Fords Strategic Positions - Essay Example

Ford Motor Company Q1. a) Using appropriate theory and models identify the major external factors which have undermined Fords Strategic position as at 2007. The position of firms within their local but also in the international market is usually evaluated using specific theoretical concepts and models; PESTEL analysis is the most common strategic tool used for the identification of the factors that influence the performance of a firm within a specific industry. In the case of Ford the particular external factors that can be regarded as related with the strategic position of Ford in 2007 - undermining the development of the firm in the specific year, are the following ones (always based on the PESTEL analysis): a. Political: the political environment in which Ford had to operate can be considered as rather adverse; not only in USA but all around the world the political conditions were characterized by constant and strong turbulences, a fact that also influenced the performance of Ford. b. Economical: The financial conditions within the international market could not be characterized as completely friendly for commercial activities; on the contrary strong turbulences in the economies of most countries around the world, especially during 2007, lead to the conclusion that any business initiative targeting the international market should be carefully prepared. c. Social: Ford is a firm with a long history in the automobile industry. In fact, the firm is related with the cultural and the social ethics of a specific country (USA); however it has proved that it can respond to the needs of the public around the world. In 2007 no specific change was noticed regarding the social environment of Ford. d. Technological: In Ford the development of technology has been a decisive part of corporate activity; new methods of product development and delivery have been incorporated in current business policies – referring to the previous year - in order to support the position of the firm towards its competitors. e. Legal: The activities of all firms that operate in the automobile industry are monitored by the local and the international authorities in terms of the application of the standards related with the quality of the products delivered to the customers but also of the standards related with the tax regulation of the firms operating in this sector; Ford has aligned its strategies with current legal principles regarding all its activities (both at the production and at the operation levels) so that the public would feel secure when acquiring the firm’s products. Despite all the problems presented above, the firm’s position could be strongly supported if organizational strategies were constantly reviewed so that a high flexibility was established within all organizational sectors. The specific issue was also highlighted by Parnell (2003, 16) who noticed that ‘an organization can remain flexible so that it does not become committed to products, technology, or market approaches that may become outdated’; however, the effectiveness of the relevant projects depends on the competence and the skills of the firm’s employees – especially of its managers. If the strategies applied throughout the organization were not appropriately designed and supported the impact of the so-called ‘external factors’ – as described above – could be normally expected to be stronger. b) Which changes in the Automotive industries Critical Success Factors, over recent years have most impacted upon this organisation, in terms of its current level of “EVR” congruency or loss? (Environment, Value system and Resources, after J.L. Thompson. 2005). The production of automobiles around the world has been increased the last years despite the potential difficulties and challenges related with the various activities of the firms operating in this sector. In UK, statistics related with the specific business activity show that ‘total car production, seasonally adjusted, in the three months to July 2007 increased by 5.4 per cent compared with the previous three months; in comparison with the same three months a year ago, total production increased by 3.2 per cent’ (National Statistics Online, 2007). The changes observed in the automotive industries critical success factors could be described – indicatively - as following: increase of cost of production, increase of the costs for logistics, development of competitiveness (entrance of new firms in the specific industry) and development of substitute products (cars with similar characteristics of existing ones but in low price are offered to the public). There are no standard forms of critical success factors in the automotive industry (as in all industries worldwide); however because specific parts of commercial activity of Ford has to be criticized specific reference should be made to the change in the following success factors: a) environmental turbulences; the high level of environmental pollution worldwide has led to the introduction of severe legislation regarding the various business activities; additional expenses are required by all firms (including Ford) in order to meet the standards set by the legislator; b) Value system: the global financial crisis – stronger the last years – requires the review of current firm policies (minimization of expenses and increase of productivity) and c) Resources: the increase in the cost of materials leads to the need for change the suppliers (if the relevant cost is high) and the limitation of the costs related with the compensation/ personal development of firm’s employees (alternative forms of employment should be introduced if necessary in order to minimize the cost of resources in all organizational activities). c) How would you describe the nature of the EVR configuration at Ford as at 2007. Justify your argument. The nature of EVR at the firm in 2007 could be described as following: a) Ford is highly dedicated to the protection of the environment; within 2007 the firm offered an amount of $90,000 (within the context of its Conservation and Environmental grants program, see also AME info, 2008); the firm also supports the Emirati Environmental Group (see AME info, 5 February 2008) while it has also participated in most relevant activities taking place in 2007 around the world (e.g. the UK eco-rally in 2007); b) the firm’s value system is appropriately structure ensuring the support of the community and the environment and the limitation of losses from potential risky investments (the financial performance of the firm for the first quarter of 2008, see Appendix section, Figure 4) can lead to the assumption that the Value System of the firm in terms of financial and non-financial priorities and values is appropriately structured and monitored, c) The Resources of the firm are appropriately evaluated; in the context of human resources, the firm’s employees are fairly compensated and offered equal opportunities of personal development (see corporate website, career opportunities and diversity section); the firm’s relationship with its suppliers is also at a very good level – cooperation and mutual support are promoted in the firm’s relationship with its suppliers. Q2. a) Assuming that Ford’s retrenchment strategies, in terms of job cuts and selling of areas of its business portfolio, are successful in supporting a turnaround strategy generate, using appropriate concepts and models, generate three alternative possible strategic options they could now pursue. The successful application of firm’s retrenchment strategies could be followed by the following three strategic options: a) expansion of the firm’s activities within the international market (at the lowest possible cost, mostly through a joint – venture scheme) in countries where the automotive market is still under development (referring to developing countries worldwide); b) development of new models that would address the higher social class; these models would be promoted to countries where the sale of luxury cars faces a period of continuous development (e.g. countries of the Gulf) and c) development of strategic alliances with firms that operate in other sectors (e.g. in the sector of heavy equipment) so that a greater part of the international market could be targeted. b) Apply evaluative techniques to each of these strategic options In general, the strategic plans of a firm could be evaluated using appropriate theoretical models like the Wiseman’s Grid (Figure 2, Appendix). For its particular strategic options, a firm can establish specific evaluative techniques and monitoring mechanisms. Regarding specifically the strategic options proposed above, the following evaluative techniques could be established: a) the expansion of the firm within the international market could be monitored and evaluated by appropriately trained managers – expatriates that will be based on the regions in which the expansion of the firm is attempted; b) the development of new products (referring to the case of luxury cars) could be monitored and evaluated by specifically appointed staff – development of particular organizational department that will act independently from the firm’s other staff – the supervisors in this department would report directly to the firm’s director – in this case the development of this department could be closely monitored and c) in the case of strategic alliances the relevant decision should be taken by the firm’s board of directors; if approved the relevant plan should be monitored by a specifically appointed supervisor that will have the responsibility for the control over the whole project; appropriate preparation should be made in advance in order to ensure the feasibility of this project and its potential benefits for the organization. c) From your evaluation which strategic option would you recommend to Ford? The development of strategic options by modern firms remains a challenging initiative for managers of all firms around the world. In this context, it is supported by Parnell (2003, 16) that ‘in many respects, the evidence for the existence of a strategy can permeate an organization; its customers appreciate knowing what a company is attempting to accomplish and prospective investors tend to hesitate when they do not have a clear grasp of the firm’s position and future priorities’. In other words, in order for a specific strategic option to be successful it should be clearly stated and described presenting to all interested parties (especially to the firm’s stakeholders) its advantages and its risks. Taking into account the current position of Ford within the international market it would be stated that the only strategic option that would be most appropriate for the firm currently would be the development of strategic alliances with other firms that operate in similar industrial sectors – a multi-dimensional organization could be resulted in this case being extremely powerful towards its competitors. References AME info (2008) http://www.ameinfo.com/153811.html) AME info (5 February 2008) http://www.ameinfo.com/145820.html Auto Industry, UK (2007), [Online], available at http://www.autoindustry.co.uk/statistics/production/world/index#cars National Statistics Online. 2007. Motor Vehicles, [Online], available at http://www.statistics.gov.uk/CCI/nugget.asp?ID=376&Pos=6&ColRank=2&Rank=288 Parnell, J.A. (2003). Five Critical Challenges in Strategy Making. SAM Advanced Management Journal, 68(2): 15-25 Porter, M. (1998) On Competition. Harvard Business School Press Pritsker, K.D. (1997). Strategic Reengineering: An Internal Industry Analysis Framework. SAM Advanced Management Journal, 62(4): 32-43 http://www.ford.com/about-ford Appendix A. Porter’s Five Forces Figure 1 - Industry Competition, five forces (Porter, 1998, 22) B. Wiseman’s Grid What is the strategic target? Supplier Customer Competitor What is the strategic thrust? Differentiation Cost Innovation Growth Alliance What is the mode? Offensive Defensive What is the direction? Use Provide Figure 2 - Strategic Option Generator (Wiseman, C., 1985, ‘Strategy and Computers’, Dow Jones – Ivwin) C. 1997 1998 1999 2000 2001 2002 2003 2004 2005 North America 15,747 15,640 17,634 17,697 15,798 16,714 16,244 16,278 16,340 South America 2,516 2,044 1,682 2,087 2,115 2,004 2,037 2,669 2,985 European Union 15,313 16,549 16,929 17,106 17,219 16,871 16,777 16,851 16,440 Other Europe 2,576 2,636 2,842 3,085 2,825 2,951 3,222 3,984 4,362 Japan 10,975 10,050 9,895 10,141 9,777 10,257 10,286 10,511 10,799 South Korea 2,818 1,954 2,843 3,115 2,946 3,148 3,178 3,470 3,699 China 1,441 1,692 1,801 2,072 2,182 3,261 4,444 5,235 5,708 Other 1,732 1,339 2,631 3,046 3,441 4,484 4,476 5,498 6,133 Total 53,117 51,902 56,260 58,347 56,305 58,690 60,664 64,496 66,465 Source: OICA.net Figure 3 – Production of motor vehicles around the world for the period 1997 up to 2005 (source: Auto Industry, UK, 2007) Figure 4 – Ford, preliminary results for the first quarter of 2008 (source: http://www.ford.com/doc/ir_20080424_1q08_earnings.pdf) Read More