently the company is providing its customers with best products according to their needs. Profits are required by the company to survive and grow (Smith, 2005).
- Quality comes first: To achieve satisfaction of customers, the quality of Ford’s products and services remained first and foremost priority in the history and even today.
- Customers are the focus of everything we do: Ford believes that its work must be done while keeping their customers in mind. Moreover, Ford wants to provide better products and services to customers as compared to the competitors (Smith, 2005).
- Continuous improvement is essential to our success: Ford believes that they should strive for excellence in everything they do. From products to services and from safety to values, Ford’s human relations, it competitiveness and its profitability all are channeled to achieve excellence for the customers (Smith, 2005).
- Employee involvement is our way of life: Ford considers itself as a team and in the team all members are treated with trust and respect.
- Dealers and suppliers are our partners: Ford maintains mutually beneficial relationship with dealers, suppliers and other basic business associates (Smith, 2005).
- Integrity is never compromised: The conduct of the company worldwide is maintained in a way that every person is socially responsible and commands respect for its integrity and positive contributions towards the society. Ford’s suggest that its doors are open to every man and woman alike without any discrimination and without any ethnic discrimination (Smith, 2005).
Ford’s vision is based on its “One Ford” approach or program that was introduced by the company back in 2009. Following are the three main elements of this approach: One team, one plan and one goal (One Ford, 2013).
People will work together as a lean, global enterprise for automotive leadership and will be measured by Ford’s customers, employees, dealers, investors, suppliers, and union/council and community satisfaction.
- Ford aims to aggressively restructure to operate profitably at the current demand and changing model mix.
- Ford wants to accelerate the development of new products that customers want and are valued by the customers
- Ford finance its plan and improve its balance sheet in real time
- The employees of the company work together effectively as one team (One Ford, 2013).
- Ford has one goal worldwide that is to deliver profitable growth for all.
In order to achieve the goals and objectives of Ford’s vision, the company has also presented expected behaviors list for its employees.
1. Foster functional and technical excellence
- Ford expects that its employees know and have a passion for the business and its customers
- They should be able to demonstrate and build functional and technical excellence
- They must ensure that they process discipline
- They must incorporate the philosophy of having continuous improvement and practice (One Ford, 2013).
2. Own working together
- Ford believes that through “One Ford” approach, the company hire and retain skilled and motivated people working together in the company
- Ford wants to include everyone; respect them, listen to them, help and appreciate others.
- Ford wants to build strong relationships so that the company develops long lasting bonds with others
- Ford communicates clearly, concisely and candidly
3. Role Model Ford Values
- Ford wants to show initiatives, courage, integrity and expects good corporate citizenship
- Ford always strives for improving quality, safety and sustainability
- Incorporate positive attitude in employees
- Set high expectations and inspire others (One Ford, 2013).
Ford’s Goals and Objectives
Ford Motor Company wants to strengthen its balance sheet and continue to globalize its vehicle platforms that can be adapted to meet specific regional needs and to produce the vehicles that customers want. The company is planning to introduce more efficient fuel vehicles to become the market leader in fuel economy. Ford is channelizing it’s all energies to execute its “One Ford” transformational plan in order to create leaner and more efficient global enterprise (Ford Sustainability, 2012).
There are three major goals of the Ford Motor Company:
- The overall goal of Ford Motor is to deliver best-in-the-world quality while striving for best in class in every phase of vehicle development, from design to delivery to the end customers.
- Ford continues to reduce “things gone wrong (TGW)” and warranty spending (Ford Sustainability, 2012).
- Ford wants to improve its customer satisfaction towards its vehicles and sales and service divisions (Ford Sustainability, 2012).
Question 3: Please enlighten me as to Ford’s perspective of corporate level strategy (concentration, vertical integration, and diversification).
Ford’s corporate level strategies
Ford carries out a single business strategy. The company’s core markets lies in the automotive industry though it manufactures a wide range of products in their area, its. Besides this, they seek partnerships with the companies that are incorporated into their vehicle. These companies include Sony, Sirius Satellite Radio, Microsoft, BP and many more. These partnerships add value to the Ford’s product. These partnerships also act as a type of outsourcing to improve the vehicles that the company manufactures (Johnson, 2010).
Expansion of business operations has become another important strategy of the company because Ford has huge potential for producing innovative products in the transportation industry. Instead of focusing solely on the battle of selling personal vehicles, the company developed entirely new types of mobility markets in 2010 when it was expected that the market of automobiles will soon reach US$13 billion (Strategic Transformation of Ford Motor Company, 2006).
The success of Ford’s success is powered by the level of commitment of the company around the world. The company is reducing its environmental impact on products and facilities in order to support positive change and ensure economic viability for long-term growth. Under “one Ford” approach, the company’s business is organized by its four regional segments: North America, South America, Europe and Asia Pacific and Africa. North America and Europe are the largest markets for the company. The automotive industry in Europe is extremely competitive due to which the company faces hard times in implementing its corporate level strategy (Ford’s Current Financial Health, 2012).
The Asia Pacific region and Africa region are the fastest growing market for the automotive industry. To meet the growing demand, Ford is expanding its dealer network and also building seven new state-of-the-art, highly flexible manufacturing facilities in order to provide production capacity of 2.3 million vehicles by the mid of this decade. In China, the company has also significantly expanded its operations through its research and engineering centers in Nanjing (Ford’s Current Financial Health, 2012).
Brazil and Argentina is the highest-volume South American markets for Ford. Brazil’s economy and demographics will help the company to penetrate in the automotive market to more than double since 2002. Figure 2 shows Ford’s region employments and sales in a glance.
Figure 2: Ford’s Regions at a glance
Ford has reduced several global vehicle nameplates from 97 in 2006 to 59 in 2008. This was further reduced from 38 in 2010 to 37 in 2011. In 2011, the company sales increased with the Ford brand surpassing the 2 billion target for U.S. vehicle sales thus making it best seller brand in America. The last time any car manufacturing brand selling 2 million vehicles was in 2007 prior to the economic recession. However, in 2011 total sales of Ford was up by 11 percent as compared to slow year of 2010. In Germany, the company became fastest-growing auto manufacturer with its sales of more than 17.6 percent in 2010. In 2011, the company remained the market leader in Britain and Canada. On the other hand, Ford’s wholesale sales in the Asia Pacific and Africa region increased by 7.5 percent as compared to 2010. Figure 3 shows sales volume for Ford by five key global platforms in 2011.
Figure 3: Ford’s Sales in 2011
After a closure of several plants in the period of economic recession, Ford is back on track to achieve the goals and objectives of its One Ford policy. A critical component of Ford’s business strategy has been to focus on realigning production with demand. In some cases, this means re-tooling the production facilities that had previously built large trucks and SUVs to instead manufacture small cars or more energy-efficient vehicles. The company wants to regain its market position by investing heavily in plant operations (Ford’s Current Financial Health, 2012).
At the Kansas Assembly plant, Ford has invested nearly $1.1 billion in a new body shop. It is a new tooling area with an upgraded paint shop and all-new integrated stamping plant. These investments were made in order to support the 2013 North American product debut. This was the full size Ford Transit van that was aimed to achieve gas mileage of at least 25 percent better as compared to the E-series of vans. A proportion of the investment will be used to sustain the next-generation F-150 pickup truck production at the plant (Ford’s Current Financial Health, 2012). Ford has invested $16 billion in its U.S. operation which includes a $6.2 billion in U.S. plant to design, engineer and manufacture more new and upgraded vehicles in components by 2015. Other investments include (Ford’s Current Financial Health, 2012):
- About $1.1 billion including $700 million for plant upgradation (Ford’s Current Financial Health, 2012).
- An incremental of about $850 million investment in plants based Michigan between 2011 and 2013.
- Nearly $600 million to redevelop Ford Louisville Assembly plant to build the next-generation Ford Escape and other innovative vehicles (Ford’s Current Financial Health, 2012).