Case Study – Ford Motors
Tony
Introduction
Ford
Motors is one of the leading automobile manufacturers in the world. Its founder
is Henry Ford, and the Ford family has exercised control over the
company. Its business operations have enabled it to evolve continuously
thereby meeting the needs of its customers. The company has utilized the SWOT
analysis to optimize its operations (Hoffman, 2012). The components of SWOT
analysis are discussed below.
Internal
analysis
The
success of Ford Motors does depend on both its internal and external
conditions. Ford Motors does possess an exceptional set of capabilities which
not only adds value to the company, but it also enables the company to achieve
a competitive advantage in the market (Hoffman, 2012). These exceptional sets
of capabilities are innovativeness, customer responsiveness, efficiency,
quality and special expertise. Normally, these aforementioned capabilities do
enable a company to perform its activities at the optimum (Fleisher &
Bensoussan, 2003). However, in Ford Motors, these capabilities have not only
enabled the company to operate at its optimum, but it has also enabled the
company to maintain the continuity of effective leadership. This is exemplified
by exhibit 7 and exhibit 8 which state that the company chose an outsider, Alan
Mulally, as the company’s president and chief executive officer (CEO). Mulally
was chosen due to the fact that he understood the intricacies of the global
market, global competitiveness, and the complexities of a unionized workforce.
He was thus able to streamline and also simultaneously optimize the operations
of the company (Hoffman, 2012).
The activities performed by a company can be demonstrated in a simplified
illustration termed the value chain. A generic value chain is depicted below.
This simple illustration can be used as a framework for analyzing the strengths
and weaknesses of the company. The value chain also shows the primary and
support activities performed by a company. These primary activities are
involved in the production, sale, distribution, and servicing of the products
purchased by the buyer (Fleisher & Bensoussan, 2003).
For
Ford Motors, these primary activities are enumerated below:
1.
Inbound logistics: Reception, storage and
distribution of inputs that would be used for the manufacture of automobiles.
2.
Operations: This encompasses all the activities
that are involved in the transformation of the inputs into the final products.
3.
Outbound logistics: the collection, storage and
distribution of the final product (automobile) to the purchasers.
4.
Marketing and sales: This encompasses all the
activities that are used to get the potential buyers to purchase the
automobiles manufactured by Ford Motors.
5.
Service: This involves the repair and
installation of customized gadgets and appliances into the purchased
automobiles. It also includes the training offered by the company to the
customer on how to use and operate the automobile.
The
aforementioned primary activities are performed optimally due to the input of
the support activities (Fleisher & Bensoussan, 2003). For Ford Motors,
these support activities are:
1.
Firm infrastructure: this encompasses the
companywide guaranteed support for the entire value chain. It encompasses
quality of management, organizational culture, financial performance and the
operational strategies.
2.
Human resource management: this encompasses the
hiring and recruitment processes, employee training and the employee’s reward
systems.
3.
Research and Development. This encompasses all
activities involved in the development and manufacturing of technologically
advanced products. It also enhances the performance of the company.
4.
Procurement: It involves the purchase and
management of inputs used in the operations of the company. It also encompasses
the development and management of supplier relations.
Value chain analysis has enabled Ford Motors to identify its strengths and
potential (or relative) weaknesses, and this has enabled the company to
strengthen its core competencies thereby adding value to its operations and
also achieving a competitive advantage in the market. Additionally, a
comparative value chain analysis done by Ford Motors in relation to its
competitors has revealed potential opportunities that can be exploited by the
company in order for it to improve its market competitiveness (Fleisher &
Bensoussan, 2003).
External
analysis
Companies are affected by the conditions and settings of the environment.
External analysis is used to identify and assess the opportunities and threats
to the company in relation to its environment. Usually, information gathering
for the external analysis utilizes three basic approaches: scanning, monitoring
and competitive intelligence (Baron, 2003). All these approaches are used by
Ford Motors during the phase of information gathering.
The
tools that are utilized during the analysis are (Ferrell, 2012):
1.
General Environment Assessment: This encompasses the assessment of the nation’s
demographics, the politico-legal conditions affecting the industry and business
in general, relevant technological development and advancements, macroeconomic
conditions and the related policies, sociocultural factors, and the state of
the global automobile business. The assessment has a direct bearing on the
competitive environment.
2.
Competitive environment: this encompasses all the conditions affecting
competition within the automobile industry. These conditions have been broadly
categorized into:
a)
Key Success Factors in the Automobile Industry.
They
enhance the market competitiveness of the company. They include sale of
high-quality cars, priced-for-quality products, robust distribution network and
appropriate advertisements. The company was able to increase its dividend
payouts from $2.50 in 2007 to $7.51 in 2007.
b)
Strategic Groups.
Ford
Motors competes does not compete against all the automobile companies, but only
with the companies which have competitive approaches that are similar to its
own approaches. These approaches are related to the price, innovation
capabilities, research, range of products, customers served and the quality of
products on sale. In the 2008-2009 financial year, Ford Motor sales volume were
second only to General Motors.
c)
National Competitive Advantage.
The
nation does provide a competitive advantage to Ford Motors by enhancing factor
endowments and also providing a growing market.
d)
Competitive Changes during the Evolution of the Automobile Industry.
This
has a direct bearing on the basis and nature of competition changes. Ford
Motor’s is currently at the fourth stage of the industry’s evolution. Ford
Motor cars were ranked as the overall best automobiles in 2008.
e)
Five-Force Analysis.
This
determines the attractiveness of the industry. For Ford Motors, the Porter
five-force analysis can be represented graphically. It is used to qualitatively
evaluate the position of the company in the automobile industry. The analysis
enables the company to understand the needs of the customers and thereby
implement value-creating strategies that aim to fulfill the needs of the
end-user. The five-force analysis assesses the following:
i.
Threat posed by new entrants into the automobile manufacturing industry. For
ford motors, this threat is not very significant because the cost of a new
entrant establishing itself within the niche is exceptionally high, and also
the government regulations are likely to pre-empt foreign companies that have
low liquidity from establishing themselves in the American market.
ii.
Supplier power: for ford motors, the supplier industry is currently dominated
by a few firms, but these firms do value ford motors as their customer. The
supplier’s product is vital for the company’s operations and the switching
costs are prohibitively high. Fortunately, the supplier can never integrate
forwards and become a new entrant into the market.
iii.
The threat posed by substitutes is ever present for ford motors. This has
necessitated the company to add value to their automobiles while still ensuring
that the vehicles are still sold at a reasonable price.
iv.
Buyer power: There are more buyers as compared to the number of sellers, and
the buyers can never integrate backwards. Moreover, the buyer purchases are
relatively higher than the company’s sale thus increasing the profit margin of
the company.
v. Competitive rivalry: There are a few equally balanced competitors in the market and this has created high strategic stakes for Ford Motors. However, the rapid rate of growth of the automobile industry does provide a potential for the company to grow and also increase its revenue.
Business
Level Strategy
The
basic aim of this strategy is to satisfy the needs of the purchaser. The
customers are thus the foundation of this strategy. Also, the company uses the
strategy to exploit the core competencies to add value and gain competitive
advantage in the automobile market. The strategy is thus concerned with
strengthening the company’s position in the automobile industry relative to its
competitors (Ferrell, 2012). The strategy comprises of the following:
1. Cost
Leadership: Ford Motors uses it to enhance its internal efficiency thereby
increasing the profitability of the company. It involves the construction of
avant-garde and efficient production plants that cannot be imitated by its
rivals, and maintenance of tight control over overhead costs. It also includes
the minimization of R&D, sales and service costs.
2. Differentiation:
Ford Motors creates value for its products by using the strategies stated
hereafter: manufacturing of high quality cars which have advanced technological
features, image management, excellent customer service, and rapid product
innovation.
3.
Focus: Ford Motors has narrowed its focus to several market segments in order
to target these market niches. This focus has led to the creations of divisions
within the company that are concerned with specific niches, for example,
commercial vehicles, luxury vehicles and the manufacture of automobile parts.
Strategic
Control
It is
a significant component of the SWOT analysis that involves the tracking,
evaluating, monitoring and assessing the overall effectiveness of the various
strategies used by Ford Motors to enhance their output and also improve their
market competitiveness (Hoffman, 2012). Strategic control has enabled the
company to adjust and improve its strategies where applicable (Baron, 2003).
References
Ferrell,
O. C. (2012). Marketing Strategy Text and
Cases. Stamford, CT: Cengage Learning.
Fleisher,
C. S., & Bensoussan, B. E. (2003). Strategic
and competitive analysis: methods and techniques for analyzing business
competition. Upper Saddle River, NJ: Prentice Hall.
Hoffman,
B. (2012). American Icon: Alan Mulally
and the Fight to Save Ford Motor Company. New York, NY: Random House
Digital.
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