Ford Motor Company Strategy Analysis - Report Example

FORD Attn. Allan Mulally: In terms of defining and discussing the business-level strategy currently used by Ford, the company is retaining a competitive edge by focusing on domestic concerns, which is admirable and should be continued. You have been lauded for your ability to “focus the company around the Ford brand and get rid of the European luxe brands. He did that when there were ready buyers and the credit markets were still operating normally. He may even pull off a sale soon for Volvo, the last of the Euro brands in Ford’s stable, while GM can hardly find a buyer for Hummer, Saab or Saturn” (Mulally, 2009). Ford still has a centralized command structure, however. This is a common form of business organization in many settings, including the setting of the current setting. Businesses can also organize by product and customer. In a product method, the business can have different product lines led by different managers. In a customer-oriented method, a business can have different types of customers whose needs differ. This is an increasingly salient option in a market in which customer attenuation has become a watch-word, and customer attenuation is another facet of business that tends to unify rather than divide. At Ford, it is the geographical model that reigns, with plants separated by location. The establishment of core competency is a prerequisite of strategic management decisions, and this is an important part of Ford’s current business-level strategy. One group of authors state that, “A company’s core competence can relate to any of several aspects of its business: expertise in building networks and systems that enable e-commerce; speeding new or next generation products to market; good after-sale service; skills in manufacturing a high-quality product; (and) innovativeness in developing popular product features;” (Thompson and Strickland). Ford needs to continue to concentrate on its core competency. I also have some advice for you, relative to how the companys value-chain activities can be better linked to create value for the company. This has to do with Ford’s centralized power structure as well; the value chain, working from a domestic perspective, can be heightened by removing obstacles between manufacturing and delivery to showrooms. However, Ford also must look towards its international operations. And labor relations are also an important part of the value chain, although this may not be such a problem at Ford; “you have to be impressed with how Ford has struck a major agreement with the United Auto Workers union ahead of GM and Chrysler, and how it moved this week to reduce its debt by some $10 billion by offering bond holders equity and other considerations. Analysts seem to think that the bond holders will take the deal” (Mulally, 2009). This shows a competitive edge as well for the company. Respectfully, we need to figure out how Ford can successfully position itself in terms of the five forces of competition. Porter’s five forces can be applied to the case of the general automobile manufacturing industry and the industry represented effectively, especially because the industry is so competitive and changeable. This industry can be subjected to a five-force analysis, which provides answers and also displays a holist perspective on the industry. “The intensity of industry competition and an industry’s profit potential are a function of five forces of competition: the threats posed by new entrants, the power of suppliers, the power of buyers, product substitutes, and the intensity of rivalry among competitors” (Ireland et al., 2006). The most important force for Ford to look at in this analysis is the threat posed by new competitors. Porter’s system is more of a symbiotic relationship. In general, entry barriers are factors which make it more difficult or more easy for a company to get a start in some given industry. High barriers are like high obstacles that keep competitors from entering the industry, while low barriers are more easily surmountable to competitors seeking returns within the industry. It is a rule of thumb within this equation that the fewer competitors there are in an industry, the more they can take advantage of opportunities and strengths to garner better returns. The industry in which the typical auto manufacturer operates is slightly more complicated than this however, because it tends to have a small and concentrated number of large and well established companies at the top of the market share, and a relative abundance of smaller companies at the bottom, showing a high entry barrier to get to the top of the market share, but a lower one to get into the industry in general. You must also be aware of competition, from a standpoint of competitor analysis. Many of Ford’s overseas competitors still have an advantage in hybrid technology, despite the fact that Ford offers many hybrid models. It may seem that hybrid electric vehicles are an incremental innovation, because they build on existing engine technology. These vehicles not require big changes in the fueling infrastructure, as long as electrical outlets for the cars can function with the existing power grid, or in consumer behavior, since people are still essentially buying the same product: an automobile. For most of the major stakeholders, including customers, automakers, and petroleum companies, the electric or hybrid automotive technology will likely be seen as competence enhancing, though it might be seen as competence destroying to an automaker in some cases. For example, in the case of an automobile manufacturer that is unwilling to develop a hybrid electric vehicle, competence will actually be lost rather than gained. Competency is a major factor in this case. The behavior of your competitors can be assessed by the model of competitive rivalry. “This is most likely to be high where entry is likely; there is the threat of substitute products, and suppliers and buyers in the market attempt to control. This is why it is always seen in the center” (Competitive, 2010). As noted, Ford may face less of a threat from competitors because of high entry barriers. And Ford certainly fared better in the recent financial crisis than GM or Chrysler. “What is notable with Ford these days is the orderliness with which it is restructuring. They haven’t taken U.S. Treasury TARP money as GM and Chrysler have. Yet, they are getting their restructuring moves done ahead of their crosstown rivals and ahead of the government deadlines, which they don’t even have to hit” (Mulally, 2009). However, significant competitive rivalry still exists for Ford overseas. To solve this issue, there needs to be some kind of synthesis of these subjects along with more specific processes to manage conflict and change. “Managing change is a continuous process within most growing organizations but varying environments have to be considered. Group conformity is one of the foremost considerations in this situation with the development of group cohesion as primary but conflicts are, in spite of everything, inevitable behaviors. Managing conflicts in a situation of constant dynamic change is an essential process” (Mushref, 2002). Defusing critical incidents that occur in the organization also means being able to get to the root of the problem. Strategic leadership will play a key role in helping you and the organization meet strategic objectives. But there are obstacles to effective leadership that you must guard against at Ford. Often, when a group becomes too socially close, they lose some degree of their professionalism. This facet of groups also relates to subjects of conformity, compliance, obedience, and other relations among groups of people, including how they relate to what could be called the authority of the collective. The concept of informal groups is also interesting because it relates with the issue of Groupthink, which is a type of conformity. Promotional leadership has a significant relationship to the formation of Groupthink symptoms, as shown in the pressure Ford was under to adapt to new Japanese competitors in the early 1980s, but there is not any sustainable correlation between the level of predisposition to conformity and the formation of similar symptoms. Informal groups build consensus on agreement, not at an any cost mentality, but in a mentality that results in teamwork for the organization. However, informal groups can also lead to poor solutions compared to formal ones. As a leader at Ford, you need to demonstrate effective communication. There is a difference between positive and negative communication, and often this difference is that in positive communication, the leader focuses on listening instead of blindly pushing people towards the exits. Communication must be a two-way street in which both the sender and receiver of information benefit, and this is the overall mission and philosophy of the effective executive. The conflict management systems in many organizations are not without faults, often because they do not show a lot of attention to establishing functional leadership and communication links, and act more dysfunctional. REFERENCE Ireland, Hoskisson, and Hitt (2006). Understanding Business Strategy. New York: Thompson. Mushref, M (2002) Managing conflict in a changing environment. Management Services. Thompson, A.A., and A.J. Strickland (1997). Strategic Management. New York: McGraw-Hill. Mulally and Ford (2009). http://www.businessweek.com/autos/autobeat/archives/2009/03/commentary_mula.html Competitive rivalry (2010). http://marketingteacher.com/Lessons/lesson_fivefoces.htm Read More