Power point-ford

By: Leigh Ann Vaughan

Ford Motor Company

Founded by Henry Ford in 1903

Went public in 1956

Offers more than just automobiles

First to implement the “Moving Assembly Line”

Only auto manufacturer of the Big Three not to take bailout

Ford, a History in the Making

Ford Motor Company’s main headquarters is located in Dearborn Michigan. It was founded in 1903 by Henry Ford who was funded by 11 investors. The Ford family bought out there initial investors they were the sole investors of the company until January 1956 when the public sale of common stock was offered. The primary products that the Ford Motor Company manufactures are cars, trucks, tractors, and automotive parts. This is one of the largest automotive manufactures in the world, with manufacturing and distribution plants in nearly every continent. To keep up with the other major auto manufacturers, Ford Motor Company also offers Ford Credit, this helps to save cost and allows the customer to finance their purchase through the dealership instead of having to finance through an outside financial institution. As of December 31, 2015 they have 199,000 people employed nationwide.

One of the primary strategies that Henry Ford used, and is still being used today was to limit cost to increase profit. By becoming the pioneer in the moving “assembly line” in 1913, Ford Motor Company was able to produce a vehicle in just 4 hours, where just 14 months earlier it took 23 man-hours. This cut cost and increased productivity which in turn increased profit. Not only did this decrease cost but in the beginning this process differentiated Ford from the rest of the manufacturers. In 1922 Ford acquired and luxury auto company by the name or Lincoln which would help to put them into the higher end market place to compete with some of the other luxury auto manufacturers such as Mercedes.

The focus of the company within the first 20 years was to have an automobile that was cost efficient to manufacture which in turn made the vehicle affordable to the public. They also focused on innovation and productivity by developing and incorporating the first moving assembly line to help with turning vehicles out from start to finish in a shorter amount of time than their competitors. With the acquisition of the Lincoln Motor Company in 1922 to help bring in the more affluent customers who would not settle for a Model T or Model A. Then in 1938 Ford started their Mercury vehicle line to bridge the gap between the economy vehicles and the luxury Lincoln’s. This gave them a well-rounded focus on the entire customer base, which helped to compete with GM and other manufacturers.

By November 21, 2008 the U.S. Government requested credible restructuring plans from the auto manufactures to help with keeping the doors open and keeping jobs for the manufacturer’s employees. By December 2 each of the Big 3 submitted their plans for restructuring and avoiding bankruptcy. General Motors decided to sell off or completely do away with certain brands such as Buick, Pontiac and GMC. Along with the reduction in brands they requested up to $18 billion to help pay vendors and have working capital.

Chrysler requested a $7 billion loan to help with liquidity and working capital, each one these two auto manufacturer CEO’s also stated they would only draw an annual fee of $1 during the plan period. Ford, on the other hand only requested a “stand-by” line of credit of $9 billion if they needed it. Their restructuring plan was the start of the Ford plan known as the “One Plan” which is the beginning of the plan known as “One Ford”.

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One Ford Plan

Ford breaks down their “One Ford” plan into three parts:

One Team

One Plan

One Goal

Ford Motor Company prime strategies are focusing on the acceleration of the “One Ford” plan, being passionate in delivering product excellence, and being innovative in every facet of the business. Their One Ford plan includes three parts, they are; One Team, One Plan, and One Goal. The One Team plan constitutes “people working together as a lean, global enterprise for automotive leadership, as measured by: customer, employee, dealer, investor, supplier, union/council, and community satisfaction”. One Plan is broken down into four segments, first is to restructure aggressively to be profitable in current and future changing model mixes. Second is to increase development of new products to give the customers what they want and value. Third is to improve their balance sheet and finance the plan, lastly is one team working together effectively. Lastly is One Goal which is “and exciting viable Ford delivering profitable growth for all”.

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SWOT Analysis Table

In the table shown here we are highlighting some of the important points in the SWOT analysis. We will delve deeper into the analysis as the presentation goes on, this is just a start on what Ford has in the way of Strengths, Weaknesses, Opportunities and Threats.

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“One Ford” Plan (discussed on previous slide)

Use of the Six Sigma System

Working with consumers wants and needs

Market share strength in the U.S. and other regions

Variety of new products providing a competitive advantage

Noteworthy research and development helps in the launch of new vehicles

Logistics and software improvements

Strengths

Over the years Ford Motor Company has succeeded in being one of the top automotive manufacturers in the world. This is done by exhausting every avenue to lower cost, stream line processes, and listening to the consumer. Their three strategic priorities which fall under the “One Ford” plan are; delivering product excellence with passion, accelerating the pace of progress and driving innovation in every part of their business.

Ford’s value chain is not all that different from other manufacturers in the same industry, these are made up of ; firm infrastructure, human resources management, technological development, procurement, inbound logistics, operations outbound logistics, marketing and sales, and service. Ford utilizes their value chain as an important tool to help reduce cost and increase customer value perception of the company.

Procurement is made up of more than one quarter of the value chain, in this case Ford obviously uses Porter’s Five Forces in their strategic business plan, Ford has utilized the Six Sigma System to drive down waste, which in turn drives down costs. Not only do they utilize the Six Sigma for themselves in their day-to-day operations, but they work with their suppliers to help eliminate waste which allows the suppliers to drive down cost. This becomes a win-win situation for both Ford and their suppliers; this also levels the playing field when it comes to the power of the buyer and the supplier.

Another important part of the value chain is the design phase, Ford works closely with consumers to get their input in successful modern technologies which has helped them in tailoring models to specific consumer wants and needs. The utilization of this process has been extremely successful in the recent financial periods, and is in line with Fords’ delivering product excellence as one their strategic points. One more highly impactful aspect of the value chain is marketing and sales, this particular part of the chain is a team effort between Ford and their dealers in creating marketing strategies to help boost sales and help increase the consumers perceived value of the product and company.

Fords’ next part of the plan is to be passionate with delivering product excellence, in 2014 Ford 24 revitalized products globally, including innovatively new F-150 pickups, Mustang, Escort, Ka (Europe market), and Transit, they also introduced the Lincoln MKC. With the introduction of these new and revitalized models, Fords’ goal is to sweep the market in a full line of best-in-class cars, trucks, utilities and trucks in small, medium, and large categories. One of the ways to stimulate the market was when they began a campaign called “Drive One”; the plan was to use social media and digital advertising to get the product visible to the public. In this campaign they loaned 100 Ford Fiesta’s to 100 “agents” and life streamed their driving experiences on YouTube which got more than 6.2 million views. They also launched a campaign on their new Super Duty pickup by running webisodes starring Mike Rowe the host of Dirty Jobs with behind the scenes testing episodes and interviewing the engineers who designed the new pickup. All-in-all the use of social media such as; Facebook, Twitter and Flickr and digital media like YouTube, has helped Ford get a positive position in the auto industry (Halliday, 2010).

With the growing gap in the wealth classes, Ford caters to the majority, for the lower wealth and work classes, the Ford line of vehicles offers; sub-compact, compact, mid-size, and trucks. Ford also has a luxury line which is Lincoln Motor Company; it caters to the more wealthy consumers and competes with BMW, Mercedes, Lexus, Infinity and Acura. This gives Ford an advantage in which the products offered does not allow one class to dictate price or terms when it comes to buying a vehicle

Ford has teamed up with Cat Logistics and SAP to help improve their warehousing and distribution of parts to the dealers and parts stores. Cat Logistics will help in the distribution of inventory from the manufacturer to the distribution warehouses and then to the dealerships and parts houses throughout the U.S. in a timely manner limiting backorders and down time. It has also helped in reducing the supply chain cycle by 57%, a 40% drop in inventory levels in the U.S., and an 85% reduction in back order lines to the customer.

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Smaller profit margin than the competition

Weak stance in Asia and India

Frequent vehicle recalls affecting brand image

Weaknesses

Fords’ profit margin of the smaller more economical compact cars is in the negative compared to their more popular SUV’s and trucks. They were differentiating themselves from the other manufacturers from the smaller vehicle market by offering more models in the larger SUV’s and truck lines. By doing this they are losing an estimated $1,467 per vehicle in the compact car line, which they are going to have to get a better grasp on due to the driving market on the smaller compact and sub-compact models that other manufacturers are producing at a higher profit.

Ford needs to take a stronger stance in the Asia Pacific market, a global alliance between Ford and the Chinese market would be an extreme boost to the company and to the economy of China with affordable automobiles offered to the public. The other market that is weak with Ford products in the Indian market, as with the Chinese market there is a huge potential in sales that Ford needs to take advantage of so they can be a driving force globally and move up from 6th in the global market. This will also help to increase the economy of the U.S. by having money coming back in to the country for products and services instead of it going out, which will be one more way of making America great again.

Due to manufacturing and design problems recalls had been issued for approximately 271,000 2013-2014 Ford F-150 pickup trucks for brake master cylinder replacement, another 202,000 2011-2012 F-150’s, 2012 Expeditions, Mustangs, and Lincoln Navigators for speed sensor issues. These recalls were issued over a two month period from April through May of 2016, in 2015 over 1.5 million vehicles were recalled due to defective air bag deflators. These recalls put a negative light on The Ford Motor Company which will affect future sales if these problems are not addressed internally before the vehicles leave the plant.

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Government incentives

U.S. and developing countries economies are on the rise

High demand for low or no-emission vehicles

Opportunities

Ford has some opportunities that they need to take advantage of; all of the political factors appear to be opportunities for Ford, with increasing trade agreements, the government offering incentives for technological innovations, and offering support to help with the infrastructure of developing countries. These can be enormous advantages that Ford needs to look into to help get more dominant in the global market.

With the U.S. economy and developing economies both on the rise, Ford has the opportunity to flood the markets with their products, the Ford brand is a strong advertising point, but they need the interest of the global market to increase sales and revenue.

Ford’s electric approach is very unique because of its broad based sustainability to provide an affordable fuel efficient car. In setting these standards Ford put in innovation, resources and planning into this project. With the One Ford Approach practice in place, this allowed them to provide a leadership toward Hybrid Electric Vehicles (HEV) and eventually Plug-In Hybrid Electric Vehicles (PHEV). They already have a substantial foot hold in the Hybrid market with the Ford Fusion, Escape, and Lincoln MKZ Hybrid. They also have a PHEV with the Ford C-MAX Energi. The most advanced models that are to be launched in 2010 and 2011 are the Ford Transit Connect BEV and the Ford Focus Electric BEV (Battery Electric Vehicle). These vehicles run solely on battery power with no internal combustion engine. The technology is here and it will be here in the future, with the stringent policies of carbon emissions and the use of fossil fuels being a major hot topic, the future is in electric vehicles and Ford is at the top of their game in this industry.

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Intense competition

Environment regulations

Strengthening of the U.S. dollar

Foreign currency fluctuations affecting profits

Threats

Ford has to compete with not only the other two major automotive manufacturers in the U.S., but also is competing with numerous other manufacturers globally. Although Ford is #2 in the U.S., they are #6 globally; two manufacturers who have risen in sales globally are Nissan-Renault and Hyundai-Kia. These two manufactures have knocked Ford from 4th in 2010 to the now 6th position in the global automotive market. Ford has lost some of their dominance in the global market due to competing against lower prices and better warranties. The vehicles are also very similar in appearance from brand to brand; this is another issue that Ford needs to address, to stand out from the rest of the cookie-cutter models that you see today.

There is wide spectrum of government induced regulations on the automotive industry, not only in the U.S. but also in the European Union. Emission levels of exhaust fumes, fuel economy and carbon dioxide guidelines makes it difficult for the automotive engine manufacturers to save on costs when more sanctions are being introduced on a yearly basis. Also China, Korea and Taiwan have adopted emissions standards that the U.S. and Europe have been instituting since 2011.

Unfortunately the strength of the dollar is increasing which means that the profits will become lower and the Ford product may not be as financially attractive as some of the other brands based from other countries.

And lastly the unstableness of the foreign exchange rates can have a serious affect on profits and the financial industry on a global scale. Ford Credit can face serious exposure to mismatched exchange rates from the time that the loan is started to the time that the loan matures, this also can cause a drop or even a loss of profit over a period of time.

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Increase the global stance as a dominant industry leader

Stronger stance in the Asia Pacific and Indian markets

Become a leader in new technologies

Limit the amount of recalls on vehicles

Maintain a positive financial position

Strategic Actions

Over the years Ford Motor Company has succeeded in being one of the top automotive manufacturers in the world. This is done by exhausting every avenue to lower cost, stream line processes, and listening to the consumer. Their three strategic priorities which fall under the “One Ford” plan are; delivering product excellence with passion, accelerating the pace of progress and driving innovation in every part of their business. Ford obviously uses Porter’s Five Forces in their strategic business plan; they have utilized the Six Sigma System to drive down waste, which in turn drives down costs (Smith, 2017). Not only do they utilize the Six Sigma but they work with their suppliers to help eliminate waste which allows the suppliers to drive down cost. This becomes a win-win situation for both Ford and their suppliers; this also levels the playing field when it comes to power of the buyer and the supplier.

By helping to eliminate waste and lower costs, this gives Ford a more solid competitive advantage compared to other automotive manufacturers. Another advantage that Ford is exploiting is manufacturing “world cars”, these cars, such as the Fiesta, are the same no matter what part of the world they are being shipped to. This standardizes manufacturing, parts, and servicing throughout the world which will also cut costs which will be extended to the consumer (Alston & Bird, 2008).

Ford has to compete with not only the other two major automotive manufacturers in the U.S., but also is competing with numerous other manufacturers globally. Although Ford is #2 in the U.S., they are #6 globally; two manufacturers who have risen in sales globally are Nissan-Renault and Hyundai-Kia. These two manufactures have knocked Ford from 4th in 2010 to the now 6th position in the global automotive market. Ford has lost some of their dominance in the global market due to competing against lower prices and better warranties. The vehicles are also very similar in appearance from brand to brand; this is another issue that Ford needs to address, to stand out from the rest of the cookie-cutter models that you see today.

The only threat that Ford would have an issue with is the competitive nature of the business. Ford would need to start thinking more out of the box with design and technology.

The automotive industry is highly competitive; a new comer in the market would have a hard time competing with manufacturers that have a dominant position in the market. In most cases in the automotive market, a smaller or fairly new competitor would more than likely be bought out or be forced to close down due to the competitive nature of the industry.

Ford needs to concentrate on the Asia Pacific and Indian markets, these are the developing countries that are demanding more vehicles and want the best technology. These two aspects need to hand in hand to make Ford a dominant force in the automotive industry not only in the U.S. but in the global market where they are lacking at the moment.

New innovative technologies are what the tech savvy consumers are looking for, with the use of mobile computing and mobile internet capabilities the sky is the limit in what can be installed into a vehicle. Enhanced online fulfillment services are right now the latest and greatest when it comes to mobile entertainment, whether it is Pandora, Playstation or Netfilx the amount of onboard computing service is boundless. Another opportunity would be working with power and oil companies to increase the amount of alternative fuel stations and charging stations throughout the country, this would make these types of vehicles more attractive and obtainable

Ford suffered some ethical issues that were right up there with the 2008-2009 Toyota Unintended Acceleration which caused a family to be fatally killed because of so-called improperly installed floor mats. From 1970 – 1980 Ford manufactured a compact car known as the Pinto, the controversy that has followed this car model is the possibility of the car exploding from a rear end collision. Because of the placement of the fuel tank being too close to the rear of the car and where it was placed over the rear axle would cause the fuel tank to rupture if the car was struck from behind. Ford was aware of the issue but decided it would not be cost effective to make any changes until people were injured or killed because of the issue.

Where Ford made their crucial mistake was that they put the societal benefits into a monetary value. They calculated that it would cost the company $137 million to recall the vehicles and change the design at $11 per vehicle with over 11 million vehicles. They calculated that it would only cost the company $49.5 million in deaths, injuries and vehicle repairs. By putting a monetary value on human life was Fords’ downfall in this case and is still a controversial case to this day.

Ford has come a long way from this instance and has become one of the most ethical companies in the world. With part of their “One Ford” plan, Ford has strived to be more committed in improving its environmental sustainability, consumer safety and stakeholder appreciation, but due to recent events still has a long way to go.

One of the main capabilities of Ford is their financial control, back during the financial crisis of 2008, the automotive market tanked along with the housing market. Ford, along with GM and Chrysler were given the opportunity to get bailed out by the government (taxpayers) to help keep the doors open and personnel employed. Ford was the only one of the three that was financially stable enough to not take the bail out, this goes to show that Ford knows how to manage their finances during the tough times. This way of doing business needs to continue for the future stability of the corporation during the good times and the tough.

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Financial control

Strong brand management

Significant cost cutting capabilities

Six Sigma and strong internal leadership

Opportunities in other regions

Competitive Advantage

Ford has taken steps in the restructuring process which was painful at first with the plant closing and job cuts, but Ford has come out of the fray leaner and stronger than ever. With a $2.1 billion net-income reported for the first quarter of 2010 which is a $3.5 billion improvement from the year prior, which is the fourth quarter in a row that Ford has shown it has made a profit. Part of the reason why Ford has done so well is because of how the company looks in the public’s eye. Ford was the only auto manufacturer of the Big 3 that did not need government assistance to keep the company in business, this was a factor but not the primary reason. Ford worked fervently to improve on their product line and listened to the public to give them what they wanted in a vehicle. They used four key pillars to improve their brand they are; quality, green, safe and smart.

The Ford name in some circles is all that is needed to dictate respect and in some cases awe, they are one of the oldest automobile manufacturers in the world, they started the first moving assembly line to manufacture automobiles, they have been in business for over 100 years and still an innovation leader with new products and models that are the best in their class. They strive to make the customer first along with gaining new customers who may not have considered buying a Ford vehicle, case in point, when they used social media to promote the Ford Fiesta and the Super Duty Pick Up Trucks.

By helping to eliminate waste and lower costs, this gives Ford a more solid competitive advantage compared to other automotive manufacturers. Another advantage that Ford is exploiting is manufacturing “world cars”, these cars, such as the Fiesta, are the same no matter what part of the world they are being shipped to. This standardizes manufacturing, parts, and servicing throughout the world which will also cut costs which will be extended to the consumer.

One of the key components of the corporate structure is the use of the “Six Sigma” system, this system uses statistical data to find and solve problems to help save costs and increase customer satisfaction levels. Along with the consumer-driven Six Sigma system Ford also implements a Quality Leadership Initiative, and a Quality Operation System. With all three of these systems in place Ford has globally eliminated more than $2.19 billion in waste since 2001, and is responsible for a significant portion of the increase of consumer satisfaction. This is just a portion of what the management systems have contributed to Fords’ success in customer satisfaction and cost cutting which allows them to be a sustainable auto manufacturer. This also is one of the reasons why Ford was able to make it through the 2008 financial crisis without having to take any money from the government bail-out (Alston & Bird, 2008).

Geographically speaking Ford is virtually worldwide; with operations centered in the United States they also have operations in Europe, Asia Pacific, South America, the Middle East and Africa. As of FY 2015 Ford employed approximately 199,000 people globally, this number will decrease slightly with the consolidation of platforms down to 8 by the end of 2016. Globally Ford held a market share of 7.2% by the end of 2015, within the United States there market share was 14.7%. In Canada their market share was 14.4%, it was 7.7% in Europe, 14.3% in the UK and 12.6% in Turkey. In South America primarily in Brazil they had 9% of the market and 14.8% in Argentina which expanded over 2% from 2013. Their lowest market is in the Asia Pacific region primarily China with a 4.5% market share, this is where Ford needs to focus on in sales and marketing, with China becoming a dominant user of fossil fuels and vehicle purchasing.

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Alston & Bird. (2008). Big three U.S. automakers submit restructuring plans to congress. Alston & Bird, LLP. . Retrieved from http:// web.ebscohost.com.library.capella.edu/ehost

Daniels (2017) Ford Motor Company Manages Ethics and Social Responsibility. Retrieved form: https:// danielsethics.mgt.unm.edu/pdf/ford-motor-case.pdf

Ford Motor Company. www.fordmotorcompany.com

Grant, R. M. (2012). Ford and the world automobile industry in 2012. West Sussex, UK: Wiley and Sons.

Grant, R. M., & Jordan, J. (2015). Foundations of strategy (2nd ed.). West Sussex, UK: Wiley and Sons.

Halliday, J. (2010). Moving on. Brandweek Global Intel, 51(21), 10-11. Retrieved from http:// web.ebscohost.com.library.capella.edu/ehost

References

Hughes-Cromwick, E. (2011). Ford motor company’s global electrification strategy. Business Economics, 46 (3), 167-170. Retrieved from http:// web.ebscohost.com.library.capella.edu/ehost

MindTools. (2016). Porter's five forces: Assessing the balance of power in a business situation. Retrieved from https://www.mindtools.com/pages/article/newTMC_08.htm

Smith, K. (2017). Six Sigma at Ford Revisited, Retrieved from: Http://www.qualitydisgest.com/june03/articles/02_article.shtml

References