Ford Motor Company: Redefining Strategies

Introduction

The business-level strategy comprises of the business actions aimed at providing value to customers; the deployment of the business-level strategies takes place within the scope of particular individual markets for the company products. This paper discusses the business-level strategies deployed by Ford Motors and how the company’s values can be better linked in order to create value for the company, and how Ford Motors can place itself in terms of the five forces of competition.

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Ford’s business-level strategy and how the company’s value-chain activities can be better linked to create value for the company

The business-level strategy deployed by Ford Motors is the cost leadership strategy, which puts emphasis on operating at lower costs, but not essentially offering the lowest prices in the market (Haines 2004). Therefore, a firm can use such a position to reduce its prices in order to increase its market share or maintain the current prices and increase its revenue per unit item compared to its competitors. The principal idea of the low-cost strategy is that cost and prices are not dependent, and the strategy puts a lot more emphasis on costs to achieve a status that it can use to foster competitive advantage or use lower costs to increase its profitability (Haines 2004). A cost leadership strategy is effective only if other competitors in the motor industry cannot imitate it (Hill and Cronk 2010). The company is deploying strategies to significantly reduce its operational costs, which is a critical success factor for the business. This means that the firm has to make effective use of the resources at its disposal compared to its major competitors in the motor industry (Ford Motors 2011). As a result, Ford Motors is trying to retain its brand name in the context of American cars without having to necessarily lose its value because of lower economic costs. In fact, this should be used to develop a sustainable competitive advantage and enhance the profitability of the company (Drucker 2007).

There are various approaches through which the company can develop its value-chain activities towards value creation for the company. The company aims at improving the environment through the use of an efficient manufacturing strategy, reducing the greenhouse emissions of its automobiles, designing automobiles that can last longer, and using recycled materials during manufacturing. From a social perspective, the company aims at strengthening the communities that it undertakes its operations as part of its corporate social responsibility (Goldsmith & Hu-Chan 2003). Ford Motors also aims at enlarging its connection with the communities as part of its value-chain activities. From an economic perspective, the company aims at improving its capability to adapt and effectively address the diverse challenges at each phase, meet the needs of its customers and the prospects of its stakeholders (Hill & Cronk 2010).

How Ford Motors Company can place itself successfully in terms of the five forces of competition

The five forces of competition in a market comprise the threats imposed by new entrants, rivalry, buyer power, the threat imposed by substitutes, and supplier power. It is important to evaluate the five forces of competition critically in order to determine where Ford Motors can position itself successfully. Threats of new entrants and potential entry barriers are likely to tighten the competition. In the motor industry, the threat of new entrants is relatively low, implying that competing successfully in the motor industry requires a firm to accomplish economies of scale (Haines 2004). This means that the company has to operate at a Minimum Efficient Scale, which denotes a production level that is most efficient. With respect to supplier power, it is arguably evident that the motor industry needs a continuous supply of raw material, labor, and critical components (Ford Motors 2011). This denotes the significance of the relationship between the buyer and the supplier in the context of the industry and the firms that supply the required raw materials used for production. Powerful suppliers are likely to influence a production industry through the high price of the raw material (Goldsmith & Hu-Chan 2003).

Owing to the diverse raw materials requirements in motor vehicle production, the bargaining power of the suppliers is significantly reduced. In addition, there are numerous suppliers meaning that the firm can switch suppliers in cases of inconveniences. Regarding the buyer power, it denotes the influence that the customers can impose on a production industry. The bargaining power of the motor industry is strong owing to the fact that the company significantly relies on its customers for business continuity (Peng 2008). This is because almost all the company’s output is bought by the customers, and there is a risk of losing the customers to a potential competitor in case their needs are not taken into consideration. The threat imposed by substitute products in the motor industry is small. In addition, the substitutes such as bikes, walking, and trains do not offer the same level of efficiency offered by motor vehicles (Drucker 2007). The rivalry is a common occurrence in the automobile industry, with the various companies deploying different strategies to meet the needs of the customers. Aspects such as price, value, fuel consumption, and efficiency are some of the factors that buyers take into account when considering a purchase. An empirical analysis of the above reveals that the Ford Motors Company needs to position itself in the force of buyer power; this implies that the company must establish and maintain high levels of trust from its customers. In addition, the firm should adopt strategies aimed at designing vehicles that are fuel-efficient and mileage savers, which will impose repetitive buyers who can subsequently become advocates for their products in the motor industry (Drucker 2007).

Ways that the company can effectively manage its customer relationships to increase strategic competitiveness

It is essential for the company to establish an on-going channel of communication with its customers in order to continually determine their needs and preferences and then tailor their marketing communications strategies to meet the outlined needs and preferences. Long-term relationships between the firm and its customers can be achieved using customer loyalty, which is a vital tool for marketing communications. The perception that consumers can be constantly moved along all the loyalty levels can be achieved using the various integrated marketing communications techniques. The underlying argument is that customers normally develop loyalty to a brand that has some sort of meaning to them with respect to the product, service, or the experience after using the product or service (Duane & Hoskisson 2008).

Another strategy that can be used to build long term relationships with the customers includes customer relationship marketing. Relationship marketing focuses more on retaining and improving the satisfaction of the current customers rather than focusing on gaining new target audiences (Peng 2008). Customer relationship marketing serves to surpass the purchase-exchange activity with the consumers in order to develop more meaningful and richer contact with them through the provision of more holistic and customized purchasing processes. In addition, the strategy makes use of the customer experience to facilitate the establishment of stronger ties between the firm and its customers. All these strategies are opportunities for business expansion, increasing customer loyalty, brand loyalty, and customer satisfaction, which help in increasing the profitability for the business (Drucker 2007).

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What conditions and tools can facilitate Ford’s efforts to produce differentiated products at relatively low costs?

The differentiation strategy puts more emphasis on the development of a distinctive product or service or the development of a perception of a distinctive product that consumers are keener to compensate a premium for it. It is important to take into account that costs are a vital issue of concern during product differentiation because the costs associated with unique product development may turn out to be higher compared to the premium amount that the consumers are willing to pay for it. Operating at lower costs enhances cost-efficiency, implying that the company can benefit from lower costs to develop differentiated products at relatively low costs. An indicator that can be used to measure the effectiveness of the differentiation strategy is the loyalty of a consumer brand. The principal argument under the differentiation strategy is that the customer should be willing to pay a premium for a given product (Banerjee 2002).

Rough competitor analysis for Ford Motors Company

Competitor analysis is vital for an organization during the development of organizational strategies that can be used in addressing future business goals and objectives, current strategies, assumptions, capabilities. It is conventional for organizations to persistently develop a defense mechanism against their competitors regarding their competitive position. Such an approach usually triggers retaliation resulting in increased competition. In addition, the results of the competitive interactions between firms play an integral role in influencing competitive advantage and hence the levels of profitability. This is core when conducting a competitor analysis for any firm.

The Awareness-Motivation-Capability Framework is usually deployed to determine how organizations view competitive pressure and the resulting influence on organizational operations. According to the AMC framework, rival firms will engage in retaliation if the three requirements are met, implying that they have to be constantly aware of the progress, motivated to address them, and have the required capabilities to address them. Capabilities involve assessing the strengths and weaknesses of the company and how it is vulnerable to potential threats that may affect the business negatively. It is also important to determine how the company is likely to exploit any potential opportunities in the future that may enhance its competitiveness in the industry.

Awareness of the competitor’s moves and the underlying motivation to address them usually affects the organizations’ competitive pressure. A company that is not aware of its competitor’s moves cannot develop a need to respond to such moves. A firm may also be aware of the competitor’s moves but lack the motivations to address them because they are not a threat to the business. In the case of Ford, we have to determine which one between capabilities and motivation greatly influences its competitive pressure. It is arguably evident that the company has knowledge of its rival’s actions; the question is whether it perceives them as a threat, lacks the motivation to respond, or the capabilities.

Role of strategic leadership in helping Mulally and the organization achieve strategic objectives

Strategic leadership plays an important role in strategy formation and evaluation, and strategy implementation. Both the steps are significant in determining the success of the strategic management process in the current global marketplace. If strategy formation and evaluation are effective, the implementation of strategic management will not be a significant challenge to the business enterprise (Banerjee 2002).

Strategy formation typically entails option generation, which involves the possible establishment plan of approaches. The strategic formation is a sequential process, which begins by conducting a situation analysis for the organization, and evaluation of the status for the business enterprise, and carrying out analysis of the competitors in the market place, which encompasses an analysis of both external and internal entities that affect the business enterprise (Duane & Hoskisson 2008). Having carried an analysis, objectives are set in accordance with the long term and short term business requirements. The strategic plan should outline the process of the realization of the proposed objectives. Strategic evaluation, on the other hand, investigates the effectiveness of the strategic plan. The evaluation of potential threats and opportunities is also important during strategy evaluation. Strategy evaluation also entails the use of criteria such as suitability, feasibility, and the acceptability of the plan (Peng 2008).

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Strategic implementation entails putting the proposed strategic plan into action. Strategic planning depends on strategic evaluation, after the choice of an effective plan of approach that clearly outlines the goals and objectives of the contemporary strategic management (Blanchard 2009). Some of the activities undertaken during strategic implementation include change management, evaluation of the limitations of the plan of approach, and eventually analyzing the benefits or drawbacks realized after implementation (Ford Motors 2011). It is also important to analyze economic factors such as returns on investments, the effects that the plan has on the overall productivity of the business enterprise (Alkhafaji 2003).

Conclusion

Ford Motors relies on the cost leadership strategy, which puts emphasis on operating at lower costs but not essentially offering the lowest prices in the market. Therefore, a firm can use such a position to reduce its prices in order to increase its market share or maintain the current prices and increase its revenue per unit item compared to its competitors. Empirical analysis reveals that the Ford Motors Company needs to position itself in the force of buyer power; this implies that the company must establish and maintain high levels of trust from its customers.

References

Alkhafaji, A 2003, Strategic management: formulation, implementation, and control in a dynamic environment, Routledge, London.

Banerjee, SB 2002, Corporate environmentalism: the construct and its measurement, Journal of Business Research, pp. 177-191.

Blanchard, K 2009, Leading at a Higher Level: Blanchard on leadership and creating high performing organizations, FT Press, New York.

Drucker, F 2007, Management challenges for the 21st century, Butterworth-Heinemann, New York.

Duane, I & Hoskisson, R 2008, Understanding Business Strategy: Concepts and Cases, Cengage Learning, New York.

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Ford Motors 2011, The Ford Motor Company, Web.

Goldsmith, M & Hu-Chan, M 2003, Global leadership: the next generation, Pearson education Inc Prentice hall, New York.

Haines, S 2004, ABCs of strategic management : an executive briefing and plan-to-plan day on strategic management in the 21st century, Cengage Learning, New York.

Hill, C & Cronk, T 2010, Global Business, McGraw Hill/Irwin, New York.

Peng, M 2008, Global strategy, Cengage Learning, New York.

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