Ford Motor Company: History, Strategy, and Industry Analysis

Introduction and Company Overview

Mass production has become virtually synonymous with Henry Ford, and rightfully so. Ford popularized the process in the early 1900s, and mass production techniques have since been applied to virtually every industry where standardized production capabilities could add value — with a revolution in consumerism as the result. In the years since its founding, however, the company experienced some rocky times, particularly during the latter half of the 20th century, when the quality of its automotive products was far inferior to their Japanese-manufactured counterparts. Notwithstanding these troubled times, the company emerged in the 21st century as a major player in the global automotive industry and currently enjoys a respectable standing among its competitors.

This paper provides an overview of Ford Motor Company and its history, an overview of the industry, where the organization fits within that industry, and a review of a major economic issue that could possibly impact Ford in the future. A discussion of a potential ethical issue facing the company and possible approaches to its resolution is followed by an analysis of how increased sales or revenue might impact the company's pricing strategy and market potential. A summary of the research and salient findings is presented in the conclusion.

Ford Motor Company History and Business Sectors

Ford Motor Company was established in 1903 and has its headquarters in Dearborn, Michigan. The company currently designs, develops, manufactures, and services cars and trucks on a global basis (Ford Motor Company, 2008). Ford employs approximately 40,000 salespeople throughout the United States (Turcotte, 2005). Today, Ford competes in two primary sectors: (a) Automotive and (b) Financial Services.

This business unit markets vehicles under the brand names Ford, Mercury, Lincoln, Volvo, Jaguar, and Land Rover. In addition, the Automotive Sector markets cars, trucks, and parts through various retail dealers in North America, as well as distributors and dealers outside of North America. The Automotive Sector also markets automobiles and trucks to dealers for sale to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies, and governments. Beyond the foregoing, the Automotive Sector offers retail customers a range of after-sale vehicle services and products in areas such as maintenance and light repair, heavy repair, collision, vehicle accessories, and extended service warranties under brand names including Genuine Ford, Lincoln-Mercury Parts and Service, Ford Extended Service Plan, and Motorcraft (Ford).

This business unit provides various automotive financing products to and through automotive dealers. It offers retail financing — which includes purchasing retail installment sale contracts and retail lease contracts from dealers — and financing to commercial customers to purchase or lease vehicle fleets. It also provides wholesale financing comprising loans to dealers to finance the purchase of vehicle inventory, and other financing consisting of loans to dealers for working capital, improvements to dealership facilities, and to purchase or finance dealership real estate (Ford). In addition, the Financial Services sector services the finance receivables and leases it originates and purchases, transacts loans to its affiliates, purchases receivables, and provides insurance services related to its financing programs (Ford).

On the international front, Ford has established a number of wide-ranging joint ventures, including Mazda, Getrag Deutsche Venture GmbH and Co. KG, Neumayer Tekfor GmbH, Song Cong Diesel, and Lio Ho Group (Ford).

Perhaps best known for his innovations in mass production, the company's founder, Henry Ford, embraced this process early in the 1900s as a revolutionary production system intended to maximize profits through the production of a standardized vehicle at a low price. As Studer-Noguez reports, "In order to achieve this goal, Henry Ford designed a system that increased vehicle output from the same amount of inputs and reduced overall time of assembly. The system was based on the principle of the assembly line, which would operate on a continuous basis without disruptions from labor or from the supply of materials, parts, and components" (p. 15). During the early 1920s through the early 1940s, Henry Ford also established nineteen "village industries" throughout southeastern Michigan, situated within sixty miles of his company's headquarters in Dearborn; however, during a subsequent restructuring of Ford Motor Company, his descendants closed many of them by 1950 (Meyer, 2007). As Meyer notes, "Today they survive as public or private buildings, and a few are part of historic preservation efforts to encourage tourism in the area" (p. 352).

The introduction of the highly popular Model T is credited with fueling the American love affair with the automobile — a love affair that continues to this day (Ebony salutes Ford Motor Company, 2003). Ford's early approach to labor relations and an inordinately high turnover rate in his manufacturing plants also had long-term consequences. According to the editors of Ebony, "The Ford story moved into high gear with the $5-a-day miracle that made it possible for tens of thousands of Blacks to free themselves and other Americans. This had a ripple effect all over Black America, and today, 100 years after the founding of Ford, it is impossible to count the homes, graduates and dreams made real by the Ford idea" (Ebony salutes, p. 44).

Global Automotive Industry Overview

According to McDonald (2005), "From a global standpoint, the United States is one of the most important markets for automobiles. The United States is the world's largest single-country producer and consumer of motor vehicles. In 2004, manufacturers sold 16.9 million passenger vehicles in the United States. Consumers spent $266 billion to purchase these vehicles. The United States is the most important country in the world for investment by and competition among global motor vehicle producers" (p. 743). Two of the world's largest automakers, General Motors Corporation and Ford Motor Company, are headquartered in the United States (McDonald). Clearly, the global automotive industry is enormously competitive, and while Ford managed to retain the third-place spot in terms of sales, it had dropped from the second-place position it occupied in 2005 (Henneman, 2006).

The company's primary competitors are General Motors Corporation (ranked first in sales), Toyota Motor Corp. (ranked second), Volkswagen AG (ranked fourth), and Honda Motor Co. Ltd. (ranked fifth) (Ford). The company's reputation for quality suffered during the latter half of the 20th century, and it has struggled to overcome the lingering perception of inferior products compared to its Japanese-manufactured counterparts. Indeed, the company's then-current marketing campaign emphasized that Ford's quality was merely "equal to Toyota's" — clearly laudable, but lacking the competitive edge needed to overcome this perception. "Better than Toyota" should be the company's ultimate goal, yet it remained unclear whether this represented a long-term objective.

Conclusion and Recommendations

The research showed that Ford Motor Company enjoys a solid position in the global automotive industry and currently occupies the number three spot among its competitors. The company has a long history of embracing automation and mass production techniques that will likely continue in the future. While the company's image suffered during the latter half of the 20th century in terms of the quality of its products compared to its Japanese counterparts, this perception has been largely addressed through the introduction of new brands that the company proclaimed were "equal to Toyota's" in quality. Unfortunately, the company's marketing campaign in this regard did not emphasize any effort to exceed that level of quality — and "just as good" is not "better than."

The research also showed that Henry Ford's original concepts concerning recycling were based on a desire to save money rather than protect the environment, but this has changed in significant ways in recent years, with the company adopting a number of environmentally responsible approaches to its manufacturing processes. Finally, given the current trends in energy prices and demand from the burgeoning economic powerhouses of China, India, and Brazil, Ford would be well advised to actively pursue research into alternative fuel vehicles and bring hybrid models to market as soon as possible — hydrogen fuel cell vehicles would be an even more forward-looking step.

Ebony salutes Ford Motor Company & Black America: A 100-year adventure. Ebony, 58(8), 44.

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Meyer, D. (2007). Recasting the machine age: Henry Ford's village industries. The Historian, 69(2), 352.

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Turcotte, M. (2005, July 4). Business people. Sarasota Herald Tribune, 4.