Category: Ford

Executive Summary

Supply chain management is a very essential aspect in any organization irrespective of its size and should therefore be considered in the undertakings of an organization. This is because it determines the success or failure of the particular organization through its influence on efficiency, effectiveness, productivity, economy and profitability.

Toyota and Ford are different companies that are in the same industry (i.e. motor industry) but they both apply different supply chain management practices depending on what they deem appropriate and effective all aimed at achieving success in the companies.

Supply chain management is a practice that entails what a company engages in and the manner in which the activities are carried out in an effort to achieve the best. It is faced with various challenges and strategic planning is therefore necessary.

Introduction

Different organizations and companies have different management styles and practices depending on their specific objectives and goals and how they intend to achieve them.

Supply chain management entails the coordination of aspects (like resources for instance information, materials etc) as they move through the distribution channel, (I.e. from the suppliers to the manufacturers to the wholesalers to the retailers and finally to the consumer).

Supply chain management is a practice that involves the coordination and integration of the above within and among different companies with an aim of achieving efficiency, effectiveness, economy and profitability in the organization’s activities and practices. Companies should strive to establish and maintain an effective supply chain management system that reduces inventory under all circumstances.

A general supply chain management chain is composed of the finances flow which entails payment schedules, terms of credit and arrangement of title ownership and consignment, the information flow (which covers aspects like transmission of orders and updating the delivery status) and the product flow (which entails the movement of products and services from the suppliers all the way to the consumers) (Iver and Vasher 2009).

This paper looks into the supply chain management practices that are applied by the Toyota and Ford companies and the various aspects associated with the practices.

Describe And Critically Analyse The Supply Chain Management Practices Employed By Both Of These Companies.

Toyota is a motor company founded in 1937 with it’s headquarter in Japan and one of the world’s biggest automobile manufacturer in terms of production and also sales. The firm also takes on in producing robots and offering pecuniary services in addition to dealing with the manufacturing of vehicles. It is also well known for its production of environmentally friendly and technologically advanced cars.

Ford on the other hand is a motor company and an American multinational founded in 1903. It is ranked as the second biggest automobile and the world’s fifth largest in relation to the statistics of the 2010 vehicle sale.

Supply Chain Management Practices in Toyota

There are many benefits associated with an effective supply chain management system in any given company. Toyota Motor Company has been known for its performance advantages and this can all be accrued to the supply chain management practices that are employed in the company as they contribute collectively to the overall success of the company.

One of the strengths of Toyota Company is that it designs and manages its supply chain in a holistic manner and as a unit rather as a series of connected items which is very common in most companies.

The supply chain management in this company has helped it in the achievement of balance and efficiency through emphasizing on aspects like visibility, which advocates for maintenance of transparency in all the practices involved with an aim of allowing for continuous learning and improvement in the processes; velocity, which entails maintaining a steady flow for all the processes of the supply chain from suppliers to the consumers, variability which involves the management of any inconsistencies that may occur in an appropriate manner so as to reduce the cost and at the same time improve the quality of the processes, the products and services and variety of the products and services offered in relation to demand in the market and the operational efficiency (Iver and Vasher 2009).

The supply chain management system in Toyota aims at keeping the supply chain cost to a minimum while at the same time ensuring that the customers are well served with maximum satisfaction in regard to the quality of services offered and timely delivery.

The objective of the supply chain is to ensure that the right products are produced in the correct quantity at the correct cost, stored at the right place with the required conditions, and delivered to the correct clients at the correct t time.

The suppliers in the Toyota Company are organized into two functional tiers where the first tier suppliers are involved with the product development and hence liaise with the people involved in the development of the product in the company while the second tier suppliers are concerned with making of individual parts.

For effectiveness in the running of the processes, there is an enhanced cooperation and communication strategy between the first tier and the second tier suppliers and at times there is cross sharing of the personnel in the different departments.

The Toyota production system (TPS) is a very useful tool in the company and its practices and principles that include an extended supply chain which necessitates careful practices to ensure its efficiency. The supply chain is very complex with a lot of processes being joined together to form a unit.

The processes include; production of different parts at the supplier’s level, the transportation of the parts to the assembly plant of the manufacturer, the parts are then assembled to form complete vehicles; the vehicles are then distributed to the dealers from where they are finally delivered to the customers. The supply chain in Toyota is composed of operational and planning processes as well as physical processes (Borowski 2010).

The above is the supply chain management at Toyota Tsusho. Web.

Supply Chain Management Practices in Ford

Ford Company utilizes a supply chain model which involves development of the product, obtaining parts from a variety of suppliers; the goods are then manufactured and then sent to the potential customers through various distribution channels.

The supplier chain network in Ford is rather complex and in most instances, suppliers are identified depending on individual cost consideration rather than total supply chain cost as is the case in the Toyota Company.

The supplier networks are managed by a purchasing department that is separate and independent from the product development while the distribution channel is composed of independent agents who interact with the potential customers and finally deliver their orders through the distribution channel.

Ford company enters into long term agreements with the identified strategic suppliers which serves as an important tool for enhancing transparency, communication and a partnership attitude which keep the parties involved on their toes as they aim at achieving the best.

It allows for accountability and responsibility among those involved in the supply chain. This allows for compliance and supplier development through reduction of the supply base and development of strong and transparent networks with a fewer number of suppliers for a long period of time.

The purchasing business strategy or model employed in the ford company is the aligned business framework (ABF) which has agreements which govern the business practices and activities in a way that future collaboration is enhanced for instance in terms of payment of various costs, data transparency and extended sourcing. This allows for increased volume of business with the specific suppliers that have been identified.

The accords of the associated trade structure also act as a guide to the supplier associates and uphold “bigger responsibility” and guarantee appropriate working conditions and effectual (environmental management) systems in all the progressions in the chain.

ABF has proved to be a very useful tool in the Ford’s supply chain management as it increases profitability, allows for creativity and innovation and also reduces the probability of operational and reputation problems through the utilization of a strong management system that ensures productivity and sustainability.

It also allows the company to manage the human rights and the environment in an in depth, collaborative and appropriate manner. It has also strengthened the company’s working relationships with the suppliers locally and even on a global basis and provided a means for the alignment of the working conditions and the environmental management in a way that conflicts do not arise.

This alignment in return enhances the supply base and allows for the achievement of the company’s objectives (Parker 2006).

The above picture depicts the wireless tracking in Ford’s supply chain. Web.

Are They Involved In Strategic Alliances With Major Trading Partners?

Toyota and Ford companies are involved with major trading partners as they consider it a positive act towards strengthening their efforts and increasing productivity and profitability through unity. Toyota Company has alliances with numerous partners for instance Tesla and Toyota seal electric car alliance where some practices and services are shared between the two companies.

Tesla delivers prototypes electric vehicles to Toyota after they entered into agreements to work together towards the development of vehicles with no emissions. The alliance is aimed at helping the two companies presently and even in the future (Business Green 2010).

Toyota Tsusho Corporation is also another alliance where there is a business alliance agreement with Thai sugar manufacturer. The alliance is aimed at maintaining a well balanced profit structure where the Toyota Company will be able to expand its business operations by engaging in non automotive practices for instance those that are food related (Nexis 2010).

Ford has also entered into partnership with other companies for instance the collaboration of the Ford performance racing partners with Trading post group which is a classified advertising business company for a period of two years to the end of the year 2012 with an aim of making the practices of both companies better through combined efforts (Bhatt 2010).

What Strategies Do They Apply To Procurement And Outsourcing?

Procurement entails the process of obtaining commodities and services. It involves preparation, processing of an order to the receipt and endorsement of the invoice for payment purposes. Outsourcing on the other hand entails contracting some of the company’s activities usually the non-core ones with an aim of saving on tome personnel, money and even facilities for the sake of the core activities that lead to competitive advantage.

There are a range of approaches that are employed in the procurement and outsourcing practice in both companies (i.e. Toyota and Ford). The procurement activities and practices in both companies are usually based on engaging in fair business practices as a way through which cordial relationships and mutual benefits can be achieved.

Toyota is occupied in a wide range of trade activities in diverse fields and is for that reason involved with the procurement of parts, equipments and even materials and amenities from the diverse businesses from the suppliers positioned in different parts of the globe. The company requires that the suppliers provide high quality products at a relatively low cost at the right time.

Along with the above, the company also works together with them to enhance environmental conservation and also meet other societal needs. The procurement policy ensures fair competition, amicable relationships that lead to mutual benefit and based on mutual trust, dealing with environmentally friendly products, localization of business as well as the strict following of the company’s rules and regulations.

Outsourcing at the Ford Company is only undertaken where the practices involved are deemed to make long term strategic benefits or where it is really necessary. It for instance outsources components, IT services as well as engineering services from India (Parker 2006).

What Challenges And Risks Do They Face Internationally? How Does Each Attempt To Overcome These Challenges?

Just as any other company, Toyota and Ford are faced with some challenges and risks both locally and globally in carrying out their practices and activities and each deals with them differently according to the specific challenge and the solutions they deem effective.

Some of the challenges encountered by the Toyota and Ford companies collectively include the risks associated with outsourcing for instance lower quality of product and services, less control due to involvement of different parties where chances of less responsibilities and accountability may arise and worst still longer lead times for instance the popular recent issue of Toyota’s product recall.

Employment practices, handling of the workers in terms of rights and the working conditions are issues of concern at Toyota. The company has taken measures to ensure that the workers’ needs are catered for so that the working conditions are conducive. The company has also established some industrial ties with trade unions at various operations worldwide.

It has also allowed the workers to form unions through which they can voice their grievances. One of the challenges of Ford is the credit market risks for instance market risk, residual risk, credit risk, and liquidity risk. These problems are handled uniquely in relation to their specific contribution to the company’s overall international risk (Ferrari 2009).

Compare How These Organisations Are Incorporating Sustainable (Green) Strategies in Their Supply Chains

The environment is a very important aspect in our daily lives and should therefore be considered in all activities that are undertaken by either individuals, groups or even companies. The manufacturing industry in which Toyota and Ford companies fall are responsible for a great percentage of emissions which cause pollution which is dangerous to individuals for instance the depletion of the ozone layer due to green house gas effect.

This threatens people’s lives in the present time and also for the generations to come and it is therefore necessary for the industries to indulge in environmental friendly operations throughout the supply chain to avoid damaging the environment in any way (Sovereign 2011).

Toyota and Ford companies have engaged in different strategies that are aimed at ensuring a sustainable environment for instance, Ford has a plan of surveying a representative number of suppliers to gauge the energy used and the green house gas emissions in an effort to reduce carbon emissions in the company and the automotive industry at large.

The data collected will be used as a basis for establishing a carbon management strategy for the supply base. The strategy is aimed at ensuring collaboration and sharing of processes and practices which can result into a considerable emissions reduction and in a way help in attaining the future regulatory requirements.

The carbon disclosure (project supply chain program) is also another scheme in which Ford Company is taking part and is working hand in hand with the (automotive) industry action group in coming up with guidelines which can be used to gauge the purveyor emissions.

Most of the Ford’s dealers are now insightful on the emission matter, for instance, Johnson Controls has an evaluation system (which allows the business to gauge its supply base sustainability). Ford aims at reducing green house gases by 30 percent by the year 2030.

It is also the believe of the Toyota company that it should bring a change in the world through nurturing a sustainable society by taking care of the environment by undertaking environmental friendly operations. This has been made possible through collaboration with philanthropy, the suppliers, the government and other bodies towards maintaining a mobile society that is environment friendly.

Toyota has been involved in various programs that aim at educating and mobilizing people to manage the environment well for their benefit for instance the Together Green program that funds projects aimed at conserving the environment, undertakes training for environmental leaders and also offer opportunities for people to volunteer and work towards conserving the environment.

It has also been involved with the government to harmonize fuel efficiency and regulate green house gas emissions.

Its collaboration with business partners for example the dealers and suppliers also help in conserving the environment through the provision of the green supplier guidelines which encourage the partners to work towards meeting the environmental expectations and more so get involved in the Toyota’s programs that have been designed to cater for the environment (Urlaub 2011).

Conclusion

It is evident that supply chain management is a very essential tool in any given organization as it helps in the maximization of added value while at the same time helping in the reduction of the total cost.

Just like information and communication technology, supply chain management has become a tool through which organizations can achieve a competitive advantage and be able to secure a place both locally and even in the global market.

It has however been deemed important in manufacturing companies like Toyota and Ford as it aids in the timely delivery of products at a competitive cost without compromising the quality.

Supply chain management is also a practice that has allowed many organizations to survive through restructuring their operations in a manner that they are able to focus on the core competencies of the organization and outsource other services to enhance its productivity while saving on time and cost through specialization.

An effective supply chain management in an organization also help a firm in strategic decision making in regard to the partners to be involved with resources utilization as well as the manpower in addition to market positioning.

Reference List

Bhatt, R. 2010. Ford Performance Racing partners with Trading Post. Web.

Borowski, A. 2010. Report on the Toyota Company. Germany, Grin Verlag.

Business green, 2010. Tesla and Toyota Seal Electric Car Alliance. Web.

Ferrari, B. 2009. Toyota’s Evolving Challenges- A Sure Global Survivor. Web.

Iver, A. Seshadri, S. and Vasher, R. 2009.Toyota Supply Chain Management: A Strategic Approach to the Principles of Toyota’s Renowned System. USA, McGraw-Hill Professional.

Nexis, L. 2010. Toyota Tsusho Corporation – Business Alliance Agreement with Thai Sugar Manufacturer. Web.

Parker, S. 2006. Ford Motor Company to Outsource to India. Web.

Sovereign, R. 2011. Importance of Supply Chain Management in Modern Businesses. Web.

Urlaub, J. 2011. Managing Risk with Sustainable Supply Chain Management. Web.

Using appropriate theory and models identify the major external factors which have undermined Fords Strategic position as at 2007.

2007 was considered to be the year of great losses for Ford Motor Co. The losses were even bigger than it was forecasted and the experts did not reject the greater losses in the future. Ford’s leading F-series were at the bottom of sales and the company had to cope with those problems as far as it could (Isidore 2007). The company’s position was not a surprise for the Wall Street as due to some specific external factors the situation was predicted.

Globalization is one of the main external impacts on the company performance. The increase of the competitors from other countries, such as Japan, does not give Ford Motor Co. an opportunity to follow their fast change and meeting consumers’ tastes. Japan swiftly entered the US market and gained a leading position. Placing its manufacturing in low-wage and non-union regions in the USA, it was in the privileged position. Toyota and other companies also entered the international market and their manufacturing activities were greater than those of Ford Motor Co. were Thus, it may be stated that high competition was one more reason which caused the decline of the production in Ford Motor Co. (Schifferes 2007).

Financial crisis of 2007-2009 was one more reason which impacted Ford’ decline in sales. The inability to meet the coming changes and accommodate to them was one more external factor which identified the company’s position in 2007. Using ‘financialization’ strategies, Ford tried to save its position as the reduction in sales was observed even before 2007 and the financial crisis could have been devastating for the company. The government offered help and implemented a number of policies to protect automotive industry (Bailey, Ruyter, Michie & Tyler 2010). However, Ford did not want to take the governmental help, it was assured that it could cope individually, without influential assistance (Schifferes 2007).

Which changes in the automotive industries Critical Success Factors, over recent years have most impacted upon this organisation, in terms of its current level of “EVR” congruency or loss? i.e. Environment, Values and Resources, from Thompson and Martin (2005).

Before getting down to discussing changes in the automotive industries Critical Success Factors which influenced Ford Motor Co. over recent years, it is important to understand the nature of Environment, Values and Resources. According to Thompson and Martin (2005), E-V-R congruency is a guarantee of successful business strategy. The figure 1 helps understand the real nature of the congruency and explain the role of each factor in the model. Therefore, it may be concluded that E-V-R congruency is an essential part of international strategy which Ford Motor Co. tried to achieve.

Thompson and Martin (2005) are sure that financial success fails to be the only guarantee of leading effective business in the company. Furthermore, they even declare that the absence of E-V-R congruency is one of the reasons of business failure. Following the situation with Ford Motor Co., it should be stated that the changes in the automotive industry affected the organization under consideration in terms of E-V-R congruency.

Ford Motor Co. believes that the job cut is one of the most effective reasons. Being interested in reducing the costs on production, the company reduced 45,000 jobs in North America (‘Ford and GM see US sales decline’ 2007). Thus, it may be concluded that the increase of competition, the greater number of rival companies on the international market is one of the factors which impacted Ford. The governmental desire to affect the business in Ford organization and to offer a loan to it was ruined as the company preferred to preserve its family business, even though its share was not that great in the company (Szczesny 2008). Market segment has been changed due to the changes in the global issues. “Hybrid electric vehicles and forthcoming battery-electric and plug-in hybrids” (Hughes-Cromwick 2011, p. 167) are the changes the company has implemented in the E-V-R congruency. The nature friendly direction is one of the most positive and necessary changes which impacts company advertising strategy and the customer demand rate greatly.

How would you describe the nature of the E-V-R configuration at Ford as at 2007. Justify yourargument.

Considering the company profile of 2007, it may be completed that the company losses were devastating. The organization lost about US$5bn. The company decided to implement aggressive changes as the means for recovering from current situation. However, the actions were not positively reacted. Unfavourable economic situation in North America made the company reconsider its product markets and redirect more attention at the markets in South America (‘Company Monitor’ 2009).

Considering E-V-R congruency at Ford as at 2007, it should be stated that the Environment was positively directed at the company. Stakeholders were not depressed with the created situation, they even tried to support the company. Governmental support was also seen, even though Ford refused to get Senate’s assistance (Szczesny 2008). The national approval of the company was not ruined as well. The preference to Ford was because of the increased competition and variety, but customers did not lose trust to the car manufacture. The company resources, however, were lost. Ford Motor had to cut job places and shut down some specific plants with the purpose to remain in the business (‘Ford and GM see US sales decline’ 2007). However, public relationships were not ruined that points at the fact that the company’s actions directed at job cutting and area selling were not that negative.

Assuming that Ford’s retrenchment strategies, in terms of job cuts and selling of areas of its business portfolio, are successful in supporting a turnaround strategy generate, using appropriate concepts and models, generate four alternative possible strategic options they could now pursue.

Ford Motor Co. makes all possible to return at the market on the position it occupied. However, the job cuts and closure of several companies have negatively impacts the structure. Still, having considered the company strategy for 2011, it should be stated that the closure of some plants is planned on 2014 to make the process less painful. Nevertheless, the company has to sacrifice some manufacturing with the purpose to protect the whole company business (‘Company Profiles’ 2011, p. 30).

Having conducted a SWOT analysis for Ford Motor Co., it may be concluded that the company should choose the strategies aimed at the opportunities and company strengths. The deep consideration of the Ford’s strengths and opportunities helped to develop four following strategies the company may use:

1. Increase of the production of the hybrid electric vehicles.
2. Extend a production on a new Asia Pacific market.
3. Increase of the strategic investment.
4. Making engineering, research, and development as an outsourcing branch for other companies (‘Datamonitor’ 2010).

These four techniques may help Ford Motor Co. gain its previous positions in the world car manufacturing. These strengths and opportunities the company has should be used. Getting down to more detailed consideration of each of the strategies mentioned above, the following information should be stated.

The increase of the production of the hybrid electric vehicles should be explained by the world tendency to the increased demand on such vehicles. The environment protection movements caused great demand on nature safe vehicles. Ford should pay more attention to the development of the highly innovative hybrid with emissions reduced to minimum. The company also pays more attention to small cars as the way to help people safe on fuel (Cable 2010).

The extension of the production on a new Asia Pacific market is a guarantee of successful company development (‘Datamonitor’ 2010). Having too tight competition in North America, Ford should search for new product markets were Toyota (the main rival of Ford) has not spread its influence. Investment into innovative development is exactly what Ford needs at the moment. Offering engineering, research, and development as outsourcing for other companies is a good idea, paying attention to the fact that Ford’s engineering capability is rather strong and can satisfy the needs of the company and those who need such services.

Apply evaluative techniques to each of these strategic options.

Dwelling upon the strategies mentioned above in detail, it should be stated that “company operates over 65 engineering, research and development centers worldwide” (‘Datamonitor’ 2010, p. 5). The company has an opportunity to use these resources to satisfying the needs of other companies, get profit (which comprised about $4.9 billion in 2009) and direct that profit for company development. The working positions are going to be saved along with additional financial profit (‘Datamonitor’ 2010).

The occupation of a new market is a great opportunity. A compound annual growth rate increased on 3.8 % ($285.5 billion) in 2009 in comparison with the previous period in Asia Pacific market. Indian and Chinese markets are opened for a new manufacture and are ready to consume its product (‘Datamonitor’ 2010). Ford should do all possible and invest more in improving its capacity at a new market. A new plant in China is a great step on the way to occupying Asia Pacific new car market.

Ford is interested in investing into new products. Working on such options for several years, the company has reached much success (‘Ford Motor Company 2011’ n.d.). One of the most successful affairs the company invested into is the support of research, design and development of hybrid vehicles. The company plans to put into production new next-generation hybrids in 2012. Moreover, the investment f the company in “powertrain engineering and facility upgrades in North America to $1.8 billion to support its 2011 vehicle launches” (‘Datamonitor’ 2010, p. 9).

The development of research and using this facility as outsourcing is a great opportunity for making some companies depend on Ford. This strategy may be used for developing business and economic connections with other companies and help Ford safe its brands. To the word, Ford had to sell some brands in 2007-2010 to remain a competitive company (Cable 2010).

From your evaluation which strategic option would you recommend to Ford?

Having considered a number of specific strategies Ford Motor Co. may use, it should be stated that strategic investment is considered to be one of the best strategies. The innovative technologies have become a guarantee of company success. The possibility to meet customers’ demand (environment safe vehicles) and their desires (small cars), Ford can become one of the leading companies again. Having experienced downsizing in 2007, Ford cannot recover from crisis up to now. The investment into new products may be helpful in increasing company segment, and attracting more loyal customers.

Moreover, investing into new development and technologies resulted into creation new vehicles may help the company return its leading positions in North American market. Many customers have refused from Ford products because the company is unable to meet their requirements. The tendency to ecologically safe vehicles is a good business and Ford should do all possible to satisfy customers’ needs. Thus, Ford Motor Company should direct more attention at strategic investment into development of innovative vehicles aimed at consuming fewer natural resources. Such strategy is winning, as the society needs ecologically neutral cars.

Moreover, according to the research in a couple of years, the USA is going to be the largest market for hybrid electric and plug-in hybrid electric vehicles with rough sales of 640,000 cars (‘Datamonitor’ 2010). If Ford Motor Co. wants to return its previous magnificence and leadership, it should make all possible to occupy this market.

Reference List

Bailey, D, Ruyter, A, Michie, J & Tyler, P 2010, ‘Global restructuring and the auto industry’, Cambridge Journal of Regions, Economy and Society, vol. 3, no. 3, pp. 311-318.

Cable, J 2010, ‘Fighting Through the Worst of Times’, Industry Week/IW, vol. 259, no. 6, p. 24-28.

‘Company Monitor: Ford Motor South America Regional Overview’ 2009, Brazil Autos Report, pp. 50-55

‘Company Profiles’ 2011, Canada Autos Report, vol. 5, no. 2, pp. 28-31

‘Datamonitor: Ford Motor Company’ 2010, Ford Motor Company SWOT Analysis, pp. 1-11.

‘Ford and GM see US sales decline’ 2007, BBC News.

‘Ford Motor Company 2011 Investor Day – Final’ n.d., Fair Disclosure Wire (Quarterly Earnings Reports), International Security & Counter Terrorism Reference Center, EBSCOhost, 2011.

Hughes-Cromwick, E 2011, ‘Ford Motor Company’s Global Electrification Strategy’, Business Economics, vol. 46, no. 3, p. 167-170.

Isidore, C 2007, ‘Ford: Biggest loss ever’, CNNMoney, Web.

Schifferes, S 2007, ‘The Decline of Detroit’, BBC News.

Szczesny, JR 2008, ‘Ford family values: Why the automaker wants to go it alone’, Time Business, Web.

Thompson, JL & Martin, F 2005, Strategic management: awareness and change, Cengage Learning EMEA, London.

Brief description of the company

The second-largest car manufacture Ford Motor started its journey with only one car but in 2000, it manufactured more than 7.20 million vehicles worldwide with lots of successful brands especially Ford, Lincoln, Mercury, and Volvo (Ford Motor, 2000). According to the annual report, the US multinational company Ford has more than 164,000 employees and about 70 plants in the world, and in 2010, the net profit of this company was $6.6 billion, which is the maximum net profit in more than 10 years (Ford Motor, 2010, p.3-5). The entire market share of Ford Motor in the world’s automotive sector is not available in the secondary sources but the annual report provides market share for a different region.

The sustainability report of Ford is concentrated on creating a strong business by manufacturing products with outstanding features, so, it has already introduced few models like with alternative fuels and eco-friendly technologies that can run by using alternative fuels, for instance, bio-diesel and ethanol blends (Ford Motor, 2010, p.22). However, Ford Motor (2008, p.6) reported that this company will contribute to building a better world by implementing its near term, midterm, and long term project those specially designed to reduce CO₂ emissions, for example, near term goal of Ford is to introduce more hybrid and diesel vehicles and to save fuel by 10% to 20%. The author Seth Leitman stated that Ford has reduced its global water consumption by 16.6% each year by implementing its projects, which also help to decrease water costs (Leitman, 2010).

Paradigm Shift and Techno Centric

Deutsche Bank (2008) reported that the consumer behavior has changed from 2005 while they purchased crossover vehicles and cars of different companies instead of traditional Trucks, and it has a great influence on the US Automobiles and Ford experienced sales reduction by $2.20 billion from Sport Utility Vehicles due to this paradigm shift.

Professor of North Carolina

State University Elizabethan O’Sullivan (1985) stated that managing information is a challenge in the present internet and technology-based world, therefore, Ford Motor has been using many information management systems and decision support systems (DSS) since 1967 to ensure the protection of information with full of confidence.

PEST analysis

Political factors

Ford Motor has to obey local rules and regulation with the recommendation of pressure groups (like Ford is an active member of the US Climate Action Partnership (USCAP) and the Environmental Protection Agency (EPA))and non-compliance with such regulation may increase the number of litigation that affects the reputation of the company (Ford Motor, 2009). However, USCAP has influenced the company to follow the US climate protection legislation to reduce CO₂ production and maintain fuel economy requirements in the US and Europe zone (Ford Motor, 2009, p.5); on the other hand, the EPA forced to consider federal Corporate Average Fuel Economy law. At the same time, climate change and GHG concerns have already started to force the regulatory agenda in Europe particularly in the UK and Germany while the ACEA¹ set an objective of attaining average CO₂ emission reductions of 25% compared with 1995 (Ford Motor, 2008);

Economic factors

According to the report of online journal Reuters (2011), Ford experienced lose in FY 2008 and FY 2009, but it enjoyed outstanding success in the year 2010, for example, its net income was $6.6 billion, and the share price is increasing rapidly (Reuters, 2011). However, Ford Motor (2010) reported that new model hybrid electric vehicles would play a vital role to change customer behavior and increase sales revenue from the US and European car market as MKZ Hybrid is fuel-efficient environmental friendly cars, the C-MAX Hybrid, C-MAX Energi PHEV and MKX come in the market with technologically advance eco-friendly model.

The business environment is outstanding in the US and UK for Ford, and banks of this region help the company such as it get $699 million of loans at low interest though it gets no bailout fund in recession (Ford Motor, 2010). However, the following table shows the direct comparison among major rivals of the automobile industry –

Socio-cultural factors

Climate change is related to social issues including population growth, access to mobility, and poverty improvement; therefore, in 2001, it established the Ford-Supplier Sustainability Forum to refine its social and environmental policies (Ford Motor, 2005);

Technological environment

Advance technology is an important factor to change the financial position of the company, so, Ford uses eco-friendly technologies, EcoBoost technology, driver assistance, and crash-avoidance technology, and concentrate on ECOnetic with further advanced technology to provide various vehicles that can run alternative fuels, for instance, bio-diesel and ethanol blends (Ford Motor, 2010).

Sustainable aspects of Ford Motor

Corporate Social Responsibility

Famous author John Lowry and Alan stated that large firms always have faced criticism for their contribution to social responsibility, for instance, US company Enron and Worldcom had collapsed for lack of CSR and the evidence shows that the recent global financial crisis was also the consequence of non-compliance of ethical code (Lowry & Dignam, 2007). However, in 2010, CRSOM² has surveyed the status of human rights practice at the top hundred business entries and placed Ford Motors at the top of all others those are surveyed (Ford Motor, 2009, p.7);

Company’s ethics

Author Colin Fisher and Alan Lovell (2006) stated that the motto of ethics indicates how other people affected by the decision making of another’s morals while the rapid growth of technology and societal factors interplayed in front of business ethics; and the Ethisphere Institute deemed Ford one of the World’s Most Ethical Companies (Ford Motor, 2009, p.7).

Environmental policy

The author Perry Lawrence Johnson stated that ISO 14000 certificates involve the use of a strict environmental management system and Ford motor has achieved these certificates as this company was committed to ensuring 126 facilities by 1999 and provided a globally consistent set of environmental management performance (Johnson, 1997, p.192). Moreover, the CEO of Ford Motor intended to execute a long-term goal by launching two new hybrid electric vehicles and reducing global water consumption by 16.6% year-to-year (Ford Motor, 2009, p.2). In 2006, this company set up its next step to reduce carbon emissions and is intended to reduce CO₂ emissions by 30% by 2020 and in 2009, it expanded its analysis of potential greenhouse gas emission reduction and it decreased CO2 emissions from US and European new vehicles by 12% and 6.7% (Ford Motor, 2009, p.2). According to the report of the government body US Environmental Protection Agency (1999), the key reason for Air pollution is Hydrocarbon from cars and motorcycles and this agency reported that more than 55 percent of such pollution occurs from cars. However, Ford has achieved many other awards like the Deal of the Year award, and earned its fifth consecutive Energy Star Award for Sustained Excellence from the US Environmental Protection Agency (Ford Motor, 2009, p.7);

Workplace

Ford considers workplace health and safety issues to protect the employees from any hazards, and to ensure equal opportunity; however, this company provides the opportunity to retirees and other employees to join as a volunteer (Ford Motor, 2010, p.19).

Public concern on Ford

According to the annual report 2010 of Ford, sales of Sport Utility Vehicles (SUVs) has reduced significantly in the US market due to the high price of fuel in a global financial downturn and rising public concern about the consequence of SUV emissions on global warming (Ford Motor, 2010).

On the other hand, the Auto Editors of Consumer Guide reported that the renowned brand “Ford Pinto” was started its operation in 1970, and it tried to be a market leader in North American by competing with Volkswagen, Gremlin, Vega, and Datsun (AECG, 2009). However, this brand failed to sustain itself in the market because the design of the car was too fragile, so, many accidents occurred due to wring design and the misplacement of the gasoline tank. This brand was the subject of public concerns, as it was not an environment-friendly car, it was flamed until the absolute destruction of the body of the car, and the flimsy technological design did not lessen the carbon emission (AECG, 2009³).

Benchmarks and good practice of Ford

Author Curtis Darrel Anderson and Judy Anderson stated that Ford’s eco-friendly products are not popular like Toyota Prius or Honda Insight, so, Ford Motor should compare its position in terms of quality improvements, costs, working practice, better employee motivation, and focus on tasks, good practice, and development of team working (Anderson & Anderson, 2004, p.53). Author Ken Thomas (2008) stated that all the hybrid brands of Ford have to compete with other automobiles that offer similar products, for instance, Ford’s hybrid electric cars faced intense competition in the US market.

On the other hand, the existence of many substitutes creates practical difficulties while sales of Ford’s hybrid-cars like Ford Escape or Mercury-mariner is lower than the hybrid-cars of other companies like Toyota-Prius, Toyota-Camry, Lexus RX-400h, Honda-Civic, Honda Insight, and Honda-Accord, and other environmentally friendly cars of different companies (Anderson & Anderson, 2004, p.53,) and (Thomas, 2008). However, In October 2006, in the US, Toyota’s hybrid sales were 77%, Honda’s were 14%, and Ford’s were merely 9% (hybridCARS, 2010); however, the following figure demonstrates the yearly sales statistics of hybrid cars in the US market from 1999 to 2006 period; it is noticeable that the sale of Ford Escape is far below its competitors (hybridCARS, 2010). However, the following figure shows the Yearly Hybrid Sales of Ford by comparing with other products –

According to the annual report 2010 of Ford, it has taken few initiatives to upgrade its position in this segment, such as, in 2009, it started to use lithium-ion batteries in commercial vans power connection, and it is going to introduce the 2011 Lincoln MKZ Hybrid, plug-in hybrid electric vehicle and hybrid electric vehicles (Ford Motor, 2010).

Functional strategies of Ford

According to the annual report 2010 of Ford, it continued to concentrate on executing the four major concerns of its One Ford plan is the right strategy to accomplish its goals, such as –

• It would reshape to operate gainfully at the present demand and shifting model mix;
• Advance and introduction of new products considering customers choice;
• More investment on the prospective segments;
• Controlling the employees to work as a team (Ford Motor, 2010, p.26);
• On the other hand, it has maintained other functional strategies like closing 3 Ford-plants and 1 ACH-plant from FY2010 to FY2011, decreasing automobile debt by $10.1bn, and utilizing $2.6bn in automobile (Ford Motor, 2010).

Analysis: Effects of sustainable investment by Ford

Innovation

Ford Motor (2010) reported that it continues to establish the next border of safety with innovations for instance inflatable seat belts and curve control, liquid-injection petroleum gas (LPG) system along with other innovative global technologies like PowerShift transmissions, which will help to reduce environmental pollution, increase safety measure and reduce fuel consumption by 20%.

Brand Reputation

Author Rajendra Srivastava and Gregory Thomasa stated that a strong brand provides a consistent way to polarize multiple micro-decisions, and Ford failed to spot the bottom of the market especially it is out of touch with its heritage; however, it has a global market presence, with universal brand recognition and a particularly strong presence in European and US market.

New markets

Ford Motor (2010) mentioned that Ford is going to launch several new products by 2012, such as Fusion hybrid, MAX Hybrid, C-MAX Energi PHEV, and MKX, which would mainly be designed for the US and European customers as they are driving for eco-friendly cars.

Strategic ignorance of sustainable issues of Ford

Non-attendance of Ford motors to implementing sustainable strategic practices like the introduction of hybrid car or biofuel technology does not necessarily mean cost-effectiveness; in addition, the company has to invest huge fund to R&D to develop these new models though the failure of designation may increase legal cost and destroy reputation (Ford Motor, 2010).

Stakeholder Analysis

Johnson, Scholes & Whittington (2008)⁴ stated that Ford Motor persistently supervise and ensure whether the stakeholders of the company are satisfied with the business performance in terms of services for customers, revenue generation for the shareholders, managers, creditors, and owners, and market-leading position, remuneration of the employees. However, Professor of Marketing Michele D. Bunn, Professor of Management Grant T. Savage, and Ph.D. Candidate Betsy B. Holloway (2002) stated the five-step stakeholder analysis process and step four of this research discussed Telematics and dominant stakeholder process by providing example Ford’s joint venture with Qualcomm. However, Ford Motor has both internal and external Stakeholders those have different concerns on Ford motors like unions concentrate on workplace safety issues, employees consider environmental issues, employees, 1,600 production suppliers provide quality parts, 165,000 investors concern about returning the company to profitability, and so on (Ford Motor, 2011). However, the figure below analyses the main internal and external stakeholders of Ford –

Key Recommendations

This report demonstrates the effort of Ford Motor to reduce carbon emissions, the eagerness of the company to maintain corporate social responsibility, and other initiatives. However, this company has to face many unusual situations to operate in the global market; so the following suggestion would be helpful for the company to overcome such challenges or risks.

• The present market position of competitors like General Motors and Chrysler is not stable enough and these companies experienced huge losses due to global financial downturn; so, Ford should be more cautious regarding bankruptcy or liquidation as it could gravely disturb its supply chain management system;
• Ford should try to imply the ‘One Ford’ vision and carry out its sustainability goals to differentiate itself from major competitors but it should not lose sight of the bigger picture while endeavoring to take advantage of the current weakness of these companies;
• However, Ford should reduce the truck or SUV production as the sales revenue form these products have dropped dramatically due to the high price of fuel and it would be difficult to shift the production speedily to meet changing demand;
• The marketers should change their moral view to customers and the engineers of this company should design the products considering environmental factors and customers safety issues because the brand “Ford Pinto” had destroyed its reputation to the automobile users though the marketers spent huge fund to improve its design;
• In addition, Ford should not design the products such a way, which could increase the number of accidents;
• It should continue its initiatives to reduce water consumption, and carbon emissions by introducing hybrid electric vehicles and pure battery-electric;
• Finally, it should follow the divestiture strategy to concentrate on its single vision and it can reduce its number of suppliers to stable its supply chain.

Conclusion

The changing pace of the automotive industry in terms of rivalry and rising concentration on eco-friendly approaches through the development of brand new cars has made Ford Motor Company come up with several models with substitute energy sources and green technologies, which uses unconventional fuels like bio-diesel and ethanol. The introduction of new technologies by other industry giants like General Motors Company, Chrysler Group LLC, Toyota Motor Corporation, Honda Motor Company, Nissan Motor Company, etc to reduce environmental pollutions meant that it was essential for Ford Motor to launch highly fuel-efficient Hybrid models to boost sales in highly competitive situations. In doing so, the company had to undertake several strategic approaches, which included tactics such as an increase in expenditure on research and development to inaugurate fast intensification of technology and the utilization of an authoritarian ecological management scheme to ascertain an internationally reliable set of environmental management performance.

Moreover, the assurance of a globally sustainable operational practice required the company to propose to diminish Carbon Dioxide emissions thirty percent by 2020, implement enduring objectives by initiating two new hybrid-electric models, lower its international water consumption by 16.6 percent, and taking into account workplace security concerns to safeguard the workers from any exposure to toxic pollutions. In addition, the company focused on carrying out its plans to achieve its operational targets, for example, reforming management profitably and shifting product line, progressing and pioneering new vehicles, spending more on the potential areas, scheming the workforce to enhance teamwork, and so on. It is important to argue that if Ford was not able to come up with these strategic approaches and implementations towards sustainable management, it was likely that the company would have been facing many legal barriers relating to environmental and labor legislation, and confront numerous grievances for rising pollution levels by the company’s vehicles followed by damage to its reputation. Nevertheless, because the company now possesses a series of different approaches to sustainable management, several of which have already been implemented, and the rest are being closely observed to be executed very shortly, Ford has the potential for more well-managed organizational practices for the future.

Reference List

AECG (2009). 1971-1980 Ford Pinto. Web.

Anderson, C.D. & Anderson, J. (2004) Electric and hybrid cars: a history. NY: McFarland & Company.

Bunn, M.D., Savage, G. & Holloway, B. (2002) Stakeholder analysis for multi-sector innovations. Journal of Business & Industrial Marketing 17(2/3) pp. 181-203.

Deutsche Bank (2008) US Autos and Auto Parts: Paradigm Shift for the GlobalAuto Industry. Web.

Fisher, C. and Lovell, A. (2006) Business Ethics and Values. 2^nd ed. London: Prentice Hall.

Ford Motor (2000) Customer Profile: Ford Motor Company. Web.

Ford Motor (2005) Ford Report on the Business Impact of Climate Change. Web.

Ford Motor (2008) Blueprint for Sustainability. Web.

Ford Motor (2009) Blueprint for Sustainability.Web.

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

Ford Motor (2011) Who Are Our Stakeholders? Web.

HybridCARS (2010) October 2006 US Sales. Web.

Johnson, P. L. (1997) ISO 14000: the business manager’s complete guide to environmental management. 1^st ed. London: John Wiley and Sons.

Johnson, G., Scholes, K. & Whittington, R. (2008) Exploring Corporate Strategy: Text & Cases. 5^th ed. London: Prentice Hall

Leitman, M. (2010) Ford Motor Company Actually Cut Water Consumption..Really?. Web.

Lowry, J. & Dignam, A. (2007) Company Law. 4^th ed. London: Oxford University Press.

O’Sullivan, E. (1985) Decision Support Systems: An Introduction for Program Evaluators. Evaluation Review, 9(1), 84-92.

Reuters (2011) Chart: Ford Motor Co (F). Web.

Srivastavaa, R. K. & Thomasa, G. (2010) Managing brand performance: Aligning positioning, execution and experience. Journal of Brand Management 17, 465 – 471.

Thomas, K. (2008) Ford products lead list of safest cars. Web.

US Environmental Protection Agency (1999) Mobile Source Emissions – Past, Present, and Future. Web.

Yahoo Finance. (2011) Direct Competitor Comparison Ford Motors. Web.

Footnotes

1. European Automobile Manufacturers Association.
2. Corporate Responsibility Officer Magazine.
3. the Auto Editors of Consumer Guide.
4. Writer’s Full name Michele Bunn, Grant Savage & Betsy Holloway.

Stakeholder Interest

In this paper, I would like to carry out a stakeholder analysis of such an organization as the Ford Motor Company, one of the largest car manufacturers in the world. My cousin works in this organization and he has agreed to share his views on this enterprise. Overall, the values of this company mostly because it offers a high degree of job security and provides adequate compensation for the job. We need to show how various groups of people affect the functioning of Ford Motor Company, and how the company affects them. The findings can be presented in table format:

We can single out several potential conflicts of interest, which may arise between various stakeholders, for instance, if the investors and stockholders force the company to outsource some of its business processes to make the company, more profitable, this policy inevitably affects employees who could lose their jobs. Another possible conflict is the collision between the government and suppliers.

If the policy-makers force Ford to use eco-friendly technologies during the production process, the company will have to abandon many of its current suppliers. These are only potential conflicts that may occur in the future. At the given moment, the main purpose of Ford Motor Company is to raise their profitability and avoid conflicts among various stakeholders.

Reference List

Faurote F. & Arnold H. 1998 Ford Methods and the Ford Shops. New Jersey: Elibron.

Kreipke Robert. 2003. Ford Motor Company, the first 100 years: a chronological picture history of Ford Motor Company over the first century. NY: Turner Pub. Co.

Background

Ford Motor Company serves as an example of an American corporation with a well-designed corporate social responsibility (CSR) policy. Ford’s CSR is based on two fundamental pillars — adherence to legal norms and ethical duty to various stakeholders, ranging from customers to employees. Ford (2021a, p.7) states its corporate purpose as “to help build a better world, where every person is free to move and pursue their dreams.” This purpose statement finds its reflection in the practical CSR initiatives.

Ford CSR: The CEO’s Perspective

A CEO’s task lies in adapting the corporate image and policies in ways that allow the organization to withstand the challenges of time. In the case of Ford, following the trends is not sufficient — the company seeks excellence in the legal and ethical pillars of social responsibility. As such, Ford perceives CSR as a domain that grants a desirable competitive advantage. Due to this standpoint, Ford strives to align its CSR policy with the stated purpose of building a better world where people are daring and free.

For instance, the legal pillar of CSR implies strict adherence to the existing agreements and legislation. Ford acknowledges the issue of climate change and aspires to reach carbon neutrality by 2050 in accordance with the Paris Agreement (Ford, 2021a). However, a mere commitment to a standard benchmark is not a sign of excellence. Therefore, Ford expands its boundaries by joining the state of California in pursuit of stricter greenhouse gas standards (Ford, 2021a, p. 41). By making such a step, Ford manifests the readiness to excel in environmental protection and pursue a better world for everyone. Every person deserves to live in a world with clean air and fresh water, and Ford is ready to make its contribution to this goal.

In regard to the ethical pillar of CSR, Ford follows the same pattern of excellence. Once again, simple adherence to the expected norm is not satisfactory. The company is ready to promote ethical standards and act beyond the expected behavior and legislation. For example, Ford conducted a diversity and inclusion (DEI) audit with the assistance of Deloitte and appointed its first Racial Equity Director in history (Ford, 2021a, p. 64). Such an action was not mandatory by U.S. law; however, Ford took it in order to enhance employee experience. The Racial Equity Director is responsible for detecting and eliminating any potential systemic barriers and inequities. Therefore, this appointment aligns with a message of equality embedded into Ford’s corporate purpose. Ford’s employees are one of the vital stakeholders, the unsung heroes, the moving force behind any corporate achievement. As such, Ford perceives CSR initiatives aimed at employee experience improvement as critical for retaining competitive advantage in the labor market. Satisfied employees who see genuine care from the company are bound to be loyal.

Furthermore, it is necessary to stress that any CSR initiative must be aligned with the corporate purpose to be genuine and effective. When Ford declares the wish to promote freedom worldwide, it includes the willingness to provide decent working conditions for the employees. In this regard, Ford strives to maintain a healthy and safe work environment, follow ethical recruitment practices, and ensure workers’ right to freedom of association (Ford, 2021b, p. 12). In Ford’s vision, CSR goes hand-in-hand with sincerity — a company cannot achieve meaningful results in CSR if its actions are not aligned with the corporate purpose. Overall, Ford utilizes CSR to create a mutually satisfying connection with its customers and employees, its key stakeholders.

References

Ford. (2021a). Integrated sustainability and financial report 2021. Web.

Ford. (2021b). UN Sustainable Development Goals index 2021. Web.

Looking for Ford industry analysis? Find it here! We’ve prepared Ford Motor Company case study that contains analysis of the company’s financial condition and provides recommendations to its management.

Introduction

The current report provides an in-depth analysis of the motor vehicle industry based on the Ford Motor Company case study. It also analyzes Ford Motor Company using SWOT analytical tool. Moreover, strategies that could be adopted by Ford Motor Company for the next five years have been provided. The study is divided in several sections with the first section being the motor vehicle industry analysis.

The industry analysis explores the industry structure, major environmental changes, competitors, and Ford’s competitive position in the industry. The second section gives an environmental scan with major focus on the major opportunities and threats. The third section explores the company’s key strengths and weaknesses. The last section gives viable strategic recommendations which can be adopted for the next five years.

Ford Industry Analysis

The motor vehicle industry is very competitive and characterized by changes in vehicles design and technology (CLLES 7. Just like any other industry, the motor vehicle industrial structure and landscape have been changing and reshaping operationally, functionally, and geographically.

The increase in competition has been as a result of new emerging automotive and vehicle industries in South American, Eastern and Central European, and Asian countries (CLLES 7). The industry’s major structures are the motor vehicle and the motor vehicle parts sections.

These two sections provide employment to more than one million people in U.S. The motor vehicle industry is a loosely connected industry and diversified in terms of supply chain structure, employment levels and compensation. Lastly, the market is characterized with excess capacity which is a major structural problem.

The industry was highly affected by the 2007/2008 global financial crisis. Major players such as Chrysler and General Motor were majorly affected that it took the intervention of the government to bail them out.

However, based on the case study, Ford Motor Company was the only major company which was not affected by the financial crisis. The company has been described by as the only automaker company which has survived the major crises that have hit the motor industry without financial bailout by the government (The New York Times 2012).

The major competitors of Ford Motor Company are BMW, Chrysler, Toyota, General Motors, Honda, Nissan, Mercedes Benz, and Hyundai-Kia among others. In U.S, General Motors (GM), Toyota, and Honda are the main competitors of Ford (Canis and Yacobucci 6). Different automakers use different strategies to increase their competitive advantage.

Based on the case study, Toyota uses lean production to increase its effectiveness and efficiency in production. Toyota’s lean production encourages just-in-time scheduling, flexible production, teamwork, and quality production. In addition, the company avoids material wastage and inventories. Another company like Hyundai produces quality products to meet the demands outside Korea.

For instance, the company has recently established a production line in Alabama, U.S to near KIA to benefit from economies of scale (Canis and Yacobucci 6). In addition, the company offers the longest warranties which are geared towards the attraction of customers from the Japanese and US cars. In general, all the major competitors have brand product portfolio which are part of product diversification and cost differentiation.

General Motors which is the largest competitor of Ford Company has adopted a new strategy which has been borrowed from Toyota Company (Ferrell & Hartline 30). The new strategy is based on new auto designs which meet the expectations and demands of emerging market segments.

The company has acquired the Toyota’s design which involves synchronization of production, platforms, and parts from different parts of the world. This new globalization strategy encourages flexible manufacturing. Based on checks and benchmarking carried by Henry (91), the competitors in the automobile industry are grouped in four groups.

The first group is of high price and low range automobiles and it consists of Rolls Royce and Bentley. The second group comprises of Ferrari, Ashton Martin and Porsche while the third group contains BMW, Mercedes, and Lexus. The last group is composed of Ford, Renault, Honda, Volkswagen, GM, Nissan, Toyota, and Daimler Chrysler (Henry 91).

The Lexus, BMW and Mercedes group produces highly priced and quality products but of a lower product range. The Last group produces a broad range of products which have considerably low prices and quality compared to other groups. In this group, competitors compete in the market based on reliability, price, and the design of their products (Henry 92).

Ford is the second largest automaker after General Motor. The American automaker has found its niche in car and truck production. The company has a strong brand which has improved its competitive advantage. Product diversification has been the major competitive advantage thus increasing its competitive position in the industry.

To maintain its competitive position, Ford brands product portfolio comprises of Ford Ikon, Ford Fiesta, Ford, Fusion, Ford Endeavor, and Ford Figo. Its survival under numerous financial crises has increased the confidence and trust from different stakeholders especially consumers (The New York Times 2012). In North America, Ford remains as the largest market shareholder.

However, the company receives high competition in new emerging markets in Asia and Europe. Nonetheless, the American automaker has continued to defend its position in the industry and in 2008, it closed the gap that existed between itself and Toyota. The company was able to sell over 55,301 vehicles compared to Toyota in 2009 (Canis and Yacobucci 6).

Based on the current statistics, Ford has a market share of 15.5% after GM which has a market share of 19.8 percent (Canis and Yacobucci 6). The fall of GM and Chrysler was beneficial to Ford as many buyers between 2008 and 2009 preferred Ford cars thus increasing its financial and competitive position in the market.

As other companies market shares declined, that of Ford increased. To remain competitive, the company has provided new models which are affordable, competitive, and environmentally friendly.

Ford Company Analysis: Environmental Scan

Environmental scan has been carried through the use of SWOT analysis to give the major opportunities and threats that Ford Company has.

Company analysis

Ford Company Analysis: Financial Condition

The company is in a better financial position compared to other players such as Chrysler and GM. In 2008, the company survived the U.S and Europe financial crises (The New York Times 2012). In addition, as other companies’ market share reduced, Ford’s market share increased to 15.5% while that of GM’s dropped to 19.8 % (Canis and Yacobucci 6). In 2009, Ford increased its sales by 55,301 vehicles compared to Toyota.

In 2011, Ford increased its small cars sales in U.S by 25 percent (Ford Motor Company 2012). The annual operating profits of Ford increased in 2011 and as a result, the company announced an operating pre-tax profit of $8.8 billion (Ford Motor Company 2012).

In a third year in a row, the company has announced improved annual operating profits which show that the company is in a better financial position. According to Ford Motor Company 2011 annual sustainability report, the company has increased its annual automotive gross cash which is a sign of financial progress (Ford Motor Company 2012).

The revenues of Ford have grown from USD 119.3 billion in 2011 to USD 128.2 billion in 2012 (Bloomberg Businessweek 2012). In addition, the company has reduced its sales pegged on income tax expense to -0.90% from -0.505 thus leading to a bottom line growth of USD 20.2 billion from USD 6.6 billion (Bloomberg Businessweek 2012).

Because of its financial position, the automaker plans to invest $16 billion in the U.S production plants with the objective of designing, engineering and producing upgraded vehicle components. Therefore, Ford Motor Company financial position is strong despite the recession and economic downturns.

Ford Case Study: Recommendations

Based on the industry and company analysis, some suggestions have been provided which can be applied for the next 5 years as part of strategic plan management. First, Ford needs to expand its market operations in emerging economies in Africa, Middle East, and Asia so as to reduce overreliance of the U.S market. This would expand its market share and meet new demand in new market segments.

Second, the company needs to diversify its products to meet the demands and expectations of consumers in the 21^st century. Ford needs to carry out market and consumer demand research to determine the major emerging market trends and patterns. Product diversification can be achieved through the production of more fuel efficient and environmentally clean cars which are small in size.

This would meet the demand in the new segment of environmentally sustainable and green fuel motor vehicles. Ford can adopt the strategy adopted by Toyota of producing a variety of cars annually which fit different market segments. For example, it can design cars that meet the income capacity of consumers in developing nations.

Conclusion

Drawing from the case study analysis, Ford is the second largest American based automaker in the world. In addition, the company operates in a very competitive and saturated market. As a result, the company faces high level of competition from major players such as BMW, GM, Toyota, Honda, Chrysler, and Mercedes Benz among others.

When grouped, Ford lie at the lowest group which produces broadest range of cars which affordable prices. The company is a strong brand which is globally known. Its financial capacity and presence has increased its market share. The major weakness of the company is that it highly depends on the U.S market. Financial crisis in Europe and U.S have threatened its performance and market share.

Financially, Ford is stable and in a better position. The company has increased in sales and revenues as well as pre-tax operating profits in a consecutive period of three years. it has been recommended that the company ought to increase its presence in emerging markets and produce diversified products

Works Cited

Canis, Bills and Brent D. Yacobucci. “The U.S. Motor Vehicle Industry: Confronting a New Dynamic in the Global Economy.” Congressional Research Service 26 Mar. 2010: 1-66. Print.

CLLES. Benchmarking Analysis for the Motor Vehicle Industry. Center for Lean Logistics and Engineered Systems. University of North Carolina, 2009. Print.

Bloomberg Businessweek. “Ford Motor Co (F: New York).” Bloomberg Businessweek 6 Dec. 2012: 1. Print.

Ferrell, O C, and Michael D. Hartline. Marketing Strategy. Mason, OH: Thomson South-Western, 2008. Print.

Ford Motor Company. “Financial Health – Sustainability 2011/12.” PDF file. 7 Dec. 2012. <https://corporate.ford.com/homepage.html>.

Henry, Anthony. Understanding Strategic Management. Oxford: Oxford University Press, 2008. Print.

Schwed, Joel. Ford: History and Corporate Profile. 12 Dec. 2011. Web. <http://www.valueline.com/Stocks/Highlight.aspx?id=12047>.

The New York Times. “Ford Motor Company.” The New York Times 30 Oct. 2012: 1. Print.

In the 1990s, Ford planned the creation of the luxury car division that could involve the car brands similar to Volvo. The division known as the Premier Automotive Group (PAG) was established in 1999 (“Ford Buys Land Rover”).

During the period of 1999-2008, the PAG included such brands of luxury cars as Volvo, Jaguar, and Land Rover acquired and then sold by Ford because of their non-profitability (Table 1).

Table 1. Ford’s Acquisitions and Sales

Referring to the table, it is important to conduct the VRIO analysis in order to state why Ford made decisions regarding the acquisitions and following sales.

The VRIO Analysis

The competitive advantage can be gained by Ford when the company utilizes ‘valuable’ (V), ‘rare’ (R), ‘inimitable’ (I), and ‘organized’ (O) resources.

Jaguar

In case of Jaguar, Ford planned to cover the niche of prestigious cars with high driving dynamics, and during a long period of time, the development of the brand addressed the requirements of value, rarity, inimitability, and organized exploitation.

However, the situation changed in 1999, when the PAG was established, and Ford planned to use the centralized approach to managing the operations within the division.

Jaguar cars became set on the common vehicle platforms as other cars of Ford, the sales decreased, and the company chose to buy the brand to the Indian corporation in 2008 (Prokesch par. 2).

Volvo

The acquisition of Volvo in 1999 was a result of Ford’s strategy to expand the market share in Europe and widen the niche of premium brands. In terms of value, Volvo was discussed as a profitable brand. Rarity and inimitability depended on the high quality and exceptional safety.

Organization depended on the synergy approach within the PAG (James par. 3). However, Volvo became less valuable brand in the 2010s, when Ford focused on uniting the engineering departments within the PAG to decrease associated costs.

As a result, the measures related to rarity and inimitability were also decreased. Ford needed to sell Volvo in 2010 while losing more than 70% of the brand cost (“Ford Sells Volvo”).

Land Rover

Land Rover was acquired in 2000 as one more luxury brand to expand the PAG. The decision was discussed as good for Ford because of the opportunity to focus on the prestigious cars with the high off-road capability. This aspect added to the rarity and inimitability of available resources (Hill and Jones 312).

In terms of value, the acquisition of Land Rover was important for Ford to expand the market share in the area of four-wheel-drive cars.

The aspect of organization was addressed ineffectively because Ford could not rely on synergies in the PAG, but the company continued to use the principle of common vehicle platforms to produce Land Rover cars.

Thus, the brand was sold in 2008 along with the Jaguar brand because cars decreased in their value and inimitability (“Ford Sells Land Rover and Jaguar to Tata”).

Focusing on the VRIO analysis, it is possible to state that the competitive advantage of Ford decreased significantly after establishing the PAG because the company aimed to reduce costs of production instead of adding to the brands’ uniqueness in terms of rarity and inimitability in order increase their value.

Works Cited

Ford Buys Land Rover. 2000. Web.

Ford Sells Land Rover and Jaguar to Tata. 2008. Web.

Ford Sells Volvo to Chinese Carmaker Geely for $1.5 Billion. 2010. Web.

Hill, Charles, and Gareth Jones. Strategic Management: An Integrated Approach. New York: Cengage Learning, 2012. Print.

James, S. Ford Acquires Volvo Car Operations. 1999. Web.

Prokesch, S. Ford to Buy Jaguar for $2.38 Billion. 1989. Web.

Introduction

In any organization regardless of the size and/or complexity, responsibilities of employees are usually defined by their work, immediate supervisors and for managers, their subjects. These definitions are often assigned to positions in the organization but not to specific individual(s).

The best organization structure, therefore, depends on a number of factors including the job, size in terms of the required workforce, revenue, geographic expansiveness and the range of its businesses. In fact, this form of organizational structure is suited for firms that are project-driven such as construction, engineering, and technological companies.

The U.S. based Ford Motors Company is one such organization whose organizational structure takes the form of a matrix structure (Moynihan & Titley 2000, p. 66). The paper attempts to discuss how the matrix structure helps Ford Motors to achieve it strategic objectives.

Ford Motor Company: Organizational Structure

Matrix organizational structure is a combination of two or more different structures. In this structure, functional departmentalization is usually combined with products groups on a project basis. If a product group, for instance intends to develop a new product, it will get workforce from functional departments such as research, engineering, production, and marketing.

However, these personnel only work under the manager of the product group as long the project lasts. The project manager usually reports directly to the vice president and the general manager. Given that each project is potentially beneficial to the organization, the project manager draws his authority from the general manager.

The structure of the Ford Motors Company has the Chairman at the apex (Bill Ford) followed by the President-cum-CEO-cum-Director (Alan Mulally), then followed by the Executive Vice President (Lewis Booth). A host of functional heads (all titled Vice Presidents) report directly to the executive vice president. They include, VP, Product Development, VP, Purchasing, VP, Communication, among others (Ford Motorsn 2011, p.4).

As a rule in matrix structured organizations, sharing of information in Ford Motors is mandatory given that a number of people may be required to perform a given task. The company adopts the third model of matrix management, secondment, as espoused by Kenneth Knight (Knight 1977, p. 142).

In this model, employees move from functional departments into project department and back again, thus effectively belonging to either department at different times. The project manager, who is ranked equal to vice presidents, has the total responsibility and accountability for the success of the project.

On the other hand, the functional department heads are responsible for the maintenance of the technical success of the project. It is therefore, imperative that information sharing is a critical aspect of matrix structure if synergy is to be realized.

The matrix organizational structure as practiced by Ford Motors has a lot of complexity emanating from clear role definition. Due to the perennial shifting of workforce, role definition is often unclear, leaving subordinates without a clear manager. At Ford Motors, the command is usually formal and relatively centralized as one move above the hierarchy.

However, the company’s reliance on new inventions in the motor industry makes the top management organ to cede some power to the project manager in order to make critical decisions. The formal aspect of the structure, nevertheless, is exercised by keeping the project manager under the executive vice president (Knight, 1977, p. 143).

Being an engineering firm, Ford Motors is compatible with matrix organizational structure since professionals and semi-skilled employees with diverse expertise run it.

Mintzberg’s Theorem and Ford Organizational Structure

Henry Mintzberg, a management guru, argued that “Every organized human activity – from making of pottery to the placing of man on the moon – gives rise to two fundamental and opposing requirements: the division of labour into various tasks to be performed and the coordination of those tasks to accomplish the activity” (Mintzberg, 1980, p. 68).

Organizations, accordingly, have a few basic structures, which are identified by the primary organizational attributes, for example, the component parts of the organization, mechanism used for work coordination elements of organizational structure, systems of power, and the external environment.

He therefore enumerated seven basic organizational configurations as the machine, the entrepreneurial, the diversified, the professional, the missionary, the political, and the innovative. He further remarked that configuration is important for organizations to achieve stability in their internal environment by creating synergy in the work process, thus establishing a fit with the external environment (Mintzberg 1980, p.50).

Applying Mintzberg’s theorem to Ford Motors, it is evident that the machine organization and the professional organization structures are pertinent. In Ford Motors Company, the products (automobiles) manufacturing is highly standardized, the work so formalized with many routines and procedures.

Such are the characteristic of machine bureaucracy that makes relevant Mintzberg’s theorem in the company. Moreover, decision-making is centralized, albeit, little autonomy given to the project manager; and tasks often grouped by functional heads in collaboration with the project manager.

Ford’s organizational structure is vertical for the top three offices: Chairman, President, and Executive Vice President. Functional heads wield equal authority and are directly under the supervision of the executive vice president. To this extent, the company practices machine bureaucracy hence its efficiency and reliance on economies of scale for success.

Ford Motors is also a professional bureaucracy given that the larger percentage of its workforce is professional, engineers and technicians to be precise. The degree of specialization is high due to the high professionalism, and decision-making is relatively decentralized as far as the project management is concerned.

According to Mintzberg, professional bureaucracy is complex and there are a number of rules and procedures, which allows for efficiency (Mintzberg 1980, p.44). By integrating machine and professional bureaucracies in its organizational structure, Ford Motors enjoys the benefits of the two configurations brings. The structure is indeed matrix, though it has various aspects of the latter two that make it very efficient in its management.

Ford’s Structure and the Achievement of Its Goals

Ford Motors’ matrix organizational system has successfully helped the company to achieve its strategic objectives. Given that the matrix structure is useful both in the external and internal environments, the company’s customer Service Division has achieved a global operation by recruiting 12,000 personnel to serve in it 15,000 dealers.

The company had launched the “Ford 2,000” initiative at the onset of the year 1995 in order to become the world’s number one automobile company in the 21^st century. To this effect, top management became concerned with customers’ complaints on product and service delivery.

Consequently, it was decided that the horizontal alignment of the functional heads (vice presidents) could offer the best opportunity to achieve a faster, efficient, and integrated approach to customer service (Moynihan & Titley 2000, p. 66). Multi-skilled teams with focus on core processes, therefore, constituted the horizontally aligned departments.

These core processes included parts and supply logistics (where parts are obtained and shipped to dealers promptly and efficiently) technical support (technical department and updated on technical information on regular basis); vehicle service and program (gathering and cascading information about repair problems); among other processes.

Moreover, each group has its process owner whose responsibility is to ensure that teams achieve the overall objectives. Not surprisingly, the company’s Customer Service Division retains a functional structure for strategy and communication, finance, and human resources departments.

The matrix model of Ford Motors has enabled it to align its strategic objectives such as expansion in the global market, by establishing efficient management as means focus. The horizontal model used enhances flexibility and rapid response to satisfy customers’ changing needs.

It further makes every employee aware of the production and value delivery to customers. By focusing on teamwork, the structure offers employees to share responsibility, to make decisions and accountable for the results. The sum total of these activities are, therefore, end focus.

The Merits of the Four Approaches to Organizational Effectiveness

There are four approaches used to measure organizational effectiveness. They include the following: the goal attainment approach, the internal process (balance scorecard) approach, the systems resource approach and the strategic constituencies approach (Slack & Parent 2005, p. 42). In goal attainment approach, effectiveness is usually based on a company’s achievement of ends, but not means.

The primary focus when using this approach should be operational goals. The Ford Motors Company’s concern has been meeting the needs of its customers. The goals of the company’s core processes have been geared at satisfying customers’ needs and giving them value for their money. Ford has managed to attain these goals by religiously following the “Ford 200” Initiative.

The goal attainment approach enhances teamwork since for it to be used there must be consensus on the goals. It also facilitates management by objective (MBO) which is an effective way of managing departments of Ford Motors (Slack & Parent 2005, p. 42).

The systems resource output as used in measuring organizational effectiveness, focuses mainly on a company’s input, thus using open systems theory. It holds that firms do not operate in isolation; rather they develop exchange and sometimes-mutual relationship with the environment within which they operate.

The effectiveness of a firm, therefore, is determined by its ability to exploit the resources in the environment and use it for its own good and the good of the environment. In fact, the more effective companies are those that are able to extract more resource from their environments.

Ford Motors is one such organization that has gone global with its operations and has been exploiting its environment for skilled and semi-skilled labor-force, raw materials for its products, among other resources. The expansion of its environment to a global scale is an indication of proper exploitation of the resources that translate in effectiveness.

This approach has three major strengths that include treating the organization as its frame of reference, considering the company’s relationship to its environment and the approach can be used to compare organizations with different goals (Slack & Parent 2005, p. 43).

The internal process approach measures effectiveness of organizations by assessing the absence of internal strains, the integration of members into the system, the fluidity of internal functioning as characterized by trust and benevolence towards individual employees, and the flow of information, et cetera. The approach thus focuses on the throughputs found in a firm.

Balance scorecard is often used synonymously with this approach given that it also provides feedback on the internal organizational processes as well as the external repercussions with a view of improving the strategic performance. It further provides a clear direction that a firm should measure to balance its finances.

Ford Motors is utilizing this approach in the assessment of its effectiveness since the approach is holistic and is prove to give objective results. Balanced scorecard approach, in fact, assesses a company from four perspectives: learning and growth, customer, business process, and financial. It develops metrics, gather data, and analyze it based on the mentioned perspectives (Slack & Parent 2005, p. 44).

The strategic constituencies approach is akin to the systems resource approach, though it emphasizes on the actions of the stakeholders in the acquisition of the resources from the environment. It considers the fact that managers have to work toward achieving several goals concurrently. They strive to meet the interest of several constituents who sway the company’s capacity to accomplish its goals.

As such, the selected goal(s) is valuable, where each goal endeavors to favor one constituent over another. Thus, organizations are political and must respond to the various stakes of their constituents (Slack & Parent 2005, p. 48).

The merits of this approach are that it views effectiveness as a multidimensional construct that takes into account internal and external factors of an organization. Ford Motors engages in social corporate activities in all its branches, which is another merit of the approach. The company, in so doing, expresses its moral and ethical obligation to the community in which it trades.

Limitations of Matrix Organizational Structure in Ford Motors

The limitation of matrix structure is always it costs, which is expansive given the complex nature of reporting requirement. Ford Motors Company has stuck with the structure for a long time since the days of Henry Ford, the founder of the company, though many modifications have been made to address the problem of high maintenance cost.

Workers, who did not have a clear picture of the chain of command in the structure, thus making information flow sometimes difficult, incurred these costs. For example, a functional head could tell an employee below him/her to undertake a certain task then the project manager tells him/her a different thing. The company managed to address, but not fully, the problem of employees’ dissatisfaction.

Currently, the company still faces the same problem, though in lower scale due to decentralization of authority that was given to the project manager. Moreover, the horizontal model that the company adopted at departmental levels has enabled employees to work in teams and create the necessity of information sharing.

To further address the issue of ambiguity of roles and unclear chain of command, Ford Motors often integrates the management structure in the company as one face of its larger plan. When a new product is to be developed, for example, the project management department is given the mandate to pick workers from other departments who are instructed to report to the project boss until the project is completed.

Conclusion

Ford Motors Company uses matrix organizational structure that enables it to easily coordinate and operationalize its vast activities. The company has a vertical management structure from the chairperson, the president, to the executive vice president then followed by a horizontal model consisting of departmental heads known as vice presidents.

The project manager who is crucial for the development of new products is given a considerable authority by the executive vice president over the workers from other departments. In Ford Motors, the application of Mintzberg’s theorem takes the form of professional bureaucracy given that it is engineers and technicians run the company.

Similarly, the machine bureaucracy is also incorporated into the structure owing to the product that the company produces. Finally, measuring effectiveness of the company is done using different approaches, namely: goal attainment, balanced scorecard, systems resources, and strategic constituencies.

List of References

Ford Motors, (2011). The official board. Web.

Knight, K. (1977) Matrix management. New York, PBI.

Mintzberg, H. (1980) The nature of managerial work, Sacramento, Prentice-Hall.

Moynihan, D. & Titley, B. (2000) Intermediate business, New York, Oxford University Press.

Slack, T. & Parent, M. (2005) Understanding Sport Organizations: The application of organization theory. New York, NY: Human Kinetics.

Executive Summary

The main objective of this assessment is to accomplish a detailed marketing plan of the Ford Motor Company within the perspective of the international automotive industry. In doing so, the paper would focus on epitomizing an appropriate company profile of Ford Motor, considering the financial overview of the company, formulating a SWOT Analysis, reviewing the current marketing situation of Ford along with a BCG matrix, and creating a comprehensive competitive review of the industry.

Furthermore, the paper would illustrate the potential marketing strategies of the company with consideration of the marketing research, brand positioning strategy, brand-positioning map, target market, and marketing mix. To conclude, the appraisal shall focus on assembling applicable recommendations together with an apposite conclusion.

Introduction

Presently, globalization has transformed the pace of the entire global commercial structure and the business environment influencing every sphere of the international trading issues both optimistically and pessimistically. The positive affects of globalization include the fact that together with many other industries, the automobile industry has also become open to the whole world and this has resulted in the business of Ford Motor to reach the market to a far-reaching level.

Widely extensive international market means increasing sales and consecutively, higher annual profit margins for the motor company. However, despite of so many benefits that Ford Motor is receiving, a major issue that remains with the impact of globalization on the company is that the firm now requires a quite high amount of expenditure on carrying out its marketing activities.

Company Profile

Bloomberg Businessweek suggested that Ford Motor Company, one of the globe’s biggest vehicle manufacturers, started its journey in the twentieth century with brands that comprise of Ford, Lincoln, and Mercury (1).

It is important to note that Ford runs in two main parts, namely, Automotive and Financial Services – the Automotive sector consist operations of North America, South America, Europe, Asia Pacific Africa and Volvo; on the other hand, the Financial services consist operations of Ford Motor Credit Company and Other Financial Services.

Ford is a multibillion-dollar automobile manufacturing business based in the United States with excellent trends as one of the largest industry players, which provides quality products and services to customers all throughout the globe; the company has over 5,000 Dealer Communication Network, such as FordStar, a largest interactive distance-training network in the world.

Financial Overview

Being such a giant player in the global automotive industry, Ford Motors possess a strong financial position enough well built to compete with the market leaders of the industry.

According to Bloomberg Businessweek (1), year over year, Ford Motor has observed revenues shrivel from $129.2 billion to $105.9 billion, although it was capable to raise net income from $2.7 billion to $14.8 billion; reduction in percentage of sales, general, and administrative costs from 16.58-12.46 percent was a key-component in the bottom line growth in the face of falling revenues.

The following table shows the five years financial review of the motor company for a better understanding of the Ford’s financial position:

Table 1: Financial Overview of Ford Motors.

Source: Self-generated from Bloomberg Businessweek (1).

On the other hand, increasing rates of oil and gasoline prices, taxation rates, fluctuated global demand for manufactured car, and rising competitive pressure through domestic production intensity, recession’s effects, and the economic conditions of the automotive industry as a whole are notable to put external impacts over the financial position of Ford Motors.

During the global financial downturn, the company suffered a loss of $6.3bn, and carried out 2600 job cuts; the company cut salaried employment costs by 10 percent by lowering compensations of the white-collar employees and sold off Jaguar and Land Rover for $2.bn to Tata Motors.

According to NASDAQ (1), such adverse impacts of the recession were clearly visible in the company’s revenue and consequently on its share prices; the following figure (a five years stock price graph) gives an apparent idea of how the external economic environment of the industry affected the stock prices of the company in 2008 to 2009 period:

SWOT Analysis of Ford Motors

A brief account of the SWOT analysis of this automotive company has illustrated in figure 1:

Strengths:

• Brand awareness
• Financial capability
• Experience
• Promotion
• Leadership
• Diversified product line

Weaknesses:

• Increase production and operating costs
• Lack of experience in new market
• Rules and regulation

Opportunities:

• To be market leader in automobile industry
• Increase Interest
• Development of e-commerce

Threat:

• Global financial Crisis
• Competitors
• Similar innovative idea
• Cultural background

Strengths

Ford (4) suggests that as response to the environmental awareness, Ford Motors has introduced safe, green, and quality vehicles to compete in the market, which is a major strength of the company.

This effort has resulted in the company to achieve the Eco-efficiency Award 2007 for its Dagenham-Engine-Plant for lowering ecological influence of current business-operations and creating an innovative engine-design through the finest in-class environmental-footprint, which cut waste-outputs and saved £3,385,600; the following figure shows the entire process through which Ford succeeded to be eco-efficient:

Eco-Efficiency Achievement Project

• Ford has contributed the automobile industry with its product innovation; fuel efficiency, labour relations, and supply chain management are most imperative factors to reformation and ensuring future success of the company;
• To ensure customers enhanced loyalty and to retain them, Ford has involved keeping its effort on fuel-efficient vehicles by R&D incentives with $12 billion annually and as consequence Ford has including Aston Martin, Jaguar, Land Rover, Volvo in its brand portfolio to capture the after market business in difficult global business environment;
• Along with the excellence of product design and development with convenience and comfort, Ford has now available in excellent vehicles ranges all over the globe while it maintaining continuous improvements in engineering efficiency to meet up complexity in engines, transmissions, vehicle platforms as well as security measures;
• Ford has derived to achieving leadership in quality and fuel efficiency to public by providing safe testing, comfort design and improved technology and at the same time it has aliened to improving customer care by using web based tools and devices and direct telephone calls according to customers’ expectations.

Weaknesses

• Due to absence of well-structured roads and fuel efficiencies in the less developed countries, Ford has been proving lower quality vehicles for those countries but such strategies are hampering the image of Ford in international market;
• In the less developed countries, customers prefer low cost carrier with high local content, but Ford is refusing to address the needs of such market with their local design, reluctant attitude to the market is reducing the market area of the company.

Opportunities

• According to Ford (63), it has enough financial capabilities to joint venture with other renowned automobile companies to expand its business operation all over the world;
• Financial report of the company forecasted the last five year’s financial data, which demonstrates that its annual profit has improved from the last fiscal years;
• Ford has the opportunity to become highly diversified company by introducing new products in this competitive market.

Threats

• Ford motor has faced macro economic challenges because of global financial meltdown and the business operation negatively influenced last fiscal year as the purchasing power of the customer has decreased. According the annual report of Ford Motor, this company lost its market leading position for the first time since 1979 for the global recession though Ford would be able to rescue its business from further influence by adopting proper marketing plan;
• Competitors like Toyota, General Motor, and Honda are the major threat for the Ford Motor;
• Other possible risks for the company are higher receivable delinquencies and bad debts, delays, or cancellations of sale orders;
• Furthermore, other external aspects create disturbance to get competitive advantages, for example, frozen of credit market, investment, interest rate, and cyclical needs in market, and volatile price of raw materials.
• In addition, some multinational companies (Enron, WorldCom, and Kelong) have collapsed because of corruption involving internal management; so, it is a major challenging issue for Ford to maintain good corporate governance system.

BCG Matrix

The BCG matrix is a portfolio planning process to measure Ford’s market situation in terms of relative market growth rate as well as relative market share –

• Star: Due to high- growth and high- share, Ford occupied this segment before global financial crisis but it failed to hold its reputation;
• Cash cow: ford is in this segment as this area point out the low growth with high- share business; this has illustrated in figure 4 below;
• Dog: Ford do not occupy this segment as it demonstrates low- growth with low- share of business and that requires large investment for further development;

• Question mark: the competitors of Ford hold the position of Question mark in global economic downturn as they experienced favorable growth rate in few countries of the world.

Current Marketing Situation of Ford

Currently, the market situation of the company is not at all in a very good position; this has occurred as Ford Motors suffered significantly from the recession throughout the FY 2009; according to the company’s annual report, the company is at present implementing several deliberated policies to recover from the financial losses in order to improve its current market situation.

This deliberated policies and the methods to execute them have outlined below with the intention of finding out the possible ways through which the firm can recover and enhance its market situation:

Table 2: Deliberated Policies to Improve Current Market Situation.

Competitive Review

The international motor vehicle industry is exceedingly competitive owing to the existence of a large a number of car producers along with their plentiful offerings; in addition, 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. The table below outlines the major competitors of the industry as well as their country of origin:

Table 3: Major Competitors of the Automotive Industry.

Threats from new entrants are quite 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, 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. In recent times, Ford motors are facing some threats from the emerging markets under its worldwide operations from some new entrants; this is especially from the densely populated markets like China and India- the company is experiencing huge competitive pressure from new domestic car producers because of governmental preferences to safeguard infant industries and the incentives provided to them.

Due to the presence of innumerable automobile producers, the switching 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 the 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 of companies like BMW or Mercedes as their prices are quite higher than others.

Therefore, the preferences of the middle-income earners remain with companies like Ford. Individual consumers, corporations, rental car organizations, and government fleet combine the buyers group; after the financial downturn, the purchasers seemed to be influencing the car industry at a higher pace as most of the customer of Ford concentrated more on price rather than quality.

The vehicles of Ford requires to contend with several s with similar qualities from 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 VolvoC70 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.

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; in October 2006, at US, Toyota’s hybrid sales were 77%, Honda’s were 14%, and Ford’s were merely 9%:

Alternative products create a big difficulty for Ford ensuing to lower annual sales; the figure below shows the yearly sales statistics of hybrid cars in the US market from 1999 to 2006 period; it is perceptible that the sale of Ford Escape is far below its competitors:

Apart from different motor vehicles from other direct competitors, Ford has to face stiff competition from some other alternative transportations like public transports, buses, railways, bicycles etc; these types of substitutes are often chosen by people because of their easy accessibility and cheapness.

The customers now prefer these transports rather than private transportations because they are still observing lower levels of income from the recession period onwards. However, public income has expected to be recovering along with the recovery of the economic downturn.

Marketing Strategy

Branding and Brand Positioning Strategy

Brand positioning is a crucial feature of a company’s strategy, which shows its main advantages in association with competitive offerings.

Owing to its well-built brand awareness, Ford Motor will trail for “more for more” or “more for same” strategy because it is undeniably a quite prominent firm with strong financial position and large organizational structure. The company has been following this strategy for a long period of time through which it has served billions of people worldwide and has gained wonderful customer feedback and satisfaction.

Brand Positioning Map of Ford Motor

Ford Motors is one of the major players of the international automotive industry; consequently, the brand positioning of the company will look quite impressive like the once illustrated in figure 8. Even though there are many established brands in the entire industry, the brand-positioning map of Ford would still occupy one of the foremost parts of the market.

In the middle of some other car manufacturers positioned in the market, Toyota Motor Corporation, General Motors Corporation, Honda Motor Co, Ltd, Chrysler Group LLC, Hyundai Motor, Volkswagen, BMW, Nissan, Mazda, Mitsubishi, Fiat, Mercedes, and Skoda are significant ones.

Marketing Research

Ford carries out its marketing research through internet or through crucial research from public by refining and creating new data gathering processes that influence product development and marketing campaigns; the firm engages customers through moderated clinics and through one-on-one interviews before automobiles reach market; it mines the internet for consumer comments in auto sites, chat rooms, and blogs.

Marketing decisions at Ford usually drives more by substantial cost diminutions; however, this practice is changing gradually and the transformation has been tremendously positive as per the top management of the company; Ford executives argue that they are truly interested in consumer feedback, and the evidence is in the car-models shown at Showrooms.

Ford goes through consumer engagement events and expends time with consumers in their residences to recognize how they use their cars; this allows the company to identify the consumer needs; in addition, as automobile sections get smaller and more assorted, Ford uses marketing research and sees how far to push design concepts and distinctive features.

Marketing Mix

• Product: One of the key competencies of Ford is that it possesses a widely diversified product line of automobiles that helps the company to reach a large part of the global automotive sector by generating good revenues; to support this fact; the following table outlines a brief account of the company’s most popular product ranges:

Table 4: – Diversified Product Line of Ford Motor

Price: Ford set the prices of the products by keeping in mind about the quality and production costs of the cars. It also considers the income levels of its targeted customers.

Place: Ford has hundreds of showrooms throughout the world where it does its placements.

Promotion: This vehicle-manufacturing firm is recently undertaking several strategic approaches to increase its sales-configuration; its advertising strategies are now concentrating on gratifying and impressing the people who put across abhorrence over Ford’s cars.

Its latest shove for inducing the customers has designed for its critics; the firm provided hundred customers a car for a period of 6 months and requested them to accomplish diverse journeys every month; at the journeys, “agents” used their Fiestas to distribute Meals on Wheels along with many other offering for the customers like treats to the National Guard.

The customers quested for exiting-adventures, or even for mere entertainment within the activities; in addition, after all these, Ford marketed the stories of those missions on You Tube, Flickr, Facebook, and Twitter that contributed significantly over Ford’s marketing activities.The promotional strategy of the Ford varies accordingly with changing consumer trends, demands, and other external circumstances.

The company plans the promotional packages depending on the factors such as different seasons, New Year festivals, Christmas Eve, occasions like Valentines Day, Easter Sunday, Mother’s Day, Father’s Day, Halloween, etc. The reason for these strategies lies behind the fact that most of the customer groups of Ford will be having a fluctuation in demand of the products offered by the company depending on these specific periods of the year. The customers more often like to buy more private-cars during festive events.

During New Year, Christmas, Mother’s day, Father’s Day the number of people visiting the Ford Showroom raises for which reason depending on the type of festival or occasion, Ford sets special offers; for instance, special promotional packages that include discount-vouchers, money-off coupon codes for great discounts, and many other packages for clients as well.

These offers will help the company to gain competitive advantage over the competitors by augmenting sales during these special periods of the year. This strategy benefits the company by generating an interest among the new Ford customers for being loyal in order to gain full advantage of the promotional packages, which in turn, would raise the profit margins of the company together with the advertising campaigns.

Recommendation

As the car manufacturing companies are showing positive attitude to save the world from global warming, they are producing environment friendly products. The competition is becoming high day-by-day among the companies; therefore, Ford Motor should launch new environment friendly brands considering purchasing power and attitude of the customer.

To hold its existing global market share, the company needs to amplify its annual budget for R&D to introduce quality products and develop technology. The rationale of this recommendation is the competitors of Ford offer differentiated environment friendly products at comparatively low price.

As Ford has corporate social responsibility, it should consider safety issue more carefully; otherwise, brand image of the company would be destroyed. As a result, Ford always should remember the consequence of Ford Pinto the oldest model of the company, which was the cause of the accidental death of several people. That model also collapsed only for the safety problem; so, it should offer quality products to protect the passenger from accidents, save the money of customers, and reduce other problems.

Conclusion

Being one of the most popular brands in world, Ford has always concentrated on serving its customers with highest level of satisfaction. In so doing, it has undertaken countless marketing strategies throughout its history. Additionally, during recession, due to financial-losses, it fell behind in terms of marketing activities. However, Ford is recovering from this by undertaking numerous development-policies through which it has expected to lead the market in future.

Works Cited

Bloomberg Businessweek. FORD MOTOR CO (F:New York). 2010. Web.

Ford. Annual Report 2009: One Ford. (2009). Web.

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

The organization in the focus of this research is Ford Motor Company. Founded in 1903, the company has been a pioneer in global industry (“Our company,” 2018). The company is concerned about making their “cars better, our employees happier and our planet a better place to be” (“Our company,” 2018, para. 2). Since high-quality vehicles are needed all over the world, Ford is actively expanding to the word’s markets. The company builds its work to follow the vision, which is “People working together as a lean, global enterprise to make people’s lives better through automotive and mobility leadership” (“Our company,” 2018, para. 4).

Ford is a company that demonstrates a steady increase in revenue throughout the majority of the last ten years. There was a dramatic drop from $143,584 million in 2008 to $115,125 in 2009, but the company overcame the crisis and finished 2011 with $128,122 million revenue (“Ford’s revenue from FY 2008 to FY 2017 (in million U.S. dollars),” 2018). As of 2017, the revenue of the Ford Motor Company was $156,776 million. Still, the company’s focus is not only making profit. Ford Motor Company is demonstrates climate commitment by taking responsibility for reducing greenhouse gas emissions through developing hybrid and electric vehicles (“Sustainability report 2017-2018,” 2018).

The company is highly concerned by constructing smart vehicles and conduct research about self-driving vehicles, which are important for building a city of tomorrow. The company provides responsible and transparent governance through clear policies and strategies. The most significant aspects for the company are ethical business practices, reduction of carbon footprint and fuel economy, product quality and safety and the resulting customer satisfaction, effective supply chain management, and government regulation and policy. This paper analyses the major aspects of the Ford Motor Company’s performance based on its financial statement, provides pro forma financial statement, conducts a ratio analysis, and evaluates the soundness of the company’s financial policies.

Financial Statement Review

Financial statement of the Ford Motor Company are presented in its annual report. The company closed 2017 financial year with 2,566 thousand of units sold to retailers in the United States and 4,041 thousand sold in other markets throughout the world (Ford Motor Company, 2018). Total revenues for year 2017 are $156,776 million, which indicates an increase in revenues compared to $151,800 million in 2016. Net income of the company increased significantly from $4,607 million in 2016 to $7,628 million in 2017 (Ford Motor Company, 2018).

The major share of income comes from the company’s automotive segment while the financial services segment makes up about one quarter of the company’s net income. Costs and expenses of the company also increased. Thus, cost of sales in 2017 was $131,332 million while in 2016 this indicator was $126,193 million (Ford Motor Company, 2018). At the same time, interest expense on automotive debt grew up as well and was $1.133 million in 2017. An increase was observed in basic income per share, which changed from $1.16 million in 2016 to $1.91 million in 2017.

An increase was recorded in the company’s assets, liabilities, and equity. For example, total assets of the Ford Motor Company grew up by almost $200 million in 2017 compared to 2016 from $237,951 million to $257,808 million respectively (Ford Motor Company, 2018). Company’s total liabilities boosted from $208,668 million in 2016 to $222,792 million in 2017, mainly due to the growth of financial services long-term debt. Total equity increases as well. While capital in excess of par value of stock did not change much, retained earnings grew up, thus leading to total equity growth from $29,170 million in 2016 to $34,890 million in 2017 (Ford Motor Company, 2018). Moreover, the company observed a slight increase in net property value.

Pro Forma Financial Statements

Pro forma financial statements are the tools that allow forecasting the impact that change in the company’s policy can have on its financial situation (Byrd, Hickman, & McPherson, 2013). In this paper, the Ford Motor Company 2017 Annual Report will be used to construct a pro forma income statement for 2018 and 2019. It will be grounded on some assumptions about how the business performed during 2016 and 2017. The historical income statements for the company can be found in Table 1 and Table 2.

Table 1. Ford Motor Company and Subsidiaries Consolidated Income Statement (in millions, except per share amounts).

Table 2. Consolidated Statement of Comprehensive Income (in millions).

Based on the data found in the report, the assumptions for 2018 and 2019 are as follows.

• Sales will increase by 10% in 2018 and 2019 compared to 2017 levels.
• COGS and SG&A will preserve the average percent from sales similar to what they were for the last two years.
• The tax rate is expected to be 25%.
• Dividend payout will remain at the average level of years 2016 and 2017.

According to the assumptions mentioned above, sales are expected to increase by 10% in 2018. Therefore, they will make 1.10 × $156,776 = $172,454 in 2018. The same growth is likely to be observed in 2019. Considering a 10% increase, sales will make 1.10 × $172,454 = $189,699 in 2019.

Another indicator of interest is the cost of goods sold (COGS). It is the accumulated total of all costs used to create a product or service, which has been sold. A manufacturer is more likely to use the term COGS while retailers operate a term “cost of sales” more frequently. In the report of the Ford Motor Company for 2017, the term cost of sales is mentioned. Thus, in 2016 and 2017, cost of sales were 83,1% and 83,8% respectively. Assume that cost of sales will be the average of 83,1 and 83,8, which is 83,5%, in 2018 and in 2019.

Gross margin can be obtained subtracting cost of sales from revenue. SG&A expense was 7,2% of sales in 2016 and 7,4% in 2017, so the average of 7,3% percent of sales can be used in 2018 and 2019. Depreciation expense can be found in Table 3.

Table 3. Depreciation Expense.

EBIT = Gross margin – SG&A expense – Depreciation expense.

Interest expense can be found in Table 1.

Taxable income = EBIT – Interest expense.

Net income can be found in Table 1. Other results can be obtained by computing taxes at 25% and subtracting them from taxable income to get net income. Thus, it can be assumed that the percent was probably not 25%.

It is necessary to subtract dividends from net income to identify how much money will be reinvested in the firm by adding it to retained earnings on the balance sheet. The pro forma income statement for Ford Motor Company can be found in Table 4.

Table 4. Pro Forma Income Statement.

Table 5. Ford Motor Company and Subsidiaries Consolidated Balance Sheet (in millions).

The assumptions for 2018 and 2019 are that common stock will not change. To complete the pro forma balance sheet, it is necessary to count the Cash per cent of sales (Revenue for 2016 and 2017) from Table 1 (Income statement). It was 10,5% in 2016 and 11,8% in 2017, so it can be assumed that the average for 2018 and 2019 will be 11,2%.

Since in the balance sheet present in the Ford Motor Company 2017 Annual Report does not follow the scheme of a classical balance sheet, there are some different positions. Therefore, there are no rows that correspond to traditional item of “Plant, Properties & Equipment (PP&E)”. The data that reflect “Net PP&E” are in the table 6.

Table 6. Net property of The Ford Motor Company (in millions).

Since the concept of “Net PP&E” is different from “Plant, Properties & Equipment (PP&E)” and “Accumulated depreciation” (which are found in table 3), it is possible to solve an inverse problem and calculate the value of “Plant, Properties & Equipment (PP&E)”:

PP&E = Net PP&E + Accumulated depreciation.

“Total assets” for years 2016 and 2017 are given in Table 5. Based on these data, pro forma total assets can be provided for years 2018 and 2019. Analogously, the Ford Motor Company 2017 Annual Report has no data for “Bank loan” and “Other CL”, but there are “Total current liabilities”, which is a similar concept. Consequently, it is possible to predict liabilities for years 2018 and 2019. Retained earnings are the values of retained earnings in 2017 plus retained earnings from Pro forma income statement (table 4) for 2018. Similarly, the respective value for 2019 is calculated. All of the mentioned data are included in pro forma balance sheet, which can be found in Table 7.

Table 7. Pro Forma Balance Sheet.

A Ratio Analysis for the Last Fiscal Year

Ratio analysis is an integral component of the company’s financial management. It is grounded on data included in financial statements of an organization and allows evaluating diverse aspects of operation and performance of a company. Ratio analysis comprises such aspects as liquidity ratios, financial leverage, asset management, profitability ratios, market value, and return on equity.

Analyzing the Liquidity Ratios

The current ratio

The current ratio measures how many times the company can cover its own current liabilities. The quick ratio measures how many times the company can cover current liabilities without selling any inventory and so is a more exact measure of liquidity. The current ratio for the Ford Motor Company for 2018 will be calculated in the following way. First of all, the Total Current Assets are taken which make 125,719 (see Table 7) and divided by the Total Current Liabilities (according to Table 7, Total Current Liabilities = 103,312).

Current Ratio = 125,719/103,312 = 1.22X

It means that the company can pay for its current liabilities 1.22 times over. Analogously, the current ratio for 2019 is calculated:

Current Ratio = 138,291/113,630 = 1.22X

It means that in 2019, the company can also pay for its current liabilities 1.22 times over. A quick analysis of the current ratio shows that the company’s liquidity will be the same in at least two subsequent years.

The quick ratio

In order to calculate the quick ratio, the Total Current Ratio for 2018 is taken and Inventory point is subtracted out. After that, the results divided by Total Current Liabilities. In the Ford Motor Company 2017 Annual Report, there is no information containing proper data on inventory or property, plant, and equipment. Therefore, the “PP&E” was calculated and can be used for defining quick ratio. Thus, quick ratio for 2018 is as follows:

Quick Ratio = 125,719-42,768/103,312 = 0.803X.

For 2019, the calculation is the same and quick ration is also 0.803X. Similarly to the current ratio, the quick ratio does not change. Thus, the company’s liquidity will remain at the same level. Usually, a company has two sources of current liabilities such as accounts payable and notes payable. Also, companies have bills that they owe to their suppliers (these are accounts payable). Moreover, nearly every company has a bank loan or an alternative source of financing. Since there is no information about the frequency of payments on the note, there is no opportunity to include them in the analysis.

Financial Leverage

Financial leverage is an indicator which presents the degree of fixed-income securities application by a company. These securities include debt and preferred equity. Financial leverage increases in case a company is using more debt financing. A high degree of financial leverage results in high interest payments, which, in turn, have a negative effect on the company’s bottom-line earnings per share.

Ford Credit plans its managed leverage grounded on prevailing market conditions and with the consideration of the risk characteristics of its business. As of December 31, 2017, Ford Credit’s financial statement leverage was 8.7:1, and managed leverage was 8.0:1. Ford Credit targets managed leverage in the range of 8:1 to 9:1 (See Figure 1).

Analyzing the Asset Management Ratios (Accounts Receivable)

Asset management ratios make another group of financial ratios that should be considered for analysis. They provide the business owner with information about the efficiency of their assets utilization to generate sales. In other words, these ratios indicate how successfully a company is using its assets to generate revenues.

The receivable turnover ratio

This ratio is also called debtors turnover ratio or accounts receivable turnover ratio and illustrates the velocity of an organization’s debt collection and the number of times average receivables are turned over during a year. This ratio influences the tempo with which a company achieves outstanding cash balances collected from its customers within an accounting period. This indicator is crucial for company’s financial and operational performance. Moreover, it can be used to determine any complications with collecting sales made on credit that a company has.

Receivables Turnover = Credit Sales/Accounts Receivable

For years 2018 and 2019, the result is 3,135. It means that all accounts receivable are cleaned up (paid off) 3,135 times.

Analyzing the Profitability Ratios

The last group of financial ratios that is in focus of business owners is the profitability ratios. In fact, it summarizes the ratios of 13 ratio groups. They indicate success in such aspects of a company’s performance as cost control, efficient use of assets, and debt management, which are three vital areas of any business.

Net profit margin

The net profit margin is a measurement of contribution that every dollar of sales makes to profit and how much of this amount is used to cover expenses. For example, in a company with a net profit margin of 5%, 5 cents of every dollar made on sales go to profit and 95 cents go to expenses. For the Ford Motor Company, the net profit margin in 2018 is as follows:

Net Profit Margin = Net Income/Sales Revenue = 6,855/172,454 = 4%

For 2019, the net profit margin value is the same. In 2016, the net profit margin was 4.5%, and in 2017 it was 3,7%. Therefore, the company observed a decrease after 2016, and an increase in their net profit margin is expected after 2017. It is evident that their sales increased while their cost of goods sold fell before 2018, which led to the growth of net profit margin.

Return on assets

The return on assets ratio, which is also called return on investment, represents the company’s asset base as well as the type of return it receives on the investment in its assets. It is better to consider the total asset turnover ratio and the return on asset ratio together. In case total asset turnover is low, the return on assets is expected to be low as well due to low efficiency of assets’ utilization by a company.

Another approach to study the return on assets is in the context of the Dupont method of financial analysis. This approach to analysis reveals the picture of return on assets in the context of both the net profit margin and the total asset turnover ratio. To calculate the Return on Assets (ROA) ratio for The Ford Motor Company for 2018, the formula is as follows:

Return on Assets = Net Income/Total Assets = 6,855/276,957 = 2.5%

For year 2019, the return on assets is the same. For two previous years, ROA2016 = 2,9% and ROA2017 = 2,3%. Since for 2018 (and 2019), the ROA is 2,5%, it is possible to state that the decreased (after 2016) and then increased return on assets in 2018 reflect the growth of sales, reduction of costs, and significantly higher net income for that year.

Return on Equity Calculation

Return on Equity

The return on equity ratio (ROE) is of high interest to shareholders or investors of a company. This ratio informs the business owner as well as the investors about the amount of income per dollar of their investment the business under analysis is earning. This ratio can be also discovered by applying the Dupont method of financial ratio analysis. For the Ford Motor Company, return on equity for 2017 was as follows:

Return on Equity = Net Income/Shareholder’s Equity,

Shareholders’ equity = Total assets – Total liabilities.

The data and results are in the table 8.

Table 7. ROE for the Ford Motor Company.

In year 2016, ROE was 4,6% while in 2017 ROE = 3,6%. According to the calculations, ROE is 3,9% for 2018. One reason for the increased return on equity was an increase in net income. In case of applying the return on equity ratio analysis, the business owner should also consider the volume of financing by means of debt and how much of the company is financed using equity.

Management Performance Assessment

One of the approaches to assess management performance is to calculate Economic Value Added (EVA). EVA, or economic profit, is the difference between revenues and costs, where costs include not only expenses, but also the cost of capital.

• EVA = NOPAT – WACC*(Total assets – Current liability)

or

• Economic profit = NOPAT – Cost of capital × Invested capital

The data for 2016 and 2017 can be found in the 2017 Annual Report (Ford Motor Company, 2018). Using additional information about the company’s EVA, the data are expanded to cover years 2018 and 2019 (“Ford Motor Co. (F),” 2018). The results are provided in Table 8.

Table 8. EVA for the Ford Motor Company.

Evaluation of the Soundness of the Company’s Financial Policies

The sustainable development of the Ford Motor Company is a result of its sound financial policies. Thus, the company provided active investment policy to expand to distant markets such as South American and Asian Pacific. As for the capital structure, the company has a substantial debt, but still remains a leader in the industry and manages to increase the revenue every year. The analysis of financial leverage of the company proves that Ford manages maintaining its leverage within the determined limits. The company’s dividend policy is also sustainable with preserved levels of dividends paid throughout the year.

Synopsis of Findings

Summarizing, it should be mentioned that the Ford Motor Company is a firm that demonstrates steady growth and spreads to international markets. Its annual report and pro forma calculations prove that the company is on the right way to achieving sustainability and increasing profit. Thus, it is expected that sales will grow by 10% during two subsequent years and the company will preserve the same rate of dividend payout.

The cost of sales is also likely to increase in 2018 and 2019. Depreciation and amortization expenses are also the indicators that grow, which can demand more investment in equipment and innovation. Still, the increasing revenue of the company allows investing in its own development and proves that Ford is developing. On the whole, the analysis of the Ford Motor Company financial statements provides evidence for its success and it can be recommended to purchase stock from this company.

References

Byrd, J., Hickman, K., & McPherson, M. (2013). Managerial finance. San Diego, CA: Bridgepont Education.

Ford Motor Co. (F). (2018). Web.

Ford’s revenue from FY 2008 to FY 2017 (in million U.S. dollars). (2018). Web.

Ford Motor Company. (2018). 2017 annual report. Web.

Key performance data. (2018). Web.

Our company. (2018). Web.

Sustainability report 2017-2018. (2018). Web.