Table of Contents
The paper provides a strategic overview of the Ford Motor company while identifying and interpreting the factors that contributed to the failures and successes of the organization. The first step entails providing a brief history of Ford Motor company through the analyses of its product portfolio, sales performance and the evaluation of key strategies with a keen focus on the corporate strategies as well as product strategies. The following step involves a comprehensive analysis of the internal and external environment to determine the forces that affect the company’s operations at home and in the foreign market. The key areas that the paper will focus on include the financial, marketing, competition, organization and operational structure. The third step is to identify the legal, ethical and social responsibilities combined with business decisions that the organization has made and continues to make in a while devising a growth strategy. The final step involves providing a recommendation, short-term strategies that the company can adapt to become more productive in the future.
The Ford Motor company popularly known as Ford is an American automotive corporation which was founded by Henry Ford in 1903 together with 11 associate investors. The company is famous for its manufacture of passenger cars, tractors, trucks as well other automotive parts and accessories. The company is headquartered in Dearborn Michigan. The primary objective of the founder was to provide cheaper and dependable vehicles for the public. In this regard, Ford introduced a moving assembly line to achieve the vision. The revolutionary strategy contributed significantly to boosting production and reducing the cost at the same time. According to Dess, McNamara & Eisner (2016), the company adopted the moving assembly line meant to mass produce the entire automobile across the board. Therefore, the plan became cost-effective and efficient only about three hours to assemble a car, from the previous 12 hours. Notably, the moving assembly line required a lot of input and the employee turnover was very high.
On the other hand, the vehicles produced were attractive, therefore, became popular over time. It is worth acknowledging that the bold leadership strategies such as adoption of an assembly line among others enabled the company to grow particularly during the great depression while the competition faltered. Between 1950-1970, Dess, McNamara & Eisner (2016) asserts that the company centered on limited diversification. However, it later focused on the automotive concerns as well as the financial sector. Ford would, therefore, acquire Jaguar which is a British Luxury car manufacture company while in 1993, Aston Martin became a wholly owned subsidiary. Other acquisitions include the rental car company Hertz Corporation, the sports utility brand Land Rover, the automobile Volvo division as well as a significant portion of the Mazda motor corporation. The purpose of such acquisitions was to expand to other regions while competing in a foreign environment. In addition, the company started a plan for full organization re-engineering business process dubbed Ford 2000 in an attempt to re-establish the company’s infrastructure.
The company would later face numerous challenges in the 21st century such that it began disposing of some of its brands. For instance, Ford sold the Aston Martin, Jaguar and Land Rover to India’s Tata Motors. In addition, it reduced the Vehicle centers to five that would cover all operations that spanned over 200 companies. The company would also cut redundancies with Information technology playing a pivotal role in the company’s strategy. The company faced even more challenges due to recalls and emergence of strong competition such as Honda and Toyota as well as general motors (Dess, McNamara & Eisner, 2016). The management felt that there was a need to adopt new strong tactics if it were to remain viable in a competitive market, hence the appointment of Alan Mullaly as the CEO. Mullaly introduced the “one Ford” strategy with the objective of creating a viable and exciting company that would deliver profitable growth.
Ford’s environmental analysis
To understand the macro and microenvironment of the company, it is important to consider the SWOT analysis, provide a PESTLE analysis as well as Porter’s five forces that significantly determine how the organization operates amidst tough economic situations and stiff competition.
The overall vehicle industry is segmented according to the types of vehicles. Almost 70% of the market is taken up by passenger cars while light trucks take up about 20% and the rest is reserved for the motorcycles. The main competition, in this case, includes general motors, Chrysler, Toyota and Honda among others. According to Wee & Wu (2009), Ford occupies about 9.4% of the market. The global economic turndown significantly affected the automobile industry between 2004 to 2008. However, Ford was able to recover without financial aid from the government owed largely to the One Ford policy introduced by the former CEO.
Porter’s Five forces analysis
Bargaining power of Suppliers
In regards to ford, the Power of suppliers has been regarded as the most significant. Notably, Ford can leverage its size to effectively negotiate with the suppliers to achieve the best deals across the industry. Most of the suppliers compete for a space to supply their wares to Ford which makes it easy to sacrifice price point for volume regarding orders. Therefore, the company wields the advantage of switching between suppliers and the many homogenous input products. The company can easily enter the markets and find low-cost suppliers all over the world. The company can also tackle this aspect by having product designs use different materials such that if the prices of certain raw material were to go up, the company could effectively switch to the next (Wee & Wu (2009). In addition, the company can learn from Nike or Walmart on how they developed third-party manufacturers whose operations solely depend on the firm creating scenario where third-party manufacturers have less bargaining power than Ford itself.
Bargaining power of buyers
Buyers demand a lot regarding quality, design, and pricing among other aspects. In addition, they need to get value for their money or pay as less as possible for the goods or services they desire. Such behavior affects Ford’s profitability in the long haul. The more powerful and smaller the customer base is, the more the bargaining power, therefore, demanding increased discounts and offers.
Threat of new entrants
The new entrants introduce newer innovations, introduce new methods of operations while putting pressure on Ford to remain competitive through lower pricing strategy and also introducing value propositions to the customers. Ford needs to manage the challenges and effectively put barriers to safeguard a competitive edge. Ford can tackle such challenges through innovation of new products and services. New products attract a larger clientele and also give old and loyal customers a variety to choose from. The company can also take advantage of economies of scale such that it can lower the fixed cost per unit. In addition, research and development are an important component that Ford can center on such that the company can have the advantage limiting the dynamic nature of new entrants since it defines the standards regularly. Moreover, such an activity reduces the window of extraordinary profits from the new firms discouraging new players in the industry. It is, however, worth acknowledging that the threat of new players is relatively low due to the large upfront capital costs as well as government legislation that acts as a barrier to new entrants. Currently, the only significant threat is Tesla which has introduced electric vehicles.
Threat of substitute products or services
Once a new product or service satisfies the needs of customers, the industry profitability may be affected. Therefore, a threat posed by a substitute product becomes high if it provides a value proposition that is distinct from existing offerings in the industry. In this case, used cars pose a potential threat as the average age of cars on the road has increased from 10 to 11 years (Yang 2014). On the other hand, increase in gas prices has led people to consider public means of transportation, particularly in metropolitan areas. Ford can avoid such a threat by ensuring it is a service-oriented firm rather than a product oriented company. It is pivotal to understand the core need of the customer rather than concentrating on what a person is purchasing. Moreover, Ford can increase the switching cost for customers.
Rivalry among the existing competitors
When the rivalry among existing players intensifies, it will likely bring down prices, therefore, decreasing the profitability of the industry. Ford operates in a highly competitive auto-manufacturers major industry. The company can, therefore, develop a sustainable differentiation and a scale to enable it to compete better. In addition, it can collaborate with competitors to increase the market size rather than just competing for a small market.
Markedly, the five competitive aspects once well studied can allow strategists to have a complete picture of the forces that affect profits within its environment. Game-changing trends can be identified such that the company can respond to emerging opportunities. In addition, the management can shape the forces in their favor.
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A PESTLE analysis
A PESTLE analysis is paramount in the understanding of the external forces that affect the performance of Ford Motors.
It is apparent that the company’s strategies serve as a reflection of the challenges the firm faces as identified through a PESTLE analysis. The main objective is to identify the most significant threats and opportunities that stem from the external factors in the company’s macro and remote environments. In the case of the ford, the global climate refers to the automotive industry. The external factors are the representations of threats and opportunities that a company needs to address to move forward.
Ford can utilize the opportunity for technological innovation provided by the government. In this case, Ford can utilize political incentives to become more innovative. In addition, the government can also increase international trade agreements which gives Ford more opportunities to expand into international markets. Markedly, high growth developing states continue to improve their infrastructure such as transportation which is an added advantage to the company’s product demand. Therefore, the political environment contributes to the increasing demand for Ford products internationally. The external political factors reveal that there is a significant opportunity for Ford’s growth in the international market.
The company has an opportunity to grow due to the economic growth albeit being slow particularly in the US which is the main market. Ford also has a chance to expand in growing economies where it already has a presence. However, strengthening of the US dollar serves as an external factor that minimizes profit margins and the popularity of the products since Ford sources most of the raw materials in the country. In this regard, Ford needs to improve efficiencies while maximizing on international markets.
There is a notable demand for electric and hybrid vehicles. As such, Ford should adopt a strategy that addresses such customer needs. There is also a chance for improving services, particularly after sale service to attract more people. However, the Ford Lincoln which is a luxury brand faces a threat due to an increasing wealth gap. People also need convenient vehicles that save on energy due to the increasing gas prices as well as the need to maintain the environment. Such factors emphasize on product innovation which the company should consider to gain a large market share.
The technological aspect of every firm is pivotal to its long-term growth. Therefore, the rising use of mobile technologies creates a chance for the company to grow and expand via mobile support system as well as mobile marketing. Ford can also improve its performance by use of online fulfillment services. The service can, for instance, be used to deliver products to customers. The Company should place more focus on technological enhancements including incorporating advanced technology in the research and design.
Environmental change is an external factor that provides a leeway for the Ford company to innovate products that are environmentally friendly. The company can also develop products that use alternative energy such as electric vehicles. The product innovation must compliment the business performance.
It is important that a business satisfies legal requirements. There is an opportunity for Ford through environmental protection regulation whereby it can improve its business sustainability. Furthermore, the company can improve the product design while taking the advantage based on safety regulations. Worth noting is that the increased intellectual property laws are improving the external environment in which Ford can develop more protection for the intellectual rights and properties. Ford can grow based on changes in the external regulatory landscape.
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The Organizational Structure of Ford Motors
The organizational structure is designed according to the business needs and various market conditions globally. Furthermore, Ford’s operations determine the key organizational structures developed to withstand market risks and competition. The main features of the OC include the corporate hierarchy, regional geographic divisions as well as global functional groups. The corporate hierarchy takes the form of a traditional structure where the executive vice presidents report to the CEO. Middle managers on the other hand report to the executive VPs. The entry-level workers report to their managers or supervisors, further reinforcing the top-down structure in business management.
The company’s local geographic means that it has subdivided operations into several regions or continents (Yang, 2014). It has three main geographic divisions in America, Europe, and Asia. Each division is headed by an executive. The One ford strategy ensures that all operations are similar in all the regions. The global functional groups, on the other hand, represent specific business functions. Some of the functional groups include the global manufacturing and labor affairs, global marketing, sales and service, communication, legal and accounting among others. The main advantage of such a top-down structure is that it maintains a global direction while ensuring control (Wee & Wu, 2009). The hierarchy ensures easy decision making and easy implementation of integrated policies and strategies. However, the structure can be risky to the company in that in simplifying the company’s approach to the market, unique features or the needs of customers can easily be disregarded.
The Legal, Ethical and Socially responsible business decisions
Ford has been faced with a myriad of ethical challenges in the past. However, the company has taken a proactive approach to eliminating such issues in the future. Firstly, it maintained a good reputation in that it remained among the automotive firms that avoided a government bail following the recession. That shows that the company made an important turn around such that it weathered an economic storm due to the One Ford strategy introduced by Mullaly. In this case, the company’s reputation made it have a competitive edge over rivals in the market. Ford has also taken steps towards enhancing the internal processes such as quality control and advanced testing techniques. Ford has made a renewed commitment and consideration to customer safety, appreciation to the stakeholders and environmental sustainability (Dess, McNamara & Eisner, 2016). Following such aspects, Ford continues to be nominated as the world’s most ethical firm for several years. The decisions are made following a thorough review of the company’s social responsibility, transparency, innovations, citizenship, communication among other important aspects. Following past mistakes, the company has taken proactive measures to ensure customer safety and satisfaction.
The organizational culture is key to the future growth of an organization since it is in this environment that employees adopt behavior that leads to particular outcomes. It is worth noting that Ford has set up a strong set of norms, values which help in shaping its mission statement that incorporates all actions into one. The One Ford mantra ensures that employees work together towards achieving a leadership position in the organization. Additionally, the company has gained a reputation for adopting a caustic corporate culture where leaders competed against each other rather than working towards a common goal. The leadership was discouraged from settling problems in the company to the extent that the employees became complacent. The company would not drop brands and in most cases, left projects incomplete. Several recalls and the weakening economy almost placed Ford into bankruptcy until Mullaly was hired. The notion was changed by the One Ford strategy where expensive brands were cut, and managers were encouraged to work together rather than competing. Mullaly also stressed on premium products even though they required additional revenue. The turnaround made the company remain viable in a weak economy.
Ford adopted several quality control processes in an attempt to maintain its high-quality products. One of the quality control is referred to as the six-sigma process that entails quality, training and continued improvement (Dess, McNamara & Eisner, 2016). The process follows the quality control problem experienced by the company through customer complaints in the past. Among other strategies, ford uses computer-assisted technologies to develop the vehicles such that it creates a more globalized model of the Ford Focus. The feature allows Ford to customize vehicles according to the global demands. The improvement of product quality seems to work to their favor as there is more demand for the vehicles which has led to the hiring of more employees and more revenue collected within a short period. Therefore, the philosophy of One Ford appears to grow as the company expands.
Code of Conduct
The company has a strong code of conduct with the main objective of informing employees about the ethical risks while providing guidance on how to establish ethical risks and how to deal with them. The handbook consists instructions on how individuals can report comments or pose questions on the company’s website meaning that they value customer feedback and satisfaction. The book emphasizes ethical conduct and areas of ethical risks such as workplace behavior, favors, gifts, conflict of interest and protection of company assets, intellectual property among others. Through such clear instructions, the company maintains ethical standards thereby avoiding conflict of interest or lawsuits that stem from such issues.
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Ford’s past misconducts
Ford has made severe mistakes in the past which include the Pinto case and Firestone recall. The Ford Pinto was a subcompact car manufactured by 1970-1980 (Wee & Wu,2009). The car was popular, but there were serious issues regarding the design. The gas tank on the vehicle was put directly behind the rear axle rather than being placed above it. The bolts were also placed near the gas tank heightening the risk of puncturing the gas tank in the event of an accident. More serious issues included a fuel filler pipe design that created a high chance that the pipe would likely disconnect from the tank causing the gas to spill out in the event of rear-end collision. Following the grim Shaw accident that caused an individual to die and another to be burned severely, the company was sued with the accusation that it knew about the malfunctioning design. The family was awarded a substantial amount of the damages, and the company called for a voluntary recall. In the subsequent years, several other rear collision accidents caused individual lives, and the company was once again sued for reckless homicide (Dess, McNamara & Eisner, 2016). The design remains controversial, but it cost the company a lot of revenue and losses due to the recall.
In a different case of misconduct, Ford incurred losses due to a massive tire recall following allegations that Firestone tires had a tire tread failure possibly related to numerous accidents. The company had a strong relationship with Firestone until the massive recall severed the connection. Albeit the logic that Firestone should have been to blame, Ford also took the risk that could have contributed to tire tread separation, for instance, it recommended low tire pressure for the vehicles. The company started a tire replacement program after the incident. The estimated tires replaced stood at 13 million. Ethical issues, therefore, crept in since the customers accused Ford of not providing due diligence before selling the cars as well as a significant loss, plummeting of its stocks and a suffering reputation.
Corporate Social Responsibility
The company has in the past few years been nominated as the most ethical company due to several reasons that include a strong corporate social responsibility. The CSR initiatives have made sustainability a major priority. Ford has an online ethics training program targeted at employees using 13 different languages (Yang, 2014). They also offer hotlines for workers in over twenty countries and trains the global counsel office to deal with international issues.
Employee well being
The company values its human resources by first recognizing that without them, no productivity would be achieved. Therefore, the management has come up with several employee initiatives meant to motivate them while improving the quality of life. For instance, there is a sustainable workforce initiative to enhance employee productivity, well-being, and efficiency. The sustainable workforce initiates centers on several tenets being, training, strategic hiring, safety, and protection as well as healthcare. Strategic hiring, on the other hand, ensures that only the best candidate is selected for a particular post. Notably, training depends on the level of the employee. Moreover, the company has created a global safety standard such that there is a reduction in the injury rates. After realizing the likely dangers of repetitive motion, Ford also carries out a virtual ergonomic assessment to identify and minimize injuries. Furthermore, the company has partnered with United Auto Workers Union to offer a voluntary 24 months enhanced health care program that is customized to employees with chronic conditions (Yang, 2014). Ford supports employee education and diversity while recognizing human rights and difference such as race, gender, sexual orientation offering a supportive work environment. For instance, Ford holds a prayer day annually and invites all religions, ethnicities, and races to participate. Ford also developed a project dubbed GLOBE which creates a safe working environment for transgendered employees, bi-sexual, lesbian and gay workers.
The company believes that the consumer is at the forefront of its success. Therefore, it is important to gain the customers respect and trust. Ford participates in and sponsors a myriad of events meant to help the local community. On a national level, Ford initiated the Partnership for Advanced studies which is an award-winning education program that brings together students, teachers, employers and the community in providing a better education for young people. The company has also created the Volunteer Ford Corps which is an initiative that rebuilds homes for poor people (Iqba, 2011). Every year, the company conducts a global day of caring where volunteers engage in community projects throughout the world. Food and other activities are offered, and the company creates awareness of its brand while keeping the people happy. Other activities include the Ford skills for life where the community members are offered driving lessons with the aim of reducing risks on the road. These are some of the few social responsibilities the company offers to the community at home and across the world.
Ford has moved towards ensuring the sustainability of its products. These include the anticipation of new regulations such as the requirement that trucks and passenger cars get 54.5 miles per gallon by mid-2020’s (Iqbal, 2011). Therefore, Ford is tasked with new ways of investigating an increase in the gas mileage while still maintaining the safety aspect of the vehicles. In addition, the firm requires remaining financially viable. One way is the current consideration to adopt lighter materials for its vehicles which will reduce the revenue spent on sourcing for expensive materials. Moreover, adopting environmentally friendly features will sustain the company, in the long run, the social aspect such as giving back to the community will ensure the brand remains strong while maintaining its customer base and attracting a new customer base.
As earlier established, Ford Motors was in the blink of bankruptcy until the new CEO; Alan Mullaly was hired. Conventionally, Ford had always been headed by a family member, but there was the need to have new blood run the organization. Mullaly introduced a new concept of Leadership that saw a turnaround of the organization from a loss-making one to generating profits. There are different leadership skills such as the democratic, laissez-faire and authoritarian. The CEO’s exhibited a democratic style of leadership which entails having supportive communication that allows interaction between employees and leaders. Mullaly further demonstrated a transformational leadership style through his style of communication as well as the actions he chose to take such as consolidating efforts to bail out the company instead of borrowing money. Iqbal (2011) posits that a transformational leader ensures that employees are appropriately empowered while at the same time, leads organization towards future success. Mullaly’s transformational leadership aroused the strength that had been lying dormant in the organization. He was concerned with the satisfaction of the physiological safety and the belonging needs. A transformational leader also strives to meet the basic needs of the follower. After the company cut its non-productive brands and disposed of assets, there was a beckoning need to structure strategies that would make it profitable again. The internal culture of the organization combined with the right communication skills enabled the CEO to establish the best strategy to lead.
Leading from The Inside
The best strategy to ensure productivity is to motivate employees by allowing avenues that lead to goal achievement while at the same time minimizing barriers. Leaders should always encourage the behavior they wish to see. Ford’s internal culture works well with the resources to allow productivity. In this regard, Mullaly and his team ensured authenticity in communication with the employees. Being a transformational leader, he applied the basic philosophies of the leadership style across all facets of he firm. He believed that programs such as the “Go Further” had to be initiated by first ensuring that every aspect of the company received a full appraisal of the common platforms and expectations.
Leadership Through Branding and Public Relations
Mullaly was well aware that the democratic leadership of the company and internal communication were not enough to make the firm sustainable particularly during the recession, a significant level of effort and investment, in this case, were necessary both in America and in the other continents. Investing in branding and public relations at the time was perceived by many as superfluous to the business needs at the time. However, the CEO knew that it was a necessary move to revive the company and all the benefits associated with it. Ford’s success depended on a successful marketing and advertising campaign (Iqbal, 2011). Subsequently, Mullaly hired Jim Farley who was the marketing officer and empowered him to make ultimate decisions that he felt were necessary for the company’s growth.
The CEO and his team worked tirelessly to ensure a successful communication with the local and international organization. Despite the several challenges along the way, the leadership style gave way for Ford to emerge from a dire financial situation without having to borrow loans from the government. Leadership must ensure that the followers are happy to achieve the goals in the end. Through the various training programs, Ford gives an opportunity to the employees to become future leaders rather than remaining as followers throughout their employment. Mullaly and the top management also offered mentorship to several other people including the current CEO Mark Fields who worked under Mullaly to become a transformational leader who puts followers needs into consideration when structuring strategies for future growth.
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Recommendations and Conclusion
The Ford Motors Company is on a trajectory towards future growth. However, several considerations can enhance its competitiveness locally and in the international sphere.
The first recommendation would be to enhance the product design and innovation to address several changes related to climate change. More people are becoming inclined towards the need to maintain the environment through safe practices. In high-growth developing countries, Ford has an opportunity to expand by first designing vehicles that are environment-friendly and considering renewable sources of energy for the vehicles.
Ford also needs to adopt the current and popular means of advertising such as e-commerce and social media to target a certain segment of customers while offering customized service since the company can link directly to the client to determine the customers’ requirements.
Ford can also adopt a Push promotional strategy which is a method by the manufacturer to encourage trade channels where members can promote and sell products. On the other hand, a pull promotion strategy is a means of promoting end customers by discounting prices to attract a larger customer base.
Brand strategy means that Ford has to invest even more in promoting the brand while paying close considerations to external factors that are likely to affect the brand.
Timetable for the recommended strategies
|June 2018 -June 2019||Research and design geared towards adopting customer tailored vehicles particularly paying close attention to the environment and social factors.|
|Revenue to be set aside for research and deign|
Hiring experts who have knowledge in electric vehicles
|March 2018-March 2019||Social media advertising|| Social media managers |
|February 2018- June 2018||Promotional strategies meant to improve market share||Information technology |
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- Iqbal, T. (2011). The impact of leadership styles on organizational effectiveness: Analytical study of selected organizations in IT sector in Karachi. Munich: Grin Verlag
- Yang, Y. (2014). Employees management analysis at Ford motor company. International Journal of Business and Social Science, 5(10).
- Wee, H. M., & Wu, S. (2009). Lean supply chain and its effect on product cost and quality: a case study on Ford Motor Company. Supply Chain Management: An International Journal, 14(5), 335-341.