What is Ford companys alignment and bargaining power of buyers - Essay Example

?Paper WHAT IS FORD COMPANY’S ALIGNMENT? The Ford Motor Company incorporates a “strategic purchasing business model” to increase its mutual profitability among its suppliers and the various business partners. Correspondingly, the Aligned Business Framework was implemented in 2005 in Ford, to increase the future collaboration, data transparency and open disbursement in the process of engineering and improvement costs. The alignment of the business model has been strategically aimed at increasing the obligations of the suppliers to control and guarantee a better condition for working and a responsible environment in providing amenities throughout the supply chain and thereby, help the company to monitor the working conditions of the suppliers towards ensuring a greater degree of quality in the entire production system. This particular phase is referred as the “macro-management” phase. With the aim to verify the same code of conduct in order to maintain better working conditions and protect the employees’ human rights throughout the chain, Ford provides training as required by the suppliers and inquires them to provide internal training to safeguard understanding of the codes. Ford also assists in developing the process of compliance to support the codes in its supply chain sustainability management as its “macro-management” strategy (Business for Social Responsibility, “Internal Alignment: An Essential Step to Establishing Sustainable Supply Chains”). The business framework also intends to inspire suppliers to accept and impose identical code of performance within Ford in the “encouraging” phase. To manage the performance in this phase, each supplier has been assigned with an executive to lead the expansion of the code and enable them to report the growth to Ford in response to the traditional metrics. During the stages of progression of the suppliers, the company also delivers considerable support, contacts and resources in order to assist the supplier to improve its program. This commitment further proves to be highly significant for both the business and its stakeholders in reducing the operational risks, which could hamper the production to a substantial extent. Apparently, the alignment certifies accountable behavior throughout the ‘Automotive Supply Chain’ establishing interlinked and interdependent sustainability goals, through the three phase expansion process of “macro-managing”, “encouraging” and “expecting” (Business for Social Responsibility, “Internal Alignment: An Essential Step to Establishing Sustainable Supply Chains”). The final phase of “expecting” focuses to share the same sustainability goals to have greater expectancy throughout the supply chain. The company has therefore been applying a vigorous procedure to ensure the effectiveness of these stages. Through this procedure of Aligned business framework, almost 24% of Ford’s suppliers have been successful to meet the benchmark performances, which are to maintain the codes of conduct and the standard internationally throughout its supply chain. It is worth mentioning in this context that with the implementation of Aligned Business Framework business model, Ford has been able to increase its cost-effectiveness, simultaneously raising the quality features of its suppliers. The alignment also increases the innovation and reduces operational risks by way of improving the working conditions to a profitable extent (Corporate Ford, Creating a Sustainable Supply Chain: Strong Relationships, Shared Commitment, and Capacity Building”). Thus, it shall be rationally affirmed that the implementation of the aligned business model framework in Ford, aided it along with its suppliers to gain higher degree of sustainability and operational efficiency, not only in terms of costs and profitability but also in the form of legal coordination with the business partners throughout. WHAT IS FORD COMPANY’S BARGAINING POWER OF BUYERS? The bargaining power of buyers’ for Ford can be examined as relatively low or moderate. Conceptually, the bargaining power of buyers is presumed to depend on various industrial factors ranging from the availability of substitute products to the pricing strategies undertaken by the company or the consumer purchasing power affecting the demand for the product/service on offer. As explained in Porter, the aggregate volume of buyers availed by the company also determines the degree of their bargaining power, apart from the facts that the products are undifferentiated in the market, a low switching cost prevails in the market (6-7). Industry competition for Ford in the global context is comparatively moderate as the market competitive structure is highly oligopolistic in nature. Thus, because products/services offered by the industry players competing with Ford have differentiate product lines, a negative affect can be observed with regards to the bargaining power of its buyers. Additionally, offering a varied range of products and/or services, Ford attempts to lure a larger volume of buyers, which also contributes to their lower bargaining power. In precise, the customers of automobile industry have few choices for purchasing cars in accordance with their needs and specifications demanded, resulting in the moderate bargaining power of Ford’s customers (Blitterswijk and Karadzhov, 48-50). Apart from the above mentioned reasons behind the persisting moderate to lo bargaining power of Ford’s buyers, the company can also be observed to obtain competitive advantages over other competitors with the virtues of its market share in the global industrial context. To be noted, there are only a few large sized market players like General Motors and Toyota that compete with Ford. In accordance, Ford applies certain measures to differentiate its product not only in terms of technology advancement but also in lieu of its costs that further affects its pricing strategies in a much positive manner. Accordingly, by raising its brand image in a sustainable manner, Ford has been able to attract a large volume of customers worldwide that has in turn hindered the bargaining power of its suppliers. However, on the other hand, buyers and their expectations from the company can be observed as increasing substantially, which has in turn forced Ford to take a partial control over the functional efficiency of its suppliers worldwide. To be noted, applying the “Aligned Business Framework”, Ford attempts to keep a continuous monitoring of its suppliers operational efficiency and aid promising suppliers in taking every possible measure to revitalize their performances by balancing quality and quantity simultaneously. Moreover, sustainability check performed by the company throughout its supply chain also contributes to its efficiency to serve its customers and differentiate its product line from its competitors to a substantial extent. Again, buyers also pose considerable effect on the supply chain management measures adopted by Ford, as it attempts to have a continuous supervision and controlled functioning performed by its retailers. Conceptually, while its allied business framework indicates a partially backward integration of the company with its suppliers on the basis of sustainability values and operational goals, Ford’s attempt to have control on its retailers’ performances justifies a partially forward integration attempt (Automotive Insights, “Supplier Outlook 2013: How To Win In A Weak Market”). Hence, this particular fact indicates that the bargaining power of buyers of Ford in moderate in the dimension of backward and forward integration strategies practiced by the company. WHAT IS THE THREAT OF NEW ENTRANTS OF FORD'S COMPANY? The threat regarding the new entrants in reference to Ford is low. To be explained from a theoretical perspective, the weakening of entry barriers in an industry, in respect to its economies of scale, governmental interventions, regulatory demands as well as in concern to the degree of competitive rivalry persisting in the industrial periphery, the threat of new entrants is determined (Porter 10-11). In a developed market like that held by Ford, there are several barriers identifiable in the industrial context that restrict new entrants and thus, can be affirmed to raise the entry barriers. To put it simply, a company or a new entrant in the automobile industry will require huge capital and shall also have to face the constraints of high economies of scale, given the oligopolistic market structure currently prevailing in the industry periphery. In addition, governmental interventions are also observed to be high in this industry, which acts as a demotivator to the new entrants. The strong brand value developed by Ford can also be considered as a significant attribute to its increasing competitive advantages that further discourages any smaller competing firm to market their products aggressively. In addition, the prevailing market structure indicates that only a few large-sized automobile companies, including Ford, captures a large proportion of the total market share, sparing almost no space for the new entrants in the global marketplace (Automotive Insights, “Supplier Outlook 2013: How To Win In A Weak Market”). The product range of the company is also identified to be huge depending on its varied scales of customer segmentation. Hence, the threat from new entrants in case of Ford can be examined as quite minimal (Slide Share, “A report on Ford Motor Company”). Moreover, the amount of capital spent by Ford on the research and development team is huge in order to forecast the trends and demands of the vehicles, which proves to be quite demanding for the new entrants. This reflects the threat from new entrants to be low for Ford as it is one of the leading market players in the global automobile industry (Zielonka, McCann, Gaynor, Metcalfe and Hasanbasic, “Ford”). Nevertheless, the company and other industry players have to face the threat of backward and forward integration by large-sized companies in related industries. For instance, large companies engaged with the manufacturing of aircrafts or railways or other products in the automobile industry are commonly observed to posses monopolistic power on the market, especially in those concerned product lines. It is in this context that when these companies decipher high possibilities to merger, diverse of integrate their function with automobile companies in competition with Ford, the capacity to challenge a high economies of scale should be considered as noteworthy. Additionally, mergers and acquisitions among large-sized or medium-sized automobile companies also pose a threat of new entrants to Ford as it weakens the entry barriers for these new players. In such circumstances, governmental and regulatory barriers are also supposed to be diminished that further contributes to a greater threat of new entrants to Ford (Automotive Insights, “Supplier Outlook 2013: How to win in a Weak Market”). Nonetheless, competing with the brand value already created by Ford shall be time consuming for these sorts of new entrants, rewarding a competitive advantage to the company to deal with the rising competitive rivalry. Works Cited “Supplier Outlook 2013: How to Win In a Weak Market”. Automotive Insights. 2013. Web. 19 Nov. 2013. “Internal Alignment: An Essential Step to Establishing Sustainable Supply Chains.” Business for Social Responsibility. 2008. Web. 19 Nov. 2013. Blitterswijk, Miel Van and Rosen Karadzhov. “Financial and Strategic Analysis of Ford Motor Company and Tata Motors”. Finance and Strategic Management. 2009. Web. 19 Nov. 2013. “Creating a Sustainable Supply Chain: Strong Relationships, Shared Commitment, and Capacity Building.” Corporate Ford. 2012. Web. 19 Nov. 2013. Porter, Michele E. “The Five Competitive Forces That Shape Strategy”. Harvard Business Review. 2008. Web. 19 Nov. 2013. “A report on Ford Motor Company.” Slide Share. 2013. Web. 19 Nov. 2013. Zielonka, Ed., Bill McCann, Matt Gaynor, Zach Metcalfe, and Garrett Hasanbasic. “Ford.” 2012. Web. 19 Nov. 2013. Read More