Firms in monopolistic competition often behave like monopolies in the short run, something that Ford will need to do to improve its bottom line. Eventually any tactic Ford adopts will be mirrored by its competitors, but the increased competition allows for Ford to implement strategy and not receive a direct and immediate response from its competitors.
4. Outline a rough competitor analysis. Directly competing against Ford is a large number of companies both domestic and international. Firms such as General Motors and Chrysler are direct competitors with similar cost structures, although their bankruptcies last year may change the nature of competition from these two firms. Foreign competitors include Honda, Toyota, Mazda, Hyundai, Kia, Mitsubishi and others. The Japanese firms tend to be more differentiated than Ford but retaining cost structures still in the mass market range. The Korean manufacturers tend to compete more in the low-cost segment. Most of the Asian companies have strong government and institutional support in their home countries. European automakers also compete against Ford, and they tend to adopt a differentiated strategy, even more so than the Japanese automakers.
5. Describe what can be learned about expected competitor behavior by using the model of competitive rivalry to understand Ford's situation. In Ford's situation, the large number of competitors and the relatively high intensity of rivalry implies that consumers are going to be price sensitive. Pricing information is readily available for all automobile products, which means that prices are going to be driven down (Urbany & Dickson, 1988). Indeed, competitors' behavior gives other firms in the industry additional insight into consumer behavior, and this has a tendency to lead to price wars (Ibid). This may be the result of an overreaction to the tendency of firms in intense rivalries to focus on the rivalry more than consumer behavior. For Ford, focusing on consumer behavior rather than on the rivalry may yield better outcomes. Consumers are going to have high price sensitivity and because differentiation is important in this industry as well, consumers will also seek out a degree of differentiation even at the lowest price points.
6. Explain what role strategic leadership will play in helping Mulally and the organization meet its strategic objectives....
Strategic leadership will be critical for Ford to deal with its issues. The company's structure and operations are complex, and Ford can derive competitive advantage from every part of its value chain. This will required Mulally to have tremendous vision, to see the different linkages and know how to improve them.
Given its relatively weak financial position and poor brand image, Ford does not have much leeway with respect to its performance improvement efforts. The company needs to be successful in its strategy, and this will require it to focus on a handful of the most effective and achievable strategic objectives. Where Mulally can improve this process is by setting these objectives, and ensuring that each objective set fits with the company's overall strategy.
In addition, Mulally needs to be able to see these strategies through. This may be the most difficult part of the turnaround, given that Ford has been so close to failure for a while now. The corporate culture may prove to be an impediment to change as well. Mulally will need to keep the company focused on the strategic objectives and outline the different tactics that will bring the company to its objectives. The plan must also be long-term in nature, so that it can be built upon at a later point. For Mulally, setting the company on a different course will not be easy. He must have strong strategic leadership with vision and the ability to change whatever parts of the organization -- structure, culture, focus -- that need to be changed. He will need to achieve organizational buy-in for his plans as well, if they are to succeed.
Works Cited:
Ford.com. (2002). Global manufacturing strategy gives Ford competitive advantage. Ford.com. Retrieved May 11, 2010 from http://media.ford.com/article_display.cfm?article_id=13633
Henry, J. (2010) Ford's high-tech strategy is bottom-up instead of top-down. BNet. Retrieved May 11, 2010 from http://industry.bnet.com/auto/10003252/ford-high-tech-strategy-is-bottom-up-instead-of-top-down/
No author. (2007). Porter's five forces. QuickMBA.com. Retrieved May 11, 2010 from http://www.quickmba.com/strategy/porter.shtml
Urbany, J. & Dickson, P. (1988). Consumer information, competitive rivalry and price setting when ignorance isn't bliss. Advances in Consumer Research. Vol. 15. 341-347.
