Individual Report Style Case Analysis: - Ford

Individual Report style Case Analysis: - Ford Motor Company - IN TEXT CASE 18 Case Objectives 1. To examine external internal forces affect competitive strategy. 2. To investigate choices business corporate-level strategies a highly turbulent industry.

Ford Motor Company

The modern day society is still striving to overcome the impediments of the economic crisis that commenced in 2007 in the United States real estate sector. The crisis left people unemployed, losing their life savings, and the economic agents in hurdle. Still, in these difficult times, the leading American manufacturer of automobiles reemerges as a strong and stable organization.

Ford Motor Company has not used federal funds to overcome the crisis, but has focused on reconsolidating itself in order to restore its balance and financial stability. Today, the organization is revealing the first signs of this stability, yet challenges still remain.

General information about Ford Motor Company

Ford Motor Company was established in 1903 in Dearborn, Michigan, and it has gradually become a symbol of the American culture, due to the visionary ideas of founder Henry Ford. Today, the organization creates automobiles and offers financial services throughout virtually all parts of the world. The company employs a total of 164,000 individuals worldwide, and strives to integrate them in the larger culture of the firm.

The company's operations and sales are completed in various global regions, yet, the most of sales -- more than half -- are completed within North America, namely the United States of America and Canada (Hoovers, 2012). Still, an important component in the strategy of Ford Motor Company was represented by the externalization of part of its operations to various global regions. In other words, the company outsourced several manufacturing and assembly operations to less economically developed regions, in an effort to reduce costs.

The outsourcing measures generated increased debate among the various stakeholder categories. The American employees were for instance unsatisfied with the loss of their jobs in the name of corporate profit; the foreign employees were however content with the creation of new jobs. The American public responded negatively to the decision, and based this reaction on the social and economic impact of an increased unemployment rate in the country.

At an internal level, the Ford Motor Company is focused on the integration of its employees, its plan and its goals in a manner in which the needs of various categories of stakeholders are attained, and the company increases its profitability. This plan for strategic management is known as the One Ford strategy and it constructed on three basic principles: One Team, One Plan and One Goal.

"One Team: One Ford emphasizes the importance of working together as one team to achieve automotive leadership, which is measured by the satisfaction of our customers, employees and essential business partners, such as our dealers, investors, suppliers, unions / councils and communities.

One Plan: The company's four-point plan consists of: balancing our cost structure with our revenue and market share; accelerating development of new vehicles that customers want and value; financing our plan and rebuilding our balance sheet; and working together to leverage our resources around the world.

One Goal: The goal of One Ford is to create an exciting and viable company with profitable growth for all" (Ford Motor Company 2010 Annual Report).

3. Industry analysis

The automobile industry is a highly dynamic and competitive industry. The penetration of the sector is limited by the need to possess increased financial resources, and the industry is capital intensive. It is generally assimilated with a conglomerate, in which there are few companies, which share in the entire marketplace.

While its structure is rather straightforward, the issue of the forces which impact the industry are far more complex, as these originate from various sources. For instance, the industry is influenced by the policies and regulations implemented by national and international organizations. Then, the industry is also impacted by the state of the economy; in economic boom and growth, the demand for its products tends to be increased, whereas in times of recession, the revenues of the automobile manufacturers contract.

Additionally, the automobile industry is impacted by forces such as technology or consumer demands. The changing needs of the customers shape the demand, to which the manufacturer has to adapt, sooner rather than later. The advancement of technology also forces the automobile producing companies to adapt.

From a strictly competitive standpoint, it is accepted that competition is intense. This is best addressed through the lenses of Porter's five forces analysis:

The threat of new entrants is fairly decreased, due to the need for increased capitals

The power of suppliers is also decreased as there are numerous purveyors who strive to sell their products and commodities to the automobile manufacturers

The bargaining power of buyers is increasing, especially in a context in which the competition intensifies in the international arena and the local buyer is able to choose from a wider product range

The availability of substitute products is a medium threat and it is best assessed through the lenses of the costs raised by using an automobile. As the cost of gasoline increases, more people are turning to other means of transportation, such as bicycles, buses, trains and so on.

All in all, the competitive rivalry among the automobile makers in intense (Investopedia, 2012).

4. Internal and external forces affecting Ford's strategy

At the external level, the strategies of Ford Motor Company are impacted by several forces, most of which add supplementary pressure for the organization. Some examples in this sense include the weakened economy, the lack of liquidities within the market or the changing needs and demands of the customers.

From an economic standpoint, the strategy of Ford is impacted at the level of the decisions which have to be made regarding the financial policy, but also the product decisions. Specifically, the threats were posed by the decreasing revenues of customers, which led to decreased demands, and sales, of Ford automobiles. Additionally, the crisis materialized in a decrease of available liquidities within the market. The economic agents become less able to access borrowed capitals to further invest in their developments.

Aside from the economic dimension, the competitive strategy of Ford is also impacted by the changing demands of customers, who now focus less on large size and luxurious vehicles, but seem to desire small size and energy efficient vehicles. This outcome is the result of fluctuating oil prices, international tensions, as well as the increasing awareness over the threat of global warming.

In terms of the internal forces impacting the competitive strategy, these could include the size and access to the company's resources, the skills of the labor force and their adaptability to change, or the technologies possessed by the firm.

Also at this stage of assessment of the forces impacting the competitive strategy of Ford, it is important to note the internal resources and assets that might create competitive advantages for the automobile maker. These factors include the following:

Solid financial gains, which have been gradually increasing since the commencement of the crisis in 2008, revealing a strong company

A strong reputation and trusted brand

Impressive skills and capabilities in the field of engineering and automobile development

Increased global presence.

5. The strategy of Ford

Ford Motor Company currently implements a multifaceted strategy, which strives to address a wide array of challenges from both within its internal environment, as well as from outside it. In this specific order of ideas, throughout the past recent years, the American automobile manufacturer has focused on restoring its financial stability; this endeavor was also supported by the fact that Ford did not need a loan from the government in order to avoid bankruptcy. The firm as such recognized the decreased access to both owned as well as borrowed capitals, and it implemented a more restrictive and prudential approach. In this setting, the strategy has focused on reorganizing and strengthening the internal environment at Ford.

This process of restructuring had primarily revolved around restoring the company's financial stability, especially following 2008, when the company had reported its largest single year losses. Still, in the processes of reshaping and restoring the company, less emphasis came to be placed on the organizational operations of Ford. As this limitation was identified, a new chief executive officer and president was elected for Ford, in the persona of Alan Mulally, former head of commercial airplanes at Boeing.

The strategy of Mulally was focused on the introduction of "innovation as a core strategy to reshape Ford" (case). The commitment of the new CEO was to strengthen the company and to ensure that 2011 would end in a financially sound manner for the company, in which its sales were at least breakeven, or even profitable. As the financial results indicate, this objective has been attained. The table below reveals some crucial financial highlights for Ford for the years 2009, 2010 and 2011.

2011

2010

2009

Revenues

$136,264 million

$128,954 million

$116,283 million

Net income / loss

$20,213 million

$6,561 million

$2,717 million

Net income per share

$5.33

$1.90

$0.86

Costs and expenses

$129,321 million

$122,296 million

$119,715 million

Source: 2011 Form 10K, Ford Motor Company

The figures presented in the table above are characteristic of the entire Ford corporation, including both the automotive operations, as well as the financial operations. The financial services provided by the firm -- while less sizeable than the automotive operations -- represent an additional step in the diversification strategy, through which Ford is trying to create more sources of revenues.

6. Mulally's strategy and challenges

Alan Mulally brought in a new managerial fleer at Ford Motor Company, which supported the success of the organization. For instance, his simple presence created more trust in the Ford company and brand, as it shuttered the previously enclosed management at Ford. Specifically, the organization had traditionally promoted from within, rather than hire new executives. This move to bring in Mulally proved that Ford was ready to change and it generated more trust from the part of the stakeholders.

Then, Mulally also became engaged in a series of strategic efforts that were perceived as less orthodox at the company, but which also generated some positive results. In this specific order of ideas, the new CEO and President of Ford met with the executives of Toyota to learn from them -- a move which would have never been completed by a traditional Ford executive. Other efforts in which Mulally had engaged include:

The real assessment of the situation within and outside the firm

The reduction of the company's size, concomitant with an increase in efficiency and profitability; this strategy also included the downsizing of an estimated 30,000 employees and the closing of 14 plants, and an increase in the productivity of the remaining plants

The reduction of costs, including personnel and plant expenditures, and the redistribution of the savings towards automobile design

An increased emphasis on strengthening the Ford brand.

Aside from these strategic changes, the new CEO also implemented a series of administrative adjustments. For instance, the executives would meet more often -- once a week, instead of once a month -- and they would directly discuss the problems. Also, emphasis was placed on the reorganization of the Ford executives.

"Since his appointment, Mulally had made some additional structural and procedural changes in the company. For instance, instead of discussing business plans monthly or semiannually as they used to do at Ford, executives now met with Mulally weekly. […] "The difference I see now is that we're actually committed to hitting the numbers. Before, it was a culture of trying to explain why we were off the plan. […]"

Mulally also did some senior executive reorganization at Ford, since many of the newly appointed executives reported to him directly" (case).

In the setting of the financial results so far available, the efforts made by Alen Mulally seem to generate the positive results. At the level of strategies to still be implemented by the new CEO, these refer to the following:

A future shift in production in order to focus on small size and fuel efficient engines

The integration of newer techniques and technologies which support environmental responsibility and sustainability

The alignment and integration of Ford Europe and Ford North America, addressed through the globalization of the Ford brand.

At the level of Ford globalization, a note has to be made in that this desire is inconsistent with the possibility of Ford Australia operating as an independent venture. The plant only manufactures vehicles for domestic consumption, and enjoys the financial support of the local government. In such a setting then, the plan might be sustainable at a theoretical level, in which it accepts low profitability and limited opportunities for development. Still, as part of the restructuring Ford, such an option is unsustainable.