This paper is about the turnaround strategy that Ford has put into place since Alan Mullaly took over. The company has predicated this turnaround on four pillars of competitive advantage. This paper looks at how well Ford is executing on those, how well its competitors are executing and what the financial performance of Ford has been.
Ford believes that the four cornerstones of competitive advantage are efficiency, quality, innovation and customer responsiveness. Ideally, the company would be able to execute on all of these at once, something that is a challenge for even the best firms. However, if that is how Ford wants to compete, then the pursuit of these advantages must be tied into the company's strategy, and for these to be a genuine competitive advantage Ford must exceed the capabilities of its competitors in these facets of the business. This paper will analyze these facets in respect of Ford's culture and how well it executes these vis-a-vis its competitors.
Ford's Strategy
Unlike its major domestic competitors, Ford turned down a government bailout on the assumption that it would be better able to execute its vision for the future without the influence of government ownership. This was met with optimism in some quarters when aspects of the company's strategy came to light (Schwartz, 2010). The company's vision entailed improving relations with its workers, focusing on long-term results rather than quarterly and selling off underperforming units. One of the immediate effects of this has been in innovation. Ford shifted its focus towards designing cars that consumers of today wanted. The result is that there is more optimism about the company's innovation pipeline than there was in the mid- to late-2000s (Ibid). Also fueling the innovation pipeline was a commitment that the company made to financing new product development, even as it restructured its balance sheet (Muller, 2012).
The innovation pipeline and responsiveness to customers has also taken place in foreign markets. For example, Ford last year announced the launch of several new models in the Chinese market. The company has a total of 20 new engines and 15 new vehicles coming online by 2015. There is a focus on increased fuel efficiency, again something that consumers have been wanting for years. These successes are allowing Ford to gain traction in China and rival General Motors, which to this point is much bigger in that market (Forbes, 2011).
Ford has struggled, however, with the quality aspect of its strategic plan. The company fell all the way down to 20th of 28 automakers in a Consumer Reports survey on reliability, with Japanese makers taking 9 of the top 10 spots. This report was damning of Ford's efforts -- the Explorer SUV, Focus compact and Fiesta in particular -- and as a result the company's stock price was hit. The improved perception of quality in Ford vehicles is one of the reasons the company's sales have been on the rise. Consumers are hearing that Ford is committed to improving quality and they are responded, so reports that show that the company's renewed commitment has yet to yield success hurt the company with respect to competitive advantage (Welch, 2011). Unfortunately for Ford, these findings are supported by other surveys, such as one by JD Power and Associates that also showed a dip in the quality of Ford vehicles (LeBeau, 2011).
Comparison with Competitors
While all of the major U.S. automakers have executed some sort of turnaround, Ford's is generally believed to be stronger. The company was able to give its executives a significant bonus, whereas the other automakers were unable to do so, because they have not had the same turnaround success (WSJ, 2012). It is interesting to look at the financials, because General Motors has restored sales to 85.6% of 2007 levels, whereas Ford has only reached 80.6% of 2007 levels. However, whereas GM earned a profit of $9.1 billion in the last fiscal year, Ford earned $20.2 billion. Such an improvement in the bottom line without even the same top line improvement highlights most of the facets that Ford considers to be competitive advantages. For example, it emphasizes that Ford has become more efficient, something that will have a direct positive effect on margins. It also hints that Ford is delivering more of what the customers want, including quality, and as such the company is able to earn higher margins on its products than GM is. Unfortunately, Chrysler has yet to float publicly and therefore no financials are available for that company.
Conclusions
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