This is a strategic report for Ford Motor Company for the next five years. It set year 2005. The report will be based on SWOT and PESTEL analyses, and will give recommendations for further improvements and growth strategies. Historically, Ford sought to compete against the industry’s leader, General Motors, by increasing its presence in foreign markets. Ford’s International Automotive Operations co-ordinates activities in twenty-six countries grouped in three principal regions (Europe, Latin America, and Asia Pacific). In the late 1990s, Ford produced outside the United States half of its worldwide vehicle production – compared with GM’s one-fourth. The Ford Motor Co. has also been a leader in introducing or rapidly adopting technological innovations in the industry (Gardiner, 2005).
Assumptions are that:
- The economy will be changing
- Ford will faced increased competition
- There will be new standards and demands to automakers based on new energy resources and green car design.
The business goals of Ford are to deliver the best quality and innovative solutions to the end consumer, expend internationally and enter new markets. For Ford, branding is an effort to make products more meaningful to consumers. The place to look for potential sources of meaning is in the consumer’s life. It is commonly assumed that the strategy of firms is derived from their key objective of profit maximization. But there are many strategies that a firm can pursue in order to achieve such an objective. Being complex actors, Ford determines their strategies based on a variety of factors that are not only related to the firm’s specific assets but also to structural, institutional, and group dynamics elements. Without a complete understanding of how these elements shape an individual firm strategy, in this case Ford, the bargaining dynamics of MNEs with host country governments could not be fully appreciated. One example is how the structural elements, or the who-gets-what rules of an industry, limit the capacity of firms to make concessions to host country governments for the simple reason that, if they did, they could incur inefficiency costs or would simply not survive (Gardiner, 2005).
Recent years, Ford experienced financial loss and decrease is sales. This situation was caused by changing economic conditions and increased competition. In 2001, “the company incurred a loss of $5.5 billion” (Ford Motor Company in 2004, n.d.). Ford has unique HR resources which help it compete on the global scale. Ford follows effective marketing strategies in order to create and sustain a unique brand image of the company. R&D groups are charged with developing products and as such are ordinarily concerned with technical issues about how the product performs. In the case of a paint product, for example, R&D may be captivated by the fact that a particular formula dries faster than a current product or a competitor’s product. Indeed this may represent an engineering breakthrough. Marketing on the other hand may have concluded that the best consumer meaning for the product revolves around the paint’s retaining its color “like new” over time. Emphasizing that the paint dries faster might actually detract from this meaning by making the paint seem cheaper or more for casual use. The R&D people, however, may well see this as a failure to appreciate the technical merits of the product, which may lead them to resist cooperating with the marketing people. Taking into account rates of ratio, it is possible to say that Ford’s overall “market share and quality rating is dropped” (Ford Motor Company in 2004, n.d.).
Recent years, Ford concentrates on “the major areas of product development” (Ford Motor Company in 2004, n.d.). GM’s moves are one constant in Ford’s strategies that confirms the relevance of the firm-to-firm negotiation in the triangular bargaining dynamic. Ford’s international operations become a key source of the company’s competitive strategy vis-à-vis GM, and sets the basis for understanding the Ford strategies. Structural rules are derived from production technologies (hard and soft technologies) that are successful in producing cars efficiently. An automobile is a complex product, which consists of over 10,000 parts and requires multiple and complex processes for its manufacture. Following Brown and Eisenhardt (1998), it is possible to say that Ford’s mass production proves successful in efficiently producing automobiles, which explains that for almost seven decades, it determined the structural rules for the automobile industry. But it is a complex system that needs to be understood in order to comprehend Ford’s strategies (Gardiner, 2005).
The main strengths for Ford are strong brand equity and country of origin image, innovative approach to cooking and unique taste appealing to mass consumers. The main weaknesses are lack of flexibility in value proposition and product differentiation (the company will have to focus on price). Also, lack of patient protection and high cost structure will have an impact on American biscuits. The opportunities involve positive economic conditions and market growth. American biscuits can gain a strong reputation among customers. An unfulfilled customer need and loosening of regulations will help the company to enter this new market. The follower strategy will help Ford to obtain a strong market position and compete with national producers of confectionary. The threats are competition from national and international companies specialized in confectionaries and biscuits. Substitute products like hydrogen cars will have a dominant impact on the company and its growth (Daniels et al 2006).
The company meets the needs of its main stakeholders delivering innovative products and solutions, introducing social corporate responsibility issues and diversity management. Thus, financial loss and decreased market share prevent Ford to invest in training and employees’ development programs.
Market Industry Analysis
Today, political situation in America and Europe is stable marked by democratic processes and liberalization reforms. Political interference and corruption are the possible risks. Legal Environment: America and Europe introduce laws and regulations in order to support foreign subsidies and attract FDI (foreign direct investments). In order to support national economy, the governmental prevents price rises, or even to rolls them back in basic industries such as steel. Governmental involvement seems to relate price increases to the impact on inflation and increased productivity. Government has the influence to block or roll back price increases. Economic situation is marked by low inflation rates and high income per capita. Thus, liberalization and high level of investments can be considered as opportunities for a company to enter this country. For Ford, there are also the necessities of making long-run capital commitments, meeting the requirements of joint ventures with nationals, and the imposition of special income taxes and import duties on necessities, as well as differences in social legislation, location considerations, protection of home products, governmental attitudes and control, laws affecting labels and standards, transportation and communications problems, and the risks o inflation, currency devaluation, and expropriation (Daniels et al 2006). All these create many additional uncertainties to those encountered in national marketing. social-demographic factors suggest fast population growth and decreased mortality rates. Both in physical appearance and in most aspects of their culture-notably, their language, their traditional form of administration, and their religion (Gardiner, 2005).
The main industry forces are technology and innovations. Technological factors involve the Internet access and development of telecommunication infrastructure, new methods of doing business and information availability. Such factors as continued economic growth, increased disposable income, vigorous domestic and foreign competition, accelerating technology, automation, population decentralization, expansion, and innovation will spur the appearance of this new marketing form. The application of computer technology and the use of new analytical techniques has added greatly to the efficacy of planning activities. Such tools as critical paths, input-output analysis, payoff matrices, decision trees, linear programming, and simulations are used extensively in marketing-planning operations. These regulatory changes permitted the US vehicle
The main three competitors are General Motors (GM), Toyota and Volkswagen. Assemblers to implement fully their new efficiency-seeking strategies come to complement their traditional market-seeking strategies. By facilitating the cross-border exchange of automotive products, those regulations permitted automotive producers to rationalize their operations on a North American basis, exploit economies of scale and scope as well as national competitiveness, and therefore reduce production costs. GM is positioned as a premium brand and a market leader. The main strengths of the competitors are strong brand image and high quality, selling history and unique perception of their brands. The main weaknesses of Volkswagen are limited market and economic instability. The main weaknesses of Toyota and GM are (1) the need to invest in new technologies and (2) high prices (Gardiner, 2005).
Innovations and low prices are the key factors of success in automotive industry. More dramatic, though less frequent than market evolution, is the case where one firm redefines value of the product through either a breakthrough technology or a breakthrough strategy. Although we often associate value innovation with technological breakthroughs, strategic innovations can also be a vital source of value innovation. The least obvious case of consumer learning is when products and competitors remain stable, unchanging for years, perhaps decades. A lack of innovation and the absence of new competitors may lead you to believe that there is no buyer learning occurring. In both laundry detergent and ice cream, for instance, product benefits have remain unchanged for years, there have been few innovations, and virtually everyone is familiar with major brands in both categories. Despite that constancy, buyers continue to learn (Daniels et al 2006).
Strategic Options for the Future
The main strategic options are investments in R&D and innovations, international expansion and improved quality, increased production and manufacturing capacities. Ford should pay a special attention to competition and economic changes such as oil prices and inflation rates. For Ford, competitive strategies play a central role in the buyer learning process. The competitive strategies brands pursue create the buyer experience and, based on this experience, buyers learn three key things—how to perceive brands, how to value the differences among brands, and how to make a choice among the alternatives. Following Brown and Eisenhardt, these perceptions, preferences, and choice strategies become the essential rules of the competitive game. Those rules, however, are continually updated as buyers continue to learn. In contrast, under the conventional view of buyers—that they know what they want—the rules of the game remain fixed, or at least they are beyond the influence of competitors’ strategies (Gardiner, 2005).
The options I would reject are increased production and increased manufacturing capacities. The current situation suggests that Ford cannot deliver the best quality and innovative solutions, so increased manufacturing worsen this problem.
During the nest five years, I would recommend Ford to expend internationally and invest heavily in R&D. Product leadership means creating a competitive edge through new offerings in the marketplace. Organizations therefore should focus on continuous innovations and have a rapid product development process. Many organizations are able to launch better new products faster by pursuing an integrated product development process. Organizations may also consider strategic outsourcing and strategic alliances or partnerships as other ways to achieve product and market leadership. In addition, they can also leverage their current product line and create synergy making the new product globally competitive and attractive. These changes lead us to rethink the managing of new products in the Information age. As discussed previously, value-driven customers think in terms of their total experience with an activity (Daniels et al 2006).
|Implementation number||Steps||Who will do each step||Timeframe|
|1. Innovations, R&D||1. Create three research and development groups working independently on innovative solutions such as a hydrogen car and improved quality. |
2. Create a control group responsible for quality and cost reduction.
|1. The first step will do the CEO of the company and R&D department. |
2. The second step will do production and control manager
|During the next 5 years |
– 6 months (creation of the department)
a)2-3 month (selection of employees)
b) 3. months – special training
|2. International expansion||1. Expansion to Central Africa |
2. Expansion to South Africa
|1.The first step will do the marketing department. It will be important to crate a special division for Central and South African consumers. |
2. The first step will do the marketing department.
|1. 3 years |
2. 5 years
Brown, S.L., Eisenhardt, K. M. 1998, Competing on the Edge : Strategy as Structured Chaos. Harvard Business School Press.
Daniels, J., Radebaugh, L., Sullivan, D. 2006, International Business: Environments and Operations. Prentice Hall. Ford Motor Company in 2004. Case 2. n.d.
Gardiner, P. 2005, Project Management: A Strategic Planning Approach. Palgrave Macmillan.