Category: Ford

Executive summary

Comparative studies determine the level of performance between two companies. Financial analyses can ascertain the usefulness of comparative studies. The comparison provides ratio analysis on market trends, financial ratios and the strength of its capital base (Brealey & Myers, 2000). Thus, financial ratio analysis provides an accurate health status of an organization (Brealey & Marcus, 1999). In this report, we will compare financial ratios between two car manufacturing companies. The report is a comparative analysis between Toyota Corporation and Ford Motors. The report shows the liquidity ratio, leverage ratio, market ratio and the profitability ratio. The analysis revealed the stability of Toyota Corporation in growth and performance.

Brief history of Toyota Corporation

Toyota was established in 1937 by Toyody Kiichiro. He invested 100,000 pounds in Toyota Corporation. In 2009, Toyota Corporation ranked first in the can manufacturing business. The company produced 8.76 million cars. The major markets include Japan, Asia, North America and most recently South America. The company produces Toyota, Scion and Lexus cars. Toyota invented hybrid engines and leased its technology to ford motors in 2009.

Brief history of Ford Corporation

Ford Corporation was established in 1913 by Henry Ford. Henry’s vision was to produce cars in mass. He divided the production department into unique parts. Each unit combined effectively to lead the world’s car manufacturers. The first car built by Ford was the T model, built in the Highland manufacturing office. The success of Ford Corporation positioned the company in 4th position, leading the automobile manufacturing companies. Ford Corporations have branches around the globe. Its brand of cars includes: Mercury, Lincoln navigator, Ford and Volvo. The company suffered from recession in 2010. Its sales in the US dropped by 23% while its market sales around Europe increases. The reasons for the drop in sales in the US includes

1. High cost of labour
2. Trade unions enforced high standards, such as payoffs and pensions.
3. The demand for low combustion engines.

Ford Corporation dominates in large vehicles such as, Pick-up vans, SUVs. The company produced its first hybrid engines in 2009. A feat achieved through Toyota Corporation. The company estimated investment in 2010 was $500 million, the investments centered on the production of its original hybrid engines

Comparative analysis between Ford Corporation and Toyota

The report examines data published on websites, and annual company reports. The report analyzed the company’s liquidity ratios, leverage ratios, profitability ratios and market ratios.

Table 1

The result in table 1 shows a high index in the liquidity ratio of Toyota Corporation. The liquidity ratio in 2009 is less than the liquidity ratio in 2010. Ford trailed behind Toyota Corporation in table 1. This result implies a high comparative variability of Toyota Corporation. The ratio shows the ability of each company in fulfilling its obligations (Brigham & Joel, 2001). The analysis reveals that Toyota has high liquidity ratio than Ford.

Table 2 Profitability ratios

The profitability ratio of Toyota is higher in 2010. The profitability ratio of Toyota is higher than the profitability ratio of Ford Corporation. The profitability ratio determines the performance and the growth index (Ross & Jaffe, 1999). It also reveals the decline in profit of a firm. Ford Corporation is at risk due to its low profitability ratio.

Table 3 Leverage ratios

Table 3 shows the leverage ratios of both companies. Toyota’s capital ratio was more stable in 2010 than in 2009. The stability of Toyota is high compared to the stability of Ford Corporation. The financial capability of an organization is determined by the ability to service each liability (Roy, 1970). This variable positioned Toyota Corporation as the leading car manufacturing company in 2010.

Table 4 Market value ratio

The market ratio reveals the performance of the company’s stock value. The earnings per share influence the growth of the organization (Roy, 1970). Toyota’s earning per share increased in 2010, showing the stability of the organization. This is attributed to the aggressive strategy in marketing hybrid engines.

Conclusion and recommendations

The report reveals the correlation between ratio analyses. The ratios correlate each other and this connection influences the success and failure in a firm. The presentation of a company’s annual report reveals the health status of the organization. Comparative studies and similarities in trends can be calculated using different annual reports. The stability of Toyota is higher than Ford Corporation and this account for the growth of the company. The trend can be attributed to the demand for economical cars produced by Toyota.

References

Brealey, R., & Marcus, A. (1999). Fundamentals of corporate finance. New York: McGraw-Hill Companies Inc.

Brealey, R., & Myers, S. (2000). Principles of corporate finance. New York: McGraw-Hill Companies Inc.

Brigham, E., & Joel, F. (2001). Fundamentals of financial management. Harcourt College Publishers: Fort Worth.

Ross, S., & Jaffe, J. (1999). Corporate finance management. New York: McGraw-Hill.

Roy, C. (1970). Analysis and interpretation of financial statements. New Delhi: Orient Longmans.

Executive Summary

This paper focuses on carrying out a new product development of Ford Motors in the UAE market. In so doing the paper will consider several issues, such as the strength of the product idea, USP, SWOT analysis, PESTEL analysis, and marketing strategy. It will also concentrate on constructing a pricing strategy, promotional strategy, financial plan for developing this new product, and on many other related issues.

Methodology

The purpose of this methodology is to provide a clear idea about the research approach, primary data, and secondary data.

Research Design

To organize this report, the author has considered the theoretical approach of Malhotra, as this process is perfect while in-depth market estimation is crucial to assess the UAE market. However, the researcher will concentrate both on quantitative and qualitative but he gave more focus on qualitative data, as SWOT, PESTEL, Porter five forces, marketing strategy, and other external factors would be based on qualitative data.

Primary Research Approach

Saunders, Thornhill, and Lewis (102) and Yin (78) expressed that primary data need to originate to serve a specific purpose, such as, concentrate on the research problem or way out to remove these issues. However, this report will collect primary data to know the UAE market environment, customer choice, behavior, and prospect of this product. This information is important to develop a new product of Ford in the UAE market; so, the researcher will prepare a questionnaire by addressing relevant factors. However, the author will also consider 50 customers to collect primary data to assess the prospect of environmentally friendly Ford products to UAE customers. Also, the author will use Microsoft Excel to originate charts from the response of the selected 50 customers.

Secondary data

Zikmund (98) and Sekaran (45) pointed out that secondary data are more useful and reliable since these data have already been processed by renowned researchers. Malhotra (112) further added that these sources have also already been approved by supervisors, universities, or general readers. As a result, the qualitative data will assist the author to recognize the strategic dilemma easily and solution to solve these problems. Also, the researcher will use secondary data to organize most of the parts of this report excluding the market survey. However, the author will consider management books, reports of yahoo finance, country profile, annual report of Ford, and other internet sources to prepare a marketing plan for a new product of Ford in the UAE market.

Strength of Concept

Strength of the Product Idea

Ford Motors will be introducing a new product in the UAE market that the company distinguishes to be one of the most innovative products in its car-making history. This new car model has fully equipped with the latest technology integration causing a groundbreaking success for Ford’s R&D department. This new Ford model, known as “F-shammoTo” possesses several distinct qualities and features – the car is environmentally friendly because it has a non-pollutant emitting internal combustion engine that lessens emissions of compounds through a technology of catalytic conversion to cleanout the pollutants after combustion; moreover, this hybrid car version utilizes bio-fuel and ethanol.

When F-shampoo is stopped from driving, the gasoline-engine will shut down automatically without generating any noise, and stay off until the accelerator is pressed; moreover, the car has a touch-screen that displays images from rear-mounted-camera to show what is directly behind it as well as displaying and controlling many functions such as the audio system, A/C, and other systems. Although the car is five seated, its amazing internal designation is fabulously user friendly allowing the highest consolation to the consumers. Because the UAE has a high per capita income, Ford developed the product as a luxury car with a wonderful outlook in terms of style, size, shape, color, and other features. The main characteristics of the car have outlined in the following figure:

USP and Product Differentiation

The pricing of F-shammoTo has set by keeping in mind several factors, such as the manufacturing cost of the car, the per capita income of the UAE residents, and most importantly, the prices charged by the competitor companies for similar types of vehicles. Even though the car has been made such that it would attract luxury car purchasers, but the charge of this innovative Ford model is reasonable enough to be afforded by middle-income earners as well.

Its price is a little higher than that of the general Ford car models, but still quite less than the hybrid cars of Toyota, BMW, Honda, etc. Initially, F-shampoo will be available at dirham 73125 (19500 dollars) to the customers. After a couple of months, Ford may increase its price by 10 percent to 15 percent depending on the demand of the market, and by analyzing the extent to which people feel appreciated about the car.

Academic Support

SWOT analysis

Being such a large business in the global automotive market, it would not be a big deal for Ford motors to develop its new product in the UAE market. It is important to note that Ford will consider developing the new product considering its strengths, weaknesses, opportunities, and threats:

Strengths

Ford Motors is renowned for manufacturing the finest automobiles including cars and other automotive vehicles; it is one of the leading manufacturers of automobiles in the world;

The company has goodwill for product superiority and consumer satisfaction and its vehicles are very dependable and fuel-efficient;

The company has provided the global industry with its product modernization; moreover, it ensures good labor associations and effectual supply chain management;

In conjunction with the distinction of car designation and improvement with expediency and console, Ford possess the capability to maintain incessant precision in engineering each vehicle to reduce consumer complaints, pollutant emissions, as well as ensuring safety measures;

The strong leadership of the company at its top management is one of the major things that would help the company with the development of its F-shampoo in the UAE market; such bold leadership provides constant help to the low-level workers to carry out their tasks more effectively.

Weaknesses

In several developing countries, consumers favor economical automobiles with high contentment in terms of longevity, but Ford is not paying enough attention to address these markets, which, in turn, is reducing the market segmentation of the company.

The company more often suffers from additional costs imposed by increasing employee turnover in some parts of its operating markets.

Opportunities

The strategy makers of the company have decided to extend its product line to include stylish luxury cars like F-shampoo in some countries outside the UAE which could be quite moneymaking;

The company has a prospect to penetrate the market of some third world countries;

It will be focusing on enhancing its IT infrastructural requirements to ensure operational effectiveness and customer gratification.

Threats

Owing to the international economic turmoil, the firm’s operations were pessimistically hampered during FY2009 as the consumer confidence decreased significantly;

The rival businesses such as General Motor, Honda, and Toyota are a major threat for Ford; other possible risks for the company are bad debts, postponements, terminations of sale orders, commotions to get competitive advantages, for instance, frozen of the credit market, unstable price of raw materials, etc.

BCG matrix

The BCG matrix is a permutated progression procedure to appraise Ford Motor’s market circumstances in context to the relative market growth rate in addition to relative market share; for a better understanding, this has demonstrated in the following figure:

Star: As a result of the high growth rate and high market share, the automotive company was in this section earlier to the global economic downturn; however its goodwill has seriously damaged during the economic crisis as it failed to stay in this section;

Cash cow: The company is currently under this section as this section indicates the low growth with high market share businesses;

Dog: Ford do not occupy this section as it shows low-growth with low-share companies that require a large investment for further advancement;

Question mark: Some rivals of Ford clutch the position of Question mark in the global economic downturn as they experienced some level of growth in several countries where the effect of the recession was not severe.

Political factors

Foreign direct investment policies of a foreign government, unfriendly governmental attitude in foreign countries like Venezuela, the unsteady atmosphere in South Asia, range of governmental incentives, e.g. tax-exclusion and tax-credit of automobile pool lanes, and so on are putting great impacts on the global automobile industry (Ford 48). However, it is notable that the governmental policies of the UAE are business-friendly and Ford operations have not hampered by its political affluence. Also, launching new products are not subjected to these factors.

Economic factors

The global automobile industry could be influenced by alterations in demand, increasing inflation rates, uneven interest rates, fluctuating exchange rates, rising taxation rates, and more recently, the global financial crisis has contributed to the lower expansion rate of the industry. According to NASDAQ (1), such unfavorable impacts of the recession were visible in the company’s revenue and consequently on its share prices; the following figure shows how the external economic environment of the industry affected the stock prices of the company from 2008 to 2009 period. Nevertheless, the share prices of the company are recovering from the very beginning of 2010 and it has expected that the company would not have any encumbrances in launching F-shampoo.

Socio-cultural factors

Ford is very much concerned about its social responsibilities; its annual CSR report includes opposing anti-social rudiments that pose a danger to society and it works jointly with the police and other correlated bodies for proper response in the UAE.

Technological factors

Ford carries out the R&D with most modern technologies making vehicles that are low-emitting, unique, and globally competitive focusing on the foremost technologies addressing ecological concerns; “F-shammoTo” is one such hi-tech car outfitted with flexible-fuel technology.

Environmental Factors

To ensure environmental safeguard, the company has strong obligations to undertake all the necessary steps for reducing emissions of poisonous gases in both its manufacturing plants and cars; to do so, the company has received numerous awards as well. It is significant that Ford’s new product F-shampoo is eco-friendly, which applies bio-ethanol and gasoline.

Legal Factors

Ford complies with all the legal and regulatory legislation of the UAE in carrying out its operations over there. These include compliance with the labor laws, environmental laws, and some other Islamic laws.

Porter five forces

Porter (3) pointed out that if the following forces are intense, almost no business organization can get attractive returns on investment, and as a result, it is important to assess current market competition:

Rivalry among Existing Firms

The global motor vehicle industry is remarkably competitive because of the subsistence of a large number of car producers along with their abundant offerings; also, Ford has to face numerous smaller and larger rivals in UAE; the potential competitors of the company are General Motors, Honda, Mitsubishi, Nissan, BMW, Volkswagen, Toyota, Skoda, Fiat, etc.

The threat of New Entrants

Threats from new entrants are quite low in the UAE industry because of various barriers to enter the market; new entrants more often lack adequate finances, proficiency, satisfactory knowledge about specialized car manufacturing methods, and skilled personnel. Furthermore, once established, it gets hard for the new players to sustain in the highly competitive business environment and to join in price competitions with the industry giants. Besides, the legal barriers and regulations pose adverse impacts for newcomers as well.

Bargaining Power of Buyers

Because of the presence of countless vehicle producers in UAE, the switching costs of the buyers are relatively high than any other industry sector; moreover, customer loyalty is also not significantly noticeable. Companies like Ford, Toyota, Nissan, Honda, Fiat, etc offer the cars relatively at the same prices for which it gets easier for the customers to select their desired piece of product from any one of them.

Bargaining Power of Suppliers

The bargaining powers of suppliers are average in the UAE because their numbers are high. These suppliers of raw materials more often compete with each other in terms of price and quality providing a good prospect for Ford to flourish in the UAE market with its new product items.

The Threat of Substitute Products

The existence of so many substitutes create practical difficulties for F-shampoo in the UAE market; this is because some other eco-friendly cars are present in the industry, like Toyota-Prius, Toyota-Camry, Lexus RX-400h, Honda-Civic, and Honda-Accord; nevertheless, it is important to note that F-Shimamoto possesses some unique features that are not present in any other substitute motor vehicles.

Market segmentation

Kotler and Armstrong (89) pointed out that market segmentation is the process of separating a market into distinct groups of target customers by taking into account their age, gender, diverse requirements, characters, or income structures. It is noteworthy that F-shampoo is a luxury car, fully equipped with all the special and distinct features, latest technologies along with fuel-efficiency and environmentally safe characteristics, ensuring the highest comforts of the user.

Even being such an exclusive model, the market of the car has been segmented by keeping in mind the income levels of all customers. The stylish features of the car will attract people from all age groups in the UAE and its eco-friendly traits will focus on engaging conscious and knowledgeable customers to buy the car.

Target market

The following groups will be the target market of F-Shimamoto:

• High-income earner seeking for comfort – Ford’s new product is a super deluxe that guarantees the highest ease and comfort;
• People from all ages – Besides attracting people who value comfort over everything, F-shammoTo will also be a prime choice of the young residents of UAE because of its attractive outlook;
• Conscious people – This car will also target those well-informed UAE citizens who have a good knowledge of the environmental pollutions caused by conventional car models, and who strive to cut down the rates of emissions.
• Middle-income earners – The price of the car is not excessively high; its price has set keeping in mind the price of any other general Ford models so that it can target a mass market.

Market Position

After launching the product for the first time, F-shampoo will occupy a small part of the market. However, the company expects to capture a large part of the UAE’s market share with this car within a very short time. The figure below shows the positioning of F-shampoo in the market; it is apparent that this car is of high quality and is available at comparability lower price than BMW ActiveHyb and Toyota Prius:

Customer Choice

Kotler and Armstrong (105) suggest that consumer choices are generated when the external aspects such as marketing motivations and other stimulus transfers in the black box of the buyer where it goes through buyer characteristics and buyer’s decision-making process and finally transform into the consumer’s response in making up the choices:

Just in the way the consumer’s decision-making process is subjected to numerous inducements, this choice-making procedure in turn influences several factors as illustrated in the figure:

Business plan

Marketing Strategy

Competitive Advantage and differentiation

Ford invests a large amount of money for R&D to introduce F-shampoo that strives for eco-friendly, inventive, and distinct qualities by developed technology; this increased budget for research is more responsive in meeting customer demand, as the market is too competitive in terms of product, service, innovation, development cycle, loyalty, safety, price, and fuel economy. Ford has integrated SAP software, which facilitates the company to acquire a comprehensive and consistent view of every customer providing it with competitive advantages; in context, Ford maintains privacy policy and data protection system, the procedure for sales, complaint management, marketing campaign management, after-sales service, and facilitates the sharing of knowledge and encourages collaboration.

Pricing Strategy

Ford will build up the pricing strategy of F-shammoTo by keeping in mind all the necessary factors like the financial conditions of the UAE-based customers and the prices charged by its competitors for similar types of cars.

Promotion Strategy

The promotional activities of Ford are configured below:

Table 1: Promotional Tools of F-shammoTo. Source: Self-generated.

Distribution Strategy

To carry out the distribution process, F-shampoo will be available to the customers through Ford’s showrooms in the UAE, or through the local car dealers.

Financial plan

The financial plan for Ford to develop F-shampoo in the UAE market has been outlined below.

Important Assumptions

Key financial indicators: –

Table 2: Key financial indicators. Source: Self-generated.

Projected Profit and Loss

Table 3: Projected Profit and Loss. Source: Self-generated.

Projected Cash Flow

Pro-forma balance sheet: – For the year 2011.

Table 4: Pro-forma balance sheet for 2011. Source: Self-generated.

For the year 2012

Table 5: Pro-forma balance sheet for 2012. Source: Self-generated.

For the year 2013.

Table 5: Pro-forma balance sheet for 2013. Source: Self-generated.

For the year 2014.

Table 6: Pro-forma balance sheet for 2014. Source: Self-generated.

For the year 2015.

Table 7: Pro-forma balance sheet for 2015. Source: Self-generated.

Projected Balance Sheet

Table 8: Projected Balance Sheet. Source: Self-generated.

Break-even Analysis

As the Pro-forma income statement suggests, Ford will be able to reach the break-even point for the development of its new product within the first year of its commencement in the market. This is the stage where the revenue generated from F-shampoo will be AED14292500, which is equal to the total cost of AED14292500, indicating the break-even point that has graphically represented as the following:

Milestone Schedule

Timing and objectives

By the end of 2010 Ford will survey the market to find out what is the prospect of launching F-shampoo in the UAE;

Ford will introduce F-shampoo in 2011; therefore it would be allocating the total capital within the first quarter of 2011;

Immediately after launching the new product in the second quarter of 2011, the company will start advertising it on the television, print, and other forms of mediums;

The company expects to observe profit from F-Shimamoto’s sales from the very beginning of 2012.

Also, the following table will show more elaborately the work detail and the milestone scheduling for the new product development.

Deadline and milestone

Table 9: Milestone Scheduling for F-shammoTo. Source: Self-generated.

Findings and Result

Can eco-friendly cars for lower down pollutions:

Amongst 50 respondents, 70% of customers believe that eco-friendly cars can lower pollutions, whereas 30% disagree with this.

Is driving comfort more essential than an interior decoration

About 58% of customers appreciate comfort to be the most important thing whilst the rest 34% emphasized on decoration. However, 2% of respondents do not comment on anything on this.

Making large investments for a stylish outlook

For 52% of customers, a stylish outlook is more important than price, but the rest 48% is not ready to pay high for a good outlook.

Can fuel-efficiency lower down fuel consumption rates?

About 80% of people agreed to the fact that fuel efficiency lessens fuel consumption rate; conversely, 16% of people disagreed and the rest 4% have not commented anything on this.

Do higher prices ensure better quality?

More than 62% of respondents think that higher prices can ensure better quality whereas 38% denied this fact.

Works Cited

Ford. Annual Report 2009: One Ford. Web.

Kotler, Philip, and Armstrong Gary. Principles of Marketing. New Delhi: Prentice-Hall, 2006. Print.

Malhotra, Naresh. Marketing Research- An Applied Orientation. London: Prentice-Hall, 2009. Print.

NASDAQ. Ford Motor Credit Company (F) Stock Charts. 2010. Web.

Saunders, Mark. Thornhill Adrian, and Lewis Philip. Research Methods for Business Students. London: FT Prentice Hall, 2006. Print.

Sekaran, Uma. Research Method for Business. London: John Wiley & Sons, 2006. Print.

Yin, Robert. Case Study Research: Design and Methods. Beverly Hills, CA: Sage, 2003. Print.

Zikmund, William. Business Research Methods. Orlando: Harcourt Publishers. 2006. Print.

Appendix

Questionnaire

• To what extent do you agree that it is important to use eco-friendly cars for lowering pollutions?
  • [Yes]
  • [No]
  • [No-comments]
• Do you appreciate that driving comfort is more essential than interior decoration?
  • [Yes]
  • [No]
  • [No-comments]
• Are you interested to make large investments for a stylish outlook?
  • [Yes]
  • [No]
  • [No-comments]
• Can fuel efficiency lower down the rate of fuel consumption by car engines?
  • [Yes]
  • [No]
  • [No-comments]
• Do you think that higher car prices ensure better quality?
  • [Yes]
  • [No]
  • [No-comments].

Firestone and Ford

This scandal broke out because due to a very high rate of tire failures equipped on the vehicles produced by Ford Motor Company. In particular, one should speak about such models as Ford Explorer and Mercury Mountaineer. These tires were manufactured by Firestone, a company that was a supplier of Ford for a long time (Nutt, 2009, p. 2). It is believed that these tire failures resulted in 1100 accidents and 119 deaths (Nutt, 2009, p. 2). These accidents attracted the attention of governmental organizations and consumer advocacy groups. As a result, both companies were accused of irresponsibility.

It should be noted that at the beginning, these organizations began to blame one another for these accidents (Vance, 2009, p. 138). For example, Ford representatives argued that these problems could be explained by the tread separation of the tires. They could disintegrate when a car was running at a relatively high speed; therefore, such a vehicle could eventually rollover (Nutt, 2009, p. 3).

In their turn, the executives of Firestone argued that these incidents could be attributed to the faulty design of Ford Explorer and the specifications that this company set for the tires of this vehicle. Therefore, it is possible to say at the beginning, the communication strategy chosen by this organization was based on the complete denial of any accusations. However, later they tacitly admitted that their products could be malfunctioning.

For example, one can mention that Firestone had to recall millions of tires (Nutt, 2009, p. 3). In this way, this organization tried to avoid accusations and lawsuits. The main problem is that the representatives of Firestone did not speak openly about the underlying causes of this problem. Moreover, they did not specify what they would do in order to eliminate possible risks. In turn, Ford tried to settle various disputes out of the court. In both cases, these companies tried to avoid negative publicity, but they did not achieve this goal because they were portrayed as irresponsible corporate citizens.

This case led to several important outcomes. In particular, one should mention that Ford and Firestone broke up their long-standing partnership (Nutt, 2009, p. 3). Secondly, it is important to remember that the sales of Firestone plummeted when the company began to be perceived as the major culprit for numerous accidents and deaths (Nutt, 2009, p. 3). In its turn, Ford began to pay more attention to the quality control methods used by their suppliers. These are some of the main details that should be considered.

There are several alternative strategies that can be adopted by the organizations involved in the case. For instance, Firestone should have focused on the possible causes of tread separation and eliminate this dangerous defect as soon as possible. Secondly, instead of denying their mistakes, the executives of the company should have explained what they were doing in order to address this problem. This strategy could enable the company to protect its reputation.

Similarly, Ford should have immediately responded to the increased rates of incidents in which their vehicles were involved. They needed to identify the causes of these incidents and possible defects even if Firestone tried to deny any accusations. Overall, it is possible to say that these companies only tried to shift the blame on one another without trying to identify their own flaws. The proposed alternative might have helped them to eliminate the defects and avoid negative publicity.

Exxon Valdez

In 1989, the tanker belonging to the Exxon Shipping Company struck Bligh Island Reef and spilled more than 260,000 barrels of crude oil (Ramlogan, 2004, p. 50). This event resulted in catastrophic environmental effects. For instance, it killed more than 36,460 birds in Prince William Sound (Ramlogan, 2004, p. 50). Moreover, the population of many marine species declined significantly. It should be mentioned that the Exxon Shipping Company was accused of failure to provide a sufficient and rested crew for their ship. These people were both fatigued and overworked (Salinger, 2005, p. 304).

Moreover, the crew did not have a well-developed recovery plan that could have helped them reduce the impact of the spill. Furthermore, the company became criticized because it did not respond to the emergency adequately. On the whole, this incident underlined the necessity to control the marine transportation of oil. These are some of the key issues that should be taken into account.

One can argue that the company accepted its responsibility and agreed to pay $ 900 million in order to restore the ecosystem damaged by this oil spill (Salinger, 2005, p. 305). Additionally, this organization did not try to deny the accusations. They accepted that the lack of organizational safeguards eventually contributed to this environmental disaster (Ramlogan, 2004, p. 50). However, this organization attempted to reduce the number of punitive damages that they had to pay.

In their opinion, the court had to consider the fact that they spent a significant amount of money on the clean-up of oil. Overall, the representatives of this company tried to emphasize the idea that the company did everything possible to mitigate the effects of the spill on the welfare of various stakeholders. This is the communication strategy that this organization adopted.

The major outcome of this case is that the government adopted several regulations that were aimed at reducing the probability of such events in the future. For example, one can speak about the adoption of the Oil Pollution Act in 1990. According to this law, the ships that caused significant oil spills were not allowed to enter Prince William Sound.

Moreover, it is possible to mention several regulations adopted by the legislators in Alaska. Furthermore, one should speak about the decline of economic growth in many cities affected by this spill. In particular, it is important to remember that many people were dependent on the tourism industry and fishing (Salinger, 2005, p. 304). In turn, this event undermined the development of many businesses in this area. This is one of the consequences that should not be disregarded.

Overall, Exxon should have taken several steps in order to respond to the situation more adequately. First of all, they should have adopted stringent rules ensuring that each tanker of this company is adequately staffed. As it has been said before, this spill can be explained by the fact that the crew of Exxon Valdez was extremely overworked.

By laying stress on this policy, the company could have increased its credibility. This approach is critical for minimizing the risk of such events in the future. Secondly, this organization should have settled disputes out of the court. These are the main recommendations that can be made in this case. This approach might have helped this company to avoid negative publicity.

Reference List

Nutt, P. (2009). Why Decisions Fail: Avoiding the Blunders and Traps That Lead to Debacles: Easyread Edition. New York, NY: ReadHowYouWant.

Ramlogan, R. (2004). The Developing World and the Environment: Making a case for Effective Protection of the Global Environment. New York, NY: University Press of America.

Salinger, L. (2005). Encyclopedia of White-Collar & Corporate Crime. New York, NY: SAGE.

Vance, D. (2009). Corporate Restructuring: From Cause Analysis to Execution. New York, NY: Springer.

Introduction

The ongoing crisis for Ford can be mitigated through adopting novel solutions as opposed to the attempts to support traditional manufacturing processes. In order to do so, it is required to evaluate internal and external conditions for the business while reflecting on the chances of eliminating the underlying risks. Therefore, this report aims to present the ways of increasing profits in the long run based on the evidence received from the previous decisions of the company’s CEOs over decades.

Internal

The first aspect, which is to be taken into consideration when elaborating a new course, is the strengths Ford can rely on when performing shifts. As follows from the past indicators of sales alongside the ideas implemented for increasing them, one of its advantages is flexibility in readjusting to the changing market conditions. It is effectively complemented by innovative approaches to product lines and well-established cooperation between departments. In this way, Ford’s employees are experts in working in the context of unpredictability.

Weaknesses

Alongside the specified strengths, there are significant weaknesses, which can present an obstacle to modifying the business course. They primarily include the lack of resources for keeping up with competitors in the area of autonomous vehicles and the neglect of regular operations when innovating. Subsequently, the financial situation becomes unstable when the established procedures are disregarded while new solutions are not introduced yet. Also, marketing decisions concerning the preferences of particular products do not correspond to country-specific demand but are still ignored by the managers.

External

In the automobile industry, Ford’s opportunities are mainly connected to the rapid evolution of the field and the deriving possibility of becoming a pioneer in an area with insignificant numbers of rivals. More specifically, the provision is accompanied by the chance to invest in mobility services, thereby drawing the attention of greater amounts of people to the company’s vehicles. Also, the potential development of hybrid electric cars might increase sales and allow Ford to occupy a more significant market share in order to overtake the competition.

Threats

The opportunities discussed above are crucial for Ford’s progress in the future, but the existence of critical threats attributed to market conditions, might disrupt these initiatives. Thus, high levels of unpredictability do not allow automobile businesses to make long-term plans. The lack of control over the economy is complicated by shifting customer preferences, which creates more uncertainty. In the end, these two issues, alongside the overall unsatisfactory circumstances of the market and evolving environmental concerns, might prevent Ford from gaining substantial profits in the following years.

Suggestions

The first suggestion for Ford to improve its situation in the long-term perspective is to create a clear focus in relation to the course for developing autonomous technologies. The rationale for this idea is the previous lack of precision in what models should include innovative features, which led to the confusion of investors. At the corporate level, it will increase the effectiveness of employees’ work due to their awareness of expectations. In turn, for the business, it will be advantageous for increasing its attractiveness to shareholders and customers.

The second idea is to eliminate the existing gaps in innovations which were previously introduced by Ford. It is based on the failure in the past to keep up with other competitors in this field. In this case, additional research is required to determine what characteristics distinguish their products and install them on the company’s vehicles as a part of regular manufacturing procedures. From the point of view of the integrated multi-functional perspective of the organization, this solution will also be beneficial for deciding on the expertise of what employees correspond to the task.

The third suggestion is to shift from the traditional approach to the processes of design and production to taking calculated risks. The analysis above showed that Ford’s operations are flexible enough to perform this change, and there are no threats which cannot be timely detected for changing the course. Meanwhile, for the managers of the company, this method would mean the possibility of pioneering in the field as per the opportunities, such as manufacturing eco-friendly hybrid cars. This strategy is best implemented at the level of managers and, consequently, spread to other employees, as in the case with the previously given solutions.

The fourth modification, which is feasible from the perspective of the conducted analysis, is the introduction of different types of loans to clients as opposed to only those purchasing new cars. Its rationale is connected to the fact that the innovative product lines are not yet familiar to the customer, and the application of flexibility to maintenance might be beneficial for evoking interest while promoting business. In this area, the competition will be improved in the corresponding market segment, and on the corporate level, they will indicate a client-oriented approach.

Conclusion

To summarize, the analysis of Ford allowed to formulate the suggestions as per the revealed strengths, weaknesses, opportunities, and threats. It is recommended to develop a clear focus on innovations and eliminate the gaps in similar initiatives which were previously developed by the managers. Also, it is reasonable to take calculated risks to boost the progress based on flexibility and introduce loans to buyers of autonomous cars. In this way, Ford will manage to offer new models as per demand in different countries and guarantee their popularity.

Recent economic decline and financial problems faced by giant motor companies require unpopular strategies to save money. Ford motor company introduces such strategies as layoff and decreased compensation rates in order to save jobs for other workers. Depending on the business structure, the costs of compensation represent a large proportion of the total cost of running the company. Given compensation’s pervasive impact on HR, Ford lawfully asks what kind of return–in performance, loyalty and retention, employee satisfaction, and the like–they are obtaining from this investment. “This jobcut will help keep our costs in line with the level of receivables we have,” both reports of Automotive News and Bloomberg News quoted Ford spokeswoman Margaret Mellott as saying” (Ford Layoff 2009). For Ford, compensation focuses on one of three distinct goals: attracting and retaining qualified employees. Thus, current economic situation requires new strategies to save the business and remain profitable for several years (Ford Home Page 2009). Current strategies based on reduced working hours and schedules allow Ford to set low wage rates and salaries at or above the market average. Today, high base salaries violate the cost control issues. In addition, several of the proposed strategies put Ford in the position of designing compensation and benefits strategies to meet the specific economic requirements of the organizations. For many motor companies, it is relatively easy to find salary surveys that identify the prevailing wage rates found in a labor market. “In November, Ford said it planned to improve automotive cash by $14 billion to $17 billion through 2010 through many cost cuts, including reducing expenses for salaried workers by 10 percent by the end of January in North America” (Ford Layoff 2009).

The current situation suggests that with the possible exception of layoffs and terminations, compensation and benefit rates proposed by Ford are the most high-profile HR management activity performed. There are several factors for the central role played by Ford’s administration. First, compensation and benefits are important expenses associated with running the company. Second, without layoff, high compensation will hurt the motor industry. Third, compensation rates will lead to great pull and push on employment practices and will play an instrumental role in shaping and redefining the culture of the company (Robbins 43).

The case of Ford company suggests that low compensation is sensitive to the competitive labor market and economic conditions. For this reason, using salary decrease skillfully becomes very important. Beyond current pay rates in competitive market conditions, compensation proposals should be correctly structured and designed to support organizational strategies and business aims. Such issues as how much money it takes to serve as a driver to effective performance, ethical concerns in using incentive strategies, and fully aligning incentive programs with organizational requirements are all fundamental ingredients to effective plan design.

In sum, Ford is faced with a difficult problem that required careful analysis and evaluation. In the current economic environment, layoffs and low compensation rates are the only possible strategies to save the business and remain competitive. Benefits plans and designs are vital in their way, but such compensation requires a sizable portion of dollars. For that expense, Ford motor company would like to receive–but has trouble obtaining–returns in employee goodwill and performance. For this reason, effective compensation strategy is a silent but important issue of organizational behavior.

Works Cited

Ford Layoff. January 2009. Web.

Ford Home Page. 2009. Web.

Ford Motor Company presents a clear and concise business strategy that consists of four key elements. In particular, the company strives to improve people’s lives, strengthen the bonds between communities, and make our planet healthier (Ford, “Our Purpose”). Therefore, it is important to hire employees who will be committed to these elements of corporate strategy. Aligning their talent with the company’s strategy would demand clear communication; as such, an HR specialist must recruit capable people and build an atmosphere of trust and cooperation among them. In addition, the employees must be motivated — in this regard, it would be necessary to maintain high job satisfaction rates through friendliness, fairness, and adequate pay for their work.

These tasks are accomplished on multiple levels within the typical HR Department. For instance, the U.S. Bureau of Labor and Statistics offers two variants of the HR Department job positions: Human Resources specialist and Human Resources manager. The HR specialist screens candidates conduct interviews and introduce new employees to their professional roles (U.S. Bureau of Labor and Statistics, “Human Resources Specialists”). The HR manager operates on a strategic level by planning, coordinating, and directing recruitment efforts for the whole organization (U.S. Bureau of Labor and Statistics, “Human Resources Managers”). Consequently, the HR manager is usually required to have several years of experience in a related occupation and receives considerably higher pay. Given these facts, I would prefer the position of an HR manager since it offers better pay and implies significant influence over matters critical for the company’s future. However, a realistic assumption tells me that one has to work for at least several years as an HR specialist to acquire the skills and competencies necessary for an HR manager.

Regarding Ford, Human Resource Management (HRM) can be used to enhance the competitive advantage associated with diversity and inclusion. Most importantly, diversity will bring no good if the objectives and goals are not set. Therefore, Ford should provide all employees with an explanation of the benefits that diversity brings to them and the company. Furthermore, it would be useful to eliminate any remaining non-merit-based status differences between the demographic groups in the organization as possible (Guillaume et al.). According to the One Ford truth of Ford’s corporate culture, all company employees should rely on, respect, and care for each other (Ford, “One Ford”). Therefore, removing the existing status differences would bolster unity among the employees and strengthen their loyalty to the company.

Finally, it is possible to highlight specific ways of increasing Ford’s workplace diversity levels. Workplace diversity provides a valuable competitive advantage in the modern globalized economy, as it helps synergize employees’ skills and competencies (Tamunomiebi and John-Eke 263). In this regard, Ford might benefit from the three solutions in HR management. Firstly, the company can encourage HR managers and specialists to prioritize hiring candidates from different genders and ethnic backgrounds if their level of competence meets the job requirements. Secondly, the company can facilitate the work of internal employee groups, organizations, and communities that represent various population groups. This measure will help evoke a sense of belonging among the employees, which is essential for talent retention. Lastly, Ford can extend support to currently unemployed specialists to incentivize their re-entry into the workforce. This move will let the company show that age or gap in employment is not a world-ending obstacle. As a result, Ford will be able to obtain the valuable professional knowledge of new employees and stay true to the declared principles of diversity and inclusion.

Works Cited

Guillaume, Yves R.F., et al. “Harnessing Demographic Differences in Organizations: What Moderates the Effects of Workplace Diversity?” Journal of Organizational Behavior, vol. 38, no. 2, 2017, pp. 276-303.

“Human Resources Managers.”U.S. Bureau of Labor Statistics, 2021, Web.

“Human Resources Specialists.”U.S. Bureau of Labor Statistics, 2021, Web.

“One Ford.”Ford, Web.

“Our Purpose.”Ford, Web.

Tamunomiebi, Miebaka Dagogo, and Ebere Chika John-Eke. “Workplace Diversity: Emerging Issues in Contemporary.” International Journal of Academic Research in Business and Social Sciences, vol. 10, no. 2, 2020, pp. 255-265.

In the 21^st century, the matters of teamwork and organizational structure have been in the spotlight of the experts’ and researchers’ attention. However, the concept on its own is not a recent invention, as the pioneers of business acknowledged the essential role of a well-organized team in the development of a corporate entity. The creation of a strong, functional team that works in a synchronized manner is not an easy endeavor. As Henry Ford once said, “coming together is a beginning. Keeping together is progress. Working together is success” (Di Feliceantonio, 2015). In this regard, the case of his company provides a vivid example of how a strong business team can create success in long-term development.

Henry Ford is known for having revolutionized the landscape of the automotive industry, but his impact extends beyond one sector of global economy. Ford’s contribution to the rules of business, in general, make him a legendary figure and an important source of inspiration for business-related research. As per Riopelle and Wang (2019), Ford favored teamwork and believed in the prospects of mutually beneficial collaboration as a driving force of business development. Within his own enterprise, he is considered to be the pioneer of efficient organizational structures that utilize the joint efforts of the team to make the production process quick, reliable, and cost-efficient (Link, 2018). The assembly line is one of Ford’s essential inventions that became possible through the precise team-building around a solid central structure. His anecdotal decision to pay his repair workers for the time they rest rather than the time work to ensure that the assembly line remains functional for as long as possible is a case in point. The key to success lay in charismatic leadership that relied on shared values and clear, motivating priorities that guided the structure.

Overall, the case of the early 20^th-century Ford Motor Company is one of the most prominent examples of successful team-building at the dawn of corporate studies. Henry Ford was able to create a fully functional mechanism that relied on a solid structure that paved the way to efficient production and distribution patterns. Subsequently, all links of this supply chain saw strong benefits of the organizational efforts made by Ford and his team. While it was not perfect, Ford Motor Company provides an important lesson for today’s research into organizational structure.

References

Di Feliceantonio, S. (2015). The American Dream Is based on a team. Web.

Link, S. (2018). The charismatic corporation: Finance, administration, and shop floor management under Henry Ford.Business History Review, 92(1), 85–115. Web.

Riopelle, K., & Wang, X. (2019). Building a shared present and future: Learnings from Henry Ford and Albert Kahn’s Co-Wuity collaborative innovation network on the moving assembly line and mass production. In Y. Song et al. (Eds.). Collaborative Innovation Networks (pp. 3-41). Springer, Cham.

Business-level Strategy of Ford Motor Company

Sameer Kirtane et al argued that market share of Ford Motor decreased dramatically in the US market and its sales profit dropped more than $1 billion in 2006 due to lack of implementation of effective strategies though it changed leadership approach in 2005¹.

As a result, Ford followed a real business-level strategy to be more cost effective company, for instance, it reduced operating costs, and offered generous buyout packages.

According to the annual report -2010 of Ford, the management team of this company decided to increase investment on the potential new models, suggests the employees to work as a team with shift model mix and adopting functional strategies, for instance, it would close three Ford-plants including one ACH-plant by 2011 that would result decreasing automobile debt by $10.1 billion.

Enhancing Ford Motor’s Value-Chain Links To Create Value for the Firm

Value chain structure works as a determinant for potential profit of the major players in a particular industry paying attention on industry’s present appearance.

However, in order to compete better in this era of globalisation, it is essential for the Ford Motor Company to focus on developing its value chain links. The value chain links could be enhanced by improving its infrastructure, human resources management, procurement, and technology in the way suggested below: –

• Infrastructure: – The management team should review the changing strategic decisions with IT infrastructural strategy, and acquire or joint venture with other competitors and it would be greatly benefit its value chain links;
• Human resources management: – Ford should also arrange numerous training program for the pilot, crew, and other employees in order to minimize risks, increase efficiency, and satisfy the customer;
• Procurement: – These activities should be coupled with the concerns on supply chain management by ensuring more efficiency on supply chain with IT enabled customer services of online services can reconcile any gap in the value chain links;
• Technology: – It is one of the most important factors for Ford, as use of cloud computing in internal organisation can create better communications system.

On the other hand, concentrating on primary functions, pricing strategies, production management systems, customer relationship management, assessment of market situation, route planning, and analysis of the position of major competitors can enhance the value chain of Ford.

Porter’s Five Forces Model and Position of the Ford Motor Company

Rivalry among existing firms

The international motor vehicle industry is exceedingly competitive owing to the existence of a large a number of car producers along with their exceptional offerings. As a result, Ford has to confront numerous smaller and larger rivals at both national and international levels; nonetheless, potential competitors of the company are General Motors, Honda, Mitsubishi, Nissan, BMW, Volkswagen, Toyota, Skoda, Fiat, etc.

Threats from new entrants

Threats from new entrants are comparatively low in the industry because of various barriers to enter the market. New entrants more often lack adequate finances, proficiency, satisfactory knowledge about specialized car manufacturing methods, and skilled personnel. Furthermore, it gets hard for the new players to sustain in the highly competitive business environment after establishment and to join in price competitions with the industry giants.

Bargaining power of buyers

Due to the presence of many automobile producers, the switching off costs of the buyers are relatively high than any other industry sectors; moreover, the customer loyalty is also not significantly noticeable.

Companies like Ford, Toyota, Nissan, Honda, Fiat, etc. offers cars comparatively at the same prices for which it gets easier for the customers to select their desired piece of product from any one of them. However, the bargaining power of the customers seem to diminish when it comes to price considerations of cars companies like BMW or Mercedes as their prices are quite higher than others.

Threats of substitute products

The vehicles of Ford need to contending with several similar product lines of the rival firms; for instance, the substitutes of Ford Taurus and Volvo are Toyota Avalon, Acura RL, Lincoln MKS, etc; Ford Fusion faces competition from Honda Accord, Mercedes C Class, and BMW 3-Series (4-door).

On the other hand, the substitutes of the midsize convertibles of Ford like Volvo C70 are Saab 9-3 and Volkswagen Eos; the substitutes of midsize SUVs like Ford Edge, Ford Flex, Ford Taurus X, and Volvo XC90 are Acura RDX, BMW X3, BMW X5, Honda Pilot, Hyundai Santa Fe, Hyundai Veracruz, Mercedes M Class, Nissan Murano, and Toyota FJ Cruiser.

According to the evaluation of sales in 2006, the existence of so many substitutes create practical difficulties for Ford; in comparison between the sale of Ford’s hybrid-cars, the hybrid-cars of other companies like Toyota-Prius, Toyota-Camry, Lexus RX-400h, Honda-Civic, and Honda-Accord seemed to be selling more than Ford Escape or Mercury-mariner. However, Ford occupied merely 9% share in the US market whereas Honda occupied about 14% share; however, the following figure shows more details –

Figure 1: – US Sales Percentage of hybrid cars in October 2006

Source: – Self generated from Ford Motor²

Bargaining power of suppliers

Annual report of Ford Motor (2010) suggested that the suppliers of the company are generally raw materials suppliers those responsible to deliver steel, aluminium, fuel, copper, lead, rubber, etc. therefore, the bargaining power of these suppliers varies as it has to collect product from different countries, for instance, bargaining power of Mexican suppliers differ in accordance with quality and price.

In context, the global automobile industry possesses numerous raw material providers for which their bargaining powers are not too high. The lithium ion battery producing companies are the key supplier group of Ford Motor Company to delivering technical components to producing hybrid cars; as a result, these manufacturers’ bargaining power are a little more than the suppliers of raw materials’ (steel, aluminium, fuel, resins, copper, lead, rubber).

Managing Customer Relationships to Increase Strategic Competitiveness

Second largest car manufacture Ford Motor manufactured more than 7.20 million vehicles worldwide with lots of successful brands and it earned highest revenue through selling the maximum number of car in UK market.

However, Toyota Corporation was able to earn highest revenue in 2010 by selling the maximum number of car in global market while Ford was in third position and BMW was not in top ten automobiles; however, numbers of car sales depend on many factors including customer relationship management, price, quality and services.

The customer relationship management of Volkswagen and Toyota is stronger than Ford; therefore, it should need to meet up this gap immediately by introducing effective CRM tools in order to become global market leader in automobiles industry.

According to the view of Stoner et al, there are mainly four obligatory elements, which are vital for successful implementation of CRM and these features have driven from the theoretical framework of CRM implementation and these tools have showed in the following figure –

Figure 2: – Theoretical framework of customer relationship management

Source: – Self generated from Stoner et al

Robert Grant notes, ‘four crucial elements help practice of CRM at any organisation’ and these are relationship marketing, appropriate organisational structure, manage of data warehouse and data consumption for effective customer management, and the four elements generate the framework of CRM necessary for any organisation that intend to develop their CRM strategies⁴.

As a result, the CEO of Ford would suggest the board of the company to follow the above model along with other business strategies in order to get better outcomes.

The marketers of Ford identified that CRM system of automobile industry has turned just into a slogan rather than appropriate integration due to lack of knowledge about core values of CRM; therefore, the CEO of Ford reported that the company should more concentrate on this issue though it has already integrated SAP to know the comprehensive view of the customers.

However, Ford should develop successful CRM program to influence customers regarding its new products and it should use multimedia marketing strategies to increase sales revenue and decrease its investment risks.

In order to avoid late response from the company side, the marketers need to take prompt initiatives to upgrade data base system to collect and retrieve data about the customers and need to increase number of call centre to provide reply on time. In addition, development of communication skills is one of the most important factors for Ford to expand its operation all over the world and to give right message to the customers regarding new products, after sales service, new offers and so on.

Moreover, Ford needs to take technological advantages and integrates Microsoft Dynamics of CRM in order to solve the problem of the customers; consequently, it should increase budget to arrange regular training program and integrate other relevant software.

Effective Way to Differentiate Products at Low Costs

To differentiate its products efficiently at low costs, the business should focus on its manufacturing progressions – costs can be reduced by adopting Japanese manufacturing process, just in time management, specialisation approach, and entire superiority management or QC techniques. Conversely, introduction of innovative technologies and focus on advertisement through celebrity endorsements together with total quality management will be able to create adequate differentiations

Competitor Analysis

Reuters notes that the main competitors of Ford are Toyota Motor Corporation from Japan, General Motors Corporation from United States, Honda Motor from Japan, Chrysler Group LLC from United States, Hyundai Motor from South Korea, Volkswagen from Germany, BMW from Germany, Nissan from Japan, Mazda from Japan, Mitsubishi from Japan, Fiat from Italy, Mercedes from Germany, and Skoda etc⁵. However, the following table shows the direct comparison among major rivals of automobile industry –

Figure 3: – Direct Competitor Comparison

Source: Self generated from Yahoo Finance

Learning Outcomes from Competitive Situation

From the competitive position of the company analysed in the paper before, it can be concluded that Ford is in a comparatively superior position than major competitors. However, to survive in this tough competition in long-term, it is important for the business to offer vehicles at lower prices like Toyota, to emphasize more on eco-friendly and hybrid cars, and to follow the strategic leadership approach and to introduce effective corporate governance system.

Role of Strategic Leadership to Meet Strategic Objectives

Ford was the first company of the world, which adopted the dictatorial approach of Taylor in its business; later on, the company has adopted autonomous approaches to some extent with time, but it is important to argue that a single form of leadership style may not be sufficient to manage the business effectively.

This is because firms may need to uphold different leadership styles in different times, for instance, during tough times, paternalistic form of leadership will play important role, whilst autonomous management will work best if the employees in a particular sector are highly efficient.

Therefore, it is significant to the business to adopt a situational approach of leadership, which would help Ford to take the right decisions at right time to meet the strategic objectives. However, the short time objectives of the firms include in the following figure –

Figure 4: – The short time objectives

Source: – Self-generated from Ford Motor⁷

Currently, the market situation of the company is not in very good position as Ford suffered significantly from the recession throughout the FY 2010; therefore, it should need effective plan to attain its ultimate objective to be market leader and to recover quickly from this situation by introducing strong leadership style instead of flexible approach.

In fact, paternalistic approach may not suffice to face global financial crisis. In this context, the CEO of Ford Motor should adopt a situational approach of leadership to be market leader in the UK market and to achieve the short time objectives.

Bibliography

Ford Motor. One Ford Annual Report 2010: Ford Motor Company. Web.

Grant, R, Contemporary Strategy Analysis and Cases: Text and Cases, 7th edn, Blackwell Publishing, London, 2010.

Kirtane, S, R Shukla, & L Wang. Is The Way Forward Really Ford’s Way Forward? 2006. Web.

Reuters. Ford Motor Company (F.N). 2011, retrieved <https://www.reuters.com/finance/stocks/companyProfile/F.N>.

Stoner, F, F Edward & G Daniel. Management, 3rd edn, Prentice-Hall, Delhi, 2003. Yahoo Finance. Direct Competitor Comparison Ford Motors. 2011, retrieved <https://finance.yahoo.com/quote/F/profile?ltr=1>.

Footnotes

¹ Kirtane, S, R Shukla, & L Wang. Is The Way Forward Really Ford’s Way Forward?

² Ford Motor. One Ford Annual Report 2010: Ford Motor Company.

³ Stoner, F, F Edward & G Daniel. Management, 3rd edn, Prentice-Hall, Delhi, 2003.

⁴ R, Grant, Contemporary Strategy Analysis and Cases: Text and Cases, 7th edn, Blackwell Publishing, London, 2010

⁵ Reuters. Ford Motor Company (F.N). 2011.

⁶ Yahoo Finance. Direct Competitor Comparison Ford Motors. 2011.

⁷ Ford Motor. One Ford Annual Report 2010: Ford Motor Company. 2011.

Strategic Management process

Strategic management process encompasses other planning processes such as the strategic planning as well as the human resources planning. In essence, strategic management processes necessitate all the tactical arrangements and the ability of the organization to execute the strategies (Aaker, 2001).

Specifically, strategic management process is the practice of making out and implementing the tactical policies of an organization. During the process, the company competencies and capabilities must correspond to the environmental needs.

The strategic management process begins from defining the current business and its mission to the evaluation process where the company performance is assessed against the strategies. Specifically, the strategic management process involves executing the plans and evaluating the performance or outcome against the planned strategies (Aaker, 2001).

In the planning cycle, strategic execution and strategic evaluation are always the last steps. Essentially, strategic management process involves the execution of strategic planning process and the evaluation of the strategic performance.

The role of the planning cycle

As indicated, the strategic management process encompasses various steps that involve the strategic planning process. Strategic planning process includes various steps ranging from defining the current situation of the business according to its mission to formulating the strategies to attain the strategic goals (Aaker, 2001). The strategic planning process involves five steps, which is referred to as the planning cycle.

As mentioned, the first step in the planning cycle is to identify the business and align it with its mission. The second step involves evaluating the business through the application of its internal strengths and weaknesses as well as the threats and opportunities that come from external sources.

The third process is devising the novel business statements. Fourth process involves transforming the business mission into tactical objectives. The last step in the planning process is the implementation of the tactical objectives. In the simplest sense, the planning cycle helps businesses or firms identify their current position and forecast achievable goals through formulated strategies.

Strategic management process and the way companies maintain sustainable competitive advantage

As mentioned, strategic management process involves tactical planning process, implementation of the strategies and the evaluation of the strategies. The company gauges these processes against environmental demands to achieve the competitive advantage (Aaker, 2001). In the first step of the planning process, firms have to choose the path on which it will compete.

In other words, the company has to decide the type of product or service it will bring into the market, how to differentiate its product or service and the place to sell the product. In essence, the company evaluates its current position and the kind of business to be involved in given their strengths, weaknesses and opportunities. Managers, through the application of the company mission, formulate the strategic actions that would enable the company attain its objectives.

In the second step of the planning process, the company performs detailed audit of its internal strengths and weaknesses, the threats that the firm faces from external environment and the opportunities the external environment brings to the firm. The strategic internal and external audit is facilitated by the application of SWOT analysis.

Based on this situation analysis, managers formulate novel business mission statement that capture the new form of business in terms of the type of product to sell, the geographical location in which it will sell the products and how the product will be differentiated.

The mission is transformed into strategic goals. In other words, the mission has to be translated into achievable objectives that all employees and various departments of the company understand. The mission statement has to be transformed into ways through which the products and services are made to satisfy the demands of the customers.

To sustain its competitive advantage, the company mission has to be translated into strategic goals that are geared towards creating and enhancing the shareholders value, sustaining the higher rate of returns through strong balance sheets and maintaining high quality products that satisfy the needs of the customers.

The final stage in the planning process is where the firms come up with strategies that will enable it attain the strategic goals. Based on the above processes, the strategy is the plans of action that will enable the business achieve the set objectives. The last step to attain the competitive advantage is the implementation of the strategies and evaluating the performance.

For instance, Ford Motor Company has been faced with huge losses and decreasing share in the market. The company has been losing market share to its rivals such as Toyota and Nissan. The reason is that its costs were higher than the competitors hence cannot stand the fierce competition in the market.

To overcome its problems, Ford Motor Company adopted a strategic plan that entailed cost reduction approaches such as closing some of its plants and terminating most of the employees. In the strategic plan, the company evaluated the internal strong points as well as limitations and matched them with corresponding external prospects and pressures to improve its competitiveness in the market.

The role of microeconomics in creating a sustainable competitive advantage

Companies use microeconomic concepts to evaluate the environmental needs (Pindyck & Rubinfeld, 2005). For instance, the concept of consumption is critical in evaluating the demand. The consumer theory is also important in examining the way consumers behave in the market. Understanding the behavior of consumers as well as other components of environment is important in sustaining competitive advantage.

References

Aaker, D. (2001). Developing business strategies. NY: John Wiley & Sons, Inc.

Pindyck, R. & Rubinfeld, D. (2005). Microeconomics. Web.

Introduction

The history of lean manufacturing philosophy and six-sigma production philosophy began in 1980s. During this time, many organizations were focusing specifically on total quality management (TQM) as a strategy for increasing performance. Organizational performance was then measured in terms of outputs and profitability without necessarily focusing on the inputs or processes.

The Toyota Company first adopted the lean manufacturing philosophy with the goal of minimizing wastes. On the other end, the Motorola Company focused on costs that were associated with variation of products, thus leading to rejection of many finished products when subjected to quality testing. To resolve these challenges, Motorola incorporated the six-sigma philosophy.

The benefits accruing from the two production philosophies were integrated to form the lean six-sigma production philosophy that was adopted by organizations such as Ford, Allied Signal, Honeywell, and GE among others. This paper discusses the case of Ford in an effort to demonstrate how the company fostered the lean six-sigma culture as a tool for improving performance through elimination of costs of variations (six sigma) and wastes (lean manufacturing).

Company’s History and Growth

Ford Motor Company or simply Ford is an American multinational organization, which was established in 1903. Its main offices are based in Dearborn in Michigan. It manufactures and sells various types of vehicles under the Ford brand name. Luxurious automobiles are sold under the Lincoln brand name.

In addition, it owns Troller, FPV, and SUV. The latter is based in Brazil. The company also engages in the production of tractors. It has stakes in various other automobiles that manufacture organizations such as Mazda (Japan), Aston (the UK), and Jianglin (China).

In its manufacturing plants, Ford established flow and large-scale systems of manufacturing. It also embraced large-scale techniques of management of workforce through an elaborated sequential manufacturing system that was characterized by mobile assembly lines.

By 1914, this approach became a common practice that was adopted by many industries (Karel, Haslam & Williams, 2002, p.518). Ford sold Jaguar vehicles, which were acquired in 1999, Land Rovers, which were purchased in 2000, and the Tata Motors of 2008. Ford Motors Company also owned the Volvo between 1999 and 2010.

However, amid selling these subsidiaries, the company remains the second largest automobile manufacturing organization in the US and fifth largest across the globe based on the 2010 automobile sales statistics. In Europe, Ford was the largest automaker in 2009 based on sales revenues (118.3 billion). In 2008, the company had employed 213,000 people across all its 90 manufacturing plants across the globe.

Strengths and Weaknesses of Ford Motor Company

The company has established a strong position in the automobiles industry in the US. It is the second largest automobile company operating in the US. The US is also the second largest market for automobiles across the globe. In this market, the company has managed to build a good reputation for its products.

In fact, the organization has a strong selling position for commercial vehicles, which are also the highly profitable automobiles made by the organization. Ford has successfully been able to implement ECOnetic initiative (Ford Motor Company, 2013).

This technology involves the production of engines that are highly fuel-efficient through improvement of the existing ones contrary to the deployment of hybrid engines. This effort has translated to mass production of Ford Fiesta. The car produces the lowest emission among all other mass-produced vehicles in the European market. Compared to Toyota Prius with reference to the initiative, Ford Focus has better consumption rates for fuel.

Other strengths of Ford Company are good financial performance, significant growth in other markets such as China, and exploration of only one strategy for success. China is not one of the strongest markets for Ford. However, the organization experienced an amicable growth. In 2012, Ford reported 46 percent growth in the Chinese market (Ford Motor Company, 2013).

In terms of financial performance, Ford was the only US biggest automaker that never required government bailing. It was the first one to have its investment status restored. Compared to other automakers operating in the US, Ford has a higher profit margin ratio and higher liquidity share (Ford Motor Company, 2013). Ford deploys one approach to success in the global market.

The approach entails the production of product lines that fit various market segments. This move implies that the company stopped the production of customized vehicles since the approach led to a reduction of costs. The company also deploys lean six-sigma production philosophy by focusing on the reduction of variation costs and the costs that are associated with production wastes.

Although Ford Motors Company has the above strengths, it also has some weaknesses (Gerry, Kevan & Whittington, 2005). One of Ford Motor company’s subtle weaknesses is poor records on environmental protection. Ford faces immense critics from green movements in its dwindled efforts to mitigate environmental pollution that emanates from its plants.

It also has the largest cost structure. Through the ‘one approach’ strategy and/or the use of six-sigma approaches to production, the company has been able to reduce its costs tremendously. However, compared to other automobile makers, its cost structure remains high.

The company adopts generous pension plans together with compensation programs for its employees to increase its costs structure. Particularly, this step is a major challenge considering that it has a weakness of low profit operation markets in Europe. For instance, the company registered a loss of 1.75 billion US dollars in 2012 (Ford Motor Company, 2013). The company in the region expects more losses until 2015.

Problem Definition

Ford focused on output management to ensure compliance with total quality. Management of outputs implies the measurement of outputs such as sales and profitability, dominance in markets, and growth as measures of the extent of performance of an organization. In 1990s, this approach failed to deliver substantial results. Ford Motor Company had to think differently. There was a huge accumulation of wastes in the form of work in progress, re-works, and scrapped materials.

To ensure customer value, Ford considered altering its concerns on performance from basing it on outputs to focus on inputs in late 1990s. The major problem that required solution was wastes reduction.

This issue led to the establishment of control systems such as operation control, development of programs for enhancing human resource management, programs for assessing customer satisfaction, reviewing compensation and pension schemes for employees, and even deployment of various problem-solving techniques. These aspects encompassed the lean six-sigma methodology for resolution of the challenges experienced by Ford.

The Lean Methodology

The lean six-sigma methodology adopted by Ford has five important phases. These phases include define, measure, analyze, improve, and control. The definition phase involves the establishment of opportunities together with significant implications of the opportunities in terms of customer services and quality satisfaction.

Any opportunity embraces an activity, which may enhance the performance of Ford. In the second phase, measurement of every activity to determine how well the activity can be optimally executed was done. The analysis phase involves investigation of the opportunities in the effort to determine what can go wrong in the process of opportunity implementation.

Where issues of concern were identified in the analysis phase, the next phase, improvement, entailed fixing of the aspects of concern, which may lead to defects and accumulation of wastes such as work in progress, rejection of the already completed products due to variations beyond acceptable quality levels, and even re-working. Control performance was considered an important phase in the bid to stabilize the outputs.

After identification of the vital steps in the development of a Lean Six Sigma methodology, the next task involved setting the Lean Six Sigma processes. The company took the model for supplier- consumer relationships and broke it down in the effort to define the various opportunities for value creation. The breakdown involved the establishment of various processes through which the products could go through in a Ford manufacturing facility.

This way, it became possible to identify the various wastes and track their sources in each process before proceeding to apply the six-sigma formulas for waste reduction. After every process, control was done to mitigate the likelihood for cascading defects. This goal was accomplished by ensuring that all units of work within a process were organized with respect to the anticipated outcomes and goals of each process.

Changing people’s work culture to ensure strict compliance with the efforts of reduction of wastes in every process and work unit that people are in charge of was a major obstacle. The overall goal of the Lean Six Sigma methodology was to ensure 99.99% DPMO (defects per million opportunities).

The Current State of the Company

The current state of Ford before the implementation of the lean methodology was essentially based on TQM and the just-in-time (JIT) strategies. No VSM was conducted to identify wastes. The focus was on improving the production process and planning to enhance production of quality products. Ford also paid incredible attention to the control of its processes from a statistical perspective. As part of continuous processes for improvement, emphasis was placed on the job training.

Vigorous training and establishment of self-improvement programs were deemed appropriate to enhance employee productivity. All these strategies were considered effective in enhancing organizational transformation. These approaches are ingrained in the perspectives of total quality management. JIT was also an important system for production processes before the adoption of the lean methodology. Under this approach, the focus was on the control of costs as opposed to the reduction of wastes.

The Future State

Ford Motors Company endeavored to improve its business performance by implementing Lean Six Sigma methodology. Some of the desired future states include the streamlined production and manufacturing processes. In this context, Ford wants to reduce and eliminate unnecessary production processes especially the ones, which do not add any value to the final product.

The organization also wants to have systems that measure the value of products acquired after going through various process based on the willingness of the customer to pay for such value addition. Fords also desires to create a system that will ensure elimination and minimization of defects and wastes. These accomplishments will translate to an increase in efficiency and quality of products.

Lean Culture Strategy Implementation

Upon considering the desired Ford’s future state, implementation of Lean Six Sigma culture is the best approach in achieving the goals. The company implemented this culture by integrating both six sigma and lean manufacturing techniques. Statistical control was deployed to ensure that both defects and wastes were minimized. Care was taken to ensure that the methodology deployed in the calculation of variation opportunities was consistent all the time.

This step was important upon considering that any failure to ensure consistency would result to inaccurate measures and approaches for comparison of the actual outcomes with the desired outcome (Beinhocker, 2006). Using statistical controls, 1σ corresponds to 31.00 percent of the time in which no defects are recorded. 2σ matches with 69.2 percent while 3σ matches with 93.32 percent. Similarly, 4σ, 5σ, and 6σ correspond to 99.3790, 99.9770, and to 99.99966 percent respectively in terms of the time in which defects are not produced.

Through this approach, the company ensures that in every 10,000 vehicles made, defects and wastes in the form of re-working are only likely for one vehicle. Using the technique, Ford managed to make savings of 1 billion US dollars between 2000 and 2002 (Holden, 2005). In the Ford’s Kentucky plant, Davis Chris deployed statistical control tools for six-sigma to track the sources of variations. He identified the source of vibrations in F-series product line. In the absence of Lean Six Sigma culture, the traditional approach would have called for realigning the suspension systems. However, the challenges could have persisted. Through the success of Davis Chris strategy, Ford accelerated the change process by empowering people through this case example for applicability of Lean Six Sigma in attaining the desired future state of the company.

However, in the leaning out process, challenges were experienced. A major challenge was reluctance to alter the culture of constrained dialogue. Additionally, hierarchical structures hindered ardent interaction between various people who were in charge of different processes and work units to enhance efforts for accurate identification of wastes and analysis of the causes of variations and product defects.

Conclusion

Through Lean Six Sigma, Ford was able to reduce wastes significantly such as re-works and defects. This strategy led to efficiency improvements, improved quality, and streamlined production processes. Between 2000 and 2002, the organization was able to save 1 billion US dollars through defects and wastes reduction. This outcome made the company focus on building its production culture around Lean Six Sigma production philosophy.

To ensure consistency, the company incorporated control structures that ensured that no defect and wastes were produced in one million opportunities or 99.99 percent of the time. This observation implies that Ford Motor Company was able to ensure that only 3.5 vehicles had defects.

Reference List

Beinhocker, E. (2006). The Origin of Wealth. Boston: Harvard Business School Press.

Ford Motor Company. (2013). 2012 Annual Report. Retrieved from https://corporate.ford.com/homepage.html

Gerry, J., Kevan, S., & Whittington, R. (2005). Exploring corporate strategy: text and cases. London: Prentice Hall.

Holden, L. (2005). Fording the Atlantic: Ford and Fordism in Europe. Business History, 47 (3), 122-127.

Karel, W., Haslam, C., & Williams, J. (2002). Ford versus ‘Fordism’: The Beginning of Mass Production. Work, Employment and Society, 6(4), 517–555.