Ford Motor Company: Strategic Analysis

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Ford Motor Company had a difficult 2020 fiscal year and lost several positions in the 2021 Fortune 500 list. However, it is unclear whether the situation is so drastic or 2020 was a temporary setback. A study of current Ford’s situation through six topics of strategic analysis provided more insight into the actual state of affairs. An examination of the company’s mission, strategy statement, strategy grouping, strategic drift, organizational culture, and competition allowed to understand the nature and severity of Ford’s problems. Overall, it can be stated that the struggles of 2020 were caused mainly by the force-majeure impact of the COVID-19 pandemic, and Ford has sufficient reserves for recovery. A focus on promising models combined with the elimination of poorly performing sedans should allow Ford to improve the situation, at least on the national level. However, the highly competitive nature of the automotive industry leaves a question, whether Ford will be able to achieve a breakthrough on the international market.

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Keywords: mission, purpose, strategy statement, strategy grouping, strategic drift, organizational culture.

Ford Motor Company: Strategic Analysis

Similarly to other players in the automotive industry, Ford Motor Company has faced a problematic 2020 business year. As a result, Ford lost nine spots in the 2021 Fortune 500 list, falling from 12th to 21st place in the standings. Therefore, it is necessary to analyze the reasons behind this slump to understand whether Ford’s struggles are long-lasting or can be rectified in the near time. The current situation is analyzed through six topics: mission statement, strategy statement, strategic grouping, strategic drift, organizational culture, and competitive advantage. The application of these topics in the context of Ford would allow to reveal possible flaws on the basic level of strategy and understand what the company does to change a negative trend.

Mission Statement and Company’s Purpose

The mission statement lies in the foundation of almost every company since a business needs a purpose to exist. In the case of Ford, the mission and company’s purpose have evolved significantly. For example, in 2001, Ford stated its mission as “deliver superior shareholder returns” (King et al., 2019). At the beginning of the 21st century, the companies mainly focused on maximizing profits, so the corporate purpose of making more money was satisfactory. However, by 2021, when sustainability and corporate social responsibility trends have become increasingly important, Ford had to introduce respective amendments to its mission. For instance, in their open letter, Executive Chairman Bill Ford and CEO Jim Farley claimed that the company is guided by a “desire to help a better world” (Ford Motor Company, 2021, p. 6). As such, Ford is now positioning itself as a customer and employee-centered company rather than a profit-oriented business. Therefore, Ford’s purpose and mission correspond to the modern world’s values, and the wrong mission statement cannot be considered a reason for poor 2020 results.

Strategy Statement

A strategy statement is a narrower topic than a mission statement since it contains particular objectives, activities, and advantages rather than a broad description of the company’s mission. Regarding Ford, the most recent strategy statement has been made by CEO Jim Farley. Farley claimed that Ford “opened the door to becoming vibrant, growing company” and urged “to charge through that door” (Ford Motor Company, 2021, p. 7). These words can be treated as an intention to turn the tide of the harsh 2020 business year by capitalizing on the new trends, such as electrification and autonomous vehicles. For example, Ford can win a significant share of the market with electrified modification of already popular F-150 truck, gaining an advantage over the competition in the national market. Overall, Ford’s current strategy statement seems to be a solid prerequisite for regaining the ground lost in 2020.

Strategic Grouping

From the perspective of strategic grouping, Ford belongs to a highly competitive group of automotive companies. As a result, the company has to constantly look at such competitors as Toyota, Volkswagen AG, GMC, Daimler AG, and others. The modern automotive industry develops fast, so Ford cannot fall behind, especially in innovative spheres, such as electrification and self-driving vehicles. Judging by the evolution of the company’s mission and strategy, one can claim that Ford management realizes this situation and implements necessary steps to stay with competitors.

An example of strategic grouping used by Ford can be found in the TOPS (Team-Oriented Problem Solving) method. This 8-steps method of problem-solving within an organization is quite similar to Toyota’s 8-step approach (Fadnavis et al., 2020). One can easily see how Ford implemented a competitor’s solution to teamwork. In addition, it is possible to claim that Ford switched to a more customer-oriented, socially responsible, and innovative agenda due to watching the competitors. Therefore, Ford utilizes strategic grouping on multiple levels, from daily business matters to strategic planning.

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Strategic Drift and Influence of Today Economic Situation on Decision-Making

Strategic drift implies a situation in which a market-leading company loses its position and stands in front of the need to change. This precarious situation can either be resolved in favor of the company or lead to its demise. Considering Ford’s worsened place in Fortune 500 list, one might state that Ford has entered a strategic drift phase. The COVID-19 pandemic delivered a significant blow, forcing Ford to close plants, disrupting supply chains, and reducing demand for vehicles. As a result, Ford’s revenues and profits plummeted in 2020.

However, even before the pandemic, Ford management has implemented several measures, which can serve as a basis for a resurgence. For example, the company focused on popular trucks and SUVs, removing sedans from the model range. The current economic situation favors vehicles with greater utility, and Ford responded to that trend in time. Even Lincoln, Ford’s luxury brand, emphasized SUV manufacturing and discontinued the iconic Continental model. In addition, Ford has adopted a customer-based approach towards hybrid and electric programs (Bohnsack et al., 2020). Overall, the company undertakes strategic decisions to rectify the current drift.

Organizational Culture

Organizational culture can be described as a mixture of values, beliefs, and behaviors cultivated in a particular company. As a result, organizational culture directly impacts the employees’ performance and overall business atmosphere. According to Satyanarayana and Bhaskar (2020), from 2012 to 2017, Ford’s Employee Satisfaction Index (ESI) never dropped below 70%. Therefore, it is possible to claim that Ford managed to create a healthy organizational culture, and satisfied employees can become a vital asset for improvement in the post-2020 period.

In particular, Ford’s organizational culture emphasizes a caring, responsible approach with significant employee engagement. For instance, the previously mentioned TOPS problem-solving method includes team celebration as a closing step (Fadnavis et al., 2020). This approach is different from the strictly formal method used by Toyota. Overall, Ford still possesses an essential resource in the shape of well-motivated and generally satisfied employees. This factor creates an extra premise for recovery from the difficult 2020 fiscal year.

Competition: Five-Force Framework and Strategies of Competition

Since the automotive industry is highly competitive, it is imperative for Ford to evaluate the competition constantly. Michael Porter’s five-force analysis in relation to Ford provides the following results:

  • Threat of entry: relatively low, since Ford competes against other established car manufacturers;
  • Threat of substitutes: high, and this explains why Ford emphasized the development of electrified vehicles and discontinued poorly selling sedans;
  • Power of buyers: relatively low, because Ford has quite a loyal customer base, especially in the USA;
  • Power of suppliers: high, since supply chain disruptions during the pandemic were one of the reasons why Ford struggled in 2020;
  • Extent of rivalry: very high, Ford is a big corporation, but the competitors are also powerful.

Overall, Ford relies on its brand strength and loyal customer base. However, intense competition and pandemic-related struggles have forced the company to optimize model range and accelerate the development of innovative solutions. As a result, resources were diverted to more promising models, such as electrified F-150 truck and Mustang Mach-E. In the end, Ford preferred to enhance already strong positions in SUV and truck segments. The underperforming elements were eliminated instead of investing resources in saving them.

Conclusion

Six topics of strategic analysis provided a valuable basis for understanding the current situation of Ford Motor Company. From that perspective, it is possible to claim that Ford will be able to recover from the consequences of the 2020 fiscal year. The company has a mission, purpose, strategic grouping, and organizational culture suitable for improvement. However, the extent of rivalry makes further progress extremely challenging. Overall, Ford Motor Company should improve its position on the Fortune 500 list, but the international expansion would require more effort.

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References

Bohnsack, R., Kolk, A., Pinkse, J., & Bidmon, C. M. (2020). Driving the electric bandwagon: The dynamics of incumbents’ sustainable innovation. Business Strategy and the Environment, 29(2), 727-743.

Fadnavis, S., Najarzadeh, A., & Badurdeen, F. (2020). An assessment of organizational culture traits impacting problem solving for lean transformation. Procedia Manufacturing, 48, 31-42.

Ford Motor Company. (2021). Integrated sustainability and financial report 2021

King, D. L., Case, C. J., & Carney, J. R. (2019). Evolving mission statements: A fifteen year comparison. Global Journal of Business Pedagogy, 3(1), 66-77.

Satyanarayana, P. N. V. V., & Bhaskar, N. U. (2020). Beyond ethics –Towards dharma & ethos – A retrospective study on correlation between ethical business practice & improved performance –A case of Ford Motor Company. International Journal of Research in Applied Management, Science & Technology, 5(2), 1-15.

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